##### Table of Contents



FIRST SHARES BANCORP, INC.

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

|                |  |                                                                                                                                           
|--------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------
|X IN BALLOT BOX |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED SEPTEMBER 30, 2002.
|               
|OPEN BALLOT BOX |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION
PERIOD FROMTO                 

Commission file number 0-29837

FIRST SHARES BANCORP, INC.
(Exact name of small business issuer as specified in its charter)

|                                                                                 |  |                                                
|-------------------------------------------------------------------------------- |  | -----------------------------------------------
|INDIANA
(State or other jurisdiction of
incorporation or organization)           |  | 35-1948962
(I.R.S. Employer
Identification No.)
|                                                                                
|996 South State Road 135,
Greenwood, IN
(Address of principal executive offices) |  | 46143
(Zip Code)                               

(317) 882-4790
(Registrants telephone number, including area code)

Indicate by check mark whether the registrant (1) 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 IN BALLOT BOX   No OPEN BALLOT BOX

Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date:

|                                  |  |                                                  | 
|--------------------------------- |  | ------------------------------------------------ | 
|Class
Common Stock, with $.01 par |  | Outstanding at November 7, 2002
1,052,779 shares | 

Transitional Small Business Format:  
Yes OPEN BALLOT BOX   No X IN BALLOT BOX





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TABLE OF CONTENTS



|                              |                                                                                               |                                                                                                             |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | Item 1.                                                                                      
|                              |                                                                                               | Consolidated Balance Sheets  September 30, 2002 and December 31, 2001                                     
|                              |                                                                                               | Consolidated Statements of Income and Comprehensive Income  Nine Months Ended September 30, 2002 and 2001 
|                              |                                                                                               | Consolidated Statements of Income and Comprehensive Income
 Three Months Ended September 30, 2002 and 2001
|                              |                                                                                               | Consolidated Statements of Cash Flows  Nine Months Ended September 30, 2002 and 2001                      
|                              |                                                                                               | Notes to Consolidated Financial Statements  September 30, 2002                                            
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                              | Item 3. Controls and Procedures                                                              
|PART II. OTHER INFORMATION   
|                              | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                   
|Certification                
|Certification                



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##### Table of Contents



FIRST SHARES BANCORP, INC.

INDEX

|                             |  |                                                                                                                 
|---------------------------- |  | ----------------------------------------------------------------------------------------------------------------
|PART I FINANCIAL INFORMATION
|Item 1.                      |  |                                                                                                                 
|                             |  | Consolidated Balance Sheets  September 30, 2002 and December 31, 2001                                          
|                            
|                             |  | Consolidated Statements of Income and Comprehensive Income 
Nine Months Ended September 30, 2002
     and 2001 
|                            
|                             |  | Consolidated Statements of Income and Comprehensive Income  Three
Months Ended September 30, 2002 and
     2001
|                            
|                             |  | Consolidated Statements of Cash Flows  Nine Months Ended September 30, 2002 and 2001                           
|                            
|                             |  | Notes to Consolidated Financial Statements  September 30, 2002                                                 
|                            
|Item 2.                      |  |                                                                                                                 
|                            
|                             |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                           
|                            
|Item 3.                      |  |                                                                                                                 
|                            
|                             |  | Controls and Procedures                                                                                         
|                            
|PART II OTHER INFORMATION    | 
|                            
|Item 6.                      |  | Exhibits and Reports on Form 8-K                                                                                
|                            
|SIGNATURES                   |  |                                                                                                                 





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##### Table of Contents












FIRST SHARES BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except per share data)





---

|                                                           |                                                                                                     |                |         |               |         |   |              |         |         | 
|---------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | -------------- | ------- | ------------- | ------- | - | ------------ | ------- | ------- | 
|                                                           |                                                                                                     |                |         | (unaudited)   |         |   |              |         |        
|                                                           |                                                                                                     |                |         | September 30, |         |   | December 31, |        
|                                                           |                                                                                                     |                |         | 2002          |         |   | 2001         |        
|                                                           |                                                                                                     |                |         |               |         |   |              |        
|ASSETS                                                     |                                                                                                     |                |         |               |         |   |              |        
|Cash and due from banks                                    |                                                                                                     | $              | 4,518   |               |         | $ | 5,227        |        
|Federal funds sold                                         |                                                                                                     |                |        |               |         |   | 1,081        |        
|                                                           |                                                                                                     |                |         |               |         |  
|                                                           | Cash and cash equivalents                                                                           |                |         | 4,518         |         |   |              | 6,308   |        
|Securities available for sale (at market)                  |                                                                                                     |                | 37,164  |               |         |   | 22,881       |        
|Securities held to maturity (market value of
$277 in 2001) |                                                                                                     |                |        |               |         |   | 275          |        
|FHLB stock, at cost                                        |                                                                                                     |                | 670     |               |         |   | 670          |        
|Loans held for sale                                        |                                                                                                     |                | 2,582   |               |         |   | 2,759        |        
|Loans, net of allowance( $1,336 and $1,148)                |                                                                                                     |                | 103,308 |               |         |   | 89,808       |        
|Premises and equipment, net                                |                                                                                                     |                | 2,039   |               |         |   | 2,072        |        
|Intangible assets, net                                     |                                                                                                     |                | 86      |               |         |   | 119          |        
|Cash surrender value of life insurance                     |                                                                                                     |                | 2,393   |               |         |   | 2,293        |        
|Accrued interest receivable and other assets               |                                                                                                     |                | 1,687   |               |         |   | 928          |        
|                                                           |                                                                                                     |                |         |               |         |  
|                                                           |                                                                                                     | $              | 154,447 |               |         | $ | 128,113      |        
|                                                           |                                                                                                     |                |         |               |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY                       |                                                                                                     |                |         |               |         |   |              |        
|Liabilities                                                |                                                                                                     |                |         |               |         |   |              |        
|                                                           | Noninterest-bearing deposits                                                                        |                | $       | 13,540        |         |   | $            | 11,253  |        
|                                                           | Interest-bearing deposits                                                                           |                |         | 114,233       |         |   |              | 100,122 |        
|                                                           |                                                                                                     |                |         |               |         |  
|                                                           |                                                                                                     | Total deposits |         |               | 127,773 |   |              |         | 111,375 | 
|                                                           | Federal funds purchased                                                                             |                |         | 2,600         |         |   |              |        |        
|                                                           | Federal Home Loan Bank advances                                                                     |                |         | 3,000         |         |   |              | 3,000   |        
|                                                           | Repurchase agreements                                                                               |                |         | 5,309         |         |   |              | 4,211   |        
|                                                           | Note Payable                                                                                        |                |         | 1,500         |         |   |              | 1,780   |        
|                                                           | Debentures                                                                                          |                |         | 5,000         |         |   |              |        |        
|                                                           | Accrued interest payable and other liabilities                                                      |                |         | 807           |         |   |              | 484     |        
|                                                           |                                                                                                     |                |         |               |         |  
|                                                           |                                                                                                     |                | 145,989 |               |         |   | 120,850      |        
|Shareholders equity                                       |                                                                                                     |                |         |               |         |   |              |        
|                                                           | Common stock, $.01 par value: 10,000,000 shares authorized,
1,052,779 shares issued and outstanding |                |         | 11            |         |   |              | 11      |        
|                                                           | Additional paid in capital                                                                          |                |         | 4,674         |         |   |              | 4,674   |        
|                                                           | Retained earnings                                                                                   |                |         | 3,642         |         |   |              | 2,583   |        
|                                                           | Accumulated other comprehensive income (loss)                                                       |                |         | 131           |         |   |              | (5      | )      
|                                                           |                                                                                                     |                |         |               |         |  
|                                                           |                                                                                                     |                | 8,458   |               |         |   | 7,263        |        
|                                                           |                                                                                                     |                |         |               |         |  
|                                                           |                                                                                                     | $              | 154,447 |               |         | $ | 128,113      |        
|                                                           |                                                                                                     |                |         |               |         |  





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See accompanying notes

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FIRST SHARES BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
Nine months ended September 30, 2002 and 2001
(Unaudited)
(Dollar amounts in thousands, except per share data)





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|                                                    |                            |                                                    |       |                           |       |      |       |     |       |  |       | 
|--------------------------------------------------- | -------------------------- | -------------------------------------------------- | ----- | ------------------------- | ----- | ---- | ----- | --- | ----- |  | ----- | 
|                                                    |                            |                                                    |       |                           |       | 2002 |       |     | 2001  | 
|                                                    |                            |                                                    |       |                           |       |      |       |     |       | 
|Interest income                                     |                            |                                                    |       |                           |       |      |       |    
|                                                    |                            | Loans, including related fees                      |       | $                         | 5,487 |      |       | $   | 5,886 | 
|                                                    |                            | Taxable securities                                 |       |                           | 1,228 |      |       |     | 964   | 
|                                                    |                            | Nontaxable securities                              |       |                           | 49    |      |       |     | 31    | 
|                                                    |                            | Other                                              |       |                           | 20    |      |       |     | 39    | 
|                                                    |                            |                                                    |       |                           |       |      |       |    
|                                                    |                            |                                                    |       | Total Interest Income     |       |      | 6,784 |     |       |  | 6,920 | 
|Interest expense                                    |                            |                                                    |       |                           |       |      |       |    
|                                                    |                            | Deposits                                           |       |                           | 2,379 |      |       |     | 3,490 | 
|                                                    |                            | Other                                              |       |                           | 381   |      |       |     | 279   | 
|                                                    |                            |                                                    |       |                           |       |      |       |    
|                                                    |                            |                                                    |       | Total Interest Expense    |       |      | 2,760 |     |       |  | 3,769 | 
|                                                    |                            |                                                    |       |                           |       |      |       |    
|Net interest income                                 |                            |                                                    | 4,024 |                           |       |      | 3,151 |    
|Provision for loan losses                           |                            |                                                    | 248   |                           |       |      | 250   |    
|                                                    |                            |                                                    |       |                           |       |      |       |    
|Net interest income after provision for loan losses |                            |                                                    | 3,776 |                           |       |      | 2,901 |    
|Noninterest income                                  |                            |                                                    |       |                           |       |      |       |    
|                                                    |                            | Service charges on deposit accounts                |       |                           | 291   |      |       |     | 216   | 
|                                                    |                            | Gain on sale of loans                              |       |                           | 506   |      |       |     | 269   | 
|                                                    |                            | Increase in cash surrender value of life insurance |       |                           | 112   |      |       |     | 88    | 
|                                                    |                            | Securities gains                                   |       |                           | 127   |      |       |     | 27    | 
|                                                    |                            | Other                                              |       |                           | 157   |      |       |     | 110   | 
|                                                    |                            |                                                    |       |                           |       |      |       |    
|                                                    |                            |                                                    |       | Total Noninterest Income  |       |      | 1,193 |     |       |  | 710   | 
|Noninterest expenses                                |                            |                                                    |       |                           |       |      |       |    
|                                                    |                            | Salaries and employee benefits                     |       |                           | 2,272 |      |       |     | 1,877 | 
|                                                    |                            | Occupancy                                          |       |                           | 340   |      |       |     | 271   | 
|                                                    |                            | Equipment and data processing                      |       |                           | 318   |      |       |     | 284   | 
|                                                    |                            | Telephone                                          |       |                           | 103   |      |       |     | 93    | 
|                                                    |                            | Advertising/Marketing                              |       |                           | 95    |      |       |     | 75    | 
|                                                    |                            | Other                                              |       |                           | 813   |      |       |     | 669   | 
|                                                    |                            |                                                    |       |                           |       |      |       |    
|                                                    |                            |                                                    |       | Total Noninterest Expense |       |      | 3,941 |     |       |  | 3,269 | 
|                                                    |                            |                                                    |       |                           |       |      |       |    
|                                                    | Income before income taxes |                                                    |       | 1,028                     |       |      |       | 342 |      
|Income tax expense (benefit)                        |                            |                                                    | (31   | )                         |       |      |      |    
|                                                    |                            |                                                    |       |                           |       |      |       |    
|Net income                                          |                            | $                                                  | 1,059 |                           |       | $    | 342   |    
|                                                    |                            |                                                    |       |                           |       |      |       |    
|Comprehensive income                                |                            | $                                                  | 1,195 |                           |       | $    | 507   |    
|                                                    |                            |                                                    |       |                           |       |      |       |    
|Per share data                                      |                            |                                                    |       |                           |       |      |       |    
|                                                    |                            | Earnings per share                                 |       | $                         | 1.01  |      |       |     | .32   | 
|                                                    |                            | Earnings per share, assuming dilution              |       |                           | .99   |      |       |     | .32   | 





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See accompanying notes.

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##### Table of Contents






FIRST SHARES BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
Three months ended September 30, 2002 and 2001
(Unaudited)
(Dollar amounts in thousands, except per share data)

|                                                    |                                                    |                           |       |       |       |   |       |       |       | 
|--------------------------------------------------- | -------------------------------------------------- | ------------------------- | ----- | ----- | ----- | - | ----- | ----- | ----- | 
|                                                    |                                                    |                           |       | 2002  |       |   | 2001  |      
|                                                    |                                                    |                           |       |       |       |   |       |      
|Interest income                                     |                                                    |                           |       |       |       |   |       |      
|                                                    | Loans, including related fees                      |                           | $     | 1,928 |       |   | $     | 2,009 |      
|                                                    | Taxable securities                                 |                           |       | 424   |       |   |       | 334   |      
|                                                    | Nontaxable securities                              |                           |       | 32    |       |   |       | 10    |      
|                                                    | Other                                              |                           |       | 5     |       |   |       | 19    |      
|                                                    |                                                    |                           |       |       |       |   |      
|                                                    |                                                    | Total Interest Income     |       |       | 2,389 |   |       |       | 2,372 | 
|                                                   
|Interest expense                                    |                                                    |                           |       |       |       |   |       |      
|                                                    | Deposits                                           |                           |       | 779   |       |   |       | 1,152 |      
|                                                    | Other                                              |                           |       | 172   |       |   |       | 75    |      
|                                                    |                                                    |                           |       |       |       |   |      
|                                                    |                                                    | Total Interest Expense    |       |       | 951   |   |       |       | 1,227 | 
|                                                    |                                                    |                           |       |       |       |   |      
|                                                   
|Net interest income                                 |                                                    |                           | 1,438 |       |       |   | 1,145 |      
|                                                   
|Provision for loan losses                           |                                                    |                           | 138   |       |       |   | 88    |      
|                                                    |                                                    |                           |       |       |       |   |      
|Net interest income after provision for loan losses |                                                    |                           | 1,300 |       |       |   | 1,057 |      
|                                                   
|Noninterest income                                  |                                                    |                           |       |       |       |   |       |      
|                                                    | Service charges on deposit accounts                |                           |       | 102   |       |   |       | 78    |      
|                                                    | Gain on sale of loans                              |                           |       | 231   |       |   |       | 110   |      
|                                                    | Increase in cash surrender value of life insurance |                           |       | 37    |       |   |       | 29    |      
|                                                    | Securities gains                                   |                           |       | 75    |       |   |       | 19    |      
|                                                    | Other                                              |                           |       | 47    |       |   |       | 28    |      
|                                                    |                                                    |                           |       |       |       |   |      
|                                                    |                                                    | Total Noninterest Income  |       |       | 492   |   |       |       | 264   | 
|                                                   
|Noninterest expenses                                |                                                    |                           |       |       |       |   |       |      
|                                                    | Salaries and employee benefits                     |                           |       | 824   |       |   |       | 626   |      
|                                                    | Occupancy                                          |                           |       | 130   |       |   |       | 96    |      
|                                                    | Equipment and data processing                      |                           |       | 104   |       |   |       | 77    |      
|                                                    | Telephone                                          |                           |       | 40    |       |   |       | 34    |      
|                                                    | Advertising/Marketing                              |                           |       | 42    |       |   |       | 30    |      
|                                                    | Other                                              |                           |       | 345   |       |   |       | 254   |      
|                                                    |                                                    |                           |       |       |       |   |      
|                                                    |                                                    | Total Noninterest Expense |       |       | 1,485 |   |       |       | 1,117 | 
|                                                    |                                                    |                           |       |       |       |   |      
|                                                   
|Income before income taxes                          |                                                    |                           | 307   |       |       |   | 204   |      
|Income tax expense                                  |                                                    |                           | 94    |       |       |   |      |      
|                                                    |                                                    |                           |       |       |       |   |      
|                                                   
|Net income                                          |                                                    | $                         | 213   |       |       | $ | 204   |      
|                                                    |                                                    |                           |       |       |       |   |      
|Comprehensive income                                |                                                    | $                         | 379   |       |       | $ | 290   |      
|                                                    |                                                    |                           |       |       |       |   |      
|Per share data                                      |                                                    |                           |       |       |       |   |       |      
|                                                    | Earnings per share                                 |                           | $     | .20   |       |   | $     | .19   |      
|                                                    | Earnings per share, assuming dilution              |                           |       | .20   |       |   |       | .19   |      

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##### Table of Contents






FIRST SHARES BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended September 30, 2002 and 2001
(Unaudited)
(Dollar amounts in thousands)





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|                                                 |                                                                                                |                                                |                                                    |         |         |      |       |         |         |      |  
|------------------------------------------------ | ---------------------------------------------------------------------------------------------- | ---------------------------------------------- | -------------------------------------------------- | ------- | ------- | ---- | ----- | ------- | ------- | ---- | -
|                                                 |                                                                                                |                                                |                                                    |         | 2002    |      |       | 2001    |        
|Cash flows from operating activities             |                                                                                                |                                                |                                                    |         |         |      |       |        
|                                                 | Net income (loss)                                                                              |                                                | $                                                  | 1,059   |         |      | $     | 342     |        
|                                                 | Adjustments to reconcile net income
to net cash from operating activities:                     |                                                |                                                    |         |         |      |       |         |        
|                                                 |                                                                                                | Depreciation and amortization                  |                                                    |         | 243     |      |       |         | 214     |     
|                                                 |                                                                                                | Provision for loan losses                      |                                                    |         | 248     |      |       |         | 250     |     
|                                                 |                                                                                                | Discount (accretion) and premium amortization  |                                                    |         | 92      |      |       |         | (22     | )   
|                                                 |                                                                                                | (Gain)/loss on sale of securities              |                                                    |         | (127    | )    |       |         | (27     | )   
|                                                 |                                                                                                | (Gain)/loss on sale of other real estate owned |                                                    |         | (16     | )    |       |         |        |     
|                                                 |                                                                                                | Amortization of intangible asset               |                                                    |         | 33      |      |       |         | 33      |     
|                                                 |                                                                                                | Changes in assets and liabilities:             |                                                    |         |         |      |       |         |         |     
|                                                 |                                                                                                |                                                | Loans held for sale                                |         |         | 177  |       |         |         | (33  | )
|                                                 |                                                                                                |                                                | Increase on cash surrender value of life insurance |         |         | (100 | )     |         |         | (78  | )
|                                                 |                                                                                                |                                                | Interest receivable and other assets               |         |         | (714 | )     |         |         | (119 | )
|                                                 |                                                                                                |                                                | Deferred federal income tax benefit                |         |         | (148 | )     |         |         |     |  
|                                                 |                                                                                                |                                                | Interest payable and other liabilities             |         |         | 233  |       |         |         | 103  |  
|                                                 |                                                                                                |                                                |                                                    |         |         |      |      
|                                                 |                                                                                                | Net cash from operating activities             |                                                    |         | 980     |      |       |         | 663     |     
|                                                
|Cash flows from investing activities             |                                                                                                |                                                |                                                    |         |         |      |       |        
|                                                 | Proceeds from sales, calls, maturities and principal payments
on securities available for sale |                                                |                                                    | 20,765  |         |      |       | 16,122  |        
|                                                 | Proceeds from maturities of securities held to maturity                                        |                                                |                                                    | 275     |         |      |       |        |        
|                                                 | Purchases of securities available for sale                                                     |                                                |                                                    | (34,787 | )       |      |       | (23,356 | )      
|                                                 | Loans made to customers net of payments received                                               |                                                |                                                    | (13,716 | )       |      |       | (10,318 | )      
|                                                 | Premises and equipment purchases                                                               |                                                |                                                    | (210    | )       |      |       | (84     | )      
|                                                 | Proceeds from sale of other real estate                                                        |                                                |                                                    | 87      |         |      |       |        |        
|                                                 |                                                                                                |                                                |                                                    |         |         |      |      
|                                                 |                                                                                                | Net cash from investing activities             |                                                    |         | (27,586 | )    |       |         | (17,636 | )   
|                                                
|Cash flows from financing activities             |                                                                                                |                                                |                                                    |         |         |      |       |        
|                                                 | Change in deposit accounts                                                                     |                                                |                                                    | 16,398  |         |      |       | 22,120  |        
|                                                 | Proceeds from Federal Home Loan Bank advances                                                  |                                                |                                                    |        |         |      |       | 2,000   |        
|                                                 | Payments on Federal Home Loan Bank advances                                                    |                                                |                                                    |        |         |      |       | (3,300  | )      
|                                                 | Change in repurchase agreements                                                                |                                                |                                                    | 1,098   |         |      |       |        |        
|                                                 | Change in federal funds purchased                                                              |                                                |                                                    | 2,600   |         |      |       | (1,958  | )      
|                                                 | Proceeds from note payable                                                                     |                                                |                                                    | 90      |         |      |       |        |        
|                                                 | Payment on note payable                                                                        |                                                |                                                    | (370    | )       |      |       |        |        
|                                                 | Proceeds from debentures                                                                       |                                                |                                                    | 5,000   |         |      |       |        |        
|                                                 |                                                                                                |                                                |                                                    |         |         |      |      
|                                                 |                                                                                                | Net cash from financing activities             |                                                    |         | 24,816  |      |       |         | 18,862  |     
|                                                 |                                                                                                |                                                |                                                    |         |         |      |      
|Net change in cash and cash equivalents          |                                                                                                |                                                | (1,790                                             | )       |         |      | 1,889 |        
|Cash and cash equivalents at beginning of period |                                                                                                |                                                | 6,308                                              |         |         |      | 3,394 |        
|                                                 |                                                                                                |                                                |                                                    |         |         |      |      
|Cash and cash equivalents at end of period       |                                                                                                | $                                              | 4,518                                              |         |         | $    | 5,283 |        
|                                                 |                                                                                                |                                                |                                                    |         |         |      |      

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##### Table of Contents






FIRST SHARES BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2002
(Dollar amounts in thousands, except per share data)

NOTE 1  BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of First
Shares Bancorp, Inc. (the Company) and its wholly owned subsidiary, First Bank
(the Bank). The significant accounting policies followed for interim financial
reporting are consistent with the policies followed for annual reporting. The
consolidated interim financial statements have been prepared according to
accounting principles generally accepted in the United States of America and in
accordance with the instructions for Form 10-QSB. The interim statements may not
include all information and footnotes normally disclosed for the full annual
financial statements. It is the opinion of management that all adjustments
necessary for a fair presentation of the results for the reporting period have
been included in the accompanying unaudited consolidated financial statements
and all adjustments are of a normal recurring nature. Certain prior period
information may be reclassified to conform to the 2002 presentation.

NOTE 2  SECURITIES

The fair values of securities available for sale and related gains and losses
recognized in accumulated other comprehensive income (loss) were as follows:

|                                                 |  |       |        |  |            |       |     |            |       |   |      |  
|------------------------------------------------ |  | ----- | ------ |  | ---------- | ----- | --- | ---------- | ----- | - | ---- | -
|                                                 |  |       |        |  |            | Gross |     |            | Gross |  
|                                                 |  | Fair  |        |  | Unrealized |       |     | Unrealized |      
|                                                 |  | Value |        |  | Gains      |       |     | Losses     |      
|                                                 |  |       |        |  |            |       |     |            |      
|September 30, 2002                               |  |       |        |  |            |       |     |            |       |   |      |  
|U.S. Treasury and government agency securities   |  | $     | 10,426 |  |            | $     | 135 |            |       | $ | (12  | )
|Obligations of states and political subdivisions |  |       | 5,036  |  |            |       | 63  |            |       |   | (6   | )
|Other securities                                 |  |       | 6,768  |  |            |       | 51  |            |       |   | (89  | )
|Mortgage backed securities                       |  |       | 14,934 |  |            |       | 141 |            |       |   | (66  | )
|                                                 |  |       |        |  |            |       |     |            |      
|                                                 |  | $     | 37,164 |  |            | $     | 390 |            |       | $ | (173 | )
|                                                 |  |       |        |  |            |       |     |            |      
|December 31, 2001                                |  |       |        |  |            |       |     |            |       |   |      |  
|U.S. Treasury and government agency securities   |  | $     | 12,547 |  |            | $     | 156 |            |       | $ | (112 | )
|Obligations of states and political subdivisions |  |       | 616    |  |            |       |    |            |       |   | (11  | )
|Other securities                                 |  |       | 1,792  |  |            |       | 6   |            |       |   | (14  | )
|Mortgage backed securities                       |  |       | 7,926  |  |            |       | 37  |            |       |   | (72  | )
|                                                 |  |       |        |  |            |       |     |            |      
|                                                 |  | $     | 22,881 |  |            | $     | 199 |            |       | $ | (209 | )
|                                                 |  |       |        |  |            |       |     |            |      

The carrying amount, unrecognized gains and losses and fair value of securities
held to maturity were as follows:

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FIRST SHARES BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2002
(Dollar amounts in thousands, except per share data)

NOTE 2  SECURITIES (Continued)

|                                                 |  |           |     |  |              |       |   |              |       |   |       |  |  |   |     | 
|------------------------------------------------ |  | --------- | --- |  | ------------ | ----- | - | ------------ | ----- | - | ----- |  |  | - | --- | 
|                                                 |  |           |     |  |              | Gross |   |              | Gross |   |       |  |  |  
|                                                 |  | Amortized |     |  | Unrecognized |       |   | Unrecognized |       |   | Fair  | 
|                                                 |  | Cost      |     |  | Gains        |       |   | Losses       |       |   | Value | 
|                                                 |  |           |     |  |              |       |   |              |       |   |       | 
|September 30, 2002                               |  |           |     |  |              |       |   |              |       |   |       |  |  |   |     | 
|Obligations of states and
political subdivisions |  | $         |    |  |              | $     |  |              |       | $ |      |  |  | $ |    | 
|                                                 |  |           |     |  |              |       |   |              |       |   |       | 
|December 31, 2001                                |  |           |     |  |              |       |   |              |       |   |       |  |  |   |     | 
|Obligations of states and
political subdivisions |  | $         | 275 |  |              | $     | 2 |              |       | $ |      |  |  | $ | 277 | 
|                                                 |  |           |     |  |              |       |   |              |       |   |       | 

NOTE 3  LOANS

Loans are comprised of the following:

|                                |  |               |         |   |              |   |        |  
|------------------------------- |  | ------------- | ------- | - | ------------ | - | ------ | -
|                                |  | September 30, |         |   | December 31, |  
|                                |  | 2002          |         |   | 2001         |  
|                                |  |               |         |   |              |  
|Commercial                      |  | $             | 23,083  |   |              | $ | 19,606 |  
|Commercial Real Estate          |  |               | 13,348  |   |              |   | 12,725 |  
|State & Political Subdivisions  |  |               | 45      |   |              |   |       |  
|Residential Real Estate         |  |               | 24,451  |   |              |   | 24,537 |  
|Construction                    |  |               | 16,105  |   |              |   | 10,292 |  
|Consumer                        |  |               | 27,612  |   |              |   | 23,796 |  
|                                |  |               |         |   |              |  
|                                |  |               | 104,644 |   |              |   | 90,956 |  
|Less: Allowance for loan losses |  |               | (1,336  | ) |              |   | (1,148 | )
|                                |  |               |         |   |              |  
|                                |  | $             | 103,308 |   |              | $ | 89,808 |  
|                                |  |               |         |   |              |  

NOTE 4  ALLOWANCE FOR LOAN LOSSES

An analysis of the allowance for loan losses follows:

|                                |  |               |       |   |               |   |       |  
|------------------------------- |  | ------------- | ----- | - | ------------- | - | ----- | -
|                                |  | September 30, |       |   | September 30, |  
|                                |  | 2002          |       |   | 2001          |  
|                                |  |               |       |   |               |  
|Balance, January 1              |  | $             | 1,148 |   |               | $ | 910   |  
|Provision charged to operations |  |               | 248   |   |               |   | 250   |  
|Loans charged off               |  |               | (80   | ) |               |   | (133  | )
|Recoveries                      |  |               | 20    |   |               |   | 41    |  
|                                |  |               |       |   |               |  
|Balance, September 30           |  | $             | 1,336 |   |               | $ | 1,068 |  
|                                |  |               |       |   |               |  

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FIRST SHARES BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2002
(Dollar amounts in thousands, except per share data)

NOTE 5  EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted
average shares outstanding during the period.

|                           |                                                            |  |                   |           |  |                    |   |           |               |  |   |               |  |  |   |           | 
|-------------------------- | ---------------------------------------------------------- |  | ----------------- | --------- |  | ------------------ | - | --------- | ------------- |  | - | ------------- |  |  | - | --------- | 
|                           |                                                            |  | Nine months ended |           |  | Three months ended |  
|                           |                                                            |  |                   |           |  |                    |  
|                           |                                                            |  | September 30,     |           |  | September 30,      |   |           | September 30, |  |   | September 30, | 
|                           |                                                            |  | 2002              |           |  | 2001               |   |           | 2002          |  |   | 2001          | 
|                           |                                                            |  |                   |           |  |                    |   |           |               |  |   |               | 
|Earnings per share         |                                                            |  |                   |           |  |                    |   |           |               |  |   |               |  |  |   |          
|                           | Net income                                                 |  | $                 | 1,059     |  |                    | $ | 342       |               |  | $ | 213           |  |  | $ | 204       | 
|                          
|                           | Weighted average shares
outstanding                        |  |                   | 1,052,779 |  |                    |   | 1,052,779 |               |  |   | 1,052,779     |  |  |   | 1,052,779 | 
|                           |                                                            |  |                   |           |  |                    |   |           |               |  |   |              
|                           | Earnings per share                                         |  | $                 | 1.01      |  |                    | $ | .32       |               |  | $ | .20           |  |  | $ | .19       | 
|                           |                                                            |  |                   |           |  |                    |   |           |               |  |   |              
|                          
|Diluted earnings per share |                                                            |  |                   |           |  |                    |   |           |               |  |   |               |  |  |   |          
|                           | Net income                                                 |  | $                 | 1,059     |  |                    | $ | 342       |               |  | $ | 213           |  |  | $ | 204       | 
|                          
|                           | Weighted average common shares
outstanding                 |  |                   | 1,052,779 |  |                    |   | 1,052,779 |               |  |   | 1,052,779     |  |  |   | 1,052,779 | 
|                          
|                           | Add: Dilutive effects of assumed
exercise of stock options |  |                   | 16,481    |  |                    |   | 8,760     |               |  |   | 15,426        |  |  |   | 16,178    | 
|                           |                                                            |  |                   |           |  |                    |   |           |               |  |   |              
|                           | Average shares and dilutive
potential common shares        |  |                   | 1,069,260 |  |                    |   | 1,061,539 |               |  |   | 1,068,205     |  |  |   | 1,068,957 | 
|                           |                                                            |  |                   |           |  |                    |   |           |               |  |   |              
|                           | Diluted earnings per share                                 |  | $                 | .99       |  |                    | $ | .32       |               |  | $ | .20           |  |  | $ | .19       | 
|                           |                                                            |  |                   |           |  |                    |   |           |               |  |   |              

Shares of 500,000 issuable under the mandatory stock purchase contracts were not
considered in computing diluted earnings per share because they were
anti-dilutive.

NOTE 6  PUBLIC OFFERING

During the first quarter of 2002, the Company initiated a public offering of
Debentures and Stock Purchase Contracts. The Company was seeking to raise a
minimum of $2,500 (and a maximum of $5,000) through the sale of securities. The
offering was closed during the third quarter with gross proceeds totaling
$5,000. Capitalized costs in connection with the offering total $640 at
September 30, 2002. The Debentures are unsecured and subordinated, have a term
of approximately 9 years, and accrue interest at 8% per annum payable quarterly
in arrears.

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FIRST SHARES BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2002
(Dollar amounts in thousands, except per share data)

NOTE 6  PUBLIC OFFERING (continued)

The Debentures mature on July 1, 2011, but are redeemable by the Company at any
time prior to their maturity. The Stock Purchase Contracts require a purchaser
to buy common shares of the Company at $10 per share on January 1, 2011. A
purchaser may elect to purchase the common shares of the Company at any time
prior to that date at the same price per share. The Stock Purchase Contracts
will be cancelled in the event the Debentures are redeemed. Proceeds of $3,000
were contributed to the Bank to support growth.

NOTE 7  NEW ACCOUNTING PRONOUNCEMENTS

New accounting standards require all business combinations to be recorded using
the purchase method of accounting. Under the purchase method, all identifiable
tangible and intangible assets and liabilities of the acquired company must be
recorded at fair value at date of acquisition, and the excess cost over fair
value of net assets acquired is recorded as goodwill. Identifiable intangible
assets with finite useful lives will continue to amortize under the new
standard, whereas goodwill ceased being amortized starting in 2002.
Unidentifiable intangible assets from previous financial institution branch
business combinations is reclassified to goodwill as of January 1, 2002. Annual
impairment testing will be required for goodwill with impairment being recorded
if the carrying amount of goodwill exceeds its implied fair value. These
accounting standards currently have no effect on the Companys financial
statements, as the Company has no goodwill or unidentifiable branch intangible
assets.

Intangible assets recorded on the Companys balance sheet consist of core
deposit intangibles acquired from a 1995 branch acquisition. The gross amount of
the asset is $396 and the accumulated amortization is $310. This intangible
asset is subject to amortization, and amortization expense was $33 for the first
nine months of 2002 and 2001. Estimated amortization expense thereafter is as
follows: 2002 $11, 2003 $44, and 2004 $31.

Effective January 1, 2002, the Company adopted a new accounting standard on
impairment and disposal of long-lived assets. The adoption of this new standard
was not material to the financial statements.

A new accounting standard regarding asset retirement obligations will apply for
2003. Management does not believe this standard will have a material effect on
the Companys financial statements.

NOTE 8  STOCK SPLIT

On November 6, 2002 the Company declared a three-for-two common stock split to
shareholders of record as of November 20, 2002. The split is not reflected in
these financial statements, but if reflected for all periods presented earnings
per share would be as follows:

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FIRST SHARES BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2002
(Dollar amounts in thousands, except per share data)

NOTE 8  STOCK SPLIT (continued)

|                                      |  |                   |     |  |                    |   |     |               |  |   |               |  |  |   |     | 
|------------------------------------- |  | ----------------- | --- |  | ------------------ | - | --- | ------------- |  | - | ------------- |  |  | - | --- | 
|                                      |  | Nine months ended |     |  | Three months ended |  
|                                      |  |                   |     |  |                    |  
|                                      |  | September 30,     |     |  | September 30,      |   |     | September 30, |  |   | September 30, | 
|                                      |  | 2002              |     |  | 2001               |   |     | 2002          |  |   | 2001          | 
|                                      |  |                   |     |  |                    |   |     |               |  |   |               | 
|Earnings per share                    |  | $                 | .67 |  |                    | $ | .21 |               |  | $ | .13           |  |  | $ | .13 | 
|                                      |  |                   |     |  |                    |   |     |               |  |   |               | 
|Earnings per share, assuming dilution |  | $                 | .66 |  |                    | $ | .21 |               |  | $ | .13           |  |  | $ | .13 | 
|                                      |  |                   |     |  |                    |   |     |               |  |   |               | 

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FIRST SHARES BANCORP, INC.




ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements in this section constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause actual results, performance or achievements of
First Shares to differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements.

Such risks could include: increases in competitive pressure from other financial
institutions in our markets, unexpected increases in loan losses, changes in
market interest rates, unanticipated changes in our level of growth or our
ability to manage the growth, changes in economic conditions in our markets, or
legislation or regulatory changes.

Results of Operations for the Quarters and Nine-Month Periods Ended September 30, 2002 and 2001

Net Income

During the current year, we have continued to focus on earnings and growth as
outlined in our strategic plan. Banking offices currently total seven with the
addition of a new branch located in Franklin, IN. In addition to our seven
branches we also have a mortgage loan production office.

Net income for the nine months ended September 30, 2002 was $1.1 million or
$1.01 per share compared to $342,000 or $.32 per share for the nine months ended
September 30, 2001. Return on average assets (ROA) for 2002 was 1.02% compared
to .39% for 2001 on an annualized basis, while return on average equity (ROE)
was 18.27% compared to 6.73% for the same period last year, also on an
annualized basis.

Net income includes a tax benefit of $125,000 recorded during the second
quarter, representing the elimination of the reserve on deferred tax assets. The
reserve was eliminated due to the full utilization of the net operating loss
carryforward during the second quarter and the continued trend of taxable
income.

Net Interest Income

Net interest income is the difference between interest and fees realized on
interest earning assets and interest paid on interest bearing liabilities. The
net interest margin is this difference expressed as a percentage of average
earning assets. For the nine months ended September 30, 2002, net interest
income totaled $4.0 million, representing an $873,000 or 27.7% increase over the
same period for 2001.

Interest income through September 30, 2002 was $6.8 million, compared to $6.9
million in 2001, a decline of $136,000 or 1.9% from last year. The slight
decrease in interest income is attributed to rate decreases on repricing loans
offset by volume growth in the loan portfolio. The average

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FIRST SHARES BANCORP, INC.

loan balance showed growth, increasing from $87.5 million in 2001 to $97.4
million in 2002, an increase of $9.9 million or 11.3%. Average investments,
including securities and federal funds sold, were $31.5 million in 2002,
compared to $21.3 million in 2001. The increased volume of earning assets has
been the key contributor in maintaining interest income levels, as average
yields, on a fully tax equivalent basis, declined to 7.04% in 2002 from 8.50% in
2001. This represents a slight decrease over second quarter 2002 results, when
the tax equivalent average yield was 7.09%, illustrating the impact of decreases
in interest rates by the Federal Reserve Bank.

Interest expense, year to date in 2002, decreased $1.0 million, or 26.8%,
compared to 2001. The decrease is rate driven, as average deposits increased, in
all categories, by a total of $12.0 million, or 13.1%, compared to 2001. Time
deposits comprised most of the increase, with the average balance increasing by
$7.6 million. Average other interest-bearing liabilities increased from $6.2
million for year to date 2001 to $12.8 million for 2002. The average cost of
interest bearing liabilities declined sharply due to deposit products repricing
to lower rates. The average cost on interest-bearing liabilities was 3.14% in
2002 compared to 5.09% in 2001.

The effect of a decrease in the yields on earning assets and a much sharper
decrease in the cost of funds was an improvement in the net interest margin.
Through September 30, 2002, the net interest margin was 4.19%, compared to 3.88%
for 2001.

For the quarters ended September 30, 2002 and 2001, interest income remained
stable, increasing $17,000 with income of $2.4 million for the third quarter of
2002. Interest expense declined from $1.2 million for the three months ended
September 30, 2001 to $951,000 for the three months ended September 30, 2002.
Net interest income was $1.4 million for the third quarter of 2002, compared to
$1.1 million in 2001, an increase of $293,000 or 25.6%.

Provision for Loan Losses and Asset Quality

The provision for loan losses represents charges made to earnings to maintain an
adequate allowance for loan losses. The allowance is maintained at an amount
that we believe to be sufficient to absorb losses inherent in the loan
portfolio. We conduct, on a quarterly basis, a detailed evaluation of the
adequacy of the allowance.

The provision for loan losses was $248,000 for the first nine months of 2002
compared to $250,000 in 2001. The 2002 and 2001 provision for loan losses was
primarily attributable to strong loan growth during these periods. Net
charge-offs through the first nine months of 2002 were $60,000, representing
..06% compared to $92,000 or .11% of the loan portfolio for the same period last
year. The allowance for loan losses at September 30, 2002 was $1.3 million, or
1.25% of total loans, compared to $1.1 million or 1.16% of total loans at
September 30, 2001.

Nonperforming loans have declined $97,000, to $215,000 since year-end. The
amount of nonperforming loans remains modest (.20% at September 30, 2002
compared to .33% at year end 2001).

We designate certain loans for internal monitoring purposes on a watch list.
Loans may be placed on the watch list as a result of delinquent status, concern
about the borrowers financial condition or the value of the collateral securing
the loan, substandard classification during

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FIRST SHARES BANCORP, INC.

regulatory examinations, or simply as a result of our desire to monitor more
closely a borrowers financial condition and performance.

For the quarters ended September 30, 2002 and 2001, provision expense increased
to $138,000 from $88,000 driven by loan growth and net charge offs. Provision
expense is made to maintain the allowance at levels sufficient to cover probable
loss in the portfolio.

Noninterest Income and Expense

Noninterest income increased $483,000, or 68.0% to $1.2 million for 2002
compared to $710,000 in 2001. A portion of the increase is attributed to the
larger number of deposit accounts, which increased deposit service charge income
by 34.7%. A significant part of the increase can be attributed to higher loan
sale revenue as declining rates continue to spur activity in this area. Loan
sale revenue rose $237,000, or 88.1%, from $269,000 last year. Additionally,
gains on the sale of securities rose 370.4% to $127,000 for the nine months
ended September 30, 2002 compared to $27,000 for the same period in 2001.
Earnings on the cash surrender value of life insurance rose from $88,000 for the
nine months ended September 30, 2001 to $112,000 during the same nine months of
2002, an increase of 27.3%.

Noninterest expense increased by $672,000 or 20.6%, to $3.9 million for the
first nine months of 2002. The largest contributors to the increase in
noninterest expense were employee salaries and benefits and occupancy and
equipment.

Salary and employee benefits expense increased from $1.9 million for the nine
months ended September 30, 2001 to $2.3 million for the same nine-month period
in 2002, an increase of $395,000 or 21.0%. This increase is the result of annual
salary increases and health insurance increases. Also, staffing levels increased
from 61 full time equivalents at September 30, 2001 to 79 full time equivalents
at September 30, 2002.

Occupancy and equipment expense increased $103,000 as we established a new
branch and moved our mortgage loan department to a new location.

For the quarters ended September 30, 2002 and 2001, noninterest income increased
from $264,000 to $492,000, a change of $228,000 or 86.4%. Much of this increase
is attributable to the increased mortgage banking revenue and gains on the sale
of securities. Noninterest expense posted an increase rising from $1.1 million
to $1.5 million, an increase of $368,000 or 32.9%. Salary and employee benefits
accounted over half of the increase.

Income Taxes

A tax benefit of $125,000 was recorded during the second quarter of 2002. The
benefit represented the elimination of the reserve on deferred tax assets. The
realization of deferred tax assets is now considered more likely than not, as
the net operating loss carryforward was fully utilized during the second
quarter, and a trend of taxable income has been established. With the full
utilization of the loss carryforward, the Company began recording tax expense
in the third quarter, resulting in an effective tax rate of 30.6% for the
quarter.

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FIRST SHARES BANCORP, INC.

FINANCIAL CONDITION

Total assets were $154.4 million at September 30, 2002 compared to $128.1
million at year-end 2001, an increase of $26.3 million or 20.6%. Increased loan
totals were funded primarily by increased deposits.

Securities

Securities are designated as either available for sale or as held to maturity.
To provide more flexibility and better support for our current strategy, held to
maturity securities have been allowed to mature and pay-off, with all security
purchases since March 1999 classified as available for sale.

In addition to securities of the U.S. Government and its agencies, we had
concentrations in corporate securities that exceeded 10% of shareholders equity
at September 30, 2002. The obligors were Regional Diversified Funding, with a
cost of $1.4 million and a fair value of $1.3 million and Ford Motor Credit,
with a cost of $1 million and fair value of $999,000.

Loans

Total loans, excluding loans held for sale, increased $13.7 million or 15.0%
from year-end 2001 to September 30, 2002. Loan growth occurred in nearly all
categories.

Consumer loans continue to comprise the largest single segment of the portfolio
at 26.4%. Consumer loans totaled $27.6 million at September 30, 2002, increasing
$3.8 million or 16.0% from year-end. Management believes that relationships
maintained with local auto and recreational vehicle dealers provide the indirect
loan market segment with strong growth opportunities. Underwriting standards for
indirect loans are consistent with the standards applied to direct loans in an
effort to maintain strong asset quality.

Commercial and commercial real estate loans grew by 14.9% or $4.8 million from
December 31, 2001 to September 30, 2002 and combined comprised 34.9% of our
portfolio at the period end. Growth in these segments was attributed to the
local economy, primarily in the Greenwood area and further penetration in our
market areas. Residential mortgages excluding loans held for sale, remained
stable at $24.5 million.

Mortgage banking activity remains strong, providing our customers with a wider
array of mortgage loan products. At September 30, 2002, loans held for sale,
which are carried at the lower of cost or fair value, totaled $2.6 million. All
loans are sold servicing released.

Deposits and Other Borrowings

Total deposits increased $16.4 million or 14.7%, from year-end 2001 to September
30, 2002, as we continue to gain market share. Noninterest-bearing deposits
increased to $13.5 million from $11.3 million. At September 30, 2002, $39.3
million or 50.9% of our time deposits had balances greater than $100,000. The
average balance of time deposits issued in amounts greater than $100,000 totaled
$33.1 million in 2002 and $25.7 million in 2001, representing 48.0% and 41.8% of
total average time deposits in each period.

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FIRST SHARES BANCORP, INC.

While deposits have funded a significant portion of our growth, we also can
obtain funding from the Federal Home Loan Bank (FHLB). Our outstanding advances
from the FHLB have various terms with rates ranging from 4.73% to 5.3% and
maturities from January 23, 2006 to March 7, 2011. At September 30, 2002, we
also had federal funds purchased, which were obtained to meet the daily reserve
requirement as set by the Federal Reserve Bank. Additionally, we obtained bank
financing at the holding company level, with a significant portion of these
proceeds contributed to First Bank to support continued growth. The bank
financing had an outstanding balance of $1.5 million at September 30, 2002. This
original line has been closed and transferred to a term note. The note has a
variable rate of LIBOR plus 250 basis with a maturity date of July 30, 2005.
During the second and third quarters, the Company received proceeds of $5.0
million from a public offering, of which $3.0 million was downstreamed to the
Bank to support growth.

Capital

We are subject to various regulatory capital guidelines as required by federal
banking agencies. These guidelines define the various components of core capital
and assign risk weights to various categories of assets.

Tier 1 capital consists of shareholders equity net of intangible assets and
excluding unrealized gains and losses on securities available or sale, as
defined by bank regulators. The definition of Tier 2 capital includes the amount
of allowance for loan losses which does not exceed 1.25% of gross risk weighted
assets. Total capital is the sum of Tier 1 and Tier 2 capital.

The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
requires federal regulatory agencies to define capital tiers. These are: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. Under these regulations, a
well-capitalized institution must achieve a Tier 1 risk-based capital ratio of
at least 6.00%, and a total capital ratio of at least 10.00%, and a leverage
ratio of at least 5.00% and not be under a capital directive order. Failure to
meet capital requirements can result in regulatory action that could have a
direct material effect on our financial statements. If only adequately
capitalized, regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions, asset growth, and expansion are
limited, in addition to the institution being required to submit a capital
restoration plan.

On July 1, 2002, the Company completed a $5.0 million offering of redeemable
subordinated debentures and mandatory stock purchase contracts. The debentures
are unsecured and subordinated, have a term of approximately 9 years, and accrue
interest at 8% per annum payable quarterly in arrears. The debentures mature on
July 1, 2011, but are redeemable by the Company at any time prior to their
maturity. The stock purchase contracts require a purchaser to buy common shares
of the Company at $10 per share on January 1, 2011. A purchaser may elect to
purchase the common shares of the Company at any time prior to that date at the
same price per share. The stock purchase contracts will be cancelled in the
event the debentures are redeemed. Proceeds of $3.0 million have been
contributed to the Bank to support growth. As of September 30, 2002, capitalized
costs of the offering totaled $640,000.

At September 30, 2002, our Tier 1 risked based capital ratio, total risk-based
capital and leverage ratio for the Bank were 10.81%, 11.91%, and 8.96%, levels
which meet the regulatory guidelines of well capitalized.

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FIRST SHARES BANCORP, INC.

At December 31, 2001 the Tier 1 risk-based capital ratio, total risk based
capital ratio and leverage ratio for the Bank were 9.02%, 10.18% and 6.95%, all
meeting the well capitalized designations. The increase in the capital ratios
is the result of the debenture and stock purchase contract offering by the
Company in which $3.0 million of the $5.0 million in proceeds was downstreamed
to the Bank as capital.

Liquidity and Rate Sensitivity

Liquidity refers to the availability of funds to meet deposit withdrawals and
borrowing repayments, fund loan commitments and pay expenses. We have many
sources of liquid funds, including cash and cash equivalents, payments and
maturities of loans and securities, and growth in deposits. In addition, we have
the ability to sell securities available for sale, and may borrow from the
Federal Reserve and the Federal Home Loan Bank.

We believe we have sufficient liquidity to meet reasonable borrower, depositor,
and creditor needs in the present economic environment. We have not received any
recommendations from regulatory authorities which would materially affect
liquidity, capital resources or operations.

Our interest rate sensitivity position is influenced by the timing of the
maturity or repricing of interest earning assets and interest-bearing
liabilities. One method of gauging sensitivity is by a static gap analysis.

Rate sensitivity gap is defined as the difference between the repricing of
interest earning assets and the repricing of interest bearing liabilities within
certain defined time frames. Rising interest rates are likely to increase net
interest income in a positive gap position, while declining rates are likely to
be beneficial in a negative gap position.

At September 30, 2002, we had a negative one-year interest rate gap of 34.8% of
interest earning assets. This compares to a negative 25.5% at December 31, 2001.
The increased negative gap is primarily the result of a large amount of time
deposits maturing within the next three months and fewer loans repricing during
the next three months.




ITEM 3. CONTROLS AND PROCEDURES

Within the 90-day period prior to the filing of this report, an evaluation was
carried out under the supervision and with the participation of First Shares
Bancorp, Inc.s management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c) under the
Securities Exchange Act of 1934). Based on their evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that the Companys disclosure
controls and procedures are, to the best of their knowledge, effective to ensure
that information required to be disclosed by First Shares Bancorp, Inc. in
reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. Subsequent to the date of their evaluation,
our Chief Executive Officer and Chief Financial Officer have concluded that
there were no significant changes in First Shares Bancorp, Inc.s internal
controls or in other factors that could significantly affect its internal
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.

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FIRST SHARES BANCORP, INC.




Part II. OTHER INFORMATION




Item 6.



| |  |  | Exhibits and Reports on Form 8-K
| |  |  | --------------------------------
|
| |  |  | a.)   Exhibits                  

|     |  |                                                                                                                                                                                                                                                                
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1  |  | Amended and Restated Articles of Incorporation of First Shares Bancorp, Inc.,
incorporated by reference to Exhibit 3.1 to the registration statement on Form SB-2 of
First Shares Bancorp, Inc. (file no. 333-31520), as amended (the Registration
Statement)
|    
|3.2  |  | Amended and Restated By-Laws of First Shares Bancorp, Inc., incorporated by reference to
Exhibit 3.2 to the Registration Statement.                                                                                                                            
|    
|99.1 |  | Certification of Chief Executive Officer under section 906 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                                  
|    
|99.2 |  | Certification of Chief Financial Officer under section 906 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                                  



| |  |  | b.)   Reports on 8-K  No Reports were filed.
| |  |  | ---------------------------------------------
|




SIGNATURES

|      |  |                    |  |                            |  |                                                                                                                                     
|----- |  | ------------------ |  | -------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------
|      |  |                    |  | FIRST SHARES BANCORP, INC.
|     
|Date: |  | November 14,  2002 |  | By:                        |  | /s/ JERRY R. ENGLEJerry R. Engle
President and Chief
Executive Officer                                                              
|     
|     
|Date: |  | November 14, 2002  |  | By:                        |  | /s/ KIMBERLY B. KLINGKimberly B. Kling
Secretary, Treasurer and
Chief Financial Officer
(Principal Financial and
Accounting Officer)

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FIRST SHARES BANCORP, INC.

I, Jerry R. Engle, Chief Executive Officer, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of First Shares Bancorp, Inc.;

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly
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 quarterly report;

4. The registrants other certifying officers 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 we 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 quarterly 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 quarterly report (the Evaluation Date); and

c) presented in this quarterly 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 officers 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 officers and I have indicated in this quarterly report whether
or not 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: November 14, 2002 |  |                                                         
|                       
|                        |  | /s/ Jerry R. EngleJerry R. Engle
Chief Executive Officer

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FIRST SHARES BANCORP, INC.

I, Kimberly B. Kling, Chief Financial Officer, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of First Shares Bancorp, Inc.;

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly
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 quarterly report;

4. The registrants other certifying officers 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 we 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 quarterly 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 quarterly report (the Evaluation Date); and

c) presented in this quarterly 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 officers 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 officers and I have indicated in this quarterly report whether
or not 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: November 14, 2002 |  |                                                               
|                       
|                        |  | /s/ Kimberly B. KlingKimberly B. Kling
Chief Financial Officer

20