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

                                    FORM 10-Q


[ X ]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
          EXCHANGE ACT OF 1934

          For the period ended September 30, 1998

                                      OR

[    ]    TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
          EXCHANGE ACT OF 1934

          For the transition period from                 to                

          Commission file number 0-14671


                     REPUBLIC SECURITY FINANCIAL CORPORATION
             (Exact name of registrant as specified in its charter)

         FLORIDA                                             59-2335075
         (State or other jurisdiction of                     (I.R.S. Employer
         incorporation or organization)                      Identification No.)


                 4400 Congress  Avenue,  West Palm Beach,  FL 33407  (Address of
               principal executive offices)(Zip Code)

        Registrant's telephone number, including area code (561) 840-1200



     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No


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


Class                                         Outstanding as of November 9, 1998
Common Stock
par value $.01 per share                                   47,280,850

<PAGE>

             REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARY

                                      INDEX
<TABLE>
<CAPTION>
                                                                                                                  Page
<S>                                                                                                               <C>
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995....................................1
for Forward-Looking Information

PART I:        FINANCIAL INFORMATION

Item 1:

               Condensed Consolidated Statements of Financial Condition
               September 30, 1998 and December 31, 1997.............................................................2

               Condensed Consolidated Statements of Income for the
               three months ended September 30, 1998 and 1997.......................................................3

               Condensed Consolidated Statements of Income for the
               nine months ended September 30, 1998 and 1997........................................................4

               Condensed Consolidated Statements of Comprehensive Income for the
               three and nine months ended September 30, 1998 and 1997..............................................5

               Condensed Consolidated Statements of Shareholders' Equity
               for the nine months ended September 30, 1998
               and the year ended December 31, 1997.................................................................6

               Condensed Consolidated Statements of Cash Flows for the
               nine months ended September 30, 1998 and 1997........................................................7

               Notes to Condensed Consolidated Financial Statements.................................................8

Item 2:        Management's Discussion and Analysis of Financial Condition and
               Results of Operations...............................................................................12

Item 3:        Quantitative and Qualitative Disclosure about Market Risk...........................................16

PART II:       OTHER INFORMATION

Item 1:        Legal Proceedings...................................................................................17

Item 2:        Changes in Securities and Use of Proceeds...........................................................17

Item 3:        Defaults Upon Senior Securities.....................................................................17

Item 4:        Submission of Matters to a Vote of Security Holders.................................................17

Item 5:        Other Information...................................................................................17

Item 6         Exhibits and Reports on Form 8-K....................................................................18

               Signatures..........................................................................................19
</TABLE>
<PAGE>

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
for Forward-Looking Information

Information  in this  report  contains  forward-looking  statements  within  the
meaning of the Private Securities Litigation Reform Act of 1995 that are subject
to risks and  uncertainties  that could cause the  Company's  actual  results to
differ materially from those projected in forward-looking statements. The use of
forward-looking  statements  can be  identified  by  statements  that express or
involve discussions as to expectations,  beliefs, plans, objectives, assumptions
or future events or performance (often, but not always, through the use of words
or phrases such as "will likely result," "are expected to," "will continue," "is
anticipated," "estimated," "projection," or "outlook"), are not historical facts
and may be forward-looking.  Such statements involve estimates, assumptions, and
uncertainties   which  include,   but  are  not  limited  to,  overall  business
conditions,  particularly  in the business  markets in which  Republic  Security
Financial  Corporation and its wholly owned subsidiary,  Republic Security Bank,
operate; general economic conditions,  changes in interest rates, deposit flows,
loan  demand,  real  estate  values,  and  competition;  changes  in  accounting
principles,  policies, or guidelines;  changes in legislation or regulation; and
other economic, competitive, governmental, regulatory, and technological factors
that affect the Company's operations,  pricing,  products,  and services.  Other
factors,  such as the  general  state of the  economy,  could also cause  actual
results  to  vary   materially   from  the  future   results   covered  in  such
forward-looking  statements.  Accordingly,  any such statements are qualified in
their  entirety by reference  to, and are  accompanied  by, the above  mentioned
important  factors  that  could  cause the  Company's  actual  results to differ
materially from those contained in the forward-looking statements of the Company
made by or on behalf of the Company.

All such  factors are  difficult  to predict,  contain  uncertainties  which may
materially affect actual results and are beyond the control of the Company.


                                        1
<PAGE>

PART I - FINANCIAL INFORMATION
ITEM 1:
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                   September 30,     December 31,
                                                                                                       1998              1997
(Amounts in thousands except share and per share data)                                              (unaudited)
------------------------------------------------------------------------------------------------ ----------------- ----------------
<S>                                                                                              <C>               <C>
Assets
Cash and amounts due from depository institutions                                                          $28,572          $60,867
Interest-bearing deposits in other financial institutions                                                   56,256           75,473
Federal funds sold                                                                                                            7,665
------------------------------------------------------------------------------------------------ ----------------- ----------------
         Total cash and cash equivalents                                                                    84,828          144,005
Investments available-for-sale                                                                             149,573          129,748
Investments held to maturity (market value of $11,688 and $10,305 at September 30, 1998 and December 
31, 1997, respectively)                                                                                     11,624           10,277
Loans - net                                                                                                766,080          729,525
Loans held for sale (Market value of $32,738 and $13,828 at September 30, 1998 and December 31, 1997,
respectively)                                                                                               32,552           13,565
Property and equipment - net                                                                                28,579           23,445
Other real estate owned - net                                                                                3,317            6,046
Goodwill - net                                                                                               6,690            7,110
Loan servicing rights - net                                                                                  1,508            1,519
Accrued interest receivable                                                                                  6,058            5,517
Other assets                                                                                                29,507           20,479
------------------------------------------------------------------------------------------------ ----------------- ----------------
Total                                                                                                   $1,120,316       $1,091,236
------------------------------------------------------------------------------------------------ ----------------- ----------------
Liabilities and Shareholders' Equity
Deposits                                                                                                  $902,035         $870,002
Federal Home Loan Bank advances                                                                             76,979           88,397
Securities sold under agreements to repurchase                                                               8,228           14,443
Advances from borrowers for taxes and insurance                                                              9,165            3,841
Bank drafts payable                                                                                         12,118            5,806
Other liabilities                                                                                           12,258           14,565
------------------------------------------------------------------------------------------------ ----------------- ----------------
Total liabilities                                                                                        1,020,784          997,054
------------------------------------------------------------------------------------------------ ----------------- ----------------
Commitments and Contingencies
Preferred  stock issued by pooled  company  $7.13 stated value;  300,000  shares
authorized:
 Series "A" - 111,660 shares issued and outstanding at December 31, 1997                                                        796
Preferred stock $10.00 stated value; 10,000,000 shares authorized:
 Series "C" - 948,996 shares issued and outstanding at December 31, 1997                                                      9,490
Common stock $.01 par value; 100,000,000 shares authorized;  25,532,224 and  23,713,111 shares issued 
and outstanding at September 30, 1998 and December 31, 1997, respectively                                      255              237
Additional paid-in capital                                                                                  71,540           60,233
Retained earnings                                                                                           26,966           22,847
Unrealized gain on investments available-for-sale, net of taxes                                                771              579
------------------------------------------------------------------------------------------------ ----------------- ----------------
Total shareholders' equity                                                                                  99,532           94,182
------------------------------------------------------------------------------------------------ ----------------- ----------------
Total                                                                                                   $1,120,316       $1,091,236
------------------------------------------------------------------------------------------------ ----------------- ----------------
See notes to condensed consolidated financial statements.
</TABLE>



                                        2

<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Three months ended September 30,
                                                                                                        (unaudited)
(Amounts in thousands except per share data)                                                      1998                 1997
---------------------------------------------------------------------------------------- ---------------------- -------------------
<S>                                                                                      <C>                    <C>
Interest Income:
Interest and fees on loans                                                                              $17,140             $16,064
Interest and dividends on investments                                                                     3,170               3,279
---------------------------------------------------------------------------------------- ---------------------- -------------------
                                                                                                         20,310              19,343
---------------------------------------------------------------------------------------- ---------------------- -------------------
Interest Expense:
Interest on deposits                                                                                      7,991               7,442
Interest on borrowings                                                                                    1,208                 679
---------------------------------------------------------------------------------------- ---------------------- -------------------
                                                                                                          9,199               8,121
---------------------------------------------------------------------------------------- ---------------------- -------------------
Net interest income                                                                                      11,111              11,222
Provision for loan losses                                                                                 1,400                  81
---------------------------------------------------------------------------------------- ---------------------- -------------------
Net interest income after  provision for loan losses                                                      9,711              11,141
Non-interest Income:
Service charges on deposit accounts                                                                       1,775               1,582
Gain on sale of loans                                                                                       310                 146
Gain on sale of investments available-for-sale                                                                                  262
Other income                                                                                                903                 887
---------------------------------------------------------------------------------------- ---------------------- -------------------
                                                                                                          2,988               2,877
Operating Expenses:
Employee compensation and benefits                                                                        4,334               5,324
Occupancy and equipment                                                                                   1,966               1,768
Professional fees                                                                                           197                 824
Advertising and promotions                                                                                  178                 100
Communications                                                                                              298                 261
Data processing                                                                                             409                 349
Insurance                                                                                                   133                 111
Other                                                                                                     1,131               1,225
Merger expenses                                                                                           2,098
---------------------------------------------------------------------------------------- ---------------------- -------------------
                                                                                                         10,744               9,962
Income before income taxes                                                                                1,955               4,056
Provision for income taxes                                                                                  723               1,065
---------------------------------------------------------------------------------------- ---------------------- -------------------
Net income                                                                                               $1,232              $2,991
---------------------------------------------------------------------------------------- ---------------------- -------------------
PER SHARE DATA:
Basic earnings per common share                                                                           $0.05               $0.12
Diluted earnings per common share                                                                         $0.05               $0.11
Dividends per common share                                                                                $0.06               $0.05
Average common  shares and common stock equivalents outstanding                                          26,034              24,948
---------------------------------------------------------------------------------------- ---------------------- -------------------
See notes to condensed consolidated financial statements.
</TABLE>



                                        3
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Nine months ended September 30,
                                                                                                             (unaudited)
(Amounts in thousands except per share data)                                                           1998                 1997
---------------------------------------------------------------------------------------- ---------------------- -------------------
<S>                                                                                      <C>                    <C>
Interest Income:
Interest and fees on loans                                                                              $51,890             $47,060
Interest and dividends on investments                                                                     8,476               9,463
---------------------------------------------------------------------------------------- ---------------------- -------------------
                                                                                                         60,366              56,523
---------------------------------------------------------------------------------------- ---------------------- -------------------
Interest Expense:
Interest on deposits                                                                                     22,849              21,557
Interest on borrowings                                                                                    3,377               1,972
---------------------------------------------------------------------------------------- ---------------------- -------------------
                                                                                                         26,226              23,529
---------------------------------------------------------------------------------------- ---------------------- -------------------
Net interest income                                                                                      34,140              32,994
Provision for loan losses                                                                                 1,599                 918
---------------------------------------------------------------------------------------- ---------------------- -------------------
Net interest income after  provision for loan losses                                                     32,541              32,076
Non-interest Income:
Service charge on deposit accounts                                                                        5,103               4,711
Gain on sale of loans                                                                                     1,026                 343
Gain on sale of investments available-for-sale                                                              381                 436
Other income                                                                                              2,465               2,466
---------------------------------------------------------------------------------------- ---------------------- -------------------
                                                                                                          8,975               7,956
Operating Expenses:
Employee compensation and benefits                                                                       13,306              14,674
Occupancy and equipment                                                                                   5,626               5,268
Professional fees                                                                                           730               1,904
Advertising and promotions                                                                                  598                 468
Communications                                                                                              958                 868
Data processing                                                                                           1,299                 971
Insurance                                                                                                   484                 526
Other                                                                                                     3,601               4,215
Merger expenses                                                                                           2,251               3,979
---------------------------------------------------------------------------------------- ---------------------- -------------------
                                                                                                         28,853              32,873
Income before income taxes                                                                               12,663               7,159
Provision for income taxes                                                                                4,650               1,362
---------------------------------------------------------------------------------------- ---------------------- -------------------
Net income                                                                                               $8,013              $5,797
---------------------------------------------------------------------------------------- ---------------------- -------------------
PER SHARE DATA:
Basic earnings per common share                                                                           $0.32               $0.22
Diluted earnings per common share                                                                         $0.31               $0.22
Dividends per common share                                                                                $0.16               $0.14
Average common shares and common stock equivalents outstanding                                           26,173              23,907
---------------------------------------------------------------------------------------- ---------------------- -------------------
See notes to condensed consolidated financial statements.
</TABLE>



                                        4
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Three Months Ended September 30,
                                                                                                             (unaudited)
(Amounts in thousands)                                                                                 1998                 1997
---------------------------------------------------------------------------------------- ---------------------- -------------------
<S>                                                                                      <C>                    <C>   
Net income                                                                                               $1,232              $2,991
Other comprehensive income, net of tax:
         Unrealized gain on investments available-for-sale arising during the period
         net of tax of $158 and $166, respectively                                                          428                 449
Reclassification adjustment for amounts realized on sale of investments included in
net income, net of taxes of ($97)                                                                                             (165)
---------------------------------------------------------------------------------------- ---------------------- -------------------
Comprehensive income                                                                                     $1,660              $3,275
---------------------------------------------------------------------------------------- ---------------------- -------------------
                                                                                                   Nine Months Ended September 30,

                                                                                                             (unaudited)

(Amounts in thousands)                                                                                 1998                 1997
---------------------------------------------------------------------------------------- ---------------------- -------------------
Net income                                                                                               $8,013              $5,797
Other comprehensive income, net of tax:
         Unrealized gain (loss) on investments available-for-sale arising during the
         period, net of tax of $71 and ($91), respectively                                                  192               (246)
Reclassification adjustment for amounts realized on sale of investments included in
net income, net of taxes of ($141) and ($161), respectively                                               (240)               (275)
---------------------------------------------------------------------------------------- ---------------------- -------------------
Comprehensive income                                                                                     $7,965              $5,276
---------------------------------------------------------------------------------------- ---------------------- -------------------
See notes to condensed consolidated financial statements.
</TABLE>


                                        5
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                 Unrealized Gain
                                                                                                                    (Loss) on
                                                                                   Additional                      Investments
                                                     Preferred        Common        Paid-in        Retained       Available-for-
(Amounts in thousands except share data)               Stock          Stock         Capital        Earnings     Sale, Net of Taxes
-------------------------------------------------- -------------- -------------- -------------- -------------- --------------------
<S>                                                <C>            <C>            <C>            <C>            <C>  
Balance, December 31, 1996                                $11,146           $226        $57,316        $26,445                ($96)
Exercise of options -924,624 shares                                            9          2,032
Issuance of stock  grants - 3,000 shares                                                     27
Conversion of preferred stock series "C" into 
common stock - 133,306 shares                               (860)              2            858                                     
Cash dividends - common stock                                                                          (2,175)
Cash dividends paid by pooled companies - common stock                                                 (2,760)
Cash dividends - preferred stock series " C"                                                             (708)
Cash dividends - pooled company preferred stock
series "A"                                                                                                (56)                      
Net income                                                                                               2,101
Change in unrealized gain (loss) on investments                                                                                  
available-for-sale, net of taxes                                                                                                675
-------------------------------------------------- -------------- -------------- -------------- -------------- --------------------
Balance, December 31, 1997                                 10,286            237         60,233         22,847                  579
Exercise of options - 236,632 shares                                           2          1,044
401(k) plan - 4,474 shares                                                                   43
Conversion of preferred stock series "C" into
common stock - 1,463,347 shares                           (9,440)             15          9,425                                     
Conversion of pooled company preferred stock into  
common stock - 111,660 shares                               (796)              1            795                                     
Cash redemption of preferred stock series "C"                (50)
Cash dividends - common stock                                                                          (3,882)
Cash dividends - preferred stock series "C"                                                              (202)
Cash dividends - pooled company preferred stock                                                           (27)
Net income                                                                                               8,013
Income for three months ended December 31, 1997 for  
pooled company                                                                                             217                      
Change in unrealized gain on  investments
available-for-sale, net of taxes                                                                                                192
-------------------------------------------------- -------------- -------------- -------------- -------------- --------------------
Balance, September 30, 1998 (unaudited)                                     $255        $71,540        $26,966                 $771
-------------------------------------------------- -------------- -------------- -------------- -------------- --------------------
See notes to condensed consolidated financial statements.
</TABLE>



                                        6
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                           Nine Months Ended September 30,
                                                                                                     (unaudited)
(Amounts in thousands)                                                                      1998                     1997
---------------------------------------------------------------------------------- ----------------------- ------------------------
<S>                                                                                <C>                     <C>
Operating Activities:
Net income                                                                                          $8,013                   $5,797
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses                                                                            1,599                      918
Depreciation and amortization                                                                        2,404                    1,935
Gain on sale of investments available-for-sale                                                       (381)                    (436)
Gain on sale of loans                                                                              (1,026)                    (343)
Loans originated for sale                                                                         (21,078)                 (13,669)
Purchase of loans held for sale                                                                   (13,552)                 (16,155)
Sale of loans and loan participation certificates                                                   47,559                   41,145
Other - net                                                                                          1,381                    1,428
---------------------------------------------------------------------------------- ----------------------- ------------------------
Net cash provided by operating activities                                                           24,919                   20,620
---------------------------------------------------------------------------------- ----------------------- ------------------------
Investing Activities:
Purchases of investments available-for-sale                                                      (134,327)                 (55,735)
Proceeds from sales and maturities of investments available-for-sale                                78,615                   67,851
Maturities and calls of investments held to maturity                                                 4,013                    3,492
Purchases of investments held to maturity                                                                                   (8,944)
Loans purchased for investment                                                                    (65,855)
Net increase in loans                                                                              (4,726)                 (42,744)
Purchase of property and equipment                                                                 (6,997)                  (4,082)
Other - net                                                                                         21,900                    1,688
---------------------------------------------------------------------------------- ----------------------- ------------------------
Net cash used in investing activities                                                            (107,377)                 (38,474)
---------------------------------------------------------------------------------- ----------------------- ------------------------
Financing Activities:
Net increase in demand deposits, NOW accounts, Money Market accounts and savings  
accounts                                                                                             8,532                    7,525
Net increase in certificates of deposits                                                            23,501                    5,449
(Decrease) increase in FHLB advances                                                              (11,418)                   11,657
Other - net                                                                                        (9,287)                  (3,989)
---------------------------------------------------------------------------------- ----------------------- ------------------------
Net cash provided by financing activities                                                           11,328                   20,642
---------------------------------------------------------------------------------- ----------------------- ------------------------
(Decrease) increase in cash and cash equivalents                                                  (71,130)                    2,788
Adjustments to reconcile for different year end of pooled company (see Note 2):
   Net income for three months ended December 31, 1997                                                 217
   Other cash flows-net                                                                             11,736
---------------------------------------------------------------------------------- ----------------------- ------------------------
Cash and cash equivalents at beginning of period                                                   144,005                  109,330
---------------------------------------------------------------------------------- ----------------------- ------------------------
Cash and cash equivalents at end of period                                                         $84,828                 $112,118
---------------------------------------------------------------------------------- ----------------------- ------------------------
For purposes of reporting cash flows, cash and cash equivalents  include cash on
hand, amounts due from banks and federal funds
sold.  Generally, federal funds are purchased and sold for one-day periods.  The Company paid $2,342 and $2,385 in income tax
payments during the nine months ended September 30, 1998 and September 30, 1997,  respectively.  The Company paid $60,709 and
$56,472 in interest on deposits and other borrowings during the nine months ended September 30, 1998 and 1997, respectively.  The
Company  had $2,400 and $2,826 of  transfers  from loans to OREO during the nine
months ended September 30, 1998 and 1997,
respectively.  In addition, the Company transferred  approximately $27.5 million
of loans acquired in the Unifirst merger to loans held for sale at closing (July
2, 1998).
-----------------------------------------------------------------------------------------------------------------------------------
See notes to condensed consolidated financial statements
</TABLE>



                                        7
<PAGE>

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                               September 30, 1998

1.        Basis of Presentation

          The accompanying unaudited condensed consolidated financial statements
     include the  accounts  of  Republic  Security  Financial  Corporation  (the
     "Company" or "RSFC") and its  wholly-owned  subsidiary,  Republic  Security
     Bank (the "Bank" or "Republic"),  and have been  retroactively  restated to
     include  the   accounts   and  results  of   operations   of  Unifirst  FSB
     ("Unifirst"),  a federal savings bank which merged into Republic on July 2,
     1998  (See  Note  2).  In the  opinion  of the  Company's  management,  the
     financial   statements  contain  all  adjustments   (consisting  of  normal
     recurring accruals) considered necessary to present fairly the consolidated
     financial  position  of Republic  Security  Financial  Corporation  and its
     subsidiary  as of September  30, 1998.  The December 31, 1997  consolidated
     financial  position is combined with the statements of financial  condition
     of Unifirst as of September 30, 1997. The condensed consolidated statements
     of  income  and cash  flows of RSFC for the  three  and nine  months  ended
     September  30, 1997 is combined  with the  statements of income of Unifirst
     for the three and nine months ended June 30, 1997.

          The accompanying unaudited condensed consolidated financial statements
     have  been  prepared  in  accordance  with  generally  accepted  accounting
     principles for interim  financial  information and with the instructions to
     Form  10-Q and  Article  10 of  Regulation  S-X.  Accordingly,  they do not
     include all of the information and footnotes required by generally accepted
     accounting principles for complete financial statements.  Operating results
     for the nine months ended September 30, 1998 are not necessarily indicative
     of the results that may be expected for the year ending  December 31, 1998.
     For further information, refer to the consolidated financial statements and
     footnotes  thereto included in Republic  Security  Financial  Corporation's
     annual report on Form 10-K for the year ended December 31, 1997.

          The balance  sheet at  December  31,  1997 has been  derived  from the
     audited  financial  statements at that date but does not include all of the
     information  and  footnotes  required  by  generally  accepted   accounting
     principles for complete financial statements.

2.        Merger and Potential Mergers

          On  September  14, 1998,  RSFC  entered  into a  definitive  agreement
     whereby  Northside  Bank of Tampa  ("Northside"),  headquartered  in Tampa,
     Florida,  is  expected  to  merge  into  the  Bank,  in  a  stock-for-stock
     transaction accounted for as a  pooling-of-interests.  Northside has assets
     of $65.5 million, loans of $37.9 million and deposits of $55.6 million.

          Under the  terms of the  agreement,  shareholders  of  Northside  will
     receive  3.64  shares of RSFC's  common  stock for each share of  Northside
     common stock. RSFC expects to issue approximately 2.1 million shares of its
     common  stock  for  all  of  the  outstanding  shares  of  Northside.   The
     transaction  is subject to  shareholder  approval of Northside,  receipt of
     state regulatory approval and other customary closing  conditions.  Federal
     Reserve Bank approval was received in November 1998. The merger is expected
     to close in December 1998.

          On September 8, 1998, the Bank entered into a definitive  agreement to
     acquire the Florida branch offices of Household Bank, f.s.b. ("Household"),
     a wholly owned subsidiary of Household International,  Inc. Under the terms
     of the  agreement,  Republic  Security  Bank  expects to acquire two branch
     locations with  approximately  $32 million in loans and  approximately  $19
     million in deposits.  The Bank will pay a purchase  price equal to 4% times
     the deposit balances  outstanding at the closing date and the consideration
     will be paid in cash.


                                        8
<PAGE>

          The transaction is subject to approval by the State of Florida Banking
     Department  and is expected to close in November  1998.  Approval  from the
     Federal Reserve Bank was received in October 1998.

          On August 24,  1998,  RSFC  entered  into a  definitive  agreement  to
     acquire  Newberry Bank  ("Newberry"),  a Florida  state,  commercial  bank,
     headquartered in Newberry,  Florida. Newberry has approximately $37 million
     in assets,  loans of $28 million and  deposits  of $33  million.  Under the
     terms of the  agreement  the  purchase  price  equals two times  Newberry's
     tangible  equity  as of the  month  end  prior  to the  closing  date.  The
     transaction  will be accounted for as a purchase  business  combination and
     approximately $3.0 in goodwill will be recorded related to the transaction.

          The  transaction  is  subject to  shareholder  approval  of  Newberry,
     receipt  of  state   regulatory   approval  and  other  customary   closing
     conditions.  The merger is expected to close in the fourth quarter of 1998.
     Federal Reserve approval was received in October 1998.

          On July 2, 1998, RSFC issued  1,245,196  shares of its common stock in
     exchange  for all  outstanding  common  stock of  Unifirst.  This  business
     combination  has  been  accounted  for  as  a   pooling-of-interests   and,
     accordingly,  the unaudited condensed consolidated financial statements for
     periods prior to the combination have been restated to include the accounts
     and results of  operations  of Unifirst.  In  connection  with the Unifirst
     merger the Company incurred approximately $2.2 million in merger expenses.

          The  results  of  operations   previously  reported  by  the  separate
     companies and the combined amounts presented in the accompanying  unaudited
     condensed consolidated financial statements are summarized below.

<TABLE>
<CAPTION>
                                Six months ended
                                    June 30,
                                    1998 1997
----------------------------------------------- -------------------- ------------------
                                   (unaudited)
<S>                                             <C>                  <C>
Revenue:

         RSFC                                                $26,993            $24,008
         Unifirst                                              1,823              1,911
----------------------------------------------- -------------------- ------------------
         Combined                                            $28,816            $25,919
----------------------------------------------- -------------------- ------------------
Net Income:
         RSFC 1                                               $6,415             $2,394
         Unifirst                                                366                277
----------------------------------------------- -------------------- ------------------
         Combined                                             $6,781             $2,671
----------------------------------------------- -------------------- ------------------
</TABLE>

          See Note 7 for discussion of the merger with First Palm Beach Bancorp,
     Inc. which was consummated on October 29, 1998.

3.        Non-Performing Assets and Allowance for Loan Losses

          At  September  30, 1998,  the Bank had $9.8 million in  non-performing
     assets  (loans  90 days or more  past  due,  other  real  estate  owned and
     repossessed  assets).  The  provision  for loan losses was  $1,599,000  and
     $918,000  for  the  nine  months  ended   September   30,  1998  and  1997,
     respectively.  The  provisions  for loan  losses  include  charges  of $1.2
     million and $400,000 for the nine months ended September 30, 1998 and 1997,
     respectively,  to conform Unifirst and Family Bank's  accounting and credit
     policies to those of RSFC.


--------
          1 The six months  ended June 30, 1997,  includes  merger costs of $2.5
     million, net of taxes,  related to the Family Bank acquisition.  The merger
     costs  consist of  approximately  $1.6  million in  professional  fees,  $1
     million  in data  processing  conversion  costs and $1.4  million  in costs
     associated with the integration of operations and other expenses.

                                        9
<PAGE>

          Although management uses its best judgement in underwriting each loan,
     industry  experience  indicates  that a portion  of the  Bank's  loans will
     become  delinquent.  Regardless of the  underwriting  criteria  utilized by
     financial  institutions,  losses  may be  experienced  as a result  of many
     factors  beyond their control  including,  among other  things,  changes in
     market  conditions  affecting the value of security and unrelated  problems
     affecting the credit of the borrower.  Due to the concentration of loans in
     South Florida,  adverse economic  conditions in this area could result in a
     decrease in the value of a significant portion of the Bank's collateral.

          In the normal  course of business,  the Bank has  recognized  and will
     continue  to  recognize  losses  resulting  from the  inability  of certain
     borrowers  to  repay  loans  and  the  insufficient   realizable  value  of
     collateral securing such loans. Accordingly,  management has established an
     allowance  for loan losses,  which  totaled  $7.8 million at September  30,
     1998.

          The allowance  for credit  losses is  maintained  at a level  believed
     adequate  by  management  to  absorb  estimated   probable  credit  losses.
     Management's  periodic evaluation of the adequacy of the allowance is based
     on the Bank's past loan loss  experience,  known and inherent  risks in the
     portfolio,  adverse  situations  that may affect the borrower's  ability to
     repay (including the timing of future payments), the estimated value of any
     underlying collateral,  composition of the loan portfolio, current economic
     conditions,  and other  relevant  factors.  This  evaluation  is inherently
     subjective  as it requires  material  estimates  including  the amounts and
     timing of future cash flows  expected to be received on impaired loans that
     may be susceptible to significant change.

4.        Commitments and Contingencies

          Commitments  to extend credit are  agreements to lend to a customer as
     long as there is no violation of any condition established in the contract.
     Commitments  generally  have fixed  expiration  dates or other  termination
     clauses and may require the payment of a fee. The total commitment  amounts
     do not necessarily  represent future cash  requirements as some commitments
     expire without being drawn upon. The Bank evaluates each customer's  credit
     worthiness on a case by case basis. The amount of collateral  obtained,  if
     deemed  necessary  by the  Bank,  upon  extension  of  credit  is  based on
     management's credit evaluation of the counter party.

          At September 30, 1998,  the Bank had  adjustable  rate  commitments to
     extend credit of  approximately  $175.3 million,  excluding the undisbursed
     portion of loans-in-process. These commitments are primarily for commercial
     lines of credit secured by commercial  real estate or other business assets
     and for one-to-four family residential properties.

          In  addition to the above  commitments  and  contingencies,  there are
     various  legal  actions  pending  against the Company that  management  has
     reviewed with legal  counsel.  In the opinion of management of the Company,
     amounts  accrued for awards or assessments in connection with these matters
     are  adequate  and  ultimate  resolution  of these  matters will not have a
     material effect on the Company's consolidated  financial position,  results
     of operations or cash flows.


                                       10
<PAGE>

5.       Earnings per Common Share

          The following  table sets forth the  computation  of basic and diluted
     earnings per share:

<TABLE>
<CAPTION>
                                                                           Three Months Ended            Nine months ended
                                                                             September 30,                 September 30,
                                                                                             (unaudited)
(In thousands except per share data)                                       1998          1997           1998           1997
--------------------------------------------------------------------- -------------- ------------- -------------- --------------
<S>                                                                   <C>            <C>           <C>            <C>
Numerator:
Net income                                                                    $1,232        $2,991         $8,013         $5,797
Preferred stock dividends                                                                    (195)          (229)          (584)
--------------------------------------------------------------------- -------------- ------------- -------------- --------------
Numerator for basic earnings per share - income available to common                                                              
stockholders                                                                   1,232         2,796          7,784          5,213
Effect of dilutive securities:
         Preferred stock dividends                                                                            229
--------------------------------------------------------------------- -------------- ------------- -------------- --------------
Numerator for diluted earnings per share - income available to common                                                            
stockholders after assumed conversions                                        $1,232        $2,796         $8,013         $5,213
===================================================================== ============== ============= ============== ==============
Denominator:
Denominator for basic earnings per share - weighted-average shares            25,532        24,168         24,672         23,055
Effective of dilutive securities:
         Employee stock options                                                  502           780            566            852
         Convertible preferred stock                                                                          935
--------------------------------------------------------------------- -------------- ------------- -------------- --------------
Dilutive potential common shares                                                 502           780          1,501            852
--------------------------------------------------------------------- -------------- ------------- -------------- --------------
Denominator for diluted earnings per share - adjusted weighted-average                                                           
shares and assumed conversions                                                26,034        24,948         26,173         23,907
===================================================================== ============== ============= ============== ==============
Basic earnings per share                                                       $0.05         $0.12          $0.32          $0.22
Diluted earnings per share                                                     $0.05         $0.11          $0.31          $0.22
</TABLE>

6.        Comprehensive Income

          On January 1, 1998, the Company adopted Financial Accounting Standards
     No. 130 ("FAS 130"),  Reporting  Comprehensive  Income. FAS 130 establishes
     standards  for  reporting  and  displaying  comprehensive  income  and  its
     components.  The adoption of FAS 130 did not have a material  impact on the
     Company.  All of the Company's  other  comprehensive  income relates to net
     unrealized gains (losses) on available-for-sale investments.

7.        Subsequent Events

          On October 29, 1998,  RSFC  consummated  the acquisition of First Palm
     Beach Bancorp, Inc. ("First Bank"). This business combination was accounted
     for as a  pooling-of-interests  and RSFC  issued  21,731,248  shares of its
     common  stock for all  outstanding  shares of First  Bank.  First  Bank has
     assets of approximately  $1.8 billion,  total loans of $1.1 billion,  total
     deposits of $1.3 billion and total equity of $128 million.



                                       11
<PAGE>




ITEM 2:     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

    Comparison of the Three and Nine months ended September 30, 1998 and 1997


Results of Operations

     The Company had net income of $1.2  million or $.05  diluted  earnings  per
common  share for the three months ended  September  30, 1998,  compared to $3.0
million or $.11  diluted  earnings  per common  share for the three months ended
September 30, 1997.  The decrease in net income is due to pretax merger  related
expenses of  approximately  $3.3  million  associated  with the  acquisition  of
Unifirst  Federal  Savings Bank on July 2, 1998. Net interest  income  decreased
$111,000 or 1% for the three months  ended  September  30, 1998  compared to the
three months ended September 30, 1997. Non-interest income increased $111,000 or
4.0% while operating expenses (excluding merger expenses) decreased $1.3 million
or 13% for the three  months  ended  September  30,  1998  compared to the three
months ended September 30, 1997.

     The Company had net income of $8.0  million or $.31  diluted  earnings  per
common  share for the nine months  ended  September  30,  1998,  compared to net
income of $5.8  million or $.21  diluted  earnings per common share for the nine
months ended September 30, 1997. Net interest  income  increased $1.1 million or
4% for the nine months  ended  September  30,  1998  compared to the nine months
ended  September 30, 1997.  Non-interest  income  increased  $1.0 million or 13%
while operating expenses  (excluding merger expenses)  decreased $2.3 million or
8% for the nine months  ended  September  30,  1998  compared to the nine months
ended September 30, 1997.

Net Interest Income

     Net interest income for the three months ended September 30, 1998 decreased
$111,000  compared  to the  three  months  ended  September  30,  1997 due to an
increase  of $1.0  million in  interest  income  offset by an  increase  of $1.1
million in interest  expense.  Interest  income  increased due to an increase of
$88.8 million in interest-earning assets due primarily to an increase in average
loan outstandings  offset by a decline in approximately 30 basis points in asset
yield.  The decline in asset yield was due partially to premiums related to loan
prepayments and interest in arrears recognized on Unifirst loans which were more
than 90 days past due and still  accruing  interest  at closing.  The  increased
premium  amortization  and the Unifirst  interest in arrears are not expected to
recur as the majority of loans with  premiums have paid off and loans are placed
on non accrual at 90 days past due.  The  reduction in asset yield for the three
months ended September 30, 1998 compared to the three months ended September 30,
1997 due to lower  interest  rates is  approximately  15 basis points.  Interest
expense increased due to an increase in interest-bearing liabilities as the rate
paid on interest-bearing liabilities remained unchanged.

     Net  interest  income  increased  $1.1  million for the nine  months  ended
September 30, 1998  compared to the nine months ended  September 30, 1997 due to
an increase of $3.8  million in  interest  income  offset by an increase of $2.7
million in interest  expense.  Interest  income  increased  primarily  due to an
increase in average  loans  outstanding  offset by a  reduction  in the yield on
interest-earning  assets of  approximately  12 basis  points for the nine months
ended  September 30, 1998 compared to the nine months ended  September 30, 1997.
Interest expense increased due to an increase in interest bearing liabilities of
approximately $77 million. The increase is related to an increase in deposits as
well as an increase in FHLB advances of  approximately  $50 million used to fund
loan and investment purchases.

Provision for Loan Losses

     The  provision  for  loan  losses   increased  $1.3  million  and  $681,000
respectively, for the three and nine months ended September 30, 1998 compared to
the three and nine months  ended  September  30, 1997,  due  primarily to a $1.2
million  adjustment  to the  allowance  for loan  losses to  conform  Unifirst's
accounting  and  credit  policies  related to loan loss  reserves  to the Bank's
policies.

                                       12
<PAGE>


<PAGE>


                                           Management's Discussion and Analysis
                   of Financial Condition and Results of Operations (Continued)
-------------------------------------------------------------------------------



Non-Interest Income

     Non-interest income increased $111,000 for the three months ended September
30,  1998  compared  to the three  months  ended  September  30,  1997 due to an
increase  of  $164,000  in gain on sale of loans,  an  increase  of  $193,000 in
service  charges on deposit  accounts and a decrease of $262,000 in gain on sale
of investments. The increase in service charges on deposit accounts is primarily
due to the increase in deposit accounts and an increase in the usage of products
as no significant  fee increases have occurred.  The increase in gain on sale of
loans is due to an increase in the amount of loans sold during the three  months
ended  September  30,  1998  compared  to  September  30,  1997.  There  were no
investment sales during the quarter ended September 30,1998.

     Non-interest  income  increased  $1.0  million  for the nine  months  ended
September 30, 1998,  compared to the nine months ended September 30, 1997 due to
an increase  of  $683,000  in gain on sale of loans,  an increase of $392,000 in
service charges on deposit accounts and a decrease of $55,000 in gain on sale of
investments.  The increase in gain on sale of loans is due to an increase in the
amount of loans sold during the nine months ended September 30, 1998 compared to
September 30, 1997. The increase in service  charges on deposit  accounts is due
to an  increase in  transaction  accounts as well as an increase in the usage of
products.  The  decrease  in the  gain on the sale of  investments  for the nine
months  ended  September  30,  1998  is  due to a  decrease  in  the  amount  of
investments  sold during the nine months ended  September  30, 1998  compared to
September 30, 1997.

Operating Expenses

     Operating  expenses  (excluding merger expenses)  decreased $1.3 million or
13% for the three months ended  September  30, 1998 compared to the three months
ended September 30, 1997. The decrease in operating expenses is primarily due to
decreases  of  $990,000  in  employee  compensation  and  benefits,  $627,000 in
professional fees and $94,000 in other expenses offset by an increase of $60,000
in data  processing  fees, an increase of $198,000 in occupancy  expenses and an
increase  of $78,000 in  advertising  and  promotion  expense.  The  decrease in
employee  compensation  and benefits is due to a decrease of $900,000 related to
the expense for Stock  Appreciation  Rights (SARs)  accrual for the three months
ended  September 30, 1998 compared to the three months ended September 30, 1997.
SARs expense was lower for the three months ended September 30, 1998 compared to
the three months ended September 30, 1997 as no additional accrual was necessary
because the market price of RSFC common stock has declined  since  September 30,
1997.  In  addition,  in order to restore  the  purpose  of the SAR's  grants of
providing long- term incentive for the board members,  in June 1998, the Company
paid a total of  $171,000  to the SAR  holders  to extend the  original  vesting
period to seven years from various shorter vesting  periods.  Professional  fees
decreased  for the three months ended  September  30, 1998 compared to the three
months ended  September  30, 1997  primarily  due to decrease in legal  expenses
related to two legal matters,  and problem loans as well as a settlement payment
made in August 1997.  Other  operating  expenses  decreased  primarily  due to a
reduction in OREO  expenses  associated  with Unifirst (a pooled  company).  The
increase  in data  processing  fees is  primarily  due to the  addition  of data
processing for Family Bank and County  National Bank in September 1997 and March
1998,  respectively.  Occupancy  expense  increased  for the three  months ended
September  1998 compared to September  1997 primarily due to the opening of five
new branches located in Palm Beach and Broward counties since September 1997.

     Operating  expenses  (excluding  merger costs) decreased $2.3 million or 8%
for the nine months ended  September  30, 1998 compared to the nine months ended
September  30,  1997.  The decrease in  operating  expenses is primarily  due to
decreases of $1.4 million in employee compensation and benefits, $1.2 million in
professional  fees and a decrease  of $614,000  in other  expenses  offset by an
increase  of  $328,000  in data  processing  fees,  an  increase  of  $90,000 in
communication  expenses  and an increase of $358,000 in occupancy  expense.  The
decrease in employee compensation and benefits is primarily due to a decrease of
$1.4  million in SAR's  expense for the nine  months  ended  September  30, 1998
compared to the nine months ended September 30, 1997 duet to the market price of
RSFC common

                                       13
<PAGE>
                                           Management's Discussion and Analysis
                   of Financial Condition and Results of Operations (Continued)
-------------------------------------------------------------------------------


stock and the extension of the vesting  period related to the SARs. The decrease
in  professional  fees is  primarily  due to fees paid in  relation  to a County
National Bank (a pooled company) litigation matter which was settled in December
1996 and a decrease in legal fees paid in relation to  pre-foreclosure  expenses
related to Unifirst  (a pooled  company).  Other  operating  expenses  decreased
primarily due to non-recurring  expenses of $100,000 associated with the startup
of the Trust  and  Investment  Services  division  and a  $150,000  fixed  asset
write-off associated with the relocation of a branch in 1997. In addition, other
real estate owned  expenses  decreased  due to the  disposition  of certain OREO
assets. The increase in data processing fees is primarily due to the addition of
data  processing  for  Family  Bank from an  in-house  EDP  system to the Bank's
outside data processor in September  1997 and for County  National Bank in March
1998.  Occupancy expense increased for the nine months ending September 30, 1998
primarily  due to the  opening  of six new  branches  located  in Palm Beach and
Broward  counties as well as the opening of the Bank's new Trust and Investments
Division in late 1997.

Provision for Income Taxes

     The  provision  for income  taxes  decreased  $342,000 for the three months
ended  September 30, 1998 compared to the three months ended  September 30, 1997
due to a decrease of $2.1  million in income  before  taxes for the three months
ended  September  30, 1998 offset by an increase in the  effective tax rate from
26% for the three  months ended  September  30, 1997 to 37% for the three months
ended  September  30, 1998.  The increase in the  effective tax rate is due to a
reduction  of the  allowance  for  deferred tax assets in the three months ended
September 30, 1997.

     The provision for income taxes  increased  $3.3 million for the nine months
ended  September 30, 1998  compared to the nine months ended  September 30, 1997
due to a $5.5 million  increase in income before income taxes and an increase in
the effective tax rate from 19% for the nine months ended  September 30, 1997 to
37% for the nine months ended  September  30, 1998.  The  effective tax rate was
lower  for the nine  months  ended  September  30,  1997  due to a $1.1  million
reduction  of the  allowance  for  deferred  tax assets in the nine months ended
September 30, 1997.

Liquidity, Sources of Capital and Capital Requirements

     As a member of the Federal  Home Loan Bank  System,  the Bank is subject to
regulations  which  require it to maintain  "long term"  liquidity  ratios.  The
majority of the liquid assets of the Bank are investments available-for-sale and
deposits with the Federal Home Loan Bank of Atlanta.  The Bank was in compliance
with liquidity requirements during the three and nine months ended September 30,
1998.

     On certain occasions,  demand for loan funds may exceed cash available from
deposits.  On such  occasions,  the Bank may borrow  funds from the Federal Home
Loan Bank of Atlanta, draw on lines of credit with commercial banks and/or enter
into repurchase agreements on eligible investments.

     Cash and cash equivalents  decreased by approximately  $71.1 million during
the nine months ended  September 30, 1998. The decrease in cash is due primarily
to increases in loans and  investments and a decrease in FHLB advances offset by
a $32.0  million  increase in  deposits  and $24.9  million in cash  provided by
operating activities.

     The  following  table shows the  capital  amounts and ratios of the Bank at
September 30, 1998:

<TABLE>
<CAPTION>
(Dollars in thousands)                                                                       Amount                    Ratio
-------------------------------------------------------------------------- ------------------------ ------------------------
<S>                                                                        <C>                       <C>   
Total risk based capital                                                                    $90,528                   11.56%
Tier 1 risk based capital                                                                   $82,362                   10.52%
Leverage capital                                                                            $82,362                    7.50%
-------------------------------------------------------------------------- ------------------------ ------------------------
</TABLE>


                                       14
<PAGE>
                                           Management's Discussion and Analysis
                   of Financial Condition and Results of Operations (Continued)
-------------------------------------------------------------------------------


     At September 30, 1998,  the Bank exceeded  each of the  regulatory  capital
requirements and was considered a "well capitalized"  institution for regulatory
purposes.

Financial Condition

     As of  September  30,  1998,  total assets  increased  approximately  $29.1
million  or 2.7% from  December  31,  1997.  Loans-net  and loans  held for sale
increased approximately $55.5 million, investments increased approximately $21.2
million  and cash and cash  equivalents  decreased  $59.2  million.  In addition
property and  equipment-net  increased  $5.1 million due to the purchase of land
and  buildings  associated  with new and future  branches and  equipment for new
branches.  Other  assets  increased  approximately  $9.0  million  due to a $2.9
million purchase of life insurance policies related to the directors  retirement
plan, a $1.7 million increase in prepaid dealer rebates associated with indirect
consumer lending and a $5.0 million increase in accounts  receivable  associated
with the sale of assets.  Other real estate owned  decreased $2.7 million due to
OREO sales by Unifirst (a pooled company)  during 1998. The overall  increase in
assets was funded primarily by an increase of $32 million in deposits.  Advances
from  borrowers  for taxes  and  insurance  increased  $5.3  million  due to the
accumulation of escrow payments related  primarily to residential loans and bank
drafts payable  increased $6.3 million  related to loan funding checks issued at
the end of  September  1998 due to an increase in loan  production  in September
1998.

Year 2000

     The Bank  utilizes  and is  dependent  upon a  third-party  vendor  for its
primary  data  processing  functions.  The Bank also  utilizes  other  purchased
software packages which operate on in-house computer networks. In 1997, the Bank
developed a Year 2000 plan to assess,  remedy and test the Bank's operations for
Year 2000 compliance.  In addition, the Bank's Year 2000 plan includes assessing
the impact of the Year 2000 issue on borrowers' ability to repay. Through formal
communication,  the Bank's  primary data  processing  vendor and the majority of
other vendors have indicated  their hardware  and/or software is or will be Year
2000  compliant in 1999. The majority of the Bank's  non-information  technology
providers  are not date  sensitive.  The Bank is  developing  contingency  plans
related to  non-information  technology  providers  which are date sensitive and
provide services which are critical to the Bank's operations.  The Bank has also
contacted  all of its  significant  commercial  loan  customers to determine the
borrowers'  ability and readiness to become Year 2000  compliant.  Approximately
58% of the  loan  customers  contacted  have  responded  and  the  Bank  has not
identified any significant issues with those customers. However, there can be no
guarantee  that the systems of other  companies on which the Bank's  systems and
operations rely will be timely converted and would not have an adverse effect on
the Bank's operations.

     Currently,  the Bank is upgrading or replacing  purchased software packages
and in-house  computer  network  software and hardware,  as needed,  and testing
certain software for Year 2000  compliance.  The Bank will utilize both internal
and  external  resources  to upgrade,  replace and test  hardware,  software and
third-party  vendor  programs.  The Bank  anticipates  completing  the Year 2000
project by October 31,  1999,  which is prior to any  anticipated  impact on its
operating  systems.  As of  September  30,  1998,  the Bank has not incurred any
significant  expenses  other than  personnel  time.  Costs to purchase  computer
hardware and software are estimated to be approximately  $2.0 million which will
be  capitalized.  The cost of the  Year  2000  project  will be  funded  through
operating cash flows.  While management does not anticipate the cost of the Year
2000 project to have a material  impact on the  Company's  financial  condition,
operations or cash flows, the project is currently  substantially  incomplete in
the areas of testing the computer  systems and  assessing the impact of the Year
2000 issue on certain  borrowers.  The anticipated  costs of the project and the
date on which the Company  believes it will  complete  the Year 2000 project are
based on management's  best  estimates,  which were derived  utilizing  numerous
assumptions of future events,  including the continued  availability  of certain
resources,  third-party  modification  plans and other  factors.  Therefore,  no
guarantee can be made that these  estimates  will be achieved and actual results
could differ  materially  from those  anticipated.  Specific  factors that might
cause such

                                       15
<PAGE>
                                           Management's Discussion and Analysis
                   of Financial Condition and Results of Operations (Continued)
-------------------------------------------------------------------------------


material  differences include, but are not limited to, the availability and cost
of  personnel  trained in this area,  the  ability  to locate  and  correct  all
relevant computer codes and similar uncertainties.

ITEM 3:     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     As a financial institution holding company, the Company's primary component
of market risk is interest rate volatility.  Fluctuations in interest rates will
ultimately  impact  both the level of income  and  expense  recorded  on a large
portion  of the  Bank's  assets  and  liabilities  and the  market  value of all
interest-earning assets, other than those with short term maturities. All of the
Company's  interest  rate risk  exposure  lies at the Bank  level.  Accordingly,
interest rate risk management  procedures are performed at the Bank level. Based
on the  nature of the  Bank's  operations,  the Bank is not  subject  to foreign
currency  exchange or commodity  price risk.  The Bank's real estate  portfolio,
concentrated primarily within Palm Beach, Martin, Broward, Dade and Lee counties
of Florida, is subject to risks associated with the local economy.

     The Company  manages its interest rate risk exposure by limiting the amount
of long-term  fixed rate loans it holds for investment,  increasing  emphasis on
shorter-term loans for portfolio,  increasing or decreasing the relative amounts
of  long-term  and  short-term   borrowings  and  deposits   and/or   purchasing
commitments to sell loans.  The following table presents the Company's  exposure
to interest rate risk at September 30, 1998:

<TABLE>
<CAPTION>
                                                                                       September 30, 1998 2
                                                             -----------------------------------------------------------------------
                                                                One Year       1 to 3        3 to 5         Over 5 
                                                                or Less         Years         Years          Years         Total
                                                             -------------- ------------- -------------  ------------- -------------
                                                                                     (Dollars in thousands)

<S>                                                          <C>            <C>           <C>            <C>         <C>       
Total interest-earning assets                                      $517,205      $251,888       $94,545       $149,152    $1,012,790
Total interest-bearing liabilities                                  740,196        55,143        21,771          2,456       819,566
Interest rate sensitivity gap                                    ($222,991)      $196,745       $72,774       $146,696      $193,224
Cumulative interest rate sensitivity gap                         ($222,991)     ($26,246)       $46,528       $193,224
Cumulative interest rate sensitivity gap as a
 percent of total assets                                            (19.9)%        (2.3)%          4.2%          17.3%
</TABLE>




--------

     2 In preparing  the table above,  certain  assumptions  have been made with
regard to loan  prepayments  and  withdrawals  of NOW,  Money Market and savings
account  deposits.  Loan  prepayment  rates  are  based  upon  market  consensus
estimates for similar securities. NOW, Money Market and savings account balances
are assumed to reprice  immediately  and are  included in one year or less.  All
other  assets  and  liabilities  have  been  repriced  based on the  earlier  of
repricing or contractual maturity.  The above assumptions are annual percentages
based on the latest available  assumptions and on remaining  balances and should
not be regarded as indicative of the actual prepayments and withdrawals that may
be experienced by the Company.  Moreover,  certain  shortcomings are inherent in
the analysis  presented by the foregoing  table.  For example,  although certain
assets and  liabilities  may have similar  maturities or periods for  repricing,
they may react in different  degrees to changes in market interest rates.  Also,
interest  rates on certain  types of assets and  liabilities  may  fluctuate  in
advance of or lag behind changes in market interest rates. Additionally, certain
assets, such as ARM loans, have features that restrict changes in interest rates
on a short-term basis and over the life of the assets.

                                       16
<PAGE>
PART II.  OTHER INFORMATION


ITEM 1:     Legal Proceedings

            Neither the Company nor its subsidiaries are involved in any pending
legal  proceedings,  other than routine legal matters  occurring in the ordinary
course of business which in the aggregate  involve amounts which in management's
opinion are not material to the consolidated  financial  condition or results of
operation of the Company.

ITEM 2:     Changes in Securities and Use of Proceeds

            Not applicable.

ITEM 3:     Defaults Upon Senior Securities

            Not applicable.

ITEM 4:     Submission of Matters to a Vote of Security Holders

            A special  meeting of shareholders  of Republic  Security  Financial
Corporation was held on October 27, 1998. The following matters were voted upon:

            1. Approval of the Agreement and Plan of Merger, dated as of May 27,
1998, as amended,  (the "Merger  Agreement")  by and between RSFC and First Palm
Beach  Bancorp,  Inc.  ("FPBB")  providing  for the merger of FPBB with and into
RSFC.  The  Merger  Agreement  provides  for  each  common  share  of FPBB to be
converted  into 4.194  shares of RSFC common stock and the  transaction  will be
accounted for as a pooling of interests.

            2.  Approval of an  amendment  to RSFC's  Articles of  Incorporation
increasing the authorized  shares of its common stock, par value $0.01 per share
from  100,000,000 to 500,000,000,  increasing the authorized  shares of Series B
Junior  Participating  Preferred  Stock from 1,000,000 to 5,000,000 and deleting
the 7% Cumulative Convertible Preferred Stock, Series C, therefrom.

            3.  Approval of an  amendment  to the  Republic  Security  Financial
Corporation  Performance  Incentive  Plan (the "Plan")  increasing the number of
shares of RSFC Common Stock  issuable  under the Plan from  2,000,000  shares to
5,000,000  shares.  The  increase  in shares in the Plan is needed due to an 80%
increase in the number of officers and employees as a result of the FPBB merger.

            The results of the votes for each of the above  three  matters is as
follows:

                                               Votes Cast:              Broker
Matter        For          Against      Withheld      Abstain          Non-vote 

  1        14,402,217       169,252                   543,981
  2        13,301,593     1,208,934                   604,920
  3        12,804,661     1,785,866                   524,920

ITEM 5:     Other Information

            Not applicable.




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<PAGE>
ITEM 6:     Exhibits and Reports on Form 8-K

            (a)       The following exhibits are filed as part of this report:

                      27         Financial Data Schedule (for SEC use only).

            (b)       During  the three  months  ended  September  30,  1998 the
                      Company filed one report on Form 8-K:

                      (i)        Form 8-K filed on July 10,  1998  reported  the
                                 acquisition of Unifirst Federal Savings Bank in
                                 a stock for stock transaction.



                                       18
<PAGE>
                     REPUBLIC SECURITY FINANCIAL CORPORATION


                                   SIGNATURES


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



                                      Republic Security Financial Corporation
                                      (Registrant)




Date:      November 13, 1998          /s/ Richard J. Haskins
                                      ----------------------------------------
                                      Richard J. Haskins
                                      Executive Vice President & CFO
                                      (Principal Financial Officer)




Date:      November 13, 1998          /s/ Carla H. Pollard
                                      ----------------------------------------
                                      Carla H. Pollard
                                      Vice President/Controller
                                      (Duly Authorized Officer)
























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