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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-K



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ANNUAL REPORT PURSUANT to SECTION 13 or 15(d)

of the SECURITIES EXCHANGE ACT OF 1934



For the fiscal year ended

December 31, 2002

Commission File No. 0-27652



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REPUBLIC BANCSHARES,
INC.

(Exact Name of Registrant As Specified In Its Charter)



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|FLORIDA                                 |  | 59-3347653                       
|--------------------------------------- |  | ---------------------------------
|(State of Incorporation)                |  | (IRS Employer Identification No.)
|                                       
|111 2nd Avenue N.E., St. Petersburg, FL |  | 33701                            
|(Address of Principal Office)           |  | (Zip Code)                       



(727)
823-7300

(Registrants telephone number, including area code)



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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 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



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 ̈



The aggregate market value of the registrants Common Stock held by non-affiliates of the Registrant was approximately $227.4 million on March 13, 2003. As of March 13, 2003, there
were 11,428,459 shares of the Registrants Common Stock, par value $2.00 per share, issued and outstanding. No shares of preferred stock were outstanding at December 31, 2002.



Portions of the Companys Proxy Statement for the 2003 Annual Meeting of Stockholders are incorporated
by reference into Part III of this report.





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TABLE OF CONTENTS



|                  |  | PART I                                                                                |  |   
|----------------- |  | ------------------------------------------------------------------------------------- |  | --
|Item 1.           |  | Business                                                                              |  | 1 
|Item 2.           |  | Properties                                                                            |  | 16
|Item 3.           |  | Legal Proceedings                                                                     |  | 16
|Item 4.           |  | Submission of Matters to a Vote of Security Holders                                   |  | 16
|                 
|                  |  | PART II                                                                               |  |   
|                 
|Item 5.           |  | Market for Registrants Common Equity and Related Stockholder Matters                 |  | 17
|Item 6.           |  | Selected Consolidated Financial Information                                           |  | 17
|Item 7.           |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 19
|Item 7A.          |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 30
|Item 8.           |  | Financial Statements and Supplementary Data                                           |  | 32
|Item 9.           |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  | 33
|                 
|                  |  | PART III                                                                              |  |   
|                 
|Item 10.          |  | Directors and Executive Officers of the Registrant                                    |  | 33
|Item 11.          |  | Executive Compensation                                                                |  | 35
|Item 12.          |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 35
|Item 13.          |  | Certain Relationships and Related Transactions                                        |  | 35
|Item 14.          |  | Controls and Procedures                                                               |  | 35
|                 
|                  |  | PART IV                                                                               |  |   
|                 
|Item 15.          |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |  | 36
|                 
|Signatures        |  | 73                                                                                   
|Certifications    |  | 75                                                                                   
|Index to Exhibits |  | 77                                                                                   







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PART I



Item 1. BUSINESS



Forward-Looking
Statements



Certain statements contained in this Annual
Report on Form 10-K (other than the financial statements and statements of historical fact), including, without limitation, statements as to our expectations and beliefs presented under the caption Managements Discussion and Analysis of
Financial Condition and Results of Operations, may constitute forward-looking statements. Forward-looking statements are made based upon our expectations and beliefs concerning events, many of which, by their nature, are inherently uncertain
and outside of our control. It is possible that our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements.



We caution readers that the assumptions which form the basis for
forward-looking statements, with respect to or that may impact earnings in future periods, include many factors that are beyond our ability to control or estimate precisely. Some of those factors include: the adequacy of our loan loss allowance; the
outcome of pending litigation; our ability to recover any or all of the claim under our Financial Institution Bond; the market demand and acceptance of our loan and deposit products; the impact of competitive products; and changes in economic
conditions, such as inflation or fluctuations in interest rates.



While we periodically reassess material trends and uncertainties affecting our results of operations and financial condition in connection with our preparation of managements discussion and analysis contained in this annual
report, we do not intend to review or revise any particular forward-looking statement referenced herein.



Background and Prior Operating History



Republic Bancshares, Inc. (the Company or Republic or We) is a bank holding company registered with the Board of Governors of the Federal Reserve System under the
Bank Holding Company Act of 1956 (as amended). We conduct business mainly through our banking subsidiary, Republic Bank (the Bank), a Florida-chartered commercial bank headquartered in St. Petersburg, Florida, and provide a broad range
of traditional commercial banking services. At December 31, 2002, our branch network consisted of 71 branches throughout Florida and our consolidated assets totaled $2.5 billion. Loans, including loans held for sale, totaled $1.5 billion, deposits
were $2.1 billion and stockholders equity was $183.7 million. The Banks activities are regulated by the Florida Department of Banking and Finance (the Department) and the Federal Deposit Insurance Corporation (the
FDIC). Deposits are insured by the FDIC up to applicable limits, and the Bank is a member of the Federal Home Loan Bank of Atlanta (the FHLB).



We became a publicly-traded company in December 1994. During the latter part of 1994 and throughout 1995, the Bank increased
its retail banking presence on the west coast of Florida, opening new branches. We also converted to a holding company structure in 1996. During 1997 and 1998, we further expanded our retail banking franchise via acquisition of Firstate Financial,
F.A., a thrift institution headquartered in Orlando, Florida and F.F.O. Financial Group, Inc. (FFO), St. Cloud, Florida, the holding company parent of First Federal Savings and Loan Association of Osceola County.



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In 1998, we acquired seven
branch offices and their related loans and deposits from BankAmerica, all of which were located in Florida. We also acquired an additional BankAmerica branch located in Brunswick, Georgia, which has since been sold. Also in 1998, we purchased a
branch office and its deposits in Deerfield Beach (Broward County), Florida from the Dime Savings Bank, F.S.B. In a separate transaction during 1998, we purchased three branches and leased 22 branches from BankAmerica that had been closed in
connection with their acquisition of Barnett Banks, N.A. No deposits or loans were included in this transaction.



In the fourth quarter of 1998 we acquired Bankers Savings Bank, F.S.B., Coral Gables, Florida, and Lochaven Federal Savings and Loan Association, Orlando, Florida, in stock-for-stock transactions.
Their operations and branch offices were merged into the Bank. At the close of 1998, our branch network numbered 62 branch offices.



In 1996, a mortgage banking operation was initiated that placed an emphasis on non-traditional mortgage products. Losses from that operation in 1998
caused us to cease those activities. All out-of-state loan production offices were closed and we discontinued the telemarketing efforts that were the source of the majority of the loan originations by that mortgage banking unit. At year-end 1998, a
restructuring charge of $6.7 million was recorded, primarily for severance benefits payable to mortgage banking employees whose positions were eliminated.



In March 2000, the board of directors of the Company and the Bank announced the appointment of Mr. William R. Klich as President and Chief Executive
Officer of the Company and the Bank. Mr. Klich became Chairman of the Bank in 2002 with the hiring of Mr. Ken Coppedge as President and Chief Operating Officer of the Bank. Since Mr. Klichs hiring, a new business strategy has been implemented
that focuses on these strategic initiatives:



| |  | Concentration on and expansion of our core market;
|- |  | --------------------------------------------------



| |  | Conservative and plain vanilla lending;
|- |  | -------------------------------------------



| |  | Diversification of the loan portfolio through the origination of consumer lending products through our retail banking outlets and the continued development of
commercial lending activities to small and medium sized businesses as well as high net worth individuals;
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Implementation of residential lending as the cornerstone of our retail banking efforts;
|- |  | ---------------------------------------------------------------------------------------



| |  | Reduction of nonperforming assets.
|- |  | ----------------------------------



Market Area



Our primary market area consists of: (1) central Florida and Floridas middle and lower west coast; (2) Palm Beach and Broward counties on the east
coast of Florida, and; (3) Monroe County, the Florida Keys. We believe our market area is economically strong and adequately provides for future growth opportunities for both assets and deposits.



As of December 31, 2002, we operated 71 full-service branches in 17 counties
throughout Florida, a highly competitive state for financial services of all kinds. Consumers can choose from a wide range of suppliers of credit and deposit products, including credit card companies, consumer finance companies, credit unions and
mortgage bankers, as well as from competing financial institutions and through alternative delivery channels such as the Internet.



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We ranked 18th among all
depository institutions in the state of Florida in terms of deposits held as of June 2002, the latest date for which comparable data is available. As the following table indicates, market share ranges from to 9.1% in Osceola County to 0.1% in
Hillsborough County.



Branch Deposits in
Florida by County

($ in thousands)



|             |  | At December 31, 2002     |  | As of June 30, 2002 |          
|------------ |  | ------------------------ |  | ------------------- | ---------
|             |  | Number of Branch Offices |  | Republic Deposits   |          
|Brevard      |  | 5                        |  | $                   | 177,926  
|Broward      |  | 9                        |  |                     | 261,168  
|Collier      |  | 1                        |  |                     | 29,275   
|Hernando     |  | 1                        |  |                     | 35,869   
|Hillsborough |  | 3                        |  |                     | 22,793   
|Lee          |  | 1                        |  |                     | 17,751   
|Manatee      |  | 6                        |  |                     | 166,537  
|Marion       |  | 3                        |  |                     | 71,852   
|Monroe       |  | 4                        |  |                     | 105,340  
|Orange       |  | 3                        |  |                     | 60,816   
|Osceola      |  | 4                        |  |                     | 124,094  
|Palm Beach   |  | 4                        |  |                     | 92,666   
|Pasco        |  | 3                        |  |                     | 73,915   
|Pinellas     |  | 18                       |  |                     | 681,706  
|Sarasota     |  | 4                        |  |                     | 95,971   
|Seminole     |  | 1                        |  |                     | 32,685   
|Volusia      |  | 1                        |  |                     | 19,352   
|             |  |                          |  |                     |          
|Total        |  | 71                       |  | $                   | 2,069,716
|             |  |                          |  |                     |          



Lending Activities



We originate a full range of traditional lending products
for our portfolio, using conservative underwriting guidelines that were revamped in 2000. Under our business plan, residential loan originations are made in our Florida markets using strong underwriting standards. Commercial real estate lending is
an important line of business with this product line also focused on borrowers within Florida. We have implemented a program for development of our commercial lending products to small and medium-sized businesses and high net worth individuals and
origination of consumer lending products, primarily home equity loans. For 2002, loan originations from all product types totaled $791.4 million. Of this amount, originations of commercial real estate and commercial (business) loans totaled $265.9
million, consumer loan originations (primarily home equity loans) totaled $213.0 million and residential loan originations were $312.5 million. Mortgage warehouse lending, origination of subprime first lien loans and origination of second lien High
LTV Loans have been discontinued. The balances of these loan products remaining in our loan portfolio now comprise 3.7% of total loans. The remaining amount of all types of loans outside Florida in our portfolio is also significantly less than in
prior years and now comprises 7.6% of total loans.



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The following tables show
information about our loan portfolio by collateral type, based on total dollars and percent of portfolio, as of the dates indicated ($ in thousands):



|Based on total dollars:           |  | At December 31, |          
|--------------------------------- |  | --------------- | ---------
|                                  |  | 2002            |          
|Real estate mortgage loans:       |  |                 |          
|One-to-four family residential    |  | $               | 382,592  
|Commercial real estate            |  |                 | 548,502  
|Home equity loans                 |  |                 | 288,142  
|Multifamily residential           |  |                 | 38,750   
|Subprime mortgages                |  |                 | 33,672   
|Warehouse lines of credit         |  |                 | 118      
|High LTV loans                    |  |                 | 20,729   
|                                  |  |                 |          
|Total real estate mortgage loans  |  |                 | 1,312,505
|Commercial (business) loans       |  |                 | 145,264  
|Consumer loans and other loans    |  |                 | 18,100   
|                                  |  |                 |          
|Total portfolio loans             |  |                 | 1,475,869
|Allowance for loan losses         |  |                 | (27,987  
|                                  |  |                 |          
|Portfolio loans, net of allowance |  |                 | 1,447,882
|Loans held for sale               |  |                 | 37,416   
|                                  |  |                 |          
|Total loans                       |  | $               | 1,485,298
|                                  |  |                 |          



|Based on percent of portfolio:   |  | At December 31, |  
|-------------------------------- |  | --------------- | -
|                                 |  | 2002            |  
|Real estate mortgage loans:      |  |                 |  
|One-to-four family residential   |  | 25.92           | %
|Commercial real estate           |  | 37.16           |  
|Home equity loans                |  | 19.52           |  
|Multifamily residential          |  | 2.63            |  
|Subprime mortgages               |  | 2.28            |  
|Warehouse lines of credit        |  | 0.01            |  
|High LTV loans                   |  | 1.41            |  
|                                 |  |                 |  
|Total real estate mortgage loans |  | 88.93           |  
|Commercial (business) loans      |  | 9.84            |  
|Consumer loans and other loans   |  | 1.23            |  
|                                 |  |                 |  
|Total portfolio loans            |  | 100.00          | %
|                                 |  |                 |  



The following table
shows the maturities of our real estate secured loans at December 31, 2002 and 2001. Loans having no stated schedule of repayments and no stated maturity are reported as due in one year or less. This table also shows the dollar amount of loans
scheduled to mature after one year, according to their interest rate characteristics ($ in thousands):



|                                                              |  | December 31, 2002 |           | December 31, 2001
|------------------------------------------------------------- |  | ----------------- | --------- | -----------------
|                                                              |  | Real Estate       |           | Commercial       
|Type of loan:                                                 |  |                   |           |                  
|Amounts due:                                                  |  |                   |           |                  
|One year or less                                              |  | $                 | 166,631   |                  
|After one through five years                                  |  |                   | 222,134   |                  
|More than five years                                          |  |                   | 961,168   |                  
|                                                              |  |                   |           |                  
|Total                                                         |  | $                 | 1,349,933 |                  
|                                                              |  |                   |           |                  
|                                                             
|Interest rate characteristics for amounts due after one year: |  |                   |           |                  
|Adjustable rate                                               |  | $                 | 163,774   |                  
|Fixed rate                                                    |  |                   | 1,019,528 |                  
|                                                              |  |                   |           |                  
|Total                                                         |  | $                 | 1,183,302 |                  
|                                                              |  |                   |           |                  



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The composition of our loan
portfolio, according to the location of the borrower or the real estate taken as underlying collateral, was as follows ($ in thousands):



|            |  | December 31, |          
|----------- |  | ------------ | ---------
|            |  | 2002         |          
|            |  | Amount       |          
|State       |  |              |          
|Florida     |  | $            | 1,398,830
|New England |  |              | 26,583   
|Georgia     |  |              | 9,530    
|California  |  |              | 12,806   
|Texas       |  |              | 3,493    
|All other   |  |              | 62,043   
|            |  |              |          
|Total       |  | $            | 1,513,285
|            |  |              |          



Credit Administration



We manage our loan portfolio on an ongoing basis using
written portfolio management strategies, guidelines for underwriting standards and risk assessment, and procedures for ongoing identification and management of credit deterioration. We undertake regular portfolio reviews to estimate loss exposure
and determine compliance with policies. Our loan approval process provides for various levels of lending authority to loan officers, the Officers Loan Committee, the Chairman, and the Chief Executive Officer. In addition, loans in excess of
$5.0 million require the approval of the board of directors Loan Committee or a majority of the full board prior to funding. Loan purchases, when applicable, are made subject to the same underwriting standards as loan originations. To achieve
consistency in underwriting policies and procedures, we have centralized the supervision of our loan approval process and all credit decision functions.



Our real estate loan portfolio is comprised of extensions of credit secured by real estate mortgages on permanent properties, and loans made for the
purpose of financing the construction of buildings or other improvements to real estate. Using applicable regulatory guidelines as our basis, we have adopted comprehensive, written real estate lending policies that we believe are consistent with
safe and sound banking practices. These lending policies reflect consideration of the Interagency Guidelines for Real Estate Lending Policies (the Guidelines) adopted by the federal banking agencies in December 1992, which set forth
standards for real estate lending.



Our lending policy addresses
loan-to-value (LTV) limits, loan administration procedures, underwriting standards, portfolio diversification standards and documentation, approval and reporting requirements. The LTV ratio framework, with a 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 real estate category. Our policy, subject to certain approval exceptions,
establishes, among other things, the following maximum LTV limits: raw land (60%); land development (75%); construction (commercial, multifamily and non-residential)(80%) and improved property (60%-85%, depending on collateral type). 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. Our commercial
(business) lending is based on a strategy of extending credit to the Florida business community, with commercial loans being made to small and medium-sized businesses and high net worth individuals with satisfactory cash flows. The board of
directors reviews and approves our lending policies at least annually.



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Asset Quality



Allowance/Provision for
Loan Losses



The allowance for loan losses represents our
estimate of an amount adequate to provide for probable losses inherent in the loan portfolio based on our historical data and the current status of the loan portfolio, including an estimate of losses on loans designated as impaired. Included among
the factors used to establish the allowance are current economic conditions in the markets where we operate, trends in the credit quality of particular loans or classes of loans, loan volumes and concentrations, seasoning of the loan portfolio,
findings of internal loan examinations and results from external bank regulatory examinations.



We conduct an ongoing evaluation and grading of the 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 estimation of the overall allowance necessary based on historical experience. The Banks Loan Review Department independently rates loans and, no less than quarterly, meets with senior management and the loan officers to
discuss all loans that have been identified as potential credit quality problems. The Loan Review Department reports its findings to the Directors Audit Committee to ensure independence of the loan grading function.



Our loan loss allowance is comprised of: (1) a component for individual loan
impairment measured according to Statement of Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a Loan, and, (2) a measure of collective loan impairment according to SFAS No. 5,
Accounting for Contingencies. A loan is considered impaired when, based on current information and events, it is probable that a lender will be unable to collect all amounts due according to the contractual terms of the loan
agreement.



Larger impaired credits that are measured according
to SFAS No. 114 have been defined by us to include loans classified in the substandard, doubtful and in selected cases, special mention risk grades where the borrower relationship equals or exceeds $500,000. These loss estimates are determined on a
loan-by-loan basis based on managements evaluation of loss exposure for each credit, given the current payment status of the loan and the value of any underlying collateral. Specific impairment on loans in this category is calculated based on
the present value of expected future cash flows discounted at the loans effective interest rate, or for collateral-dependent loans, at the fair value of the collateral. Loans for which individual impairment loss estimates are provided are
excluded from the general allowance calculations to prevent duplication.



The allowance on loans made by us that are outside the scope of SFAS No. 114 and are measured according to SFAS No. 5 is often referred to as the general allowance. Loans in this category include commercial (business) and commercial
real estate loans that are performing or have been assigned a grade superior to substandard and large groups of smaller balance homogeneous loans (e.g., residential mortgage and consumer installment) regardless of risk grade.



We believe that our loan loss allowance policy is consistent with generally
accepted accounting principles and with policies established by federal and state regulatory agencies. Also, we have determined that the level of our allowance is appropriate in light of our historical loss experience. While management uses the best
information available in establishing the appropriate amount of the allowance, future adjustments to the allowance or the methodology used in its determination may be necessary if economic conditions change materially from the assumptions used in
making the current estimate of the allowance. Adjustments to the original estimates, if necessary, are made in the period in which it is determined that loss levels may vary from those initial estimates.



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The following table presents
an allocation of the allowance for loan losses at the end of each of the past five years. The allowance has been allocated by applying the methodologies described above to the loan portfolios based on the underlying purpose of the loans. This
allocation of the allowance for loan losses is calculated on an approximate basis and is not necessarily indicative of future losses. The entire amount of the allowance is available to absorb losses occurring in any category of loans. The allocation
of our loan portfolio, calculated using a consistent methodology for 2002 and prior years and showing the allowance amount allocated and the percentage of loans to each category, is as follows ($ in thousands):



|                  |                  | 2002 |                          |  | 2001 |                  |  | 2000                     |        |  | 1999             |   |                          | 1998 |       
|----------------- | ---------------- | ---- | ------------------------ |  | ---- | ---------------- |  | ------------------------ | ------ |  | ---------------- | - | ------------------------ | ---- | ------
|                  | Allowance Amount |      | % Loans in each Category |  |      | Allowance Amount |  | % Loans in each Category |        |  | Allowance Amount |   | % Loans in each Category |      |       
|Residential       |                  | $    | 2,255                    |  | 28   | %                |  | $                        | 4,106  |  | 34               | % |                          | $    | 6,685 
|Comm. real estate |                  |      | 18,297                   |  | 40   |                  |  |                          | 15,486 |  | 39               |   |                          |      | 13,624
|Commercial        |                  |      | 1,360                    |  | 10   |                  |  |                          | 1,939  |  | 8                |   |                          |      | 1,632 
|Consumer(1)       |                  |      | 6,075                    |  | 22   |                  |  |                          | 10,466 |  | 19               |   |                          |      | 11,521
|                  |                  |      |                          |  |      |                  |  |                          |        |  |                  |   |                          |      |       
|Total             |                  | $    | 27,987                   |  | 100  | %                |  | $                        | 31,997 |  | 100              | % |                          | $    | 33,462
|                  |                  |      |                          |  |      |                  |  |                          |        |  |                  |   |                          |      |       

|(1) |  | Includes real estate-secured home equity loans.
|--- |  | -----------------------------------------------



Loan loss allowance activity during 2002 included $9.4 million of loan charge-offs (net of recoveries) and a $5.4 million provision for loan losses.
Activity during 2001 included a $16.2 million provision for loan losses, loan charge-offs (net of recoveries) of $17.0 million and $613,000 reallocated from the allowance to loan discounts. For further discussion related to the loan portfolio and
related loan loss allowance see Item 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsComparison of Balance Sheets at December 31, 2002 and 2001. The following table shows information
concerning the activity in the allowance for loan losses during the periods indicated ($ in thousands):



|                                   |  | Years Ended December 31, |        
|---------------------------------- |  | ------------------------ | -------
|                                   |  | 2002                     |        
|Allowance at beginning of period   |  | $                        | 31,997 
|                                  
|Loan discount transfer             |  |                          |       
|                                  
|Charge-offs:                       |  |                          |        
|Residential first lien             |  |                          | (249   
|Warehouse lines of credit          |  |                          |       
|Commercial real estate/multifamily |  |                          | (6,087 
|Commercial (business)              |  |                          | (716   
|High LTV                           |  |                          | (2,387 
|Home equity                        |  |                          | (896   
|Consumer and other loans           |  |                          | (645   
|                                   |  |                          |        
|Total charge-offs                  |  |                          | (10,980
|                                  
|Recoveries:                        |  |                          |        
|Residential first lien             |  |                          | 126    
|Warehouse lines of credit          |  |                          |       
|Commercial real estate/multifamily |  |                          | 96     
|Commercial loans (business)        |  |                          | 15     
|High LTV                           |  |                          | 497    
|Home equity                        |  |                          | 763    
|Consumer and other loans           |  |                          | 123    
|                                   |  |                          |        
|Total recoveries                   |  |                          | 1,620  
|                                   |  |                          |        
|Net charge-offs                    |  |                          | (9,360 
|Provision for loan losses          |  |                          | 5,350  
|                                   |  |                          |        
|Allowance at end of period         |  | $                        | 27,987 
|                                   |  |                          |        
|Net charge-offs to average loans   |  |                          | 0.64   
|                                   |  |                          |        



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Nonperforming Assets



Nonperforming
assets include: (1) loans which are 90 days or more past due; (2) loans which are less than 90 days past due but where sufficient doubt exists as to the possibility of collecting additional interest; and (3) other real estate (ORE) and
other assets acquired in satisfaction of a loan. Nonperforming loans that are restructured and are current as to their revised terms remain in nonperforming status until there is sufficient payment history to warrant an upgrade to performing status.



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. If there is sufficient doubt as to the collection of future interest a loan may also be placed in non-accrual status before becoming 90 days or more past due. When a
loan is placed in non-accrual status, interest accruals cease and uncollected accrued interest is reversed and charged against current income. Interest income on non-accrual loans is recognized only when received.



Loans classified as nonaccrual totaled $22.2 million at December 31, 2002,
compared with $46.2 million at December 31, 2001, a decrease of $24.0 million. At December 31, 2002 and 2001, we had nonperforming assets (including loans classified as non-accrual) of $39.0 million or 1.5% of total assets and $63.3 million or 2.6%
of total assets, respectively. Accruing loans, which were 90 days past due amounted to $18,000 at December 31, 2002 and $12,000 at December 31, 2001, and primarily consisted of loans in process of renewal. For further discussion of fluctuations in
nonperforming assets, see Item 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsComparison of Balance Sheets at December 31, 2002 and 2001.



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



|                                     |  | At December 31, |       
|------------------------------------ |  | --------------- | ------
|                                     |  | 2002            |       
|Non-accrual loans:                   |  |                 |       
|One-to-four family residential       |  | $               | 4,685 
|Multifamily residential              |  |                 |      
|Subprime mortgages                   |  |                 | 5,036 
|Warehouse lines of credit            |  |                 | 118   
|High LTV loans                       |  |                 | 391   
|Commercial real estate               |  |                 | 8,848 
|Commercial (business)                |  |                 | 2,196 
|Home equity and consumer             |  |                 | 931   
|                                     |  |                 |       
|Total nonaccrual loans               |  |                 | 22,205
|Other nonperforming receivables      |  |                 |      
|ORE acquired through foreclosure     |  |                 | 16,787
|Accruing loans 90 days past due      |  |                 | 18    
|                                     |  |                 |       
|Nonperforming assets                 |  | $               | 39,010
|                                     |  |                 |       
|                                    
|Nonperforming loans to loans         |  |                 | 1.51  
|Nonperforming assets to total assets |  |                 | 1.54  



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Other Real Estate



All ORE assets are recorded at the lower of cost or estimated fair market
value, less selling costs, based on appraisal information that is updated when a property is taken into ORE and thereafter, when determined appropriate by management, but no less than annually.



The following table shows information regarding ORE balances, net of
allowances, as of the dates indicated ($ in thousands):



|                                      |  | At December 31, |       
|------------------------------------- |  | --------------- | ------
|                                      |  | 2002            |       
|Residential houses                    |  | $               | 1,590 
|Vacant land and lots                  |  |                 | 5     
|Commercial land developed for sale    |  |                 | 14,341
|Income-producing commercial buildings |  |                 |      
|Vacant commercial buildings           |  |                 | 851   
|                                      |  |                 |       
|Total ORE                             |  | $               | 16,787
|                                      |  |                 |       
|ORE to total assets                   |  |                 | 0.66  
|                                      |  |                 |       



Troubled Debt Restructurings



In a
troubled debt restructuring (TDR), the creditor allows the debtor certain concessions that would normally not be granted, 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.



The
following table shows the amount of TDRs included in the loan portfolio. All restructured loans were performing as agreed. ($ in thousands):



|December 31,
|------------
|2002        
|$720        



Investment Activities



The investment portfolio serves a primary role in our
balance sheet management. The decision to purchase or sell securities is based upon the current assessment of economic and financial conditions, including the interest rate environment and liquidity requirements. Florida statutes require that a
specified minimum amount of liquid assets be maintained, such minimum based primarily on the level of deposits. At December 31, 2002 and throughout the year, the amount of liquid assets maintained exceeded the regulatory minimum. For further
discussion of investment activities, see Item 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsComparisons of Balance Sheets at December 31, 2002 and 2001 and Note 3 to the Consolidated
Financial StatementsSecurities.



Sources of Funds



The Banks primary source of funds for lending,
investment and other general business purposes are deposit accounts. We offer a full range of deposit services, including checking and other transaction accounts, savings accounts and time deposits. In addition to deposits, another principal source
of funds is loan repayments. If necessary, additional funding is available to the Bank by borrowing from the FHLB, which has been granted a blanket lien on our residential loan portfolio as collateral. We have not relied on brokered deposits in the
past and do not foresee a need to do so in the future. To the extent that additional short-term financing is required, we intend to rely on repurchase agreements and other traditional money market sources of funding. The Company does not currently
maintain any lines of credit. For additional discussion of asset/liability management policies and strategies see Item 7Managements Discussion and Analysis of Financial Condition and Results of OperationsAsset/Liability
Management and Liquidity and Note 10. Other Borrowings.



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The following table shows the
aggregate amounts of those accounts at December 31, 2002 ($ in thousands):



|                                           |  | Weighted AverageInterest Rate |   |  | Amount |           | Percent ofTotal Deposits |       
|------------------------------------------ |  | ----------------------------- | - |  | ------ | --------- | ------------------------ | ------
|Noninterest bearing                        |  | 0.00                          | % |  | $      | 162,716   |                          | 7.86  
|Interest checking                          |  | 0.40                          |   |  |        | 204,743   |                          | 9.89  
|Money market deposits                      |  | 1.45                          |   |  |        | 393,823   |                          | 19.03 
|Savings deposits                           |  | 1.21                          |   |  |        | 180,435   |                          | 8.72  
|Time deposits with original maturities of: |  |                               |   |  |        |           |                          |       
|One year or less                           |  | 3.27                          |   |  |        | 706,395   |                          | 34.13 
|Over one year through five years           |  | 4.23                          |   |  |        | 421,604   |                          | 20.37 
|                                           |  |                               |   |  |        |           |                          |       
|Time deposits(1)                           |  | 3.63                          |   |  |        | 1,127,999 |                          | 54.50 
|                                           |  |                               |   |  |        |           |                          |       
|Total deposits                             |  | 2.40                          | % |  | $      | 2,069,716 |                          | 100.00
|                                           |  |                               |   |  |        |           |                          |       

|(1) |  | Includes time deposits in amounts of $100,000 or more of $246.0 million or 11.9% of total deposits.
|--- |  | ---------------------------------------------------------------------------------------------------



At December 31, 2002, scheduled maturities of all time deposits were as
follows ($ in thousands):



|Years endedDecember 31, |  | Amount |           | Percent ofTotal Time Deposits |       
|----------------------- |  | ------ | --------- | ----------------------------- | ------
|2003                    |  | $      | 706,395   |                               | 62.62 
|2004                    |  |        | 322,721   |                               | 28.61 
|2005                    |  |        | 57,143    |                               | 5.07  
|2006                    |  |        | 13,816    |                               | 1.22  
|2007                    |  |        | 27,918    |                               | 2.48  
|Thereafter              |  |        | 6         |                               | 0.00  
|                        |  |        |           |                               |       
|Total time deposits     |  | $      | 1,127,999 |                               | 100.00
|                        |  |        |           |                               |       



At December 31, 2002,
scheduled maturities of our time deposits that are $100,000 and greater were as follows ($ in thousands):



|                                          |  | Amount
|----------------------------------------- |  | ------
|Less than three months                    |  | $     
|Three through six months                  |  |       
|Seven through twelve months               |  |       
|Over twelve months                        |  |       
|                                          |  |       
|Total time deposits greater than $100,000 |  | $     
|                                          |  |       



Employees



At December 31, 2002, we had 858 full-time equivalent
employees, none of whom were represented by a union or other collective bargaining agreement.



Supervision and Regulation



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



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Regulation of the Company



We are a bank
holding company registered with the Federal Reserve under the Bank Holding Company Act of 1956, as amended (the BHC Act). We are subject to the applicable provisions of the BHC Act and the supervision, examination, and regulations of the
Federal Reserve.



The BHC Act requires every bank holding company
to obtain the prior approval of the Federal Reserve before: (1) 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 of the voting shares of the bank; (2) it or any of its subsidiaries, other than a bank, may acquire all or substantially all of the assets of the bank; or (3) it may merge or consolidate with any other bank holding company.
Similar federal statues require bank holding companies and other companies to obtain the prior approval of the Office of Thrift and Supervision (OTS) before acquiring ownership or control of a savings association.



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 anti-competitive 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, as amended by the
interstate banking provisions of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the Interstate Banking Act), authorizes any bank holding company located in Florida to acquire a bank located in any other state,
and any bank holding company located outside Florida may lawfully acquire any Florida-based bank, regardless of state law to the contrary, in either case subject to certain deposit-percentage, aging requirements, and other restrictions. The
Interstate Banking Act also generally provides that national and state-chartered banks may branch interstate through acquisitions of banks in other states, unless a state has opted out of the interstate branching provisions of the
Interstate Banking Act prior to June 1, 1997. Neither Florida nor any other state in the southeastern United States has opted out. Accordingly, we would have the ability to acquire a bank in a state in the Southeast and consolidate the
newly acquired bank and the Bank into a single bank with interstate branches.



The BHC Act, as currently in effect, generally prohibits us 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.



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##### Table of Contents



The Federal Reserve has
determined that, as a general matter, bank holding companies and their non-bank subsidiaries may engage in, among other things, operating a thrift subsidiary, conducting discount securities brokerage activities, performing certain data processing
services and acting as agent or broker in selling certain types of insurance in connection with credit transactions.



The BHC Act does not place territorial limitations on permissible non-banking activities of bank holding companies. Despite prior approval, the Federal
Reserve has the power to order a bank holding company or its non-bank 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 the holding company.



Under Federal Reserve policy, bank holding companies are expected to act as a source of financial strength and support to 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 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.



The Gramm-Leach-Bliley Act (the Act) amends the BHC Act to authorize new Financial Holding Companies (FHC). Under the FHC provisions of the Act, a BHC can qualify to become a FHC if all of its bank
and thrift subsidiaries are well capitalized and well managed and have a CRA rating of satisfactory or better. Once a BHC becomes a FHC, it is permitted to conduct any securities, insurance and merchant banking activities, as well as any
other activities that are financial in nature or incidental or complementary to a financial activity, such as developing financial software, hosting internet web sites relating to financial matters and operating a travel agency. Under
the regulatory structure prescribed by the Act, the Federal Reserve acts as the umbrella regulator for the FHC, with each FHC subsidiary subject to supervision and regulation by its own functional regulator or agency.



The Act also gives banks the option of conducting certain newly permitted
financial activities in a subsidiary rather than using a FHC. Banks that satisfy the well capitalized, well managed and CRA requirements applicable to FHCs will be able to establish financial subsidiaries that are permitted to conduct
all financial activities as agency and some financial activities as principal such as securities underwriting. The main activities in which financial subsidiaries currently are prohibited from engaging are insurance underwriting, real estate
development and merchant banking.



Regulation of the Bank



The Bank is
organized as a Florida-chartered commercial bank and is regulated and supervised by the Department. The FDIC serves as its primary federal regulator and the administrator of the fund that insures the Banks deposits. The Department and the FDIC
conduct regular examinations, reviewing the adequacy of the loan loss reserves, quality of loans and investments, propriety of management practices, compliance with laws and regulations, and other aspects of operations. In addition to these regular
examinations, the Bank must file 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 regulators, the Department and the FDIC have 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 (BIF) and, as such, deposits in the Bank are insured by the FDIC to the maximum extent permissible by law.



The Bank is subject to the provisions of the CRA. Under the CRA,
the Bank has a continuing and affirmative obligation consistent with their safe and sound operation to help meet the credit needs of their entire communities, including low and moderate-income individuals and neighborhoods. The CRA does



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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 their 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
their regular examinations, to assess a financial institutions record in meeting the credit needs of the community serviced by it, including low and moderate-income neighborhoods. The evaluation focuses on three tests: (1) a lending test, to
evaluate the institutions record of making loans in its service areas; (2) an investment test, to evaluate the institutions record of investing in community development projects; and (3) a service test, to evaluate the institutions
delivery of services through its branches and other offices. A federal banking agencys assessment of a financial institutions CRA record is made available to the public. Further, such assessment is required whenever the institution
applies to, among other things, establish a new branch 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 the Company applies for approval to acquire a bank or other bank holding company, the federal regulator approving the transaction will also assess the CRA records of the Bank. The Bank received a Satisfactory CRA rating in its
most recent examination.



Transactions with Affiliates



There are
multiple restrictions on the extent to which the Company and any future non bank subsidiary can borrow or otherwise obtain credit from the Bank. There are also restrictions on the Banks purchase of, or investment in, the securities or other
assets of the Company. In the event such transactions are permissible, they must be on the same terms and circumstances, including credit standards, that are substantially the same, or at least as favorable to the Bank, as those prevailing at the
time for comparable transactions with non-affiliated companies.



Deposit Insurance



The Bank is subject to FDIC deposit insurance assessments. The Bank is subject to a risk-based assessment system for insured depository institutions that takes into account the risks attributable to different categories and
concentrations of assets and liabilities. This system assigns an institution to one of three capital categories: (1) well capitalized; (2) adequately capitalized; and (3) 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, and attributed to the deposit insurance funds. Under the 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 BIF. However as
part of the acquisitions the Bank has undertaken in the past, the Bank acquired deposits previously insured by the Savings Association Insurance Fund (the SAIF). Based on these acquisitions, 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 September 30, 2002, the most recent measurement date for assessment purposes, approximately 67.8% of the Banks
deposits were treated as SAIF-insured deposits, with the remaining 32.2% of deposits being assessed at the BIF rate. Prior to enactment of the



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Deposit Insurance Funds Act of 1996 (the Funds Act), only assessments against SAIF member
institutions were available to pay interest on the so-called FICO Bonds, which were issued by the Financing Corporation (the FICO) in the late 1980s to fund the resolution of troubled thrifts. The Funds Act shifted a
portion of the FICO funding obligations to the BIF member institutions beginning in 1997. Through the end of 1999, the FICO assessment rate on BIF-assessable deposits was required by the statute to be one-fifth of the SAIF rate. Beginning January 1,
2000, the FDIC equalized the FICO assessment rates for members of both insurance funds at 0.0212 percent. In 2002, the Banks total FICO payment obligation was $176,000, $119,000 of which was attributable to the Banks SAIF-assessable
deposits and the balance of which was attributable to its BIF-assessable deposits.



Capital Requirements



We are required to comply with the capital adequacy standards established by the Federal Reserve (for the Company), and the FDIC (for the Bank). The
minimum capital requirements applicable to the Company and the Bank are essentially the same. Failure to meet capital guidelines could subject us 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 our business, including growth and dividend restrictions. Substantial additional restrictions can be imposed upon us if we fail to
meet applicable capital requirements under the federal prompt corrective action regulations. As of December 31, 2002, the Banks capital ratios exceeded the minimum standards for a well capitalized bank, according to FDIC
guidelines. For additional information regarding capital requirements applicable to the Company and the Bank and their compliance with such requirements see Note 16. Regulatory Capital Requirements.



Payment of Dividends



Under Federal law, if, in the opinion of the FDIC, the Bank 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), the FDIC may require, after notice and hearing, that the Bank 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, the Bank may not pay any dividend to the Company if such payment would cause it to become undercapitalized.



As a Florida-chartered commercial bank, the Bank is subject to Florida
statutes regarding payment of dividends. Under the Florida Financial Institutions Code, the prior approval of the Department is required for dividend payment if the total of all dividends declared by a bank in any calendar year will exceed the sum
of a banks net retained profits (net income less any dividends paid) for that year and its retained net profits for the preceding two years. As of January 1, 2003, the Bank had a net retained profit for dividend payment purposes of $658,000.
At December 31, 2002, the Company had unrestricted cash available for debt service payments of $8.5 million. The Companys annual debt service payments total $4.7 million.



Federal Reserve System



The Federal Reserve system is used primarily for the settlement of funds between member banks. The Federal Reserve
regulations require banks to maintain noninterest earning reserves against their transaction accounts (primarily NOW and regular checking accounts). The Federal Reserve Board regulations, effective November 19, 2001, generally require that reserves
be maintained against aggregate transaction accounts as follows: (1) for accounts aggregating $41.3 million or less the reserve requirement is 3.0%; and (2) for accounts greater than $41.3 million, the reserve requirement is 10.0% against that
portion of total transaction accounts in excess of $41.3 million. The first $5.7 million of otherwise reservable balances (subject to adjustments by the Federal Reserve) are exempted from the reserve



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requirements. The balances maintained to meet the reserve requirements imposed by the Federal Reserve 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, the effect of
this reserve requirement is to reduce the Banks interest earning assets. FHLB system members, including the Bank, also are authorized to borrow from the Federal Reserve discount window, but Federal Reserve regulations require
institutions to exhaust all FHLB sources before borrowing from a Federal Reserve Bank.



Federal Home Loan Bank System



The Bank is a member of the Federal Home Loan Bank (FHLB) system. The FHLB system, which consists of 12 regional
Federal Home Loan Banks is governed and regulated by the Federal Housing Finance Board (the FHFB). The FHLB provides a central credit facility for member institutions. As a member of the FHLB, we are required to acquire and hold shares
of capital stock in the FHLB in an amount at least equal to the greater of one percent of the aggregate principal amount of our unpaid residential mortgage loans, home purchase contracts and similar obligations as of the close of each calendar year,
or five percent of our borrowings from the FHLB (including advances and letters of credit issued by the FHLB on our behalf).



The FHLB makes advances to members in accordance with policies and procedures periodically established by the FHFB and the board of directors of the FHLB.
Currently, outstanding advances from the FHLB are required to be secured by a members shares of stock in the FHLB and by certain types of mortgages and other assets. Interest rates charged for advances vary depending on maturity, the cost of
funds to the FHLB and the purpose of the borrowing. As of December 31, 2002, we had $172.2 million of outstanding advances from the FHLB with an unused credit line totaling $273.0 million.



Liquidity



Under Florida banking regulations, we are required to maintain a daily liquidity position equal to at least 15% of our total
transaction accounts and eight percent of our total non-transaction accounts, less those deposits of public funds for which security has been pledged as provided by law. We may satisfy our liquidity requirements with cash on hand (including cash
items in process of collection), deposits held with the Federal Reserve, demand deposits due from correspondent banks, federal funds sold, interest bearing deposits maturing in 31 days or less and the market value of certain unencumbered, rated,
investment-grade securities and securities issued by Florida or any county, municipality of other political subdivision within the state. The Department and FDIC review our liquidity position as part of their examinations. If we fail to comply with
the liquidity requirements, we generally may not further diminish liquidity either by making any new loans (other than by discounting or purchasing bills of exchange payable at sight) or by paying dividends. At December 31, 2002, using applicable
Florida regulations, the Banks liquidity position was $862.5 million compared to a minimum position of $172.2 million.



Monetary Policy and Economic Controls



The banking business is affected not only by general economic conditions, but also by the monetary policies of the 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, short and long-term changes in the international trade balance
and in the fiscal policies of the United States Government.



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Future monetary policies and
the effect of such policies on the future business and earnings of the Bank cannot be predicted.



Item 2. PROPERTIES



Currently, the
Bank operates 71 full-service branch banking offices located in 17 Florida counties, of which 35 are leased and 36 are owned. Our branches have square footage ranging from 43,000 square feet to 1,230 square feet with lease expiration dates ranging
from the year 2003 to 2022. Our executive offices are located at 111 Second Avenue N.E., Suite 300, St. Petersburg, Florida, 33701, where we lease approximately 45,000 square feet of space under a lease that expires in 2004. Our operations and
servicing functions are conducted from a 77,000 square foot owned building located at 1400 66thStreet N., St.
Petersburg, Florida 33710. We have various options to renew leases at most of our branch locations. We also have six facilities that are not used for banking purposes, five of which are leased and one of which is owned. For further information
regarding our lease obligations, see the Notes to Consolidated Financial Statements.



Item 3. LEGAL PROCEEDINGS



For
information on pending litigation matters, see Note 11 to the Consolidated Financial StatementsCredit Risk Concentration, Off-Balance Sheet Risk, Commitment and Contingencies.



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



No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 2002.



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PART II



Item 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS



Trading Market



Our common stock is currently traded on the NASDAQ National Market under the symbol REPB. The table below shows, the high, low and closing bid information for the common stock as regularly quoted for the periods
indicated.



|                                 |  | High |       | Low |   | Closing
|-------------------------------- |  | ---- | ----- | --- | - | -------
|Quarter ended March 31, 2001     |  | $    | 13.75 |     | $ | 9.50   
|Quarter ended June 30, 2001      |  |      | 16.88 |     |   | 11.75  
|Quarter ended September 30, 2001 |  |      | 18.90 |     |   | 15.67  
|Quarter ended December 31, 2001  |  |      | 17.00 |     |   | 11.78  
|Quarter ended March 31, 2002     |  |      | 17.45 |     |   | 13.00  
|Quarter ended June 30, 2002      |  |      | 20.48 |     |   | 17.17  
|Quarter ended September 30, 2002 |  |      | 21.20 |     |   | 18.58  
|Quarter ended December 31, 2002  |  |      | 20.25 |     |   | 19.13  



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



Stockholders and Dividends



As of December 31, 2002, there were approximately 2,599 beneficial owners of our common stock. To date, the Company has not paid dividends on its common
stock. (See Note 14 to the Consolidated Financial Statements-Stockholders Equity).



Equity Compensation Plan Information



For information regarding the Companys stock option and stock appreciation programs, see Note 14 to the Consolidated Financial Statements, Stockholders Equity.



Item 6. SELECTED CONSOLIDATED FINANCIAL INFORMATION



The following selected consolidated financial and other information as of and for each of the years ended December 31, 1998 through 2002, were derived from the audited consolidated financial statements.



The following information should be read in conjunction with Item 7.
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.



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REPUBLIC BANCSHARES, INC.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

($ in
thousands, except share data)



|                                                        |  | Years Ended December 31, |           
|------------------------------------------------------- |  | ------------------------ | ----------
|                                                        |  | 2002                     |           
|RESULTS OF OPERATIONS:                                  |  |                          |           
|Interest income                                         |  | $                        | 143,245   
|Interest expense                                        |  |                          | 65,233    
|                                                        |  |                          |           
|Net interest income                                     |  |                          | 78,012    
|Loan loss provision                                     |  |                          | 5,350     
|                                                        |  |                          |           
|Net interest income after loan loss provision           |  |                          | 72,662    
|Noninterest income                                      |  |                          | 13,876    
|Noninterest expense                                     |  |                          | 76,007    
|                                                        |  |                          |           
|Income (loss) before income taxes and minority interest |  |                          | 10,531    
|Income tax expense (benefit)                            |  |                          | 4,068     
|Minority interest from subsidiary trust, net of tax     |  |                          | (1,684    
|                                                        |  |                          |           
|Net income (loss)                                       |  | $                        | 4,779     
|                                                        |  |                          |           
|Earnings (loss) per sharediluted                       |  | $                        | 0.42      
|Weighted average shares outstandingdiluted             |  |                          | 11,465,809
|                                                       
|BALANCE SHEET DATA (at period-end):                     |  |                          |           
|Total assets                                            |  | $                        | 2,526,349 
|Securities                                              |  |                          | 827,923   
|Loans                                                   |  |                          | 1,513,285 
|Nonperforming assets                                    |  |                          | 39,010    
|Allowance for loan losses                               |  |                          | 27,987    
|Deposits                                                |  |                          | 2,069,716 
|Stockholders equity                                    |  |                          | 183,684   
|Book value per share (dollars)                          |  |                          | 16.12     
|Tangible book value per share (dollars)                 |  |                          | 15.02     
|                                                       
|SELECTED OPERATING RATIOS:                              |  |                          |           
|Return on average assets                                |  |                          | 0.19      
|Return on average equity                                |  |                          | 2.72      
|Net interest margin                                     |  |                          | 3.34      
|Operating efficiency ratio                              |  |                          | 78.35     
|Loan loss allowance to portfolio loans                  |  |                          | 1.90      
|Loan loss allowance to nonperforming loans              |  |                          | 125.94    
|                                                       
|CAPITAL RATIOS:                                         |  |                          |           
|Equity to assets                                        |  |                          | 7.27      
|Equity & minority interest to assets                    |  |                          | 8.41      
|Regulatory ratiosBank:                                 |  |                          |           
|Tier 1 (leverage)                                       |  |                          | 8.17      
|Tier 1 to risk-assets                                   |  |                          | 12.81     
|Total capital                                           |  |                          | 14.09     
|Regulatory ratios  Company                             |  |                          |           
|Tier 1 (leverage)                                       |  |                          | 7.37      
|Tier 1 to risk-assets                                   |  |                          | 11.58     
|Total capital                                           |  |                          | 14.70     
|                                                       
|OTHER DATA (at period-end):                             |  |                          |           
|Number of branch banking offices                        |  |                          | 71        
|Number of full-time equivalent employees                |  |                          | 858       



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Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The following discussion and analysis of our critical accounting policies, balance sheets, statements of operations, off-balance sheet arrangements and
aggregate contractual obligations should be read in conjunction with Item 6. Selected Consolidated Financial and Other Information, the consolidated financial statements and the related notes included elsewhere therein.



Critical Accounting Policies



Financial Reporting Release No. 60, which was released by the Securities and
Exchange Commission, advises all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. The Notes to the Consolidated Financial Statements include a summary of the significant
accounting policies and methods used in the preparation of our Consolidated Financial Statements. The following is a brief discussion of the more significant accounting policies and methods we employ. The consolidated financial statements are
prepared in accordance with generally accepted accounting principles, which require us to make estimates and assumptions. We believe that, of our significant accounting policies, the following involve a higher degree of judgment and complexity.
Republics management has discussed these critical accounting estimates with the Audit Committee of the Board of Directors.



Fair Value. Certain financial instruments are recorded at fair value, or, in the case of loan servicing rights and loans held for sale, at the
lower of amortized cost or fair value. Unrealized gains and losses may be reflected in results of operations or as an adjustment to equity accounts as applicable. The preferred method of determining fair value is through use of listed market prices,
where possible, and we utilize those market quotes whenever available. If listed market prices are not readily available, fair value is determined based on other relevant factors and methods, including techniques using present value of cashflows. In
preparing fair values using methods other than listed market prices, we employ financial models to estimate those fair values. Those pricing models and their underlying assumptions determine the amount and timing of unrealized gains and losses
recognized, and the use of different pricing models or assumptions could produce different financial results. To the extent financial instruments have extended maturity dates, our estimates of fair value may involve greater subjectivity due to the
lack of transparent market data available upon which to base modeling assumptions. The illiquid nature of certain securities or debt instruments (such as certain mortgage obligations and mortgage-related loan products) also requires a high degree of
judgment in determining fair value. The amount of assets on our balance sheet valued using pricing models comprises less than 1% of total assets but the fluctuation in fair value caused by relatively minor changes in the underlying assumptions could
result in a material change in the results of operations. For an additional discussion regarding the calculation of fair value and the underlying assumptions used in those analyses, see Note 3. Securities and Note 4. MSRs and
Excess Servicing Interest-Only Strips.



Transfers of
Financial Assets. From time to time we may engage in securitization activities. Gains and losses from securitizations are recognized in the consolidated statements of operations when we relinquish control of the transferred financial assets in
accordance with Statement of Financial Accounting Standards (SFAS) SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This is a replacement of the Financial Accounting
Standards Board (FASB) Statement No. 125 and other related pronouncements. The gain or loss on the sale of financial assets depends in part on the previous carrying amount of the assets involved in the transfer, allocated between the
assets sold and the retained interests based upon their respective fair values at the date of sale. We recognize any interests in the transferred assets and any liabilities incurred in securitization transactions on the consolidated statements of
financial condition at fair value. Subsequently, changes in the fair value of interests accounted for as trading assets are recognized in the consolidated statements of operations. The use of different pricing models or assumptions could produce
different financial results. For an additional discussion regarding the calculation of



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fair value and the underlying assumptions used in those analyses, see Note 3 to the Consolidated Financial
StatementsSecurities and Note 4 to the Consolidated Financial StatementsMSRs and Excess Servicing Interest-Only Strips.



Allowance for Loan Losses. The allowance for loan losses is established through a charge to the provision for loan losses which is made to reserve
for estimated losses in outstanding loan balances. The allowance for loan losses represents Republics estimate of the probable losses that have occurred as of the date of the financial statements, as further described in Note 2 and Note 6 in
the notes to our consolidated financial statements included elsewhere herein. The allowance for loan losses is a significant estimate and is regularly evaluated by us for adequacy by taking into consideration factors such as changes in the nature
and volume of the loan portfolio; trends in actual and forecasted portfolio credit quality, including delinquency, charge-off and bankruptcy rates; and current economic conditions that may affect a borrowers ability to pay. The use of
different estimates or assumptions could produce different provisions for loan losses. Our provision for loan losses in future periods may differ from provisions recorded during 2002.



Income taxes. Our income tax policy records the estimated future tax effects of temporary differences between the tax
bases of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating loss and tax credit carryforwards. We follow specific and detailed guidelines regarding the recoverability of any tax assets
recorded on the balance sheet and provide a valuation allowance, if required. Our deferred tax asset at December 31, 2002 totaled $17.6 million. The Company adopted the actual charge off method for recording loan loss provisions on our federal and
state tax returns several years ago. Our allowance for loan losses, which totaled $28.0 million at the end of 2002, has resulted to a charge against earnings for financial reporting purposes but not for income tax purposes. This factor accounted for
55.1% of our deferred tax asset.



Years Ended December 31,
2002 and 2001



Comparison of Balance Sheets at
December 31, 2002 and 2001



Overview



Our total assets were $2.5 billion at December 31, 2002, an
increase of $67.0 million or 2.7% from the end of 2001. At year-end 2002, stockholders equity was $183.7 million and our stated book value was $16.12 per share.



Securities



Our securities portfolio is comprised primarily of mortgage-backed securities with an emphasis on securities with adjustable rate features. At December
31, 2002, securities totaled $827.9 million, compared to $834.1 million at December 31, 2001, a decrease of $6.2 million or 0.7%. At year-end 2002, the securities portfolio included 86.7% of securities that were adjustable rate and 13.3% that were
fixed rate. Throughout 2002, we undertook a program to reduce interest rate risk in our available for sale portfolio, selling fixed rate securities and replacing them with adjustable rate securities. As a result, the duration of our securities
portfolio at year-end 2002 was 1.37 years compared to 1.41 years at the end of 2001, based on prevailing expectations for mortgage prepayments at both dates. At year-end 2002, $820.1 million of securities were classified as available for sale, none
were in the held to maturity category and $7.8 million were trading assets. During 2002, we transferred securities in the held to maturity category, all of which were fixed rate, into the available for sale category to permit sale at a later date.
At December 31, 2001, $792.7 million of securities were classified as available for sale, $21.5 million were in the held to maturity category and $19.9 million were trading assets.



The market values assigned to the available for sale portfolio were derived using market quotations at period end. Unrealized
market valuation gains and losses on those securities were recorded as a separate component of shareholders equity, net of deferred income taxes. Securities in the held to maturity portfolio, if any, were



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carried at amortized cost. Trading assets were carried at current market values with any resulting adjustment reflected in current earnings.



Included in the trading asset category at year-end 2002 were
several investments acquired in prior years, including: (1) $6.2 million in overcollateralization and residual interests in cash flows from securitizations of High LTV Loans in December 1997 and June 1998; and (2) $1.6 million representing excess
spread on mortgage servicing rights. A subordinate tranche in the June 1998 securitization had been held in the trading category at the end of 2001 but was sold during 2002. Under applicable accounting rules, use of quoted market values is the
preferred method for valuing trading assets. However, where the market for those assets is illiquid and price quotations are not readily available, other methods are permitted, including techniques utilizing the present value of expected cash flows.
We have used present value techniques to value our trading assets. For additional information on the assumptions used to value our trading assets, see Note 2, Summary of Significant Accounting Policies and Note 3 Securities
in the Notes to Consolidated Financial Statements.



Loans



Management has placed an
increased emphasis on commercial and consumer lending to improve the overall profitability of the loan portfolio and diversify risk. Mortgage lending for both residential and commercial real estate purposes continue to be important products for us
under our conservative underwriting guidelines. The mix of our loan portfolio changed during 2002 with commercial and consumer loans comprising 31.2% of the total portfolio at the end of 2002 compared to 26.5% at the end of 2001. Residential and
commercial real estate mortgages comprised 68.0% of the portfolio at December 31, 2002, down from 73.5% a year ago.



Following several periods of declining loan balances, loan growth was positive during 2002. Total loans, including loans held for sale, were $1.5 billion
at December 31, 2002, compared to $1.4 billion at December 31, 2001, an increase of $92.3 million or 6.5%. Our portfolio of Florida loans amounted to $1.4 billion at year-end 2002, an increase of $263.3 million or 23.2% over $1.1 billion at the end
of 2001. Loans to borrowers located outside the state of Florida declined substantially during 2002, falling $171.0 million or 59.9% from $285.5 million or 20.1% of total loans at the end of 2001 to $114.5 million or 7.6% at the end of 2002.



We sell all of our fixed rate residential mortgage originations
in the secondary market to minimize interest rate risk and emphasize loan products with a short duration. The average duration of our loan portfolio at the end of 2002 was 1.46 years compared to 1.90 years at the end of 2001. Loans with adjustable
rate features comprised $1.1 billion or 73.0% of the portfolio at December 31, 2002 compared to $904.6 million or 65.1% of the portfolio at the end of 2001.



Allowance for Loan Losses



The allowance for loan losses amounted to $28.0 million (1.9% of portfolio loans) at December 31, 2002, compared with $32.0 million (2.3% of portfolio
loans) at December 31, 2001. The ratio of the allowance for loan losses to nonperforming loans was 125.9% compared to 69.2% at the end of 2001. During 2002 we recorded a $5.4 million provision for loan losses and charged-off $9.4 million of loans
(net of recoveries). Charge-offs taken on two hotel loans comprised $2.3 million of this total. In addition, net loan losses were $1.9 million on High LTV Loans and $701,000 on commercial (business) loans. The net charge-off ratio during 2002 was
0.6% compared to 1.1% for 2001.



Nonperforming Assets



Nonperforming assets amounted to $39.0 million or 1.5% of
total assets at December 31, 2002, compared with $63.3 million or 2.6% of total assets at December 31, 2001. Nonperforming loans totaled $22.2 million (or 1.5% of total loans) at December 31, 2002, a decrease of $24.0 million from December 31, 2001.
Nonperforming one-to-four family residential mortgage loans decreased by $3.0 million, while commercial real estate nonperformers



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decreased $20.9 million. ORE decreased $106,000 from $16.9 million at December 31, 2001, to $16.8 million at December 31, 2002.



Our nonperforming assets at year-end 2002 included a hotel in Wilmington,
Delaware that accounted for $12.4 million or 31.8% of our total nonperforming assets. Residential loans in various stages of foreclosure account for an additional 4.1% of our total nonperforming assets.



Deposits



Total deposits were $2.1 billion at December 31, 2002, a decrease of $60.6
million or 2.8% from the end of 2001. Certificates of deposit declined $78.7 million. Checking accounts (including non-retail deposits such as official checks) increased $27.2 million, while savings deposits decreased by $9.1 million.
Managements business plan includes, as one of the principal strategies, a reduction in the dependence on time deposits as a source of funds. The mix of total deposits improved during 2002 with time deposits declining to 54.5% of total deposits
at year-end 2002, compared with 56.6% at the end of 2001. Transaction accounts, including checking and money market accounts, were 36.8% of total deposits and savings deposits were 8.7% of the total at year-end 2002 compared to 34.5% and 8.9%,
respectively, at the end of 2001.



Stockholders
Equity



Stockholders equity was $183.7 million at
December 31, 2002, or 7.3% of total assets, compared to $172.0 million or 7.0% of total assets at December 31, 2001. At December 31, 2002, the Banks tier 1 (leverage) capital ratio was 8.2%, its tier 1 risk-based capital ratio was
12.8%, and its total risk-based capital ratio was 14.1%, all in excess of FDIC guidelines for an institution to be considered a well-capitalized bank. The same ratios for the Company were 7.4%, 11.6% and 14.7%.



Comparison of Results of Operations for the Year Ended December 31, 2002
and 2001



Overview



Net income for 2002 was $4.8 million or $0.42 per diluted share. For 2001, a
net loss of $3.9 million or $0.37 per diluted share was incurred. Net interest income increased year over year by $9.5 million or 13.8% while non-interest expenses declined $3.0 million or 3.7%. Valuation adjustments in the fourth quarter of 2002
totaled $1.8 million on an after-tax basis, and included charges to reduce the carrying value of loan servicing rights and record an impairment loss on a lease obligation. These fourth quarter adjustments reduced per share earnings for the full year
of 2002 by $0.16. In 2001, we recorded a $4.0 million writedown to our interest-only residual investments and a $5.9 million chargeoff of a warehouse line of credit to Greatstone, a defunct mortgage lender.



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Analysis of Net Interest
Income (see table on page 24)



Net interest margin, the
difference between the yield on earning assets and the cost of funds, including noninterest-bearing sources, was 3.3% for 2002 compared to 3.0% for 2001. Net interest income increased $9.5 million during 2002 with $4.4 million of the improvement
coming from an increased net interest margin and $5.1 million from an increase in net interest-earning assets and a more favorable asset mix. On a quarterly basis throughout 2002, net interest margin recovered after sustaining successive declines
throughout 2001. The continuing decline in interest rates that began in early 2001 and continued throughout 2002 was the major factor that caused a drop in asset yield from 7.3% for 2001 to 6.2% for 2002. However, funds costs declined during 2002 at
a faster rate than the decline in asset yield, dropping 62 basis points from 4.7% to 3.1%. This factor is due in large part to managements strategy to change the mix in interest-bearing deposits to emphasize interest checking, savings and
money market accounts and to reduce the dependence on time deposits. The percent of interest checking, savings and money market deposits increased to 39.3% of average interest-bearing deposits during 2002 from 35.5% for 2001 with the time deposit
percentage falling from 64.5% to 60.7%.



Noninterest
Income



Noninterest income for the year ended December
31, 2002, was $13.9 million compared with $23.0 million for the same period in 2001, a decrease of $9.1 million. Service charges on deposit accounts declined, primarily due to sale of branches in 2001 and reduced transaction volumes. Loan service
fee income in 2002 was reduced by the high level of repayments to the loan servicing portfolio, which required an increased level of amortization of servicing rights, and by a $1.2 million valuation allowance recorded to account for the decline in
value of the servicing portfolio. Gains on sale of new loan production increased over 2001 by $1.0 million as originations of fixed rate residential loans held for sale increased substantially. During 2001, noninterest income included $4.5 million
of gains on sale of branch deposits and a $1.1 million gain on the sale of High LTV Loan servicing rights. The following table reflects the components of noninterest income for the years ended December 31, 2002 and 2001 ($ in thousands):



|                                    |  | For the Years Ended December 31, |       
|----------------------------------- |  | -------------------------------- | ------
|                                    |  | 2002                             |       
|Service charges on deposit accounts |  | $                                | 6,285 
|Loan service fees                   |  |                                  | (1,955
|Other loan fee income               |  |                                  | 2,673 
|Gain on sale of loans, net          |  |                                  | 2,040 
|Gain (loss) on sale of investments  |  |                                  | 2,980 
|Trading loss on residuals           |  |                                  | (87   
|Gain on sale of branch deposits     |  |                                  |      
|Other income                        |  |                                  | 1,940 
|                                    |  |                                  |       
|Total noninterest income            |  | $                                | 13,876
|                                    |  |                                  |       



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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, 2002 and 2001 ($ in thousands; nontaxable loans and securities are not significant):



|                                        |  | Years Ended December 31, |          
|--------------------------------------- |  | ------------------------ | ---------
|                                        |  | 2002                     |          
|                                        |  | Average Balance          |          
|Summary of Average Rates                |  |                          |          
|Interest earning assets:                |  |                          |          
|Loans                                   |  | $                        | 1,468,583
|Securities                              |  |                          | 810,333  
|FHLB stock                              |  |                          | 14,779   
|Federal funds sold & deposits in bank   |  |                          | 27,352   
|                                        |  |                          |          
|Total interest earning assets           |  |                          | 2,321,047
|Noninterest earning assets              |  |                          | 166,679  
|                                        |  |                          |          
|Total assets                            |  | $                        | 2,487,726
|                                        |  |                          |          
|Interest bearing liabilities:           |  |                          |          
|Interest checking                       |  | $                        | 193,503  
|Money market                            |  |                          | 395,300  
|Savings                                 |  |                          | 181,480  
|Time deposits                           |  |                          | 1,190,722
|FHLB advances                           |  |                          | 95,287   
|Subordinated debt                       |  |                          | 29,309   
|Other holding company debt              |  |                          |         
|Other borrowings                        |  |                          | 36,182   
|                                        |  |                          |          
|Total interest bearing liabilities      |  |                          | 2,121,783
|Noninterest bearing liabilities         |  |                          | 189,969  
|Stockholders equity                    |  |                          | 175,974  
|                                        |  |                          |          
|Total liabilities and equity            |  | $                        | 2,487,726
|                                        |  |                          |          
|Net interest income/net interest spread |  |                          |          
|                                        |  |                          |          
|Net interest margin                     |  |                          |          
|                                        |  |                          |          



|                                       |  | Increase (Decrease) Due to: |       
|-------------------------------------- |  | --------------------------- | ------
|                                       |  |                             |       
|                                       |  | Volume                      |       
|Changes in Net Interest Income         |  |                             |       
|Interest earning assets:               |  |                             |       
|Loans                                  |  | $                           | (4,791
|Securities                             |  |                             | 10,197
|FHLB stock                             |  |                             | 90    
|Federal funds sold & deposits in banks |  |                             | (2,846
|                                       |  |                             |       
|Total change in interest income        |  |                             | 2,650 
|Interest bearing liabilities:          |  |                             |       
|Interest checking                      |  |                             | 108   
|Money market                           |  |                             | 1,512 
|Savings                                |  |                             | (126  
|Time deposits                          |  |                             | (5,629
|FHLB advances                          |  |                             | 1,751 
|Subordinated debt                      |  |                             | 381   
|Other holding company debt             |  |                             | (227  
|Other borrowings                       |  |                             | (211  
|                                       |  |                             |       
|Total change in interest expense       |  |                             | (2,441
|                                       |  |                             |       
|Total change in net interest income    |  | $                           | 5,091 
|                                       |  |                             |       



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##### Table of Contents



Noninterest Expense



Total noninterest expenses for the year ended December 31,
2002, were $76.0 million, compared with $78.9 million for the same period in 2001, a decrease of $2.9 million. Operating expenses for the year ended December 31, 2002, included in the noninterest expense total, were $72.0 million, compared with
$74.5 million for the same period in 2001, a decrease of $2.5 million.



The following table reflects the components of noninterest expense for the years ended December 31, 2002 and 2001 ($ in thousands):



|                                               |  | For the Years Ended December 31, |       
|---------------------------------------------- |  | -------------------------------- | ------
|                                               |  | 2002                             |       
|Salaries and benefits                          |  | $                                | 38,164
|Net occupancy expense                          |  |                                  | 14,474
|Advertising and marketing                      |  |                                  | 888   
|Data processing fees and services              |  |                                  | 6,289 
|Loan collection/repossession costs             |  |                                  | 1,035 
|FDIC and state assessments                     |  |                                  | 656   
|Telephone expense                              |  |                                  | 1,259 
|Postage and supplies                           |  |                                  | 2,511 
|Legal and professional                         |  |                                  | 1,235 
|Other operating expense                        |  |                                  | 5,483 
|                                               |  |                                  |       
|Total operating expenses                       |  |                                  | 71,994
|ORE (income) expense, net of ORE income        |  |                                  | (454  
|Provision for losses on ORE                    |  |                                  | 1,700 
|Amortization of goodwill & premium on deposits |  |                                  | 2,767 
|                                               |  |                                  |       
|Total noninterest expense                      |  | $                                | 76,007
|                                               |  |                                  |       



Years Ended December
31, 2001 and 2000

Comparison of Balance Sheets at December 31, 2001 and 2000



Overview



Total assets were $2.5 billion at December 31, 2001, an increase of $18.7
million or 0.8% over 2000. During 2001, we undertook a strategy to sell branch offices in areas outside our desired market area, which reduced asset growth. Excluding those branch sales transactions, total assets would have increased by $132.9
million.



Securities



During 2001, loan repayments, primarily from discontinued loan products, were
substantial and the additional liquidity from loan runoff was invested in mortgage securities. Our securities portfolio grew from $407.0 million at the end of 2000 to $834.1 million at the end of 2001, an increase of $427.1 million or 104.9%. At
December 31, 2001, $792.7 million of securities were classified as available for sale, $21.5 million were classified as held to maturity and $19.9 million were trading assets, all of which were mortgage-related securities. Included in the trading
asset category were a $10.9 million subordinate tranche purchased from a securitization of High LTV Loans in June 1998 which was sold in 2002; $5.8 million in overcollateralization and residual interests in cash flows from securitizing High LTV
Loans; and $3.2 million of excess spread on mortgage servicing rights.



At the end of 2001 an adjustment was made to the valuation assumption of expected cumulative losses on each securitization (expressed as total lifetime losses as a percent of the original balance of loans in the securitization). The
cumulative loss factor for the securitization completed in December 1997 was increased from an original estimate of 9.6% to 19.4%. The cumulative loss factor for the securitization completed in June 1998 was increased from an original estimate of
10.7% to 18.4%. As a result of that increase in expected future losses, a trading loss of $4.0 million was recorded for 2001.



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##### Table of Contents



Loans



Total loans were $1.4 billion at December 31, 2001,
compared to $1.7 billion for the same period in 2000, a decrease of $290.3 million or 17.0%. The decrease was due to payoffs of discontinued loan products, sales of loans to fund branch deposit sales and to the overall rapid decline in interest
rates, which caused loan prepayments to rise.



Residential loans declined by $177.2 million, commercial real estate loans declined $115.2 million and commercial (business) loans declined $16.2 million. Home equity loans originated through our retail banking branch network
increased $65.1 million. Overall, loans made to borrowers in Florida declined by $157.7 million or 12.1% while loans outside Florida declined by $132.6 million or 31.7%.



Allowance for Loan Losses



The allowance for loan losses amounted to $32.0 million (2.3% of portfolio loans) at December 31, 2001, compared with $33.5
million (2.0% of portfolio loans) at December 31, 2000. At December 31, 2001, the ratio of the allowance for loan losses to nonperforming loans was 69.2% compared to 66.1% at the end of 2000. During 2001 we recorded a $16.2 million provision for
loan losses. Other activity included $17.0 million of loan charge-offs (net of recoveries) and $613,000 reallocated from the allowance to loan discount. Net chargeoffs for the year included losses of $2.5 million on High LTV Loans and $6.5 million
from warehouse lines of credit, the latter including a $5.9 million charge on a warehouse line to a now-defunct warehouse lender. We also charged off $808,000 of residential loans and $2.1 million of home equity loans; both comprised primarily of
loans originated in the 1997-98 timeframe.



Nonperforming
Assets



Nonperforming assets amounted to $63.3 million
or 2.6% of total assets, at December 31, 2001, compared with $57.0 million, or 2.3% of total assets, at December 31, 2000. Nonperforming loans totaled $46.2 million (or 3.3% of total loans) at the end of 2001, a decrease of $4.4 million from the
prior year-end. Nonperforming one-to-four family residential mortgage loans decreased by $2.3 million, while nonperforming warehouse lines of credit and home equity loans decreased $3.0 million. ORE increased $11.2 million from $5.7 million at
December 31, 2000 to $16.9 million at December 31, 2001. Our nonperforming assets at year-end 2001 included a hotel in Wilmington, Delaware and a residential development in Naples, Florida, which we took ownership of in 2001, that accounted for
$26.2 million or 41.5% of our total nonperforming assets.



Deposits



Total deposits were $2.1
billion at December 31, 2001, compared to $2.2 billion at the prior year-end, a decrease of $27.5 million or 1.3%. The mix of total deposits during 2001 improved with time deposits reduced to 56.6% of total deposits at year-end 2001, compared with
62.5% at the end of 2000. Transaction accounts, including checking and money market accounts were 34.5% of total deposits and savings deposits were 8.9% at year-end 2001, compared to 28.2% and 9.3%, respectively, at the end of 2000. Overall, since
year-end 2000, certificates of deposit declined $142.6 million of which $69.9 million were from the branch sales. Checking accounts (including non-retail deposits such as official checks) increased $27.1 million, while savings deposits declined by
$10.3 million.



Stockholders Equity



Stockholders equity was $172.0 million at December
31, 2001, or 7.0% of total assets, compared to $172.3 million, or 7.1% of total assets, at December 31, 2000. At December 31, 2001, the Banks tier 1 (leverage) capital ratio was 7.9%, its tier 1 risk-based capital ratio was 13.1%,
and its total risk based capital ratio was 14.4%, all in excess of FDIC guidelines for an institution to be considered a well-capitalized bank. The same ratios for the Company were 7.2%, 11.9% and 15.2%.



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##### Table of Contents



Comparison of Results of
Operations for the Years Ended December 31, 2001 and 2000



Overview



During 2001, we recorded
a $4.0 million writedown to our interest-only residual investments and a $5.9 million charge-off of a warehouse line of credit to Greatstone, a defunct mortgage lender. Both items were major factors leading to a $3.9 million or $0.37 per share net
loss for the full year of 2001.



Analysis of Net Interest
Income (see table on page 28)



Net interest margin, the
difference between the yield on earning assets and the cost of funds, including noninterest-bearing sources, was 3.0% for 2001 compared to 3.8% for 2000. On a quarterly basis throughout 2001, net interest margin fell to a yearly low of 2.9% in the
third quarter of 2001 and then recovered to 3.1% in the fourth quarter. The changes in net interest margin throughout 2001 reflect the overall rapid decline in market interest rates that took place during the year. The repricing structure of the
Companys earning assets and interest bearing liabilities is asset sensitive, meaning that asset yield declines faster than funds costs during the first three to four months following a rate reduction. The series of consecutive rate
cuts during 2001 lengthened the time needed to stabilize the net interest margin. Also contributing to the decline in net interest margin during 2001 was a change in asset mix with a higher percentage of earning assets invested in mortgage
securities and a reduced amount of loans outstanding.



Noninterest Income



Noninterest
income for the year ended December 31, 2001 was $23.0 million compared with $7.3 million for the same period in 2000, an increase of $15.7 million. Gains on sale of new loan production increased by $472,000 to $1.0 million and gains on sale of
investments (primarily from securitization and sale of loans) were $5.3 million, a $5.1 million increase. Also during 2001, noninterest income included $4.5 million of gains on sale of branch deposits, a $1.1 million gain of the sale of High LTV
Loan servicing rights and a $4.0 million trading loss or writedown on the interest-only residual investment. For 2000, a $13.5 million writedown to the interest-only residual investment was recorded. Loan service fee income in 2001 was reduced by
the high level of repayments to the loan servicing portfolio, which required an increased level of amortization of servicing rights. The following table reflects the components of noninterest income for the years ended December 31, 2001 and 2000 ($
in thousands):



|                                    |  | For the Years Ended December 31, |       
|----------------------------------- |  | -------------------------------- | ------
|                                    |  | 2001                             |       
|Service charges on deposit accounts |  | $                                | 7,714 
|Loan service fees                   |  |                                  | 2,208 
|Other loan fee income               |  |                                  | 3,689 
|Gain on sale of loans, net          |  |                                  | 1,015 
|Gain on sale of securities, net     |  |                                  | 5,299 
|Net trading (loss)                  |  |                                  | (4,032
|Gain on sale of branch deposits     |  |                                  | 4,483 
|Other income                        |  |                                  | 2,653 
|                                    |  |                                  |       
|Total noninterest income            |  | $                                | 23,029
|                                    |  |                                  |       



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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, 2001 and 2000 ($ in thousands). Nontaxable loans and securities are not significant:



|                                        |  | 2001            |           |          | 2000 |             
|--------------------------------------- |  | --------------- | --------- | -------- | ---- | ------------
|                                        |  | Average Balance |           | Interest |      | Average Rate
|Summary of Average Rates                |  |                 |           |          |      |             
|Interest earning assets:                |  |                 |           |          |      |             
|Loans                                   |  | $               | 1,554,848 |          | $    | 124,015     
|Securities                              |  |                 | 577,161   |          |      | 34,712      
|FHLB stock                              |  |                 | 13,336    |          |      | 901         
|Federal funds sold & deposits in banks  |  |                 | 125,657   |          |      | 5,720       
|Commercial paper                        |  |                 |          |          |      |            
|                                        |  |                 |           |          |      |             
|Total interest earning assets           |  |                 | 2,271,002 |          |      | 165,348     
|Noninterest earning assets              |  |                 | 142,211   |          |      |             
|                                        |  |                 |           |          |      |             
|Total assets                            |  | $               | 2,413,213 |          |      |             
|                                        |  |                 |           |          |      |             
|Interest bearing liabilities:           |  |                 |           |          |      |             
|Interest checking                       |  | $               | 169,699   |          | $    | 846         
|Money market                            |  |                 | 346,902   |          |      | 12,152      
|Savings                                 |  |                 | 185,812   |          |      | 5,519       
|Time deposits                           |  |                 | 1,277,733 |          |      | 74,279      
|FHLB advances                           |  |                 | 13,260    |          |      | 426         
|Subordinated debt                       |  |                 | 24,110    |          |      | 1,761       
|Other holding company debt              |  |                 | 3,805     |          |      | 454         
|Other borrowings                        |  |                 | 44,202    |          |      | 1,349       
|                                        |  |                 |           |          |      |             
|Total interest bearing liabilities      |  |                 | 2,065,523 |          |      | 96,786      
|Noninterest bearing liabilities         |  |                 | 176,750   |          |      |             
|Stockholders equity                    |  |                 | 170,940   |          |      |             
|                                        |  |                 |           |          |      |             
|Total liabilities and equity            |  | $               | 2,413,213 |          |      |            
|                                        |  |                 |           |          |      |             
|Net interest income/net interest spread |  |                 |           |          | $    | 68,562      
|                                        |  |                 |           |          |      |             
|Net interest margin                     |  |                 |           |          |      |             
|                                        |  |                 |           |          |      |             





|                                       |        | Increase (Decrease) Due to |        
|-------------------------------------- | ------ | -------------------------- | -------
|                                       | Volume |                            |        
|Changes in Net Interest Income         |        |                            |        
|Interest earning assets:               |        |                            |        
|Loans                                  |        | $                          | (27,365
|Securities                             |        |                            | 8,105  
|FHLB stock                             |        |                            | (38    
|Federal funds sold & deposits in banks |        |                            | 1,994  
|Commercial paper                       |        |                            | (56    
|                                       |        |                            |        
|Total change in interest income        |        |                            | (17,360
|Interest bearing liabilities:          |        |                            |        
|Interest checking                      |        |                            | (81    
|Money market                           |        |                            | 2,568  
|Savings                                |        |                            | (1,908 
|Time deposits                          |        |                            | (7,397 
|FHLB advances                          |        |                            | 406    
|Subordinated debt                      |        |                            | 689    
|Other holding company debt             |        |                            | (918   
|Other borrowings                       |        |                            | 106    
|                                       |        |                            |        
|Total change in interest expense       |        |                            | (6,535 
|                                       |        |                            |        
|Change in net interest income          |        | $                          | (10,825
|                                       |        |                            |        



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Noninterest Expense



Total noninterest expenses for 2001 were $78.9 million
compared with $80.0 million for the same period in 2000, a decrease of $1.1 million. Operating expenses for 2001, included in the noninterest expense total, were $74.5 million, compared with $75.5 million for the same period in 2000, a decrease of
$1.0 million. The following table reflects the components of noninterest expense for the years ended December 31, 2001 and 2000 ($ in thousands):



|                                               |  | For the YearsEnded December 31, |       
|---------------------------------------------- |  | ------------------------------- | ------
|                                               |  | 2001                            |       
|Salaries and benefits                          |  | $                               | 38,557
|Net occupancy expense                          |  |                                 | 13,362
|Advertising and marketing                      |  |                                 | 1,640 
|Data processing fees and services              |  |                                 | 7,387 
|Loan collection/repossession costs             |  |                                 | 2,016 
|FDIC and state assessments                     |  |                                 | 687   
|Telephone expense                              |  |                                 | 1,626 
|Postage and supplies                           |  |                                 | 2,665 
|Legal and professional                         |  |                                 | 1,426 
|Other operating expense                        |  |                                 | 5,128 
|                                               |  |                                 |       
|Total operating expenses                       |  |                                 | 74,494
|ORE (income) expense, net of ORE income        |  |                                 | 750   
|Provision for losses on ORE                    |  |                                 | 272   
|Amortization of goodwill & premium on deposits |  |                                 | 3,449 
|                                               |  |                                 |       
|Total noninterest expense                      |  | $                               | 78,965
|                                               |  |                                 |       



Selected Quarterly
Financial Data



Selected unaudited quarterly financial
information for the years ended December 31, 2002 and 2001 follows ($ in thousands except share data):



|                           |  | 2002         
|-------------------------- |  | -------------
|                           |  | First Quarter
|Interest income            |  | $            
|Interest expense           |  |              
|                           |  |              
|Net interest income        |  |              
|                           |  |              
|Net income                 |  |              
|                           |  |              
|Earnings per share-basic   |  |              
|                           |  |              
|Earnings per share-diluted |  | $            
|                           |  |              



|                                  |  | 2001          |       
|--------------------------------- |  | ------------- | ------
|                                  |  | First Quarter |       
|Interest income                   |  | $             | 45,357
|Interest expense                  |  |               | 27,193
|                                  |  |               |       
|Net interest income               |  |               | 18,164
|                                  |  |               |       
|Net income (loss)                 |  |               | 1,636 
|                                  |  |               |       
|Earnings (loss) per share-basic   |  |               | 0.15  
|                                  |  |               |       
|Earnings (loss) per share-diluted |  | $             | 0.14  
|                                  |  |               |       



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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Liquidity and Asset/Liability Management



Liquidity



Liquidity represents our ability to meet our continuing funding needs, primarily loan growth, deposit withdrawals, and scheduled repayment of borrowings. Primary sources of liquidity for the Bank include the deposit-gathering
capacity of our retail banking network and borrowings from the FHLB. The Bank also has available to it secured borrowing lines utilizing our mortgage securities portfolio as collateral. The primary source of funds for the Company is dividends from
the Bank which the Company relies on for its debt service obligations. At January 1, 2003, the Bank had a $658,000 surplus position for dividend payment purposes. The parent company also had $8.5 million of unrestricted cash available to it. Annual
debt service requirements for the parent company are $4.7 million.



Statutory requirements of the State of Florida determine the amount of legal liquidity required to be held by the Bank. At December 31, 2002, the Banks liquidity ratio, calculated by dividing net cash and investments of $862.5
million by net deposits and short-term liabilities of $2.3 billion, was 37.5% as compared to 40.8% at December 31, 2001. Net liquid assets were $683.4 million in excess of the amount required by Florida statutes.



Asset/Liability Management



The primary objective of interest rate risk management is to minimize the
effects that changes in interest rates have on net interest income. This is accomplished through active management of asset and liability portfolios, including the timing of repricing of assets and liabilities and the optimum mix of assets and
liabilities on the balance sheet. Management has formed an Asset/Liability Committee (ALCO) that meets periodically to monitor the loan, investment and liability portfolios and determine appropriate strategies to meet interest rate risk
objectives. We manage interest rate risk primarily by changing the maturity distribution of our investment portfolio and emphasizing loan originations carrying variable interest rates tied to interest-sensitive indices. Additionally, the Bank may
employ long-term fixed rate advances from the FHLB to improve the match between interest earning assets and interest bearing liabilities. The Bank does not currently utilize off-balance sheet hedging instruments such as interest rate swaps, caps,
floors or other such financial derivatives but may do so in the future, subject to prior approval by the Board of Directors.



One traditional measure of the mismatch of assets maturing or re-pricing within certain periods, and liabilities maturing or re-pricing within the same
period, is the gap for such period. Controlling the maturity or re-pricing of an institutions assets and liabilities in order to minimize interest rate risk is commonly referred to as gap management. Positive gap
occurs, during a specific time period, when more of an institutions assets are scheduled to re-price 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. Negative gap
occurs when more of an institutions liabilities are scheduled to re-price 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. In addition to the traditional gap measurement,
management also relies on the measurement of the duration of the balance sheet. Duration is determined by calculating the weighted average of the terms of future cash flows, where the present values of the cash flows are the weights. This provides
the effective term of a series of cash flows, comparable to the term of a zero coupon (single cash flow) instrument and is a measure of the price sensitivity of an instrument with the price of a longer term instrument being more sensitive than that
of a shorter term instrument.



Our policy is to maintain a
cumulative one-year gap of no more than plus or minus 15% of total assets. Also, it is our policy to limit interest rate risk over the entire range of maturities on the balance sheet by



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minimizing the difference between asset and liability/equity durations. We monitor our compliance with
this policy through measurement of the sensitivity of changes in net interest income to changes in interest rates. Our policy guideline is to limit the change in net interest income over a one-year time horizon to no more than 15% of base net
interest income, assuming a 200 basis point change in market interest rates ramped over the one-year period.



The cumulative one-year gap at December 31, 2002, was a positive $12.3 million, or a positive 0.5% (expressed as a percentage of total assets). At the end of 2001 the cumulative one-year gap was a
negative $218.7 million or a negative 8.9% of total assets. Also at year-end 2002, the duration of our assets was 1.73 years while the duration of our liabilities and equity was 2.06 years. (A duration of 8.0 years was assigned to non-interest
bearing assets, non-interest bearing liabilities and equity accounts).



At the end of 2001, asset duration was 2.06 years while liability/equity duration was 2.23 years.



The following table presents the maturities or re-pricing of interest earning assets and interest bearing liabilities at December 31, 2002. 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 and, where appropriate, prepayment assumptions, based on the coupon rates in the portfolio have been used to
adjust the repayment amounts. Re-pricing of time deposits is based on their scheduled maturities. Certain decay rate assumptions have been used for those deposits without contractual maturities. Based on these assumptions, the interest rate
sensitivity of our balance sheet at December 31, 2002 would be as follows ($ in thousands):



|                                   |  | 0-3 months |         |             | 4-12 months |   |        | 1-5 Years |          |             | Over 5 Years |     
|---------------------------------- |  | ---------- | ------- | ----------- | ----------- | - | ------ | --------- | -------- | ----------- | ------------ | ----
|                                   |  | Amount     |         | Yield/ Rate |             |   | Amount |           |          | Yield/ Rate |              |     
|Interest earning assets:           |  |            |         |             |             |   |        |           |          |             |              |     
|Securities                         |  | $          | 81,108  |             | 5.37        | % |        | $         | 300,102  |             |              | 5.12
|Federal funds sold                 |  |            | 11,588  |             | 0.83        |   |        |           |         |             |              |    
|Interest bearing deposits          |  |            | 14,061  |             | 1.19        |   |        |           |         |             |              |    
|FHLB stock                         |  |            | 15,261  |             | 5.00        |   |        |           |         |             |              |    
|Portfolio loans                    |  |            | 536,535 |             | 5.00        |   |        |           | 313,713  |             |              | 6.83
|                                   |  |            |         |             |             |   |        |           |          |             |              |     
|Total interest earning assets      |  |            | 658,553 |             | 4.89        |   |        |           | 613,815  |             |              | 6.00
|                                  
|Interest bearing liabilities:      |  |            |         |             |             |   |        |           |          |             |              |     
|Interest checking                  |  | $          | 7,064   |             | 0.40        | % |        | $         | 21,191   |             |              | 0.40
|Money market                       |  |            | 76,795  |             | 1.45        |   |        |           | 230,385  |             |              | 1.45
|Savings                            |  |            | 5,846   |             | 1.21        |   |        |           | 17,538   |             |              | 1.21
|Time deposits                      |  |            | 156,063 |             | 3.34        |   |        |           | 550,333  |             |              | 3.25
|FHLB advances                      |  |            | 160,003 |             | 1.30        |   |        |           | 5,009    |             |              | 3.78
|Outside borrowings                 |  |            | 29,860  |             | 0.88        |   |        |           |         |             |              |    
|Holding company debt               |  |            |        |             |            |   |        |           |         |             |              |    
|                                   |  |            |         |             |             |   |        |           |          |             |              |     
|Total interest bearing liabilities |  |            | 435,631 |             | 2.01        |   |        |           | 824,456  |             |              | 2.63
|Asset/liability gap                |  | $          | 222,922 |             | 2.88        | % |        | $         | (210,641 | )           |              | 3.37
|                                   |  |            |         |             |             |   |        |           |          |             |              |     
|Cumulative asset/liability gap     |  | $          | 222,922 |             | 2.88        | % |        | $         | 12,281   |             |              | 3.01
|                                   |  |            |         |             |             |   |        |           |          |             |              |     
|Cumulative gap-%                   |  |            |         |             | 8.82        | % |        |           |          |             |              | 0.49
|                                   |  |            |         |             |             |   |        |           |          |             |              |     



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The following table shows the
effect that the indicated change in interest rates would have on net interest income, projected for the next 12 months under a static interest rate scenario. Each change in interest rates is ramped pro rata over a 12 month time horizon.
The resulting change in net interest income from the static interest rate projection provides one measure of sensitivity in relation to changing interest rates, given the assumptions used in this process. The percentage change projected for net
interest income from a static rate projection, assuming a rate shock ramped over a 12 month period, was as follows:



|If interest rates:        |  | Change-%
|------------------------- |  | --------
|Increase 100 basis points |  | 0.01%   
|Increase 200 basis points |  | (0.51)  
|Decrease 100 basis points |  | (0.70)  
|Decrease 200 basis points |  | (4.26)  



Off-Balance Sheet
Arrangements



Off balance sheet arrangements include
financial guarantees, contingent interests, derivative instruments and interests in unconsolidated entities where portions of those entities losses may be absorbed by the holder. Derivatives include such instruments as interest rate swaps,
caps, floors, collars and forward sale contracts. We did not hold any such off-balance sheet arrangements at December 31, 2002 and 2001. Our off-balance contracts were limited to loan commitments and letters of credit made to our borrowers in the
normal course of business. For information on loan commitments and letters of credit, see Note 11 Credit Risk Concentration, Off-Balance Sheet Risk, Commitments and Contingencies, to the Consolidated Financial Statements.



Aggregate Contractual Obligations



Contractual obligations for payments under long-term debt and lease
obligations are shown as follows ($ in thousands):



Contractual Obligations



|                  |  | Total |         | Less Than1 Year |   | 1-3 Years |  | 3-5 Years |       | More Than5 Years
|----------------- |  | ----- | ------- | --------------- | - | --------- |  | --------- | ----- | ----------------
|FHLB Advances     |  | $     | 172,240 |                 | $ | 165,000   |  | $         |      |                 
|Subordinated Debt |  |       | 30,000  |                 |   |          |  |           |      |                 
|Capital Leases    |  |       | 1,128   |                 |   | 376       |  |           | 752   |                 
|Operating Leases  |  |       | 29,062  |                 |   | 4,821     |  |           | 6,760 |                 
|                  |  |       |         |                 |   |           |  |           |       |                 
|Total             |  | $     | 232,430 |                 | $ | 170,197   |  | $         | 7,512 |                 
|                  |  |       |         |                 |   |           |  |           |       |                 



Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



Information required by this item is provided within the consolidated financial statements and notes thereto.



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



On April 16, 2002, the Board of Directors of Republic determined that it would not engage Arthur Andersen LLP (Arthur Andersen) as its
independent auditors and on June 14, 2002, engaged Deloitte & Touche LLP (Deloitte & Touche) to serve as its independent auditors for the fiscal year ending December 31, 2002. The Arthur Andersen dismissal and the Deloitte &
Touche engagement were recommended by Republics Audit Committee and approved by Republics Board of Directors and became effective immediately.



Arthur Andersens reports on Republics consolidated financial statements as of and for the fiscal years ended December 31, 2002 and December
31, 2000 did not contain an adverse opinion or disclaimer of opinion, nor were such reports qualified of modified as to uncertainty, audit scope or accounting principles.



During the interim period from December 31, 2001 through April 16, 2002 and Republics 2001 and 2000 fiscal years, there
were (i) no disagreements with Arthur Andersen on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to Arthur Andersens satisfaction, would
have caused Arthur Andersen to make a reference to the subject matter of the disagreements in connection with Arthur Andersens reports on Republics financial statements for such periods and (ii) no reportable events as defined in Item
304(a)(1)(y) of Regulation S-K.



Republic previously provided
Arthur Andersen with a copy of the foregoing disclosures, and a letter from Arthur Andersen confirming its agreement with these disclosures was filed as an exhibit to Republics Current Report on Form 8-K filed with the SEC on April 16, 2002
and which is hereby incorporated herein by reference.



During the
interim period from December 31, 2001 through April 16, 2002 and Republics 2001 and 2000 fiscal years, Republic did not consult Deloitte & Touche with respect to the application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be reportable events as set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.



PART III



Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT



Directors of the Company



The
information relating to the Directors appears in our Proxy Statement for the 2003 Annual Meeting of Stockholders under the caption Proposal OneElection of Directors 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 as of December 31, 2002, 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:



William R. Klich
(58)Mr. Klich has served as Director of the Bank, President and Chief Executive Officer of the Company and the Bank from March 2000 to June 2002. As of June 2002, Mr. Klich serves as Chairman of the Board for the Bank and Chief Executive
Officer of the Company and the Bank. He was previously employed as Chairman and CEO of SunTrust Bank/Gulf Coast from 1996 to March, 2000, regional corporate banking



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executive of SunTrust Bank/Gulf Coast from 1993 to 1996 and President and CEO of Coast Bank, F.S.B. from 1990 to 1993. He has more than 32
years of commercial banking experience.



J.
Kenneth Coppedge (48)President and Chief Operating Officer, Mr. Coppedge joined Republic Bank in June 2002. He recently served Wachovia Bank, N.A., as Regional President for several Florida markets. Spanning more than 21 years, his banking
career also includes service at First Atlanta Bank and First National Bank of Birmingham, Alabama.



William R. Falzone (55)Mr. Falzone has served as our Treasurer since March 1996 and Executive Vice President and Chief
Financial Officer of the Bank since February 1994. He was employed at Florida Federal Savings Bank from 1983 through 1991 where he served as Director of Financial Services. Before joining the Company, he was a Senior Consultant for Stogniew and
Associates, a nationwide consulting firm. He has more than 26 years of banking experience and is a certified public accountant.



Gilbert K. Grass(56)Executive Vice President and Corporate Services Manager, Mr. Grass joined Republic Bank in October,
2002. Mr. Grass has over 30 years of experience in bank operations and technology with Barnett Banks, and Bank of America. Before joining Republic Bank, he was EVP of Operations and Technology at Mercantile Bank, St. Petersburg, Florida.



E. Carl Goff (50)Executive Vice
President and Commercial Real Estate Manager, Mr. Goff joined Republic Bank in April 2000 as Senior Vice President of Commercial Real Estate. He has over 20 years of commercial real estate lending experience. Mr. Goff previously served with Barnett
and SunTrust Banks.



Mauro A. Harto
(42)Executive Vice President of the Bank and Residential Lending Manager since May of 2000. Mr. Harto formerly was with SunTrust Bank in Sarasota from 1995-2000 where he served as Executive Vice President/Residential Lending Division Manager.
He has over 17 years experience in all areas of mortgage production and mortgage operations.



Timothy J. Little (42)Executive Vice President and Chief Credit Officer since September 2000. Mr. Little was Senior Vice President and West Coast Executive/Corporate Services for
Huntington National Bank for two and one-half years. Previously, Mr. Little held numerous management, lending and credit administration positions with Barnett Bank for 12 years.



Rita J. Lowman(49)Executive Vice President and Retail Line of Business Manager, has served in
her present position with us since November 2000. Ms. Lowman joined Bank of America in 1985 and held various lines, administrative and managerial positions including most recently, Consumer Executive/Senior Vice President of Southwest Florida.



Thomas A. Mann (45)With 15 years of
experience, Mr. Mann joined Republic Bank as Secretary and General Counsel to the Bank in August 2002. For the previous nine years, Mr. Mann was part of the in-house legal department with SunTrust Bank in Orlando and Tampa, providing legal advice in
a number of areas including, among other areas, commercial lending, collections, special assets and operational matters.



Ruena H.(Rudi) Thompson (41)Prior to joining the Bank, Ms. Thompson was with SunTrust Banks, Inc. for 10 years where
she held Human Resources Director positions for several unit banks. Her final position was Corporate First Vice President, Human Resources Relationship Manager for the Central Florida Region. The remainder of her 16 years of HR experience was in
Compact Disc and Pulp and Paper Manufacturing.



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Item 11. EXECUTIVE COMPENSATION



Information required by this item appears in our Proxy Statement for the 2003 Annual Meeting of Shareholders under the captions, Executive Compensation and Benefits and Certain Transactions, and is
incorporated by reference.



Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT



Information required by this item appears in the Proxy Statement for the 2003 Annual Meeting of Shareholders under the captions Principal Stockholders and Security Ownership of
Management and is hereby incorporated by reference.



Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



Information required by this item appears in the Proxy Statement for the 2003 Annual Meeting of Shareholders under caption, Certain transactions and Compensation Committee Interlocks and Insider
Participation and is hereby incorporated by reference.



Item 14. CONTROLS AND PROCEDURES



Evaluation of Disclosure Controls and Procedures



Within 90 days prior to the date of this report, we carried out an evaluation (the Evaluation), under the supervision and with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer
(CFO), of the effectiveness of the design and operation of our disclosure controls and procedures (Disclosure Controls). Based on the Evaluation, our CEO and CFO concluded that, subject to the limitations noted below, our
Disclosure Controls are effective in timely alerting them to material information required to be included in our periodic Securities and Exchange Commission reports.



Changes in Internal Controls



We have also evaluated our internal controls for financial reporting, and there have been no significant changes in our
internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation.



Limitations on the Effectiveness of Controls



Our management, including our CEO and CFO, does not expect that our Disclosure Controls and internal controls will prevent all error and all fraud. A
control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of
fraud, if any, within Republic have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.



The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.



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CEO and CFO Certifications



Appearing immediately following the Signatures section of
this report there are Certifications of the CEO and the CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item 14 of this report is the information concerning
the Evaluation referred to in the Section 302 Certifications and should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.



PART IV



Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K



| | (a) |  | The following documents are filed as part of this report at pages 38 through 72.
| | --- |  | --------------------------------------------------------------------------------



| | 1. |  | Financial Statements:
| | -- |  | ---------------------



Consolidated Financial Statements of Republic Bancshares, Inc.



Independent Auditors Report



Consolidated Balance
Sheets at December 31, 2002 and 2001



Consolidated Statements of Operations, Stockholders Equity, Comprehensive Income (Loss), and Cash Flows for:



Years Ended December 31, 2002, 2001, and 2000



Notes to Consolidated Financial Statements



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



| | (b) |  | The following reports on Form 8-K were filed during the year for which this report is filed:
| | --- |  | --------------------------------------------------------------------------------------------



| | 1. |  | Report on Form 8-K, dated April 16, 2002, filed April 23, 2002,  Announces that the intention of the Company to change registrants certifying accountant
beginning in the second quarter ending June 30, 2002.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. |  | Report on Form 8-K, dated and filed June 14, 2002,  Announces the appointment of Deloitte and Touche LLP as the Companys new independent auditors for
2002.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



36



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##### Table of Contents



(c) Exhibits



|Exhibit No. |  | Description                                                                                                                                                                                          
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1         |  | Amended and restated Articles of Incorporation of Republic(1)                                                                                                                                        
|3.2         |  | By-Laws of Republic(1)                                                                                                                                                                               
|4.1         |  | Specimen Common Stock Certificate(1)                                                                                                                                                                 
|4.2         |  | Indenture dated as of December 18, 1996, among Republic and Southtrust Bank of Florida, N.A. as
Trustee, including the form of specimen 6% convertible subordinated debenture(2)                     
|4.3         |  | Republics 1995 Stock Option Plan, as amended(3)                                                                                                                                                     
|4.4         |  | Form of Indenture, among Republic and Wilmington Trust Company, as Trustee, including the form of
specimen junior subordinated debenture(4)                                                          
|4.4         |  | Indenture, dated as of September 17, 1999, between Republic and U.S. Trust Bank National Associated,
as Trustee(5)                                                                                   
|4.5         |  | Indenture, dated as of May 8, 2001, among Republic and U.S. Trust Bank National Association, as
Trustee, including the form of 7% convertible subordinated debenture(6)                              
|10.1        |  | Trust Agreement, dated as of May 29, 1997, among Republic, Wilmington Trust Company, a Delaware
banking corporation, as trustee, John W. Sapanski, William R. Falzone and Christopher M. Hunter(4)   
|10.2        |  | Form of Amended and Restated Trust Agreement, among Republic, Wilmington Trust Company, a Delaware
banking corporation, as trustee, John W. Sapanski, William R. Falzone and Christopher M. Hunter(4)
|12.1        |  | Ratio of Earnings to Fixed Charges                                                                                                                                                                   
|21.1        |  | List of Subsidiaries(7)                                                                                                                                                                              
|23.1        |  | Independent Auditors Consent                                                                                                                                                                        
|23.2        |  | Explanation concerning absence of current written consent of Arthur Andersen LLP                                                                                                                     
|24.1        |  | Power of Attorney (see signature page)                                                                                                                                                               

---

|(1) |  | Incorporated by reference to Republics Registration Statement on Form S-4, File No. 33-80895, filed  December 28, 1995
|--- |  | -----------------------------------------------------------------------------------------------------------------------



|(2) |  | Incorporated by reference to Republics Amendment No. 1 to Registration Statement on Form S-2 File No. 333-32151, filed October 31, 1997
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------



|(3) |  | Incorporated by reference to Republics Registration Statement on Form S-8, filed March 3, 1999
|--- |  | -----------------------------------------------------------------------------------------------



|(4) |  | Incorporated by reference to Republics Registration Statement on Form S-2, File Nos. 333-28213 and 333-2813-01, filed May 30, 1997
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------



|(5) |  | Incorporated by reference to Republics Registration Statement on Form S-3, filed November 18, 1999
|--- |  | ---------------------------------------------------------------------------------------------------



|(6) |  | Incorporated by reference to Republics Registration Statement on Form S-3, File No. 333-101672, filed  December 5, 2002
|--- |  | ------------------------------------------------------------------------------------------------------------------------



|(7) |  | Incorporated by reference to Republics Annual Report on Form 10-K/A filed April 13, 1998
|--- |  | -----------------------------------------------------------------------------------------



37



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##### Table of Contents

INDEPENDENT AUDITORS REPORT



To the Board of Directors of

Republic Bancshares, Inc.:



We have audited the accompanying consolidated balance sheet of Republic Bancshares, Inc. (a Florida corporation) and
subsidiaries as of December 31, 2002, and the related consolidated statements of operations, stockholders equity, comprehensive income (loss), and cash flows for the year then ended. 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 audit. The financial statements of Republic Bancshares, Inc. as of December 31, 2001 and for the two years in the period ended December
31, 2001 were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those financial statements in their report dated January 28, 2002.



We conducted our audit in accordance with auditing standards generally accepted in the United States. 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 audit provides 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 subsidiaries as of December 31, 2002 and the results of their operations and their cash flows for the year then ended, in conformity
with accounting principles generally accepted in the United States.



As discussed in Note 2 to the financial statements, in 2002 the Company changed its method of accounting for goodwill to conform to Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.



DELOITTE &
TOUCHE LLP

Certified Public Accountants



Tampa, Florida

March 6, 2003



38



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##### Table of Contents



REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



To Republic
Bancshares, Inc.:



We have audited the accompanying consolidated
balance sheets of Republic Bancshares, Inc. (a Florida corporation) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholders equity, comprehensive income (loss), and cash flows for
each of the three years in the period ended December 31, 2001. 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 auditing standards
generally accepted in the United States. 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 subsidiaries as of December 31, 2001 and 2000, and the results of
their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.



/s/    ARTHUR ANDERSEN LLP



Tampa, Florida,

January 28, 2002



Note: This is a copy of the Audit Report previously issued by Arthur Andersen LLP in connection with Republics filing on Form 10-K for the fiscal year ended December 31, 2001 and 2000. This Audit Report has not been reissued
by Arthur Andersen LLP in connection with this filing on Form 10-K for the fiscal year ended December 31, 2002. For further discussion, see Exhibit 23.2 which is filed herewith and hereby incorporated by reference into the Form 10-K for the fiscal
year ended December 31, 2002 of which this report forms a part.



39



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##### Table of Contents



REPUBLIC
BANCSHARES, INC. & SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS



($ in thousands, except share data)



|                                                                                                                                                                         |  | December 31, 2002 |           |   | December 31, 2001 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | --------- | - | ----------------- | -
|ASSETS                                                                                                                                                                   |  |                   |           |   |                   |  
|Cash and due from banks                                                                                                                                                  |  | $                 | 51,162    |   |                   | $
|Interest bearing deposits in banks                                                                                                                                       |  |                   | 14,061    |   |                   |  
|Federal funds sold                                                                                                                                                       |  |                   | 11,588    |   |                   |  
|                                                                                                                                                                         |  |                   |           |   |                   |  
|Cash and cash equivalents                                                                                                                                                |  |                   | 76,811    |   |                   |  
|Securities:                                                                                                                                                              |  |                   |           |   |                   |  
|Available for sale                                                                                                                                                       |  |                   | 820,108   |   |                   |  
|Held to maturity                                                                                                                                                         |  |                   |          |   |                   |  
|Trading                                                                                                                                                                  |  |                   | 7,815     |   |                   |  
|FHLB stock                                                                                                                                                               |  |                   | 15,261    |   |                   |  
|Loans held for sale                                                                                                                                                      |  |                   | 37,416    |   |                   |  
|Loans                                                                                                                                                                    |  |                   | 1,475,869 |   |                   |  
|Allowance for loan losses                                                                                                                                                |  |                   | (27,987   | ) |                   |  
|                                                                                                                                                                         |  |                   |           |   |                   |  
|Net loans                                                                                                                                                                |  |                   | 1,447,882 |   |                   |  
|Premises and equipment, net                                                                                                                                              |  |                   | 38,508    |   |                   |  
|Other real estate owned, net                                                                                                                                             |  |                   | 16,787    |   |                   |  
|Accrued interest receivable                                                                                                                                              |  |                   | 10,622    |   |                   |  
|Goodwill                                                                                                                                                                 |  |                   | 2,726     |   |                   |  
|Premium on deposits                                                                                                                                                      |  |                   | 15,630    |   |                   |  
|Other assets                                                                                                                                                             |  |                   | 36,783    |   |                   |  
|                                                                                                                                                                         |  |                   |           |   |                   |  
|Total assets                                                                                                                                                             |  | $                 | 2,526,349 |   |                   | $
|                                                                                                                                                                         |  |                   |           |   |                   |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                     |  |                   |           |   |                   |  
|Liabilities:                                                                                                                                                             |  |                   |           |   |                   |  
|Deposits-                                                                                                                                                                |  |                   |           |   |                   |  
|Noninterest bearing checking                                                                                                                                             |  | $                 | 162,716   |   |                   | $
|Interest checking                                                                                                                                                        |  |                   | 204,743   |   |                   |  
|Money market                                                                                                                                                             |  |                   | 393,823   |   |                   |  
|Savings                                                                                                                                                                  |  |                   | 180,435   |   |                   |  
|Time deposits                                                                                                                                                            |  |                   | 1,127,999 |   |                   |  
|                                                                                                                                                                         |  |                   |           |   |                   |  
|Total deposits                                                                                                                                                           |  |                   | 2,069,716 |   |                   |  
|Securities sold under agreements to repurchase and other borrowings                                                                                                      |  |                   | 30,913    |   |                   |  
|FHLB advances                                                                                                                                                            |  |                   | 172,240   |   |                   |  
|Convertible subordinated debt                                                                                                                                            |  |                   | 29,332    |   |                   |  
|Other liabilities                                                                                                                                                        |  |                   | 11,714    |   |                   |  
|                                                                                                                                                                         |  |                   |           |   |                   |  
|Total liabilities                                                                                                                                                        |  |                   | 2,313,915 |   |                   |  
|                                                                                                                                                                         |  |                   |           |   |                   |  
|Company-obligated mandatorily redeemable preferred securities of subsidiary trust solely
holding junior subordinated debentures of the Company                           |  |                   | 28,750    |   |                   |  
|                                                                                                                                                                         |  |                   |           |   |                   |  
|Stockholders equity:                                                                                                                                                    |  |                   |           |   |                   |  
|Common stock ($2.00 par, 20,000,000 shares authorized, 11,398,059 and 11,335,339 shares issued and
outstanding at December 31, 2002 and December 31, 2001, respectively) |  |                   | 22,796    |   |                   |  
|Capital surplus                                                                                                                                                          |  |                   | 129,860   |   |                   |  
|Retained earnings                                                                                                                                                        |  |                   | 22,418    |   |                   |  
|Accumulated other comprehensive income                                                                                                                                   |  |                   | 8,610     |   |                   |  
|                                                                                                                                                                         |  |                   |           |   |                   |  
|Total stockholders equity                                                                                                                                               |  |                   | 183,684   |   |                   |  
|                                                                                                                                                                         |  |                   |           |   |                   |  
|Total liabilities and stockholders equity                                                                                                                               |  | $                 | 2,526,349 |   |                   | $
|                                                                                                                                                                         |  |                   |           |   |                   |  



The
accompanying notes are an integral part of these consolidated balance sheets



40



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##### Table of Contents



REPUBLIC
BANCSHARES, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

($ in thousands, except per share data)



|                                                                         |  | For the Years Ended December 31, |           
|------------------------------------------------------------------------ |  | -------------------------------- | ----------
|                                                                         |  | 2002                             |           
|INTEREST INCOME:                                                         |  |                                  |           
|Loans                                                                    |  | $                                | 101,214   
|Securities                                                               |  |                                  | 40,921    
|Federal funds sold & other investments                                   |  |                                  | 1,110     
|                                                                         |  |                                  |           
|Total interest income                                                    |  |                                  | 143,245   
|                                                                        
|INTEREST EXPENSE:                                                        |  |                                  |           
|Deposits                                                                 |  |                                  | 60,467    
|Securities sold under agreement to repurchase & other borrowings         |  |                                  | 460       
|FHLB advances                                                            |  |                                  | 2,161     
|Holding company debt                                                     |  |                                  | 2,145     
|                                                                         |  |                                  |           
|Total interest expense                                                   |  |                                  | 65,233    
|                                                                         |  |                                  |           
|NET INTEREST INCOME                                                      |  |                                  | 78,012    
|PROVISION FOR LOAN LOSSES                                                |  |                                  | 5,350     
|                                                                         |  |                                  |           
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                      |  |                                  | 72,662    
|                                                                        
|NONINTEREST INCOME:                                                      |  |                                  |           
|Service charges on deposit accounts                                      |  |                                  | 6,285     
|Loan service fees                                                        |  |                                  | (1,955    
|Other loan fee income                                                    |  |                                  | 2,673     
|Gains (losses) on loans & securities, net                                |  |                                  | 4,933     
|Gains on sale of branches                                                |  |                                  |          
|Other operating income                                                   |  |                                  | 1,940     
|                                                                         |  |                                  |           
|Total noninterest income                                                 |  |                                  | 13,876    
|                                                                        
|NONINTEREST EXPENSES:                                                    |  |                                  |           
|Salaries and employee benefits                                           |  |                                  | 38,164    
|Net occupancy expense                                                    |  |                                  | 14,474    
|Advertising and marketing                                                |  |                                  | 888       
|Data & item processing fees and services                                 |  |                                  | 6,289     
|Loan collection costs                                                    |  |                                  | 1,035     
|Other operating expenses                                                 |  |                                  | 11,144    
|ORE expense, net                                                         |  |                                  | 1,246     
|Amortization of goodwill                                                 |  |                                  |          
|Amortization of premium on deposits                                      |  |                                  | 2,767     
|                                                                         |  |                                  |           
|Total noninterest expenses                                               |  |                                  | 76,007    
|                                                                         |  |                                  |           
|Income (loss) before income taxes & minority interest                    |  |                                  | 10,531    
|Income tax expense (benefit)                                             |  |                                  | 4,068     
|                                                                         |  |                                  |           
|Income (loss) before minority interest                                   |  |                                  | 6,463     
|Minority interest in income from subsidiary trust, net of tax            |  |                                  | (1,684    
|                                                                         |  |                                  |           
|NET INCOME (LOSS)                                                        |  | $                                | 4,779     
|                                                                         |  |                                  |           
|PER SHARE DATA:                                                          |  |                                  |           
|Net income (loss) per common share  basic                               |  | $                                | 0.42      
|                                                                         |  |                                  |           
|Net income (loss) per common & common equivalent share 
diluted         |  | $                                | 0.42      
|                                                                         |  |                                  |           
|Weighted average common shares outstanding  basic                       |  |                                  | 11,372,461
|                                                                         |  |                                  |           
|Weighted average common & common equivalent shares outstanding 
diluted |  |                                  | 11,465,809
|                                                                         |  |                                  |           



The
accompanying notes are an integral part of these consolidated statements



41



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##### Table of Contents



REPUBLIC
BANCSHARES, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

($ in thousands)



|                                                                         |  |                 |        |   | Common Stock |            |        |   |                 |  |   |                   | Accumulated Other Comprehensive Income |  |   |        |  
|------------------------------------------------------------------------ |  | --------------- | ------ | - | ------------ | ---------- | ------ | - | --------------- |  | - | ----------------- | -------------------------------------- |  | - | ------ | -
|                                                                         |  | Preferred Stock |        |   | SharesIssued |            | Amount |   | Capital Surplus |  |   | Retained Earnings |                                        |  |   | Total  |  
|Balance, December 31, 1999                                               |  | $               | 1,500  |   |              | 10,555,889 |        | $ | 21,112          |  | $ | 128,780           |                                        |  | $ | 26,530 |  
|Net loss                                                                 |  |                 |       |   |              |           |        |   |                |  |   |                  |                                        |  |   | (4,598 | )
|Change in fair value of available for sale securities, net of tax effect |  |                 |       |   |              |           |        |   |                |  |   |                  |                                        |  |   |       |  
|Exercise of stock options                                                |  |                 |       |   |              | 100        |        |   |                |  |   | 1                 |                                        |  |   |       |  
|Dividends on preferred stock                                             |  |                 |       |   |              |           |        |   |                |  |   |                  |                                        |  |   | (263   | )
|Other, net                                                               |  |                 |       |   |              |           |        |   |                |  |   | (46               | )                                      |  |   |       |  
|                                                                         |  |                 |        |   |              |            |        |   |                 |  |   |                   |                                        |  |   |        |  
|Balance, December 31, 2000                                               |  |                 | 1,500  |   |              | 10,555,989 |        |   | 21,112          |  |   | 128,735           |                                        |  |   | 21,669 |  
|Net loss                                                                 |  |                 |       |   |              |           |        |   |                |  |   |                  |                                        |  |   | (3,898 | )
|Change in fair value of available for sale securities, net of tax effect |  |                 |       |   |              |           |        |   |                |  |   |                  |                                        |  |   |       |  
|Exercise of stock options                                                |  |                 |       |   |              | 29,350     |        |   | 59              |  |   | 299               |                                        |  |   |       |  
|Conversion of preferred stock                                            |  |                 | (1,500 | ) |              | 750,000    |        |   | 1,500           |  |   |                  |                                        |  |   |       |  
|Dividends on preferred stock                                             |  |                 |       |   |              |           |        |   |                |  |   |                  |                                        |  |   | (132   | )
|Other, net                                                               |  |                 |       |   |              |           |        |   |                |  |   | 22                |                                        |  |   |       |  
|                                                                         |  |                 |        |   |              |            |        |   |                 |  |   |                   |                                        |  |   |        |  
|Balance, December 31, 2001                                               |  |                 |       |   |              | 11,335,339 |        |   | 22,671          |  |   | 129,056           |                                        |  |   | 17,639 |  
|Net income                                                               |  |                 |       |   |              |           |        |   |                |  |   |                  |                                        |  |   | 4,779  |  
|Change in fair value of available for sale securities, net of tax effect |  |                 |       |   |              |           |        |   |                |  |   |                  |                                        |  |   |       |  
|Exercise of stock options                                                |  |                 |       |   |              | 62,720     |        |   | 125             |  |   | 701               |                                        |  |   |       |  
|Other, net                                                               |  |                 |       |   |              |           |        |   |                |  |   | 103               |                                        |  |   |       |  
|                                                                         |  |                 |        |   |              |            |        |   |                 |  |   |                   |                                        |  |   |        |  
|Balance, December 31, 2002                                               |  | $               |       |   |              | 11,398,059 |        | $ | 22,796          |  | $ | 129,860           |                                        |  | $ | 22,418 |  
|                                                                         |  |                 |        |   |              |            |        |   |                 |  |   |                   |                                        |  |   |        |  



REPUBLIC BANCSHARES, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

($ in thousands)



|                                                                                       |  | For the Years Ended December 31, |       
|-------------------------------------------------------------------------------------- |  | -------------------------------- | ------
|                                                                                       |  | 2002                             |       
|Net income (loss)                                                                      |  | $                                | 4,779 
|Other comprehensive income (loss):                                                     |  |                                  |       
|Unrealized gains (losses) on available for sale securities:                            |  |                                  |       
|Unrealized holding gains arising during the period, net of taxes                       |  |                                  | 7,799 
|Less reclassification adjustment for gains realized in net income (loss), net of
taxes |  |                                  | (1,860
|                                                                                       |  |                                  |       
|Net unrealized gains                                                                   |  |                                  | 5,939 
|                                                                                       |  |                                  |       
|Comprehensive income (loss)                                                            |  | $                                | 10,718
|                                                                                       |  |                                  |       



The
accompanying notes are an integral part of these consolidated statements



42



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##### Table of Contents



REPUBLIC
BANCSHARES, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in thousands)



|                                                                                            |  | For the Years Ended December 31, |         
|------------------------------------------------------------------------------------------- |  | -------------------------------- | --------
|                                                                                            |  | 2002                             |         
|OPERATING ACTIVITIES:                                                                       |  |                                  |         
|Net income (loss)                                                                           |  | $                                | 4,779   
|Reconciliation of net income (loss) to net cash provided by (used in) operating
activities: |  |                                  |         
|Provision for loan and ORE losses                                                           |  |                                  | 6,870   
|Depreciation and amortization of goodwill & premium on deposits                             |  |                                  | 9,221   
|Amortization of loan premiums/discounts & MSRs                                              |  |                                  | (699    
|(Gain)/loss on sale of loans and securities, net                                            |  |                                  | (4,933  
|(Gain)/loss on sale of other real estate owned                                              |  |                                  | (1,570  
|(Capitalization) of mortgage servicing                                                      |  |                                  |        
|(Gain) on sale of branches                                                                  |  |                                  |        
|Loss on disposal of premises and equipment                                                  |  |                                  | 91      
|Deferred income tax provision (benefit)                                                     |  |                                  | (1,165  
|Net (increase) in other assets                                                              |  |                                  | (4,688  
|Net decrease/(increase) in value of performance/nonqualified options                        |  |                                  |        
|Net (decrease)/increase in other liabilities                                                |  |                                  | (793    
|                                                                                            |  |                                  |         
|Net cash provided by (used in) operating activities                                         |  |                                  | 7,113   
|                                                                                            |  |                                  |         
|INVESTING ACTIVITIES:                                                                       |  |                                  |         
|Net (increase) decrease in loans                                                            |  |                                  | (121,601
|Proceeds from sales and maturities of securities                                            |  |                                  | 245,722 
|Principal repayment on securities                                                           |  |                                  | 353,053 
|Purchase of securities available for sale                                                   |  |                                  | (575,798
|Purchase of securities held to maturity                                                     |  |                                  |        
|(Purchase)/redemption of FHLB stock                                                         |  |                                  | (2,093  
|(Purchase) of premises and equipment, net                                                   |  |                                  | (1,861  
|Proceeds from sale of other real estate owned                                               |  |                                  | 24,198  
|Sale of mortgage servicing rights                                                           |  |                                  |        
|                                                                                            |  |                                  |         
|Net cash provided by (used in) investing activities                                         |  |                                  | (78,380 
|                                                                                            |  |                                  |         
|FINANCING ACTIVITIES:                                                                       |  |                                  |         
|Net increase (decrease) in deposits                                                         |  |                                  | (60,552 
|Net cash paid for branch sales                                                              |  |                                  |        
|Net increase (decrease) in repurchase agreements                                            |  |                                  | (4,309  
|Proceeds (repayment) from FHLB advances, net                                                |  |                                  | 119,990 
|Proceeds from issuance of common stock                                                      |  |                                  | 826     
|Proceeds from holding company debt                                                          |  |                                  |        
|Repayment of holding company debt                                                           |  |                                  |        
|Dividends on perpetual preferred convertible stock                                          |  |                                  |        
|                                                                                            |  |                                  |         
|Net cash (used in) provided by financing activities                                         |  |                                  | 55,955  
|                                                                                            |  |                                  |         
|NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS                                          |  |                                  | (15,312 
|CASH AND CASH EQUIVALENTS, beginning of year                                                |  |                                  | 92,123  
|                                                                                            |  |                                  |         
|CASH AND CASH EQUIVALENTS, end of year                                                      |  | $                                | 76,811  
|                                                                                            |  |                                  |         
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                          |  |                                  |         
|Cash paid during the year for interest                                                      |  | $                                | 59,909  
|Cash paid during the year for income taxes                                                  |  |                                  | 4,832   
|Non-cash transactions:                                                                      |  |                                  |         
|Transfer of loans to other real estate owned                                                |  |                                  | 23,192  
|Conversion of perpetual preferred stock to common stock                                     |  |                                  |        



The
accompanying notes are an integral part of these consolidated statements



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REPUBLIC
BANCSHARES, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002



1. BUSINESS:



Basis of Presentation and Organization



The consolidated financial statements of Republic Bancshares, Inc. (the Company or Republic or
We) include the accounts of the Company and its wholly owned subsidiaries, RBI Capital Trust I (RBI) and Republic Bank (the Bank), and the Banks wholly-owned subsidiaries, Republic Insurance Agency, Inc. and
Republic S.P.E., Inc. Our primary source of income is from the Bank, which operates 71 branches throughout Florida. The Banks primary sources of revenue are net interest income on loans and investments and fee income from loan and
deposit-related activities. The operations of the Company are reported as one operating segment with all accounts and transactions among the subsidiaries eliminated.



Sale of Branches in 2001



On April 23, 2001, we completed the sale of five branch offices in Miami-Dade
County, Florida. The loans assigned to the branches were purchased at par value, the fixtures and improvements and other assets assigned to four of the branches were purchased at their net book value and the buyer assumed $55.0 million of deposit
liabilities of all five offices. We recognized a gain of $3.1 million on the transaction. There was no unamortized deposit premium associated with these branches.



On May 11, 2001, we completed the sale of two branch offices located in Lake City and Live Oak, Florida. The loans assigned
to the branches were purchased at par value, the premises and other assets assigned to the two branches were purchased at their net book value and the buyer assumed $62.3 million of deposit liabilities. We recognized a gain of $1.4 million on the
transaction, after deduction of the unamortized deposit premium paid to purchase the branches in 1998.



RBI Capital Trust I



RBI is our wholly owned subsidiary, formed on May 29, 1997, to issue cumulative trust preferred securities (the Preferred Security or
Securities) to the public. We own all of the securities of RBI that possess general voting powers. The Preferred Securities, issued through a public offering on July 28, 1997, were sold at their $10 par value. RBI issued 2,875,000 shares of
the Preferred Securities bearing a dividend rate of 9.1% for net proceeds of $27.4 million, after deducting underwriting commissions and other costs. RBI invested the proceeds in our junior subordinated debt, which also has an interest rate of 9.1%.
The Junior Subordinated Debentures will mature on June 30, 2027 (the Stated Maturity), which date may be shortened to a date not earlier than June 30, 2002, if certain conditions are met (including the Company having received prior
approval by the Board of Governors of the Federal Reserve System or any successor agency (the Federal Reserve) if then required under applicable Federal Reserve capital guidelines or policies). RBIs sole asset is the holding
companys junior subordinated debt. Considered together, our obligations with respect to the issuance of the preferred securities constitute a full and unconditional guarantee by the bank holding company of RBIs obligations with respect
to the preferred securities. Interest on the junior subordinated debentures and distributions on the Preferred Securities are payable quarterly in arrears. Distributions on the Preferred Securities are cumulative and based upon the liquidation value
of $10 per Preferred Security. We have the right, at any time, so long as no event of default has occurred and is continuing, to defer payments of interest on the junior subordinated debentures, which will require deferral of distribution on the
Preferred Securities, for a period not exceeding 20 consecutive quarters, provided, that such deferral may not extend beyond the stated maturity of the junior subordinated debentures. If payments are



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deferred, we will not be permitted to declare cash dividends. The Preferred Securities are subject to mandatory redemption, in whole or in
part, upon repayment of the junior subordinated debentures at maturity or their earlier redemption. We have the right to redeem the junior subordinated debentures in whole (but not in part) within 180 days following certain events whether occurring
before or after June 30, 2002. The exercise of such right is subject to us receiving regulatory approval to do so if then required under applicable capital guidelines or regulatory policies. In addition, we have the right, at any time, to shorten
the maturity of the junior subordinated debentures to a date not earlier than June 30, 2002. Exercise of this right is also subject to receiving regulatory approval to do so if then required under applicable capital guidelines or regulatory
policies.



We have reported our obligation, with respect to the
holders of the Preferred Securities, as a separate line item in the accompanying consolidated balance sheets under the caption Company-obligated mandatorily redeemable preferred securities of subsidiary trust solely holding junior subordinated
debentures of the Company. The related dividend expense, net of the tax benefit, is reported as a separate line item in the accompanying consolidated statements of operations under the caption Minority interest in income from
subsidiary trust, net of tax.



2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:



Use of Estimates, Appraisals and Evaluations in the Preparation of Financial Statements



The accompanying consolidated financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make 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. Material estimates that are susceptible to significant change in the near term are the determination of the allowance for loan losses, the
deferred tax asset, the valuation of trading assets (including residual interest in cash flows from the 1997 and 1998 securitization of High LTV Loans and the interest-only strips receivable) and valuation of loan servicing rights.



Cash and Cash Equivalents



Cash and cash equivalents include cash and due from banks,
interest-bearing deposits with banks and federal funds sold. These assets have terms to maturity of three months or less and their carrying amount is considered a reasonable estimate of their fair value.



Securities



Securities that we have 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 classified as Available for Sale are those securities that may be
sold prior to maturity as part of our asset/liability management strategies or in response to other factors. These securities are carried at fair value with any unrealized gains or losses, net of applicable tax effect, reported as a separate
component of stockholders equity. Securities identified as Trading include the residual interests in cash flows from the securitization of High LTV Loans in 1997 and 1998 and the excess spread, interest-only strip related to
securitization or sale of first lien, residential loans. Trading securities are carried at fair value with any unrealized gains or losses included in the consolidated statements of operations under Gain (loss) on loans and securities,
net. For further discussion of the valuation of securities, please see Note 3, Securities, of the Notes to Consolidated Financial Statements.



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Interest and dividends on
securities include the amortization of premiums and accretion of discounts using the effective interest rate method and are together reported as part of interest income on securities. Gains and losses realized on sales of securities are generally
determined on the specific identification method and are reported under Gain (loss) on loans and securities, net.



Accounting for Mortgage Servicing Rights (MSRs)



Mortgage servicing rights are included in the statement of condition under
the caption Other assets. The capitalization of MSRs are included in the statement of operations under the caption Gains (losses) on loans and securities, net and the amortization of those servicing rights is included under
the caption Loan service fees. MSRs are carried at amortized cost and evaluated for impairment based on their fair value. We use an automated portfolio analysis system to value our MSRs at the individual loan level. The model uses
current market assumptions for default probabilities and prepayment speeds based upon individual loan factors, including interest rate, age, loan type, geography and demographics. The analysis also takes into consideration the historical aggregate
characteristics of borrowers based on their geographic location. These factors are applied to each loan based on its own individual characteristics. The valuation is then stratified based upon predominant characteristics such as guarantee agency and
interest rates to determine possible valuation losses within each category. There was a $1.2 million valuation allowance on our MSRs at December 31, 2002. There was no valuation allowance at December 31, 2001. The following table shows the amount of
MSRs which were capitalized and amortized, and the fair value of those assets for the periods indicated ($ in thousands):



|                           |  | December 31, |       
|-------------------------- |  | ------------ | ------
|                           |  | 2002         |       
|Balance, beginning of year |  | $            | 10,212
|Capitalized MSRs           |  |              |      
|Sale of High LTV Loan MSRs |  |              |      
|Amortization               |  |              | (3,442
|                           |  |              |       
|Balance, end of year       |  |              | 6,770 
|Valuation allowance        |  |              | (1,180
|                           |  |              |       
|Net balance                |  | $            | 5,590 
|                           |  |              |       
|Fair value of MSRs         |  | $            | 5,864 
|                           |  |              |       
|Discount rate used         |  |              | 8.00  
|                           |  |              |       



Loans Held for Sale



Loans held for sale
are reported at the lower of cost or market on an aggregate portfolio basis. Gains or losses are realized on the sale of loans at the time of sale based on the difference between the net sales proceeds and the carrying value of the loans sold.



Loans



Loans held for portfolio, where management has the intent and ability to hold
for the foreseeable future, are reported at their principal balances, adjusted for any deferred fees or costs associated with the loan. Interest on commercial and real estate loans and substantially all installment loans is recognized monthly on the
loan balance outstanding.



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Loan origination and
commitment fees, net of certain costs, are deferred and the amount is amortized as an adjustment to interest income using the effective interest rate method, 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 term of the loan.



Our 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 our opinion, may be doubtful as to the collection of interest or principal. These loans are designated as nonaccrual and any accrued but unpaid interest previously recorded is reversed against current period
interest income.



Allowance
for Loan Losses



Our loan loss allowance is comprised of:
(1) a component for individual loan impairment measured according to Statement of Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a Loan,and (2) a measure of collective loan
impairment according to SFAS No. 5 Accounting for Contingencies.The allowance for loan losses is established and maintained at levels deemed adequate to cover losses inherent in the portfolio as of the balance sheet date. This
estimate is based on managements evaluation of the risks in the loan portfolio and changes in the nature and volume of loan activity. Estimates for loan losses are derived by analyzing historical loan losses, current trends in delinquencies
and charge-offs, plans for problem loan administration, changes in the size and composition of the loan portfolio and peer group information. Periodically, we are examined by the state and federal banking regulators and the results of those
examinations are also incorporated into our estimation process. Also included in managements estimates for loan losses are considerations with respect to the impact of economic events, the outcome of which are uncertain. These events may
include, but are not limited to, a general slowdown in the economy, fluctuations in overall lending rates, political conditions, legislation that may directly or indirectly affect the banking industry and economic conditions affecting specific
geographical areas in which we conduct business.



A loan is
considered impaired when, based on current information and events, it is probable that a lender will be unable to collect all amounts due according to the contractual terms of the loan agreement. Larger impaired credits that are measured according
to SFAS No. 114 have been defined by us to include loans classified in the substandard, doubtful and in selected cases, special mention risk grades where the borrower relationship equals or exceeds $500,000. These loss estimates are determined on a
loan-by-loan basis based on managements evaluation of loss exposure for each credit, given the current payment status of the loan and the value of any underlying collateral. Specific impairment on loans in this category is calculated based on
the present value of expected future cash flows discounted at the loans effective interest rate, or for collateral-dependent loans, at the fair value of the collateral. Loans made by us that are outside the scope of SFAS No. 114 and are
measured according to SFAS No. 5 (often referred to as the general allowance) include commercial (business) and commercial real estate loans that are performing or have been assigned a grade superior to substandard and large groups of smaller
balance homogeneous loans (e.g. residential mortgage and consumer installment) regardless of risk grade.



At December 31, 2002, $69.1 million of loans were considered impaired under SFAS No. 114. Those loans were assigned valuation allowances totaling $8.8 million, which are included within the overall
allowance for loan losses at December 31, 2002. As of December 31, 2001, $61.1 million of loans were considered impaired by us. Those loans were assigned valuation allowances totaling $10.3 million, which were included within the overall allowance
for loan losses at December 31, 2001.



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, where
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:



|Buildings and improvements |  | 39 years  
|-------------------------- |  | ----------
|Furniture and equipment    |  | 3-7 years 
|Leasehold improvements     |  | 5-15 years





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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.



Valuation of Long-Lived Assets



The Company periodically evaluates the carrying value of long-lived assets to
be held and used, including intangible assets, when events or circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated separately identifiable undiscounted cash flows from such an
asset are less than the carrying value of the asset. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash
flows discounted at a rate commensurate with the risk involved. Impairment losses on long-lived assets held for sale are determined in a similar manner, except that fair values are reduced for the cost to dispose of the assets. Effective January 1,
2002, we adopted Statement of Financial Accounting Standards (SFAS) No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets, which did not have a material effect on our results of operations or financial
position.



Other Real Estate
(ORE)



ORE represents property acquired through
foreclosure proceedings held for sale and real estate held for investment. ORE is net of a valuation allowance established to reduce cost to the lower of cost or fair value less to costs to sell. 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.



Income Taxes



We follow the liability
method, which establishes deferred tax assets and liabilities for the temporary differences between the financial reporting bases and the tax bases of our 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.



We file consolidated tax returns with the federal and state taxing authorities. A tax sharing agreement exists between us and our subsidiaries whereby taxes for the subsidiaries are computed as if the subsidiaries were separate
entities. Amounts to be paid or credited with respect to current taxes for the subsidiary are paid to or received from us.



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Intangible Assets



Goodwill is an
intangible asset, which represents the excess of the cost of an acquired enterprise over the fair market value of identifiable assets less the fair market value of liabilities acquired in purchase transactions. The balance of goodwill was $2.7
million at December 31, 2002 and 2001, respectively. This goodwill was acquired in a 1997 acquisition and, through December 31, 2001, was being amortized on a straight-line basis over 10 years. As of January 2002, SFAS No. 142 provided that goodwill
will not be amortized but rather will be evaluated, at least annually, for impairment. We have determined that our goodwill does not have impairment. Following are the pro forma net income and earnings per share, had all periods presented been
accounted for under SFAS No. 142 ($ in thousands, except share date):



|                                                                       |  | Twelve Months Ended December 31, |           
|---------------------------------------------------------------------- |  | -------------------------------- | ----------
|                                                                       |  | 2002                             |           
|Net income (loss)                                                      |  | $                                | 4,779     
|Amortization of goodwill, net of taxes                                 |  |                                  |          
|                                                                       |  |                                  |           
|Pro forma net income (loss)                                            |  | $                                | 4,779     
|                                                                       |  |                                  |           
|Pro forma earnings per share:                                          |  |                                  |           
|Basic                                                                  |  | $                                | 0.42      
|                                                                       |  |                                  |           
|Diluted                                                                |  | $                                | 0.42      
|                                                                       |  |                                  |           
|Weighted average common shares outstanding-basic                       |  |                                  | 11,372,461
|                                                                       |  |                                  |           
|Weighted average common & common equivalent shares
outstanding-diluted |  |                                  | 11,465,809
|                                                                       |  |                                  |           



Intangible assets
subject to amortization are comprised of premium on deposits and mortgage servicing rights, including the excess servicing interest-only strips and unearned income from sale of servicing rights. The premium on deposits amounted to $15.6 million and
$18.4 million at December 31, 2002 and 2001, respectively, and is being amortized on a straight-line basis over 10 years. Following are gross carrying amounts and accumulated amortization (where applicable) and the estimated amortization expense for
each of the five succeeding years ($ in thousands):



|                                  |  | Premium on Deposits   |        |                          | Mortgage Servicing Rights
|--------------------------------- |  | --------------------- | ------ | ------------------------ | -------------------------
|                                  |  | Gross Carrying Amount |        | Accumulated Amortization |                          
|                                  |  | $                     | 27,673 |                          | $                        
|                                  |  |                       |        |                          |                          
|Estimated amortization:           |  |                       |        |                          |                          
|For the years ending December 31, |  |                       |        |                          |                          
|2003                              |  |                       |        |                          |                          
|2004                              |  |                       |        |                          |                          
|2005                              |  |                       |        |                          |                          
|2006                              |  |                       |        |                          |                          
|2007                              |  |                       |        |                          |                          



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Time Deposits



Time deposits in amounts of $100,000 or more were $246.0
million as of December 31, 2002. The scheduled maturities of all time deposits were as follows ($ in thousands):



|Year EndedDecember 31, |  | Amount |           | Percent of Total Time Deposits |       
|---------------------- |  | ------ | --------- | ------------------------------ | ------
|2003                   |  | $      | 706,395   |                                | 62.62 
|2004                   |  |        | 322,721   |                                | 28.61 
|2005                   |  |        | 57,089    |                                | 5.06  
|2006                   |  |        | 13,815    |                                | 1.22  
|2007                   |  |        | 27,918    |                                | 2.48  
|Thereafter             |  |        | 61        |                                | 0.01  
|                       |  |        |           |                                |       
|Total time deposits    |  | $      | 1,127,999 |                                | 100.00
|                       |  |        |           |                                |       



Financial Accounting and Reporting for Goodwill and Other Intangible Assets Acquired in a Business Combination at Acquisition



On July 20, 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets.
SFAS No. 141 addresses financial accounting and reporting for goodwill and other intangible assets acquired in a business combination at acquisition. SFAS No. 141 requires the purchase method of accounting to be used for all business combinations
initiated after June 30, 2001; establishes specific criteria for the recognition of intangible assets separately from goodwill; and requires unallocated negative goodwill to be written off immediately as an extraordinary gain (instead of being
deferred and amortized). SFAS No. 142 addresses financial accounting and reporting for intangible assets acquired individually or with a group of other assets (but not those acquired in a business combination) at acquisition. SFAS No. 142 also
addresses financial accounting and reporting for goodwill and other intangible assets subsequent to their acquisition. SFAS No. 142 provides that goodwill will not be amortized but rather will be tested at least annually for impairment. It also
provides that intangible assets that have finite useful lives will continue to be amortized over their useful lives, but those lives will no longer be limited to 40 years. SFAS No. 141 is effective for all business combinations initiated after June
30, 2001, and for all business combinations accounted for by the purchase method for which the date of acquisition is after June 30, 2001. The provisions of SFAS No. 142 effective for fiscal years beginning after December 15, 2001. The adoption of
SFAS No. 141 and SFAS No. 142 did not have a material effect upon our financial position or results of operations.



SFAS No. 143-Accounting for Asset Retirement Obligations



In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible, long-lived assets and the associated retirement costs. This statement is effective January 1, 2003
and is not expected to have a material impact on our results of operations or the financial condition of the Company.



Accounting for the Impairment or Disposal of Long-Lived Assets



In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 replaces SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of and amends Accounting Principles Board
(APB) Opinion No. 30, Reporting the Results of Operations  Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequent Occurring Events and Transactions. SFAS No. 144 addresses
the financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within



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those fiscal years, with early application encouraged. The adoption of SFAS No. 144 did not have a
material effect upon our results of operations or financial position.



Accounting by Certain Entities (Including Entities with Trade Receivables) that Lend to or Finance the Activities of Others



In December 2001, the American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) 01-6,
Accounting by Certain Entities (including Entities with Trade Receivables) that Lend to or Finance the Activities of Others. SOP 01-6 clarifies that accounting and financial reporting practices for lending and financing activities
should be the same regardless of the type of entity engaging in those activities and conforms, where appropriate, differences among the accounting and financial reporting provisions previously established by certain AICPA Audit and Accounting
guides. SOP 01-6 is effective for fiscal years beginning after December 15, 2001. The adoption of SOP 01-6 did not have a material effect upon our results of operations or financial position.



Acquisitions of Certain Financial Institutions (an amendment of FASB
Statements No. 72 and 144 and FASB Interpretation No. 9)



In
October 2002, the FASB issued SFAS No. 147, Acquisitions of Certain Financial Institutions (an amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9). SFAS No. 147 removes acquisitions of financial institutions from
the scope of both SFAS No. 72 and FASB Interpretation No. 9 and requires that those transactions be accounted for in accordance with FASB Statements No. 141 and 142. The provisions of SFAS No. 147 are effective for acquisitions with an acquisition
date on or after October 1, 2002. The adoption of SFAS No. 147 did not have a material effect upon our financial position or results of operations.



Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others



In November 2002, the FASB issued Interpretation
No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (Interpretation 45). Interpretation 45 changes the accounting for and the disclosure of
guarantees. Interpretation 45 requires that guarantees meeting the characteristics described in the Interpretation be initially recorded at fair value in contrast to FASB No. 5 which requires recording a liability when a loss is probable and
reasonably estimable. The disclosure requirements of Interpretation 45 are effective for financial statements and annual periods ending after December 15, 2002. The initial recognition and initial measurement provisions of Interpretation 45 are
effective on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of Interpretation 45 is not expected to have a material effect upon our results of operations or financial position.



Consolidation of Variable Interest
Entities (an interpretation of Accounting Research Bulletin (ARB) No. 51)



In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (an interpretation of ARB No. 51) (Interpretation 46). Interpretation 46
expands the consolidation requirements of ARB No. 51 to include entities subject to a majority of the risk of loss from the variable interest entitys activities or entities entitled to receive a majority of the variable interest entitys
returns or both. The consolidation requirements of Interpretation 46 apply immediately to variable interest entities created after January 31, 2003 and apply to older entities in the first fiscal year or interim period beginning after June 15, 2003.
The disclosure requirements of Interpretation 46 are effective in all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. The adoption of Interpretation 46 is not expected to have a
material effect upon our results of operations or financial position.



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Stock-Based Compensation Plans



We
account for our stock-based compensation plans under Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. We adopted the disclosure option of SFAS No. 123, Accounting for
Stock-Based Compensation, 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 No. 123 had been adopted.



In December 2002, the FASB issued SFAS No. 148, Accounting
for Stock-Based Compensation  Transition and Disclosure (an amendment of FASB Statement No. 123). Under the provisions of SFAS No. 123, companies that adopted the fair value method of accounting for stock options were required to apply
that method prospectively for new stock option awards causing an increase in compensation expense in the few years following adoption. SFAS No. 148 provided two additional methods of transition that reflect an entitys full complement of
stock-based compensation expense immediately upon adoption. In addition, SFAS No. 148 improved the disclosures about the pro forma effects of using the fair value based method of accounting for stock based compensation for all companies, regardless
of the accounting method used. The annual disclosure provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002. The transition guidance for SFAS No. 148 is effective for fiscal years ending after December 15, 2003. The
Company has not yet determined which transition method will be used to comply with SFAS No. 148.



Reclassifications



Certain reclassifications have been made to prior period financial statements to conform to the 2002 financial statement presentation.



3.  SECURITIES:



Our securities consisted primarily of mortgage-backed and mortgage-related
securities (collectively, MBS) with a lesser amount of U.S. Treasury Securities, U.S. Agency Securities and Revenue Bonds. MBS, sometimes referred to as pass-through certificates, represent an interest in a pool of loans. The majority of
the MBS securities in our portfolio are issued by three government agencies or corporations: (1) the Government National Mortgage Association (GNMA); (2) the Federal Home Loan Mortgage Corporation (FHLMC); and (3) the Federal
National Mortgage Association (FNMA). Securities held to maturity are recorded at amortized cost, while securities available for sale and trading are recorded at estimated fair value.



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The securities portfolio at
December 31, 2002 and 2001 is summarized as follows ($ in thousands):



|                                            |  | Amortized Cost |         | Unrealized Gains |   | Unrealized Losses |  |   | Fair Value
|------------------------------------------- |  | -------------- | ------- | ---------------- | - | ----------------- |  | - | ----------
|At December 31, 2002:                       |  |                |         |                  |   |                   |  |   |           
|Available for sale securities:              |  |                |         |                  |   |                   |  |   |           
|U.S. Agency securities                      |  | $              | 2,500   |                  | $ | 23                |  | $ |          
|Revenue bonds                               |  |                | 1,560   |                  |   | 31                |  |   |          
|MBS                                         |  |                | 802,251 |                  |   | 13,743            |  |   |          
|                                            |  |                |         |                  |   |                   |  |   |           
|Total securities available for sale         |  | $              | 806,311 |                  | $ | 13,797            |  | $ |          
|                                            |  |                |         |                  |   |                   |  |   |           
|Trading securities:                         |  |                |         |                  |   |                   |  |   |           
|Republic Bank Owner Trust 1997-1 and 1998-1 |  | $              | 6,241   |                  | $ |                  |  | $ |          
|Excess servicing, interest only-strip       |  |                | 1,574   |                  |   |                  |  |   |          
|                                            |  |                |         |                  |   |                   |  |   |           
|Total trading securities                    |  | $              | 7,815   |                  | $ |                  |  | $ |          
|                                            |  |                |         |                  |   |                   |  |   |           
|At December 31, 2001:                       |  |                |         |                  |   |                   |  |   |           
|Available for sale securities:              |  |                |         |                  |   |                   |  |   |           
|U.S. Agency securities                      |  | $              | 2,500   |                  | $ | 48                |  | $ |          
|Revenue bonds                               |  |                | 2,810   |                  |   | 47                |  |   | (11       
|MBS                                         |  |                | 783,129 |                  |   | 6,426             |  |   | (2,230    
|                                            |  |                |         |                  |   |                   |  |   |           
|Total securities available for sale         |  | $              | 788,439 |                  | $ | 6,521             |  | $ | (2,241    
|                                            |  |                |         |                  |   |                   |  |   |           
|Trading securities:                         |  |                |         |                  |   |                   |  |   |           
|Republic Bank Owner Trust 1998-1 B2         |  | $              | 10,863  |                  | $ |                  |  | $ |          
|Republic Bank Owner Trust 1997-1 and 1998-1 |  |                | 5,855   |                  |   |                  |  |   |          
|Excess servicing, interest only-strip       |  |                | 3,159   |                  |   |                  |  |   |          
|                                            |  |                |         |                  |   |                   |  |   |           
|Total trading securities                    |  | $              | 19,877  |                  | $ |                  |  | $ |          
|                                            |  |                |         |                  |   |                   |  |   |           
|Held to maturity:                           |  |                |         |                  |   |                   |  |   |           
|MBS held to maturity                        |  | $              | 21,470  |                  | $ | 953               |  | $ |          
|                                            |  |                |         |                  |   |                   |  |   |           



|                              |  | 2002 |         | 2001
|----------------------------- |  | ---- | ------- | ----
|Book Value at December 31:    |  |      |         |     
|Available for sale securities |  | $    | 820,108 |     
|Trading securities            |  |      | 7,815   |     
|Held to maturity securities   |  |      |        |     
|                              |  |      |         |     
|Total securities              |  | $    | 827,923 |     
|                              |  |      |         |     



The amortized cost,
estimated fair value and weighted average yield of securities at December 31, 2002, grouped by stated maturity of the security are shown below ($ in thousands):



|                              |  | Less Than One Year |      |   | One-Five Years |   |        | Five-Ten Years |  |   | Over Ten Years |   |  | Total |        
|----------------------------- |  | ------------------ | ---- | - | -------------- | - | ------ | -------------- |  | - | -------------- | - |  | ----- | -------
|Amortized Cost:               |  |                    |      |   |                |   |        |                |  |   |                |   |  |       |        
|Available for sale securities |  | $                  | 730  |   |                | $ | 37,420 |                |  | $ | 21,295         |   |  | $     | 746,866
|Trading securities            |  |                    |     |   |                |   |       |                |  |   | 7,815          |   |  |       |       
|Held to maturity              |  |                    |     |   |                |   |       |                |  |   |               |   |  |       |       
|                              |  |                    |      |   |                |   |        |                |  |   |                |   |  |       |        
|Total securities              |  | $                  | 730  |   |                | $ | 37,420 |                |  | $ | 29,110         |   |  | $     | 746,866
|                              |  |                    |      |   |                |   |        |                |  |   |                |   |  |       |        
|Fair Value:                   |  |                    |      |   |                |   |        |                |  |   |                |   |  |       |        
|Available for sale securities |  | $                  | 735  |   |                | $ | 37,974 |                |  | $ | 22,072         |   |  | $     | 759,327
|Trading securities            |  |                    |     |   |                |   |       |                |  |   | 7,815          |   |  |       |       
|Held to maturity              |  |                    |     |   |                |   |       |                |  |   |               |   |  |       |       
|                              |  |                    |      |   |                |   |        |                |  |   |                |   |  |       |        
|Total securities              |  | $                  | 735  |   |                | $ | 37,974 |                |  | $ | 29,877         |   |  | $     | 759,327
|                              |  |                    |      |   |                |   |        |                |  |   |                |   |  |       |        
|Weighted Average Yield:       |  |                    | 5.07 | % |                |   | 4.22   | %              |  |   | 5.59           | % |  |       | 4.65   



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Proceeds from sales of
securities (including loans securitized and sold) during the years ended December 31, 2002, 2001 and 2000 were $245.5 million, $324.8 million and $42.4, respectively. Gross gains of $3.3 million, $2.7 million and $245,000 and gross losses of
$289,000, $2,100 and $5,200, respectively, were realized on these sales. Securities with book and fair values of $85.2 million and $87.1 million, respectively, were pledged to secure repurchase agreements at December 31, 2002. The fair values
assigned to the MBS classified as available for sale were derived using market quotations at December 31, 2002.



Securitized Financial Assets



At December 31, 2002, the trading asset category included $6.2 million in overcollateralization and residual interests in
cash flows from securitizations in December 1997 and June 1998 and $1.6 million of excess servicing interest-only strips. We have recorded these assets at our estimate of their fair value. The other assets category on our balance sheet included $5.6
million of MSRs.



Trading assets are evaluated at least quarterly
with any valuation adjustment reflected as a trading gain or loss in the consolidated statement of operations under the caption Gain (loss) on loans and securities, net. Under generally accepted accounting principles, use of quoted
market values is the preferred method for valuing trading assets. However, where the market for those assets is illiquid and price quotations are not readily available, other methods are permitted, including techniques utilizing the present value of
expected cash flows to value our trading assets. We have used a present value methodology to value trading assets.



The accounting estimates and judgements used in the valuation of the residual interests from the December 1997 and June 1998 securitizations are
summarized as follows ($ in thousands):



|                                           |  | Initial Valuation |         |   | 2002 Valuation |   |        | 2001 Valuation | 
|------------------------------------------ |  | ----------------- | ------- | - | -------------- | - | ------ | -------------- | 
|December 1997 Securitization               |  |                   |         |   |                |   |        |                | 
|Collateral amount                          |  | $                 | 60,000  |   |                | $ | 14,850 |                | 
|Discount rate                              |  |                   | 14.00   | % |                |   | 15.00  | %              | 
|Prepayment speed                           |  |                   | 15.00   |   |                |   | 39.00  |                | 
|Cumulative lifetime default rate (1)       |  |                   | 9.57    |   |                |   | 16.81  |                | 
|Weighted average remaining life (in years) |  |                   | 4.12    |   |                |   | 2.10   |                | 
|                                          
|June 1998 Securitization                   |  |                   |         |   |                |   |        |                | 
|Collateral amount                          |  | $                 | 240,000 |   |                | $ | 75,853 |                | 
|Discount rate                              |  |                   | 15.00   | % |                |   | 20.00  | %              | 
|Prepayment speed                           |  |                   | 15.00   |   |                |   | 34.00  |                | 
|Cumulative lifetime default rate (1)       |  |                   | 10.68   |   |                |   | 15.91  |                | 
|Weighted average remaining life (in years) |  |                   | 4.19    |   |                |   | 2.38   |                | 

|(1) |  | Expressed as the percent of total defaults over the expected life of the collateral to the initial collateral amount.
|--- |  | ---------------------------------------------------------------------------------------------------------------------



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The following schedule
summarizes the status and activity on the assets which are collateral for the two securitizations ($ in thousands):



|                                            |  | 1997-1 |       |   | 1998-1 |  
|------------------------------------------- |  | ------ | ----- | - | ------ | -
|As of December 31, 2002                     |  |        |       |   |        |  
|Cumulative credit losses, net of recoveries |  | $      | 8,670 |   |        | $
|Cumulative default rate                     |  |        | 14.45 | % |        |  
|Net credit losses in 2002                   |  | $      | 838   |   |        | $
|                                           
|Delinquencies at December 31, 2002:         |  |        |       |   |        |  
|30-59 days delinquent                       |  | $      | 292   |   |        | $
|60-89 days delinquent                       |  |        | 169   |   |        |  
|90 day and over delinquent                  |  |        | 361   |   |        |  
|                                            |  |        |       |   |        |  
|Total delinquencies                         |  | $      | 822   |   |        | $
|                                            |  |        |       |   |        |  
|Delinquency rate                            |  |        | 5.73  | % |        |  
|                                            |  |        |       |   |        |  



|                                            |  | 1997-1 |       |   | 1998-1 |  
|------------------------------------------- |  | ------ | ----- | - | ------ | -
|As of December 31, 2001                     |  |        |       |   |        |  
|Cumulative credit losses, net of recoveries |  | $      | 7,832 |   |        | $
|Cumulative default rate                     |  |        | 13.05 | % |        |  
|Net credit losses in 2002                   |  | $      | 1,663 |   |        | $
|                                           
|Delinquencies at December 31, 2001:         |  |        |       |   |        |  
|30-59 days delinquent                       |  | $      | 492   |   |        | $
|60-89 days delinquent                       |  |        | 193   |   |        |  
|90 day and over delinquent                  |  |        | 308   |   |        |  
|                                            |  |        |       |   |        |  
|Total delinquencies                         |  | $      | 993   |   |        | $
|                                            |  |        |       |   |        |  
|Delinquency rate                            |  |        | 3.98  | % |        |  
|                                            |  |        |       |   |        |  



Sensitivity in the
Valuation of Securitized Financial Assets- The market values of the securities resulting from securitization of financial assets are extremely sensitive to changes in the assumptions used to calculate the expected cash flows from those assets.
The measurements of the sensitivities presented are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on selected variations in assumptions generally cannot be extrapolated because the relationship of
the change in the assumption to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on fair value is calculated without changing any other assumption; in reality, changes in one factor may result in
changes in another factor (for example, increases in market interest rates may result in lower prepayments and increased credit losses), which might magnify or counteract the sensitivities.



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Residual Interests in
Cashflows from Securitizing High LTV Loans The following presents our approximation of the resulting changes in fair values from the current valuation reflected in these consolidated financial statements that would be due to two
alternative changes in the discount rate, the prepayment speed and the cumulative lifetime default rate ($ in thousands):



|                                                                                                                      |  |                       |       |   | To:                 |  
|--------------------------------------------------------------------------------------------------------------------- |  | --------------------- | ----- | - | ------------------- | -
|                                                                                                                      |  | FromCurrent Valuation |       |   | Pro Forma Valuation |  
|December 1997 Securitization (1997-1)                                                                               |  |                       |       |   |                     |  
|If the discount rate was changed:                                                                                     |  |                       | 15.00 | % |                     |  
|The current valuation would change:                                                                                   |  | $                     | 2,847 |   |                     | $
|                                                                                                                     
|If the prepayment speed was changed:                                                                                  |  |                       | 39.00 | % |                     |  
|The current valuation would change:                                                                                   |  | $                     | 2,847 |   |                     | $
|                                                                                                                     
|If losses over the remaining life were to increase by 25% and 35%, the cumulative
lifetime default rate would change: |  |                       | 16.81 | % |                     |  
|The current valuation would change:                                                                                   |  | $                     | 2,847 |   |                     | $



|                                                                                                                      |  |                       |       |   | To:                 |  
|--------------------------------------------------------------------------------------------------------------------- |  | --------------------- | ----- | - | ------------------- | -
|                                                                                                                      |  | FromCurrent Valuation |       |   | Pro Forma Valuation |  
|December 1998 Securitization (1998-1)                                                                               |  |                       |       |   |                     |  
|If the discount rate was changed:                                                                                     |  |                       | 20.00 | % |                     |  
|The current valuation would change:                                                                                   |  | $                     | 3,394 |   |                     | $
|                                                                                                                     
|If the prepayment speed was changed:                                                                                  |  |                       | 34.00 | % |                     |  
|The current valuation would change:                                                                                   |  | $                     | 3,394 |   |                     | $
|                                                                                                                     
|If losses over the remaining life were to increase by 25% and 35%, the cumulative
lifetime default rate would change: |  |                       | 15.91 | % |                     |  
|The current valuation would change:                                                                                   |  | $                     | 3,394 |   |                     | $



4. MSRS AND EXCESS
SERVICING INTEREST-ONLY STRIPS



Our MSRs at December 31,
2002 were $6.8 million, representing the capitalized value of the rights to service $645.8 million of loans. Our excess servicing interest-only strips were $1.6 million, representing the capitalized value of the rights to service $179.4 million of
loans (the $179.4 million of loans with excess servicing is included in the overall $645.8 million servicing portfolio amount). At December 31, 2002, the recorded fair value of the MSRs was $5.6 million after deducting a valuation allowance of $1.2
million. The excess servicing interest-only strips were stated at their fair value of $1.6 million. Both assets are sensitive to changes in economic conditions, particularly changes in the expected offering rates for new mortgage loans which
determine expected prepayment speeds, one of the major components of the valuation. We perform the sensitivity analysis on the MSRs and the excess servicing interest-only strips as one combined asset.



Our estimate of the change in fair value at December 31, 2002 for a given
change in loan offering rates was as follows:



|If Loan Offering Rates:    |  | The MSR/Excess Servicing Value Would:
|-------------------------- |  | -------------------------------------
|Increased 200 basis points |  | Increase by 95%                      
|Increased 400 basis points |  | Increase by 131%                     
|Decreased 200 basis points |  | Decrease by 11%                      
|Decreased 400 basis points |  | Decrease by 12%                      



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5.    LOANS:



Loans
at December 31, 2002 and 2001 are summarized as follows ($ in thousands):



|                                                        |  | 2002 |           |   | 2001 |  
|------------------------------------------------------- |  | ---- | --------- | - | ---- | -
|Real estate mortgage loans:                             |  |      |           |   |      |  
|One-to-four family residential                          |  | $    | 382,366   |   |      | $
|Subprime mortgages                                      |  |      | 33,672    |   |      |  
|Multifamily residential                                 |  |      | 38,750    |   |      |  
|Warehouse lines of credit                               |  |      | 118       |   |      |  
|Commercial real estate                                  |  |      | 551,934   |   |      |  
|                                                        |  |      |           |   |      |  
|Mortgage loans secured by first liens                   |  |      | 1,006,840 |   |      |  
|Commercial (business) loans                             |  |      | 145,634   |   |      |  
|Home equity loans                                       |  |      | 285,256   |   |      |  
|High LTV Loans                                          |  |      | 21,393    |   |      |  
|Consumer loans                                          |  |      | 18,097    |   |      |  
|                                                        |  |      |           |   |      |  
|Total gross portfolio loans                             |  |      | 1,477,220 |   |      |  
|Less-allowance for loan losses                          |  |      | (27,987   | ) |      |  
|Less-premiums and unearned discounts on loans purchased |  |      | (537      | ) |      |  
|Less-unamortized loan fees, net                         |  |      | (814      | ) |      |  
|                                                        |  |      |           |   |      |  
|Total loans held for portfolio                          |  | $    | 1,447,882 |   |      | $
|                                                        |  |      |           |   |      |  



Mortgage loans serviced
for others as of December 31, 2002 and 2001, were $462.4 million and $638.0 million respectively. Loans on which interest was not being accrued totaled approximately $22.2 million, $46.2 million, and $49.4 million at December 31, 2002, 2001 and
2000, respectively. Had interest been accrued on these loans at their originally contracted rates, interest income would have been increased by approximately $1.9 million, $4.3 million, and $3.1 million in the years ended December 31, 2002, 2001 and
2000, respectively. Loans past due 90 days or more and still accruing interest at December 31, 2002 and 2001, totaled approximately $18,000 and $12,000 respectively. Restructured loans totaled $720,000 and $773,000 during 2002 and 2001,
respectively.



6.  ALLOWANCE FOR LOAN LOSSES:



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



|                                                                     |  | For the Years Ended December 31, |        
|-------------------------------------------------------------------- |  | -------------------------------- | -------
|                                                                     |  | 2002                             |        
|Balance at beginning of year                                         |  | $                                | 31,997 
|Provision for possible loan losses                                   |  |                                  | 5,350  
|Discount on purchased loans allocated from allowance for loan losses |  |                                  |       
|Loans charged-off                                                    |  |                                  | (10,980
|Recoveries of loans charged-off                                      |  |                                  | 1,620  
|                                                                     |  |                                  |        
|Balance at end of year                                               |  | $                                | 27,987 
|                                                                     |  |                                  |        



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7. PREMISES AND EQUIPMENT:



Premises and equipment, net of accumulated depreciation and
amortization at December 31, 2002 and 2001, included ($ in thousands):



|                                               |  | 2002 |         |   | 2001 |  
|---------------------------------------------- |  | ---- | ------- | - | ---- | -
|Land                                           |  | $    | 7,809   |   |      | $
|Buildings and improvements                     |  |      | 23,569  |   |      |  
|Furniture and equipment                        |  |      | 31,195  |   |      |  
|Leasehold improvements                         |  |      | 5,938   |   |      |  
|Construction in progress                       |  |      | 2,629   |   |      |  
|                                               |  |      |         |   |      |  
|Total premises and equipment                   |  |      | 71,140  |   |      |  
|Less-accumulated depreciation and amortization |  |      | (32,632 | ) |      |  
|                                               |  |      |         |   |      |  
|Premises and equipment, net                    |  | $    | 38,508  |   |      | $
|                                               |  |      |         |   |      |  



Depreciation expense for
2002, 2001 and 2000 was $5.2 million, $6.0 million and $6.9 million, respectively.



8. OTHER REAL ESTATE:



The
carrying value of loans converted to ORE through foreclosure proceedings totaled $22.9 million, and $19.0 million, for the years ended December 31, 2002 and 2001, respectively. There were no sales of ORE that were financed by us for the years ended
December 31, 2002 and 2001, respectively. State banking regulations require us to dispose of all ORE acquired through foreclosure within five years of acquisition, with a possibility for additional extensions, each of up to five years. There are no
properties that have exceeded the five-year holding period limitation. Changes in the valuation for ORE were as follows ($ in thousands):



|                             |  | For the Years Ended December 31, |      
|---------------------------- |  | -------------------------------- | -----
|                             |  | 2002                             |      
|Balance at beginning of year |  | $                                | 98   
|Provision                    |  |                                  | 1,700
|Charge-offs, net             |  |                                  | (180 
|                             |  |                                  |      
|Balance at end of year       |  | $                                | 1,618
|                             |  |                                  |      



9. INCOME TAXES:



The income tax provision or benefit, excluding the income
tax benefit related to the minority interest from subsidiary trust, was comprised of the following ($ in thousands):



|                              |  | For the Years Ended December 31, |       
|----------------------------- |  | -------------------------------- | ------
|                              |  | 2002                             |       
|Current provision             |  | $                                | 5,233 
|Deferred provision /(benefit) |  |                                  | (1,165
|                              |  |                                  |       
|                              |  | $                                | 4,068 
|                              |  |                                  |       



At December 31, 2002, we
had approximately $4.7 million of remaining federal and $5.6 million of state net operating loss carryforwards. These carryforwards expire in the years 2005 through 2013. Recognition of net operating loss carryforwards incurred prior to 1998 is
limited to approximately $732,000 each year under the rules of Internal Revenue Code Section 382. 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. Through
mergers in 1997 and 1998, we acquired unrecognized deferred tax liabilities of approximately $3.2 million, and $86,000, respectively, related to base year reserves calculated under the thrift bad debt percentage method. If during any taxable year,
we cease to be a bank, these reserves shall be taxed ratably over the six taxable year period beginning with such taxable year.



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Our effective tax rate varies
from the federal statutory rate of 34%. The reasons for this difference are as follows ($ in thousands):



|                                            |  | For the Years Ended December 31, |      
|------------------------------------------- |  | -------------------------------- | -----
|                                            |  | 2002                             |      
|Computed expected tax provision/(benefit) |  | $                                | 3,581
|Increase (reduction) of taxes:              |  |                                  |      
|Tax-exempt interest income                  |  |                                  | (6   
|Goodwill amortization                       |  |                                  |     
|State taxes                                 |  |                                  | 411  
|Other                                       |  |                                  | 82   
|                                            |  |                                  |      
|Actual tax provision (benefit)              |  | $                                | 4,068
|                                            |  |                                  |      



Net Deferred Tax Asset



During 2001, the
Internal Revenue Service completed an examination of our federal income tax returns for the years 1996-1999. The exam did not result in any adjustment to our net operating loss carryforwards that, after accounting for the timing difference between
book and tax loan loss provisions, are the next major source of our deferred tax asset. Although we incurred book losses in 2000 and 2001 of $4.6 million and $3.9 million, respectively, we realized $22.8 million and $6.4 million in taxable income
for income tax purposes after utilization of applicable tax loss carryforwards for these same periods. We have concluded, based on this recent favorable outcome to the IRS examination and the fact that we are in a taxable income position and are
likely to remain such for the foreseeable future, that no valuation allowance was necessary. A valuation would be provided in future periods should material events or circumstances cause us to change this conclusion.



Temporary differences created the following deferred tax assets and
liabilities (included in Other assets) at December 31, 2002 and 2001 ($ in thousands):



|                                                                     |  | Deferred Tax Asset (Liability) |       
|-------------------------------------------------------------------- |  | ------------------------------ | ------
|                                                                     |  | 2002                           |       
|Provision for loan losses-financial expense greater than tax expense |  | $                              | 10,523
|Net operating losses and tax credit carry-forwards                   |  |                                | 1,803 
|Financial and tax differences on ORE properties                      |  |                                | 606   
|Financial and tax differences from loan securitizations              |  |                                | 2,831 
|Financial amortization of premium over tax amortization              |  |                                | 1,823 
|Financial and tax differences from mortgage servicing rights         |  |                                | 317   
|Financial and tax differences from interest on nonaccrual loans      |  |                                | 158   
|Other                                                                |  |                                | 1,034 
|                                                                     |  |                                |       
|Gross deferred tax asset                                             |  |                                | 19,095
|                                                                    
|Tax depreciation greater than financial depreciation                 |  |                                | (670  
|Financial and tax differences on purchase accounting adjustments     |  |                                | (442  
|Financial and tax differences on FHLB dividends                      |  |                                | (267  
|Other (net)                                                          |  |                                | (71   
|                                                                     |  |                                |       
|Gross deferred tax liabilities                                       |  |                                | (1,450
|Less valuation allowance                                             |  |                                |      
|                                                                     |  |                                |       
|Net deferred tax asset                                               |  | $                              | 17,645
|                                                                     |  |                                |       



An amount relating to
the unrealized gain on available for sale securities, which is recorded directly to stockholders equity, and is a component of comprehensive income, increased by $3.6 million and $2.0 million, in 2002 and 2001, respectively.



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10. OTHER BORROWINGS:



Securities Sold Under
Agreement to Repurchase



The Bank sells securities under
agreement to repurchase to the Banks customers and broker-dealers in the normal course of business. All such borrowings at December 31, 2002 and 2001 were from customers of the Bank on an overnight basis. The weighted average interest rate was
0.88% and 1.38% at December 31, 2002 and 2001, respectively.



FHLB Advances



At December 31, 2002, we were required by our collateral agreement with the FHLB to maintain qualifying first mortgage loans in an amount equal to at least 100% of the FHLB advances outstanding as collateral. The FHLB advances at
December 31, 2002 and 2001 were collateralized by such loans and securities totaling $172.2 million and $52.3 million, respectively, with an unused credit line of $323.0 million at December 31, 2002. In addition, all of our FHLB stock is pledged as
collateral for such advances.



Maturities and average interest
rates of advances from the FHLB as of December 31, 2002 and 2001, were as follows ($ in thousands):



|                            |  | Amount and weighted average rate at December 31, |        
|--------------------------- |  | ------------------------------------------------ | -------
|                            |  | 2002                                             |        
|                            |  | Amount                                           |        
|Remaining term to maturity: |  |                                                  |        
|1 month or less (on demand) |  | $                                                | 160,000
|2-12 months                 |  |                                                  | 5,000  
|13-24 months                |  |                                                  |       
|25-36 months                |  |                                                  |       
|Over 36 months              |  |                                                  | 7,240  
|                            |  |                                                  |        
|Total                       |  | $                                                | 172,240
|                            |  |                                                  |        



7% Convertible Subordinated Debt Due 2014



In September 1999, we completed a private placement of $15.0 million 7.0% convertible subordinated debentures that mature on October 1, 2014 (the 1999 Debentures) Each $1,000 principal amount of the 1999 Debentures is
convertible at any time by the holder into 55.55556 shares of our $2.00 par value common stock (a conversion price of $18.00 per share). We can redeem the 1999 Debentures at any time after October 1, 2004 at fixed redemption prices. The 1999
Debentures may also be redeemed by us without a premium if the closing price of our common stock equals or exceeds $23.40 for 20 consecutive trading days.



7% Convertible Subordinated Debentures Due 2011



In May 2001, we completed a private placement of $15.0 million 7.0% convertible subordinated debentures maturing April 1,
2011 (the 2001 Debentures). Each $1,000 principal amount of the 2001 Debentures is convertible by the holder at any time into 64.1026 shares of our $2.00 par value common stock (a conversion price of $15.60 per share). The 2001
Debentures can be redeemed by us at any time after April 1, 2003, without payment of any premium, provided the closing bid price of our common stock for not less than 20 consecutive trading days equals or exceeds $20.28. Regardless of the closing
bid price of our common stock, we can redeem the 2001 Debentures at any time after April 1, 2006 at fixed redemption prices. The 2001 Debentures are subordinate to the 1999 Debentures. The net proceeds from the 2001 Debentures were used to repay
$10.0 million of outstanding debt and the balance was used for general corporate purposes.



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Holding Company Senior Debt, Term Subordinated Debt and Unsecured Notes



During 2001 we repaid all of our holding company senior debt, term subordinated debt and unsecured notes.



Holding Company Senior DebtThe holding company senior debt had a balance of $6.8 million at the end of 2000. The senior debt was originally
borrowed in September 1998 in the amount of $25.0 million and was guaranteed by Mr. William R. Hough, our Chairman of the Board and principal shareholder. In September 1999, we paid down the principal amount by $15.0 million to a balance of $10.0
million using the net proceeds from sale of the 1999 Debentures, extended the maturity to March 31, 2001 and amended the terms so as to require monthly principal payments of $278,000 plus interest and a $5.0 million balloon payment on March 24,
2001. In December 2000, we further restructured the senior debt, made a $2.0 million payment in January 2001, with the $4.8 million remainder to be fully amortized over an 18-month period beginning in January 2001. The balance was paid off in May
2001 with the net proceeds from the 2001 Debentures.



Term
Subordinated DebtThe term subordinated debt had a balance of $2.8 million at the end of 2000. In December 1998, we borrowed $7.0 million from certain members of our board of directors on an unsecured basis. In September 1999, we refinanced
the unsecured debt to our directors by exchanging with them $4.3 million of the 1999 Debentures and $2.7 million non-convertible term subordinated debt, maturing in 2006. The term subordinated debt was paid off in May 2001 with the net proceeds from
the 2001 Debentures.



Unsecured NotesIn 2000, we
borrowed $3.5 million on an unsecured, revolving line of credit basis from Mr. William R. Hough, individually. The proceeds were used for holding company debt service. The loan was amended in December 2000 to extend the maturity to October 1, 2002.
The unsecured notes to Mr. Hough totaling $3.5 million were paid off in May 2001 with the net proceeds from the 2001 Debentures.



11. CREDIT RISK CONCENTRATION, OFF-BALANCE-SHEET RISK, COMMITMENTS AND CONTINGENCIES



Loans Outside Florida



The majority of the loans outside Florida are located in the states of California, Texas, Georgia, and in the northeastern
United States. At December 31, 2002, the composition of our loan portfolio, including loans held for sale, according to the location of the borrower or the real estate taken as underlying collateral, was as follows ($ in thousands):



|State                                 |  | Amount |           | Percent of Total |       
|------------------------------------- |  | ------ | --------- | ---------------- | ------
|Florida                               |  | $      | 1,398,830 |                  | 92.44 
|New England (1)                       |  |        | 26,583    |                  | 1.76  
|California                            |  |        | 12,806    |                  | 0.85  
|All other (none greater than $10,000) |  |        | 75,066    |                  | 4.95  
|                                      |  |        |           |                  |       
|Total                                 |  | $      | 1,513,285 |                  | 100.00
|                                      |  |        |           |                  |       

|(1) |  | New England has been defined by us to include the states of Connecticut, Delaware, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------



Off-Balance-Sheet Items



Financial
instruments with off-balance-sheet risk at December 31 2002 were limited to commitments to extend credit, commercial and standby letters of credit and unfunded lines of credit, all made in the normal course of business to meet the financing needs of
our customers. These instruments involve, to varying degrees, elements of credit and interest-rate risks that are not recognized in the accompanying consolidated balance sheets. Our 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. We use the same credit policies in making commitments and conditional obligations as we do for on-balance-sheet instruments.



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A summary of financial
instruments with off-balance-sheet risk at December 31, 2002, is as follows ($ in thousands):



|                                         |  | Contractual Amount
|---------------------------------------- |  | ------------------
|Commitments to extend credit             |  | $                 
|Unfunded lines of credit                 |  |                   
|Commercial and standby letters of credit |  |                   
|                                         |  |                   
|Total                                    |  | $                 
|                                         |  |                   



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 may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. We evaluate 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 our credit evaluation of the counter party. 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 us 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 those involved in extending loan facilities to customers. Outstanding, unsecured standby letters of credit at December 31, 2002, totaled approximately $6.6 million.



Commitments



We have entered into a number of non-cancelable operating leases primarily
for branch banking locations. In addition, during December 2002, we began leasing various equipment under capital leases which expire in 2005.



The present value of equipment under capital leases totals $1,053,000 as of December 31, 2002, payable at $376,000 per year through December 31, 2005.



Future minimum lease payments at December 31, 2002 are as
follows ($ in thousands):



|                                  |  | Operating Leases |       
|--------------------------------- |  | ---------------- | ------
|2003                              |  | $                | 4,821 
|2004                              |  |                  | 3,872 
|2005                              |  |                  | 2,888 
|2006                              |  |                  | 2,627 
|2007                              |  |                  | 2,369 
|Thereafter                        |  |                  | 12,485
|                                  |  |                  |       
|Gross operating lease commitments |  |                  | 29,062
|Less-sublease rentals             |  |                  | (588  
|                                  |  |                  |       
|Net lease commitments             |  | $                | 28,474
|                                  |  |                  |       



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Total rent expense for the
years ended December 31, 2002, 2001 and 2000, was $7.2 million, $5.6 million, and $5.6 million, respectively. Total rental income from subleases for the years ended December 31, 2002, 2001 and 2000, was $368,000, $558,000, and $1.1 million,
respectively. In addition, we are obligated to make processing payments in relation to our computer facilities of approximately $1.8 million in 2003.



Contingencies



Trustee for Atlantic International Mortgage Co. v. Republic Bank:

The Bank was named as a defendant in a complaint filed on November 20, 2002, in the United States Bankruptcy Court for the Middle District of Florida, in Tampa. The plaintiff is the trustee of three
affiliated entities (the Debtors) that were part of a now-discontinued mortgage warehouse lending program. The Debtors have filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code on November 21, 2000.
Prior to filing for such relief, the Debtors, through lines of credit and other forms of indebtedness, borrowed amounts in excess of $11 million from the Bank. The Bankruptcy Code provides that certain transfers of property by a debtor may be
avoided if such transfers were made within the 90 days prior to the Bankruptcy filing and the transfer provides the creditor more than it would have received under Chapter 7 of the Bankruptcy Code. The plaintiff alleges that the Bank received
payments in or obtained an interest in approximately $3.5 million of funds and real estate collateral that were avoidable pursuant to the Bankruptcy Code because such events occurred within the 90 day preference period. The plaintiff further alleges
that after the Debtors had filed for relief under the Bankruptcy Code the Bank received payments or interests in funds and real estate collateral of a value of approximately $806,000 that were not authorized pursuant to the Bankruptcy Code. As a
result, the plaintiff has requested that the foregoing transfer from the Debtors to the Bank be avoided, that the Bank return such payments and collateral, and any other relief that is appropriate.



The lawsuit was filed one day before the expiration of the applicable statute
of limitations. The Bank was not approached about the matters raised in the complaint prior to the complaint being filed. Management believes there may be certain defenses to the claims made, including most significantly, a defense that the alleged
transfers to the Bank did not constitute preferences avoidable under bankruptcy law because the Bank was a valid and perfected secured creditor. Evaluation of the claim and the Banks defenses is ongoing and management has not reached any
conclusion concerning the merits of this lawsuit.



James
Baker, et al v. Republic Bank:

The Bank was notified on February 21, 2003 that it had been named as one of 35 investor defendants in a
class action lawsuit filed on behalf of several Missouri residential real estate owners or borrowers. The plaintiffs obtained second mortgage High LTV Loans from Century Financial, Inc. (Century), during the 1997-1998 timeframe. During
this period, Republic purchased 112 loans from Century totaling approximately $5.4 million. The plaintiffs allege that Century charged illegal loan origination fees and closing costs in violation of the Missouri Second Mortgage Loans Act. Under the
purchase agreement with Century, all fees and costs collected by Century were retained by them. The plaintiffs are seeking both actual and punitive damages. The Bank has not at this point reached any conclusion regarding the validity of such
lawsuit.



Peak Partners, L.P. v. Republic Bank:

The plaintiff in this case purchased certain mortgage-backed notes with a face amount of $7.5 million that were collateralized by High
LTV Loans and issued by Keystone Owner Trust 1998-P2. The Bank is the servicer of record for the mortgages underlying the trust. The plaintiff later sold its investment for an amount higher than its purchase price. The plaintiff is alleging that a
correction made to the amounts remitted by the mortgage holders diminished the value of its investment and is seeking $500,000 in damages. The lawsuit, which includes claims for negligence, negligent misrepresentation and fraud, is pending in the
United States District Court for the District of New Jersey-Trenton Vicinage. Discovery is continuing in this matter. The Bank believes the lawsuit to be without merit.



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The Bank intends to respond
appropriately to the three lawsuits described and vigorously protect its interests. However, at this time, the Bank cannot conclude whether or not it will prevail in such litigation. We also are subject to various other legal proceedings in the
ordinary course of business. Based on information presently available, we do not believe that the ultimate outcome in such other proceedings, in the aggregate, would have a material adverse effect on our financial position or results of operations.



12. EMPLOYEE BENEFIT PLANS:



We have a 401(k) retirement plan that covers substantially all employees. Our
contributions were $482,000, $214,000, and $230,000 in the years ended December 31, 2002, 2001 and 2000, respectively.



13. FAIR VALUE OF FINANCIAL INSTRUMENTS:



Generally, our practice and intent is to hold our financial instruments to maturity, unless otherwise designated. Where available, quoted market prices
are used to determine fair value, however, most of our financial instruments lack quoted market prices. We have incorporated what we consider appropriate estimation methodologies for those financial instruments which lack quoted market prices which
requires that a significant number of assumptions be used to determine fair value. Those assumptions include subjective assessments of current market conditions and perceived risks associated with financial instruments, among other things. A user of
these financial statements might consider different assumptions to be more appropriate which could have a significant effect on the resulting estimated fair value. The estimated fair values presented neither include nor give effect to the intangible
values associated with our business, existing customer relationships, and branch banking network, among other things.



The following estimates of the fair value of financial instruments held by us include only those instruments that could reasonably be evaluated. Cash and
due from banks and federal funds sold were valued at cost. The securities portfolio was evaluated using market quotes, where available or fair market values based on a present value of cash flows technique. The fair value of the loan portfolio was
evaluated using the present value of cash flows, after adjusting for credit deterioration and prepayment assumptions, based upon current rates we 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. The value of our mortgage servicing rights was determined using the discounted cash flows of net income from servicing. 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. Fair values for time deposits and other borrowings 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 typically result in loans with a market interest rate when funded. The
recorded book value of deferred fee income approximates fair value.



These evaluations may incorporate specific value to us in accordance with our 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 our overall value as they exclude intangible aspects such as business and franchise value.



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The table below illustrates
the estimated fair value of our financial instruments using the assumptions described above ($ in thousands):



|                                               |  | December 31,
|---------------------------------------------- |  | ------------
|                                               |  | 2002        
|Financial Assets:                              |  |             
|Cash and due from banks                        |  | $           
|Interest bearing deposits in banks             |  |             
|Federal funds sold                             |  |             
|Securities                                     |  |             
|Loans                                          |  |             
|Mortgage servicing rights                      |  |             
|Financial Liabilities:                         |  |             
|Deposits                                       |  |             
|Securities sold under agreements to repurchase |  |             
|FHLB advances                                  |  |             
|Convertible subordinated debt                  |  |             



14.
STOCKHOLDERS EQUITY:



Dividends



Florida statutes limit the
amount of dividends we can pay in any given year to that years net income plus retained net income from the two preceding years. Additionally, we cannot pay dividends if payment would cause us to be undercapitalized as defined by federal
regulations.



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 exceeds the sum of the banks net profits for that year and its retained net profits for the preceding two years. As of January
1, 2003, there was a net retained profit for dividend payment purposes of $658,000. The holding company had $8.5 million of unrestricted cash available to it for debt service. Our annual debt service requirement is approximately $4.7 million per
year.



Perpetual Preferred
Convertible Stock



In the second quarter of 2001, all of the
holders of the Companys 75,000 shares of perpetual preferred stock converted their holdings into the Companys common stock, increasing the number of common shares outstanding by 750,000. The preferred stock had a liquidation preference
of $88 per share and carried a noncumulative dividend of $3.52 per year, which was paid quarterly. The holders of the preferred stock voted with the holders of the common stock and were entitled to 10 votes per each share of preferred stock.



Non-qualified Stock
Options



The board of directors may grant up to 25,000
nonqualified options each year. As of December 31, 2002, 146,590 of such options were outstanding. The per share exercise price of each stock option is determined by the board of directors at the date of grant, vesting over a five year period.



1995 Incentive Stock Option
Plan



On April 29, 1994, the shareholders approved a
qualified incentive stock option plan for certain key employees. In 1995, the stockholders adopted the Republic Bancshares, Inc. 1995 Stock Option Plan (the Plan) as a replacement for the 1994 Stock Option Plan. The total number of
shares that may be purchased pursuant to the Plan cannot exceed 1,125,000 shares 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 10 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. In the event of a change in control, or termination of employment without



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cause, all options granted become exercisable immediately. As of December 31, 2002, any performance
options previously granted had all either been exercised or had expired.



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 at the date of the option grant. As of December 31, 2002, 598,210 options remained outstanding under this plan, with 135,624 shares available to be granted at a future time.



1997 Stock Appreciation
Rights Plan



On October 21, 1997, the board of directors
approved a Stock Appreciation Rights Plan (the SAR Plan and SARs). Under the SAR Plan, certain key employees have been granted the right to receive cash equal to the excess of the fair market value of a share of our common
stock at the time of exercise, over the fair market value of a share of our common stock at date of grant, times the number of rights exercised. As of December 31, 2002, 11,200 SARs granted at the then current market value of $26.675 remained
outstanding. No more than 20% of the SARs may vest annually, beginning at date of grant. The term of a SAR may vary, but shall not be less than one year or more than 10 years from the date of grant.



We record compensation expense equal to the appreciation of the fair market
value of the stock times the number of outstanding SARs. As of December 31, 2002 and 2001, there had been no appreciation of our common stock over the fair market value at date of grant. Therefore, compensation expense has been recorded only for
those rights which have been exercised.



Aggregate Stock Option Activity



We have
adopted SFAS No. 123 for disclosure purposes only. The fair value of each option grant has been estimated as of the date of grant using an option pricing model with the following assumptions (weighted averages) for 2002, 2001 and 2000: risk-free
interest rate of 3.4%, 4.5% and 5.1%, respectively, expected life of seven years, dividend rate of zero percent, and expected volatility of 25.5% for 2002, 32.1% for 2001 and 41.1% for 2000. The approximate fair value of the stock options granted in
2002, 2001, and 2000 is $1.5 million, $806,000 and $1.3 million, respectively, which would be amortized as compensation expense over the five year vesting period of the options.



Had compensation cost been determined consistent with SFAS No. 123, utilizing the assumptions detailed above, our net income
(loss) and earnings (loss) per share, as reported, would have been the following pro forma amounts ($ in thousands except share data):



|                                    |  | 2002 |       | 2001 |   |        | 2000 | 
|----------------------------------- |  | ---- | ----- | ---- | - | ------ | ---- | 
|Net income (loss)                   |  |      |       |      |   |        |      | 
|As reported                         |  | $    | 4,779 |      | $ | (3,898 | )    | 
|Pro forma                           |  |      | 3,274 |      |   | (5,903 | )    | 
|Net income (loss) per share-basic   |  |      |       |      |   |        |      | 
|As reported                         |  |      | 0.42  |      |   | (0.37  | )    | 
|Pro forma                           |  |      | 0.29  |      |   | (0.55  | )    | 
|Net income (loss) per share-diluted |  |      |       |      |   |        |      | 
|As reported                         |  |      | 0.42  |      |   | (0.37  | )    | 
|Pro forma                           |  |      | 0.29  |      |   | (0.55  | )    | 



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A summary of the status of our
stock option plans at December 31, 2002, 2001 and 2000, and for the years then ended is presented in the table below:



|                                        |  | 2002    |   | 2001 |                       | 2000 
|--------------------------------------- |  | ------- | - | ---- | --------------------- | -----
|                                        |  | Shares  |   |      | Wtd. Avg. Exer. Price |      
|Fixed Options                           |  |         |   |      |                       |      
|Outstandingbeg. of year                |  | 627,860 |   |      | $                     | 16.54
|Granted                                 |  | 254,540 |   |      |                       | 19.64
|Exercised                               |  | (62,720 | ) |      |                       | 13.17
|Forfeited/Expired                       |  | (74,880 | ) |      |                       | 20.71
|                                        |  |         |   |      |                       |      
|Outstandingend of year                 |  | 744,800 |   |      |                       | 17.46
|                                        |  |         |   |      |                       |      
|Exercisableend of year                 |  | 389,670 |   |      |                       | 17.63
|Wtd. avg. fair value of options granted |  |         |   |      |                       | 5.83 



|Options Outstanding      |  | Options Exercisable           
|------------------------ |  | ------------------------------
|Range of Exercise Prices |  | Number Outstanding at 12/31/02
|$  8.7512.93            |  | 154,310                       
|12.9419.59              |  | 310,200                       
|20.0028.94              |  | 280,290                       



15. EARNINGS (LOSS)
PER SHARE:



Net Income (Loss) Per Common and Common
Equivalent Share



Diluted earnings (loss) per common and
common equivalent shares have been computed by dividing net income (loss) 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 stock options, with an exercise price greater than the average market price for the period, had been exercised at that average market price, with the proceeds being used to
buy shares from the market (i.e., the treasury stock method). Also, the calculation includes the shares that would have been issued from the conversion of our perpetual preferred convertible stock (in 2001) and the convertible subordinated
debentures, if they 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). The effect of the convertible subordinated debentures to common stock in 2002 was antidilutive,
therefore, those shares are excluded from diluted earnings per share. Basic earnings (loss) per common share was computed by dividing net income (loss) less dividends paid on the perpetual preferred convertible stock (in 2001) by the weighted
average number of shares of common stock outstanding during the year.



In a year in which a loss occurs, diluted and basic earnings per share are identical, therefore no reconciliation for the 2001 and 2000 fiscal years are presented. The table below reconciles the calculation of diluted and basic
earnings per share for 2002 ($ in thousands, except share data):



|              |  | 2002      
|------------- |  | ----------
|              |  | Net Income
|Basic         |  | $         
|Stock options |  |           
|              |  |           
|Diluted       |  | $         
|              |  |           



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During 2002, there were
285,850 stock options and 1,794,862 shares related to convertible subordinated debt which would have been antidilutive. During 2001, there were 627,860 stock options, 1,794,872 shares related to convertible subordinated debt which would have been
antidilutive. During 2000, there were 645,317 stock options, 833,334 shares related to convertible subordinated debt and 750,000 shares related to convertible preferred stock, which would have been antidilutive.



16. REGULATORY CAPITAL REQUIREMENTS:



We are required to comply with the three basic measures of capital adequacy
established by the Federal Reserve and the FDIC, two of which are risk-based measures and the third a leverage measure. All three applicable capital standards must be satisfied for a bank holding company or a bank to be considered in compliance with
minimum guidelines. Failure to meet capital guidelines could subject a bank or holding company to a variety of enforcement remedies, including among other things issuance of a capital directive, the termination of deposit insurance by the FDIC, and
certain other restrictions on our 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.



The minimum requirement for a bank to be considered
adequately capitalized is a total or risk-based ratio of 8.0%, a tier 1 to risk-weighted asset ratio of 4.0% and a tier 1 (leverage) capital ratio of 4.0%. To be considered a well-capitalized bank requires a total capital
ratio of 10.0%, a tier 1 to risk-weighted asset ratio of 6.0%, and a tier 1 (leverage) capital ratio of 5.0%. The Bank exceeded the requirements for a well-capitalized bank at December 31, 2002.



For bank holding companies, the Federal Reserve has established a minimum tier
1 (leverage) ratio 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 tier 1 (leverage) ratio of 3.0%, plus an additional
margin of 100 to 200 basis points. The holding company 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 1 Capital leverage ratio (deducting all intangibles) and other indicators of
capital strength in evaluating proposals for expansion or new activities. The Companys capital ratios exceeded Federal Reserve guidelines at December 31, 2002.



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The table which follows sets
forth the amounts of capital and capital ratios as of December 31, 2002 and 2001, and the applicable regulatory minimums ($ in thousands):



|                                                   |  | Company |         |       | Bank  |  
|-------------------------------------------------- |  | ------- | ------- | ----- | ----- | -
|                                                   |  | Amount  |         | Ratio |       |  
|As of December 31, 2002:                           |  |         |         |       |       |  
|Risk-Based Capital:                                |  |         |         |       |       |  
|Tier 1 Capital                                     |  |         |         |       |       |  
|Actual                                             |  | $       | 184,133 |       | 11.58 | %
|Minimum required to be Adequately Capitalized    |  |         | 63,625  |       | 4.00  |  
|Excess over minimum to be Adequately Capitalized |  |         | 120,508 |       | 7.58  |  
|To be Well Capitalized                           |  |         | N/A     |       | N/A   |  
|Excess over Well Capitalized requirements        |  |         | N/A     |       | N/A   |  
|                                                  
|Total Capital                                      |  |         |         |       |       |  
|Actual                                             |  | $       | 233,887 |       | 14.70 | %
|Minimum required to be Adequately Capitalized    |  |         | 127,250 |       | 8.00  |  
|Excess over minimum to be Adequately Capitalized |  |         | 106,637 |       | 6.70  |  
|To be Well Capitalized                           |  |         | N/A     |       | N/A   |  
|Excess over Well Capitalized requirements        |  |         | N/A     |       | N/A   |  
|                                                  
|Tier 1 Capital to Total Assets (Leverage):         |  |         |         |       |       |  
|Actual                                             |  | $       | 184,133 |       | 7.37  | %
|Minimum required to be Adequately Capitalized    |  |         | 99,887  |       | 4.00  |  
|Excess over minimum to be Adequately Capitalized |  |         | 84,246  |       | 3.37  |  
|To be Well Capitalized                           |  |         | N/A     |       | N/A   |  
|Excess over Well Capitalized requirements        |  |         | N/A     |       | N/A   |  
|                                                  
|As of December 31, 2001:                           |  |         |         |       |       |  
|Risk-Based Capital:                                |  |         |         |       |       |  
|Tier 1 Capital                                     |  |         |         |       |       |  
|Actual                                             |  | $       | 175,190 |       | 11.90 | %
|Minimum required to be Adequately Capitalized    |  |         | 58,889  |       | 4.00  |  
|Excess over minimum to be Adequately Capitalized |  |         | 116,301 |       | 7.90  |  
|To be Well Capitalized                           |  |         | N/A     |       | N/A   |  
|Excess over Well Capitalized requirements        |  |         | N/A     |       | N/A   |  
|                                                  
|Total Capital                                      |  |         |         |       |       |  
|Actual                                             |  | $       | 223,402 |       | 15.17 | %
|Minimum required to be Adequately Capitalized    |  |         | 117,778 |       | 8.00  |  
|Excess over minimum to be Adequately Capitalized |  |         | 105,624 |       | 7.17  |  
|To be Well Capitalized                           |  |         | N/A     |       | N/A   |  
|Excess over Well Capitalized requirements        |  |         | N/A     |       | N/A   |  
|                                                  
|Tier 1 Capital to Total Assets (Leverage):         |  |         |         |       |       |  
|Actual                                             |  | $       | 175,190 |       | 7.21  | %
|Minimum required to be Adequately Capitalized    |  |         | 97,212  |       | 4.00  |  
|Excess over minimum to be Adequately Capitalized |  |         | 77,978  |       | 3.21  |  
|To be Well Capitalized                           |  |         | N/A     |       | N/A   |  
|Excess over Well Capitalized requirements        |  |         | N/A     |       | N/A   |  



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17. RELATED PARTY
TRANSACTIONS:



Related
Party Transactions with Mr. William R. Hough



Mr. William R.
Hough, is chairman of the board of the Company, a director of the Company and the Bank, and our largest shareholder. Mr. Hough is also Chairman Emeritus and the controlling shareholder of William R. Hough & Co. (WRHC), a NASD-member
investment banking firm. A summary of the transactions with Mr. Hough, his immediate family members and his affiliates is as follows:



Securities Purchases and Sales; Investment Services

During 1999, we entered into an agreement with WRHC whereby they would act as our agent in open-market purchases and sales of securities. WRHC is compensated under that agreement on a commission basis. During 2002, 2001 and 2000, we
purchased $474.5 million, $725.6 million and $114.8 million respectively, of securities through WRHC and sold $242.6 million, $285.9 million and $41.2 million of securities through WRHC. We also periodically purchase securities under agreement to
repurchase at a rate based on the prevailing federal funds rate and one-eighth of one percent, per an agreement entered into on August 15, 1995. There were no such securities purchased from WRHC during 2002, 2001 and 2000.



WRHC offered sales of insurance and mutual fund products and investment
advisory services on our premises. Previously we were paid a commission based on the net profits earned from sales of investment products on our premises. For 2002, that arrangement was amended so that commissions paid to us would be based on gross
revenues. Fee income earned from this relationship was $213,160, $190,700 and $250,400 during 2002, 2001 and 2000, respectively. This agreement expired on October 31, 2002. The Company and WRHC did not renew the agreement.



WRHC participated as a selling agent in the placement of the $15.0 million of
convertible subordinated debentures due 2011 (the Debentures) that were issued on May 8, 2001 and was paid an $89,000 fee for its sales efforts. Mr. Hough, individually, purchased $3.7 million of the Debentures. No fee was paid on sale
of the Debentures to Mr. Hough or to any other of our directors who purchased the Debentures.



Loans from Mr. Hough

In 2000, we had borrowed from Mr. Hough, individually, $3.5
million on an unsecured, revolving line of credit basis and $1.5 million via term subordinated debt. The proceeds were used for holding company debt service. On May 8, 2001, we repaid both obligations in full.



Loans to Mr. Hough and His Related Interest

In November 1999, the Bank made a $4.2 million loan to WRH Mortgage, Inc., an affiliate of Mr. Hough. The Bank had retained $2.8 million of the loan with
the remainder participated to another financial institution on a non-recourse basis. The loan was repaid in full on December 11, 2002.



Related Party Transactions with Other Directors and Executive Officers



Certain other directors and executive officers, members of their immediate
families, and entities with which such persons are associated are customers of ours. As such, they had transactions in the ordinary course of business with us. Loans and commitments to lend to those persons were comprised of three loans, each with a
balance of less than $100,000. One loan was made to finance a personal residence, the second was a commercial business line of credit and the third was an overdraft protection line. All loans were current as to payment of principal and interest and
were made in the ordinary course of business, upon substantially the same terms as offered to non-affiliated borrowers.



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18. BANK HOLDING COMPANY
FINANCIAL STATEMENTS:



Republic Bancshares,
Inc.

Parent-Only Condensed Balance Sheets

($ in thousands)



|                                         |  | As of December 31,
|---------------------------------------- |  | ------------------
|                                         |  | 2002              
|Assets                                   |  |                   
|Cash                                     |  | $                 
|Investment in wholly-owned subsidiaries  |  |                   
|Other assets                             |  |                   
|                                         |  |                   
|Total assets                             |  | $                 
|                                         |  |                   
|                                        
|Liabilities                              |  |                   
|Convertible subordinated debt            |  | $                 
|Junior subordinated debt to subsidiary   |  |                   
|Accrued interest on debt                 |  |                   
|                                         |  |                   
|Total liabilities                        |  |                   
|                                        
|Stockholders Equity                     |  |                   
|Common stock                             |  |                   
|Capital surplus                          |  |                   
|Retained earnings                        |  |                   
|Net unrealized gain (loss) on available  |  |                   
|for sale securities, net of tax          |  |                   
|                                         |  |                   
|Total stockholders equity               |  |                   
|                                         |  |                   
|Total liabilities & stockholders equity |  | $                 
|                                         |  |                   



Republic Bancshares, Inc.

Parent-Only Condensed Statements of Operations

($ in thousands)



|                                                                                              |  | For the Years Ended December 31, |       
|--------------------------------------------------------------------------------------------- |  | -------------------------------- | ------
|                                                                                              |  | 2002                             |       
|Operating Income:                                                                             |  |                                  |       
|Dividends from bank subsidiary                                                                |  | $                                |      
|Other income                                                                                  |  |                                  |      
|                                                                                              |  |                                  |       
|Total income                                                                                  |  |                                  |      
|                                                                                             
|Operating Expenses:                                                                           |  |                                  |       
|Interest expense                                                                              |  |                                  | 4,761 
|Other expenses                                                                                |  |                                  | 2     
|                                                                                              |  |                                  |       
|Total expenses                                                                                |  |                                  | 4,763 
|                                                                                              |  |                                  |       
|Income (loss) before income taxes and equity in undistributed net income (loss) of
subsidiary |  |                                  | (4,763
|Income tax (benefit)                                                                          |  |                                  | (1,920
|                                                                                              |  |                                  |       
|Income (loss) before equity in undistributed net income (loss) of
subsidiary                  |  |                                  | (2,843
|Equity in undistributed net income (loss) of subsidiary                                       |  |                                  | 7,622 
|                                                                                              |  |                                  |       
|Net income (loss)                                                                             |  | $                                | 4,779 
|                                                                                              |  |                                  |       



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Republic
Bancshares, Inc.

Parent-Only Condensed Cash Flow Statements

($ in thousands)



|                                                                                                   |  | For the Years Ended December 31, |       
|-------------------------------------------------------------------------------------------------- |  | -------------------------------- | ------
|                                                                                                   |  | 2002                             |       
|Operating Activities:                                                                              |  |                                  |       
|Net income (loss)                                                                                  |  | $                                | 4,779 
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities: |  |                                  |       
|Equity in undistributed net income (loss) of subsidiary                                            |  |                                  | (7,622
|Expense (income) on nonqualifying/performance options                                              |  |                                  | 104   
|Amortization of issuance costs                                                                     |  |                                  | 45    
|Net Decrease (increase) in other assets                                                            |  |                                  | 1,508 
|Net increase in other liabilities                                                                  |  |                                  | 1     
|                                                                                                   |  |                                  |       
|Net cash provided by (used in) operating activities                                                |  |                                  | (1,185
|                                                                                                   |  |                                  |       
|                                                                                                  
|Investment Activities:                                                                             |  |                                  |       
|Equity investment in banking subsidiary                                                            |  |                                  | (111  
|Return of investment from savings bank                                                             |  |                                  |      
|                                                                                                   |  |                                  |       
|Net cash provided by (used in) investing activities                                                |  |                                  | (111  
|                                                                                                   |  |                                  |       
|                                                                                                  
|Financing Activities:                                                                              |  |                                  |       
|Proceeds from issuance of debt                                                                     |  |                                  |      
|Repayment of debt                                                                                  |  |                                  |      
|Proceeds from exercise of stock options                                                            |  |                                  | 826   
|Dividends on perpetual preferred convertible stock                                                 |  |                                  |      
|                                                                                                   |  |                                  |       
|Net cash provided by (used in) financing activities                                                |  |                                  | 826   
|                                                                                                   |  |                                  |       
|                                                                                                  
|Net increase (decrease) in cash and cash equivalents                                               |  |                                  | (470  
|Cash and cash equivalents, beginning of year                                                       |  |                                  | 8,956 
|                                                                                                   |  |                                  |       
|Cash and cash equivalents, end of year                                                             |  | $                                | 8,486 
|                                                                                                   |  |                                  |       



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SIGNATURES



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



|                      |  |  |  | REPUBLIC BANCSHARES,
INC.
|--------------------- |  |  |  | -------------------------
|                     
|Dated: March 17, 2003 |  |  |  |                          
|                      |  |  |  |                          



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##### Table of Contents



POWER OF
ATTORNEY



KNOW ALL THESE PERSONS BY THESE PRESENTS, that each
person whose signature appears below constitutes and appoints William R. Klich and William R. Falzone and each of them, jointly and severally, his attorneys-in-fact, each with full power of substitution, for him in any and all capacities, to sign
any and all amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each said
attorneys-in-fact or his substitute or substitutes, may do or cause to be done by virtue hereof.



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.



|SIGNATURE                                     |  | DATE           |  | TITLE                                                              
|--------------------------------------------- |  | -------------- |  | -------------------------------------------------------------------
|                                             
|/S/    WILLIAM R.
KLICHWilliam R. Klich       |  | March 17, 2003 |  | President, and Chief ExecutiveOfficer (principal executive
officer)
|                                             
|/S/    WILLIAM R.
FALZONEWilliam R. Falzone   |  | March 17, 2003 |  | Treasurer (principal financial and accounting officer)             
|                                             
|/S/    WILLIAM C.
BALLARDWilliam C. Ballard   |  | March 17, 2003 |  | Director                                                           
|                                             
|/S/    MARLA M.
HOUGHMarla M. Hough           |  | March 17, 2003 |  | Director                                                           
|                                             
|/S/    WILLIAM R.
HOUGHWilliam R. Hough       |  | March 17, 2003 |  | Director                                                           
|                                             
|/S/    ALFRED T.
MAYAlfred T. May             |  | March 17, 2003 |  | Director                                                           
|                                             
|/S/    WILLIAM J.
MORRISONWilliam J. Morrison |  | March 17, 2003 |  | Director                                                           
|                                             
|/S/    ADELAIDE A.
SINKAdelaide A. Sink       |  | March 17, 2003 |  | Director                                                           
|                                             
|/S/    CHARLES J.
THAYERCharles J. Thayer     |  | March 17, 2003 |  | Director                                                           



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##### Table of Contents



Certification



I, William R. Klich, Chief Executive Officer certify that:



| | 1. |  | I have reviewed this annual report on Form 10-K of Republic Bancshares, Inc.;
| | -- |  | -----------------------------------------------------------------------------



| | 2. |  | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. |  | The Registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the Registrant and have:
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. |  | evaluated the effectiveness of the Registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report
(the Evaluation Date); and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. |  | presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. |  | The Registrants other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrants auditors and the audit committee
of Registrants board of directors (or persons performing the equivalent functions);
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrants ability to record, process, summarize
and report financial data and have identified for the Registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. |  | The Registrants other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                    
|--------------------
|Date: March 17, 2003
|                    



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##### Table of Contents



Certification



I, William R. Falzone, Chief Financial Officer certify that:



| | 1. |  | I have reviewed this annual report on Form 10-K of Republic Bancshares, Inc.;
| | -- |  | -----------------------------------------------------------------------------



| | 2. |  | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. |  | The Registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the Registrant and have:
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. |  | evaluated the effectiveness of the Registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report
(the Evaluation Date); and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. |  | presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. |  | The Registrants other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrants auditors and the audit committee
of Registrants board of directors (or persons performing the equivalent functions);
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrants ability to record, process, summarize
and report financial data and have identified for the Registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. |  | The Registrants other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                    
|--------------------
|Date: March 17, 2003
|                    



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##### Table of Contents

INDEX TO EXHIBITS

|           
|-----------
|Exhibit No.
|           
|3.1        
|           
|3.2        
|           
|4.1        
|           
|4.2        
|           
|4.3        
|           
|4.4        
|           
|4.4        
|           
|4.5        
|           
|10.1       
|           
|10.2       
|           
|12.1       
|           
|21.1       
|           
|23.1       
|           
|23.2       
|           
|24.1       

---

|(1) |  | Incorporated by reference to Republics Registration Statement on Form S-4, File No. 33-80895, filed December 28, 1995
|--- |  | ----------------------------------------------------------------------------------------------------------------------



|(2) |  | Incorporated by reference to Republics Amendment No. 1 to Registration Statement on Form S-2 File No. 333-32151, filed October 31, 1997
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------



|(3) |  | Incorporated by reference to Republics Registration Statement on Form S-8, filed March 3, 1999
|--- |  | -----------------------------------------------------------------------------------------------



|(4) |  | Incorporated by reference to Republics Registration Statement on Form S-2, File Nos. 333-28213 and 333-2813-01, filed May 30, 1997
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------



|(5) |  | Incorporated by reference to Republics Registration Statement on Form S-3, filed November 18, 1999
|--- |  | ---------------------------------------------------------------------------------------------------



|(6) |  | Incorporated by reference to Republics Registration Statement on Form S-3, File No. 333-101672, filed December 5, 2002
|--- |  | -----------------------------------------------------------------------------------------------------------------------



|(7) |  | Incorporated by reference to Republics Annual Report on Form 10-K/A filed April 13, 1998
|--- |  | -----------------------------------------------------------------------------------------



77