REPUBLIC FIRST BANCORP INC, 424B1, 1997-11-12

REPUBLIC FIRST BANCORP INC
424B1, 1997-11-12
STATE COMMERCIAL BANKS

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<PAGE>
1,000,000 SHARES

[LOGO]

COMMON STOCK
------------------

Republic First Bancorp, Inc. (the "Company") hereby offers for sale (the
"Offering") 1,000,000 shares of its common stock, par value $.01 per share (the
"Common Stock"). The Common Stock is traded on the Nasdaq Stock Market's
National Market System ("Nasdaq/NMS") under the symbol "FRBK." On November 10,
1997, the last reported sale price of the Common Stock was $12.375 per share.
See "Market for Common Stock and Related Shareholder Matters--Market
Information."
------------------------

PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER "RISK FACTORS" BEGINNING ON
PAGE 10.

THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
---------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO PUBLIC DISCOUNT (1) COMPANY (2)
<S> <C> <C> <C>
Per Share................................. $12.00 $0.72 $11.28
Total(3).................................. $12,000,000 $720,000 $11,280,000
</TABLE>

(1) The Company has agreed to indemnify the Underwriter against certain
liabilities under the Securities Act of 1933. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated to be $380,000.

(3) The Company has granted the Underwriter a 30-day option to purchase up to an
additional 150,000 shares of Common Stock, on the same terms and conditions
set forth above, to cover over-allotments. If all of such additional shares
are purchased, the total Price to Public, Underwriting Discount and Proceeds
to Company will be $13,800,000, $828,000 and $12,972,000, respectively. See
"Underwriting."

------------------------------

The shares of Common Stock are offered by the Underwriter, subject to prior
sale, when, as and if issued to and accepted by it. The Underwriter reserves the
right to withdraw, cancel or modify such offer and to reject orders in whole or
in part. It is expected that the delivery of the shares of Common Stock will be
made on or about November 14, 1997 at the office of Janney Montgomery Scott Inc.

[LOGO]

The date of this Prospectus is November 11, 1997.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. SEE "UNDERWRITING."

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, accordingly, files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed with the Commission are available for inspection and copying
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and at Seven World Trade Center,
Suite 1300, New York, New York 10048. Copies of such documents may also be
obtained from the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, copies of such documents may be obtained through the Commission's
Internet address at http://www.sec.gov. The Common Stock is authorized for
quotation on the Nasdaq/NMS and, accordingly, such materials and other
information can also be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. The
Company has filed with the Commission under the Securities Act of 1933, as
amended (including the rules and regulations thereunder, the "Securities Act"),
a Registration Statement on Form SB-2 (No. 333-37951) (including all amendments
and exhibits thereto, the "Registration Statement") with respect to the
securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. The
Registration Statement, including any amendments and exhibits thereto, is
available for inspection and copying as set forth above. Statements contained in
this Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference.

The Company will furnish to its shareholders annual reports containing
audited financial statements and will make available copies of quarterly reports
for the first three quarters of each fiscal year containing unaudited interim
financial information.

2
<PAGE>
R E P U B L I C F I R S T B A N C O R P
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

BRANCH OFFICES

MARKET OFFICE
1515 Market Street
Philadelphia, PA

WALNUT OFFICE
1601 Walnut Street
Philadelphia, PA

GRADUATE OFFICE
One Graduate Plaza
Graduate Hospital
1800 Lombard Street
Philadelphia, PA

ARDMORE OFFICE
233 East Lansdowne Avenue
Ardmore, PA

BALA CYNWYD OFFICE
4170 City Avenue
Philadelphia, PA

EAST NORRITON OFFICE
Germantown Pike & Swede Road
Norristown, PA

ABINGTON OFFICE
111 Old York Road
Abington, PA
Opening November, 1997

[GRAPHIC]

3
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]

4
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROSPECTUS. THIS SUMMARY IS PROVIDED FOR CONVENIENCE; IT SHOULD NOT BE
CONSIDERED COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. CROSS REFERENCES IN
THIS SUMMARY ARE TO CAPTIONS APPEARING IN THE BODY OF THIS PROSPECTUS. EXCEPT AS
OTHERWISE NOTED, ALL INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES THE
UNDERWRITER'S OVER-ALLOTMENT OPTION IS NOT EXERCISED.

THE COMPANY

The Company is a Pennsylvania corporation headquartered in Philadelphia,
Pennsylvania and is a registered bank holding company for First Republic Bank
(the "Bank"), a Pennsylvania-chartered commercial bank. The Bank offers a full
range of commercial and retail banking services to professionals and small- to
medium-sized businesses that management believes are not being adequately served
by larger competitors in the Greater Philadelphia area. The Bank operates six
branches, including three located in Center City Philadelphia, one each in
Ardmore and East Norriton, Montgomery County and one located on City Line
Avenue, Philadelphia County. A seventh branch is scheduled to open in Abington,
Montgomery County in November 1997. In addition, the Company has a contractual
relationship with Jackson Hewitt, Inc. ("Jackson Hewitt"), one of the nation's
largest tax preparation services, to provide tax refund products to consumer
taxpayers for whom Jackson Hewitt prepares and electronically files federal
income tax returns (the "Tax Refund Program"). The Tax Refund Program enables
the Bank to provide accelerated check refunds ("ACRs") and refund anticipation
loans ("RALs") (collectively, "Tax Refund Products").

In June 1996, Republic Bancorporation ("Republic"), parent company of
Republic Bank, merged with and into ExecuFirst Bancorp, Inc. ("ExecuFirst"),
parent company of First Executive Bank (the "Merger"). The Company and the Bank
were the surviving entities of the Merger. Republic Bank and ExecuFirst both
commenced operations in 1988. The Bank is a member of the Federal Reserve System
and the Bank's deposits are insured by the Bank Insurance Fund ("BIF") of the
Federal Deposit Insurance Corporation ("FDIC") to the fullest extent provided by
law.

As of September 30, 1997, the Company had total deposits of $247.9 million,
loans outstanding of $184.4 million, total assets of $303.2 million and total
shareholders' equity of $21.5 million. The Company's objective is for the Bank
to become the primary alternative to the large banks that dominate the Greater
Philadelphia market. The Company's management team has developed the following
key strategic elements to achieve this objective:

PROVIDING ATTENTIVE AND PERSONALIZED SERVICE. The Company believes that
a very attractive niche exists serving small- to medium-sized businesses and
professionals that are not adequately served by larger competitors. The
Company believes this segment of the market responds very positively to the
attentive and highly personalized service provided by the Bank. The Company
offers a community banking alternative and tailors its product offerings to
fill the void created as larger competitors increase the price of products
and services and de-emphasize such products and services for small- to
medium-sized businesses.

5
<PAGE>
earned through the Tax Refund Program. To accomplish these goals, the Bank
plans to maintain sufficient margins on incremental growth through efficient
utilization and leveraging of capital.

ATTRACTING AND RETAINING HIGHLY EXPERIENCED PERSONNEL. The Bank's
executive officers and other personnel have substantial employment
experience with larger banks in the region. When opening new branches, as in
the case of the Abington office, the Bank screens and trains its employees
to ensure the staff has the necessary ability and contacts in the community
to foster rapid growth. The Company seeks to instill a sales and service
oriented culture in its personnel in order to build customer relationships
and maximize cross-selling opportunities. The Company offers meaningful
sales-based incentives to all of its customer contact employees.

CAPITALIZING ON MARKET DYNAMICS. In the past two years, banks
controlling over 45% of the deposits in the Bank's primary market area have
been acquired by large and super-regional bank holding companies. The
Company believes the ensuing cultural changes in these banking institutions
have resulted in a change in product offerings and the degree of personal
attention provided. The Company has sought to capitalize on these changes by
offering a community banking alternative. As a result, the Company believes
it has a tremendous opportunity to increase its market share.

DEVELOPING SPECIALIZED PRODUCTS. The Company has built the Tax Refund
Program into a significant source of income. Management will continue to
explore and develop other opportunities to provide specialized banking
products and services that command higher profit margins.

Financial highlights of the Company and the Bank include the following:

PROFITABILITY. The Company's banking operations are profitable and
significant income is generated by the Tax Refund Program. Net income has
increased $627,000, or 26.4%, to $3.0 million for the nine months ended
September 30, 1997 from $2.4 million for the nine months ended September 30,
1996.

RETURN ON AVERAGE EQUITY. The Company has achieved a return on average
equity which it believes compares favorably with its peers. The return on
average equity was 19.73% and 17.85% for the nine months ended September 30,
1997 and the year ended December 31, 1996, respectively.

LOAN QUALITY. The Company maintains a strong credit culture and
emphasizes conservative underwriting standards. The Company's ratio of
non-performing loans to total loans declined to 0.88% at September 30, 1997
from 1.12% at December 31, 1996 while the allowance for loan losses as a
percentage of non-performing loans increased to 117.24% at September 30,
1997, from 109.02% at December 31, 1996.

The principal executive offices of the Company and the Bank are located at
1608 Walnut Street, Philadelphia, Pennsylvania 19103 and the telephone number is
(215) 735-4422.

6
<PAGE>
THE OFFERING

<TABLE>
<CAPTION>
<S> <C>
Common Stock offered by the Company......... 1,000,000 shares

Common Stock outstanding before the
Offering.................................... 3,446,309 shares

Common Stock outstanding after the
Offering.................................... 4,446,309 shares

Use of Proceeds............................. The Company intends to contribute the majority
of the net proceeds from the Offering to the
Bank. The Bank expects to use the net proceeds
to fund branch expansion and to support growth
in its loan and securities portfolios. The
Company intends to retain a portion of the
proceeds for general corporate purposes,
possible future acquisitions and capital
contributions to existing and possible future
subsidiaries of the Company. See "Use of
Proceeds."

Nasdaq/NMS symbol........................... FRBK
</TABLE>

7
<PAGE>
SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA

The following are selected consolidated financial data for the Company at
and for the nine months ended September 30, 1997 and 1996 and for each of the
three years in the period ended December 31, 1996. The following financial data
are qualified by reference to the more detailed information contained in the
Consolidated Financial Statements and Notes thereto included elsewhere in this
Prospectus. See the Consolidated Financial Statements. The results of operations
for the nine months ended September 30, 1997 and 1996 are not audited but, in
the opinion of management, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the results of operations for
such periods have been included. The results for the nine months ended September
30, 1997 are not necessarily indicative of the results that may be expected for
the full year or for any other interim period. The data for each of the three
years in the period ended December 31, 1996 are derived from the Company's
audited, consolidated financial statements for such periods.

<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS AT OR FOR THE
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA:
Total interest income................................. $ 16,808 $ 11,902 $ 16,903 $ 9,902 $ 7,241
Total interest expense................................ 9,059 6,860 9,715 5,891 3,944
--------- --------- --------- --------- ---------
Net interest income................................... 7,749 5,042 7,188 4,011 3,297

Provision for loan losses............................. 140 55 155 223 323
Non-interest income................................... 2,626 2,314 2,614 155 1,096
Non-interest expenses................................. 5,894 3,735 5,581 3,049 2,833
Federal income taxes.................................. 1,337 1,189 1,353 291 430
--------- --------- --------- --------- ---------

Net income(1)......................................... $ 3,004 $ 2,377 $ 2,713 $ 603 $ 807
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------

PER SHARE DATA:
Primary earnings per share(1)(2)(3)................... $ 0.79 $ 0.85 $ 0.92 $ 0.31 $ 0.42
Fully-diluted earnings per share(1)(2)(3)............. 0.78 0.83 0.88 0.31 0.42
Book value per share(3)(4)............................ 6.23 5.27 5.38 4.48 3.74

BALANCE SHEET DATA:
Total assets.......................................... $ 303,166 $ 258,163 $ 273,795 $ 131,063 $ 106,203
Total loans, net...................................... 184,403 158,775 170,002 85,183 71,433
Total securities...................................... 101,114 78,062 80,954 38,352 28,209
Total deposits........................................ 247,904 231,916 250,059 116,424 87,966
Total borrowings...................................... 27,346 3,400 0 3,400 3,400
Total shareholders' equity............................ 21,481 18,025 18,371 8,622 8,000

PERFORMANCE RATIOS:
Return on average assets(5)........................... 1.32% 1.47% 1.22% 0.50% 0.75%
Return on average shareholders' equity(5)............. 19.73 22.30 17.85 7.29 10.56
Net interest margin(5)(6)............................. 3.82 3.41 3.28 3.45 3.18
Total other expenses as a percentage of average
assets.............................................. 2.59 2.31 2.51 2.54 2.65

ASSET QUALITY RATIOS:
Allowance for loan losses as a percentage of loans,
net(7).............................................. 1.04% 1.26% 1.22% 0.79% 0.90%
Allowance for loan losses as a percentage of
non-performing loans(8)............................. 117.24 84.13 109.02 126.63 60.52
Non-performing loans as a percentage of total loans,
net(7)(8)........................................... 0.88 1.50 1.12 0.63 1.49
Non-performing assets as a percentage of total
assets(8)........................................... 1.18 1.07 0.81 0.63 1.01
Net charge-offs as a percentage of average loans,
net(7).............................................. 0.17 0.21 0.20 0.25 0.19

LIQUIDITY AND CAPITAL RATIOS:
Equity to assets(9)................................... 6.68% 6.59% 6.84% 6.87% 7.15%
Tier 1 capital to risk-weighted assets(10)............ 10.97 10.15 10.08 8.40 9.10
Leverage ratio(11).................................... 7.25 6.68 6.65 6.58 7.55
Total capital to risk-weighted assets(10)............. 11.97 12.96 11.25 12.38 13.70
</TABLE>

- ------------------------------

footnotes on following page

8
<PAGE>
(1) Because of the Tax Refund Program, the Company recognizes a disproportionate
amount of its net income in the first quarter of each year.

(2) Based upon average shares and common share equivalents outstanding.

(3) Adjusted to reflect a 20% stock dividend paid on April 15, 1997.

(4) Based upon total shares issued and outstanding at the end of each respective
period.

(5) Annualized ratios at September 30, 1997 and 1996. Because of the Tax Refund
Program, the Company recognizes a disproportionate amount of its net income
in the first quarter of each year. Accordingly, performance ratios for a
full year generally will be less than annualized ratios as of any interim
date.

(6) Represents net interest income as a percentage of average total
interest-earning assets, calculated on a tax-equivalent basis.

(7) Net of unearned income.

(8) Non-performing loans are comprised of (i) loans which are on a nonaccrual
basis, (ii) accruing loans that are 90 days or more past due and (iii)
restructured loans. Non-performing assets are comprised of non-performing
loans and foreclosed real estate (assets acquired in foreclosure).

(9) Based upon average daily balances for the respective periods.

(10) Based on Federal Reserve Board ("FRB") risk-based capital guidelines, as
applicable to the Company. The Bank is subject to similar requirements
imposed by the FRB.

(11) The leverage ratio is defined as the ratio of Tier 1 capital to average
total assets.

9
<PAGE>
RISK FACTORS

WHEN USED IN THIS PROSPECTUS, THE WORDS OR PHRASES "WILL LIKELY RESULT,"
"ARE EXPECTED TO," "WILL CONTINUE," "IS ANTICIPATED," "ESTIMATE," "PROJECT,"
"BELIEVE" OR SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. THE COMPANY WISHES TO CAUTION READERS THAT ALL FORWARD-LOOKING
STATEMENTS ARE NECESSARILY SPECULATIVE AND NOT TO PLACE UNDUE RELIANCE ON ANY
SUCH FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE MADE, AND TO
ADVISE READERS THAT VARIOUS RISKS AND UNCERTAINTIES, INCLUDING REGIONAL AND
NATIONAL ECONOMIC CONDITIONS, CHANGES IN MARKET INTEREST RATES, CREDIT RISKS OF
LENDING ACTIVITIES, AND COMPETITIVE AND REGULATORY FACTORS, COULD AFFECT THE
COMPANY'S FINANCIAL PERFORMANCE AND COULD CAUSE THE COMPANY'S ACTUAL RESULTS FOR
FUTURE PERIODS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED OR PROJECTED. THE
RISKS HIGHLIGHTED HEREIN SHOULD NOT BE ASSUMED TO BE THE ONLY RISKS THAT COULD
AFFECT FUTURE PERFORMANCE OF THE COMPANY.

ABILITY OF THE COMPANY TO IMPLEMENT ITS GROWTH STRATEGY AND MANAGE GROWTH

The Company's goal is to open three new branches per year in 1998 and 1999.
In the last year the Company has opened three new branches in areas with
significant concentrations of commercial activity as part of its growth
strategy. The Company believes it has in place the management, systems,
including data processing systems, internal controls and strong credit culture
to support continued growth and expansion. However, the Company's continued
growth and expansion depends on the ability of its officers and key employees to
manage such growth effectively, to attract and retain skilled employees and to
maintain adequate internal controls and a strong credit culture. Accordingly,
there can be no assurance that the Company will be successful in achieving its
expansion goals and the failure to do so could adversely affect the Company's
financial condition and results of operations.

One result of adding new branches is an increase in non-interest expense.
These costs are associated with branch construction and renovation, increased
staffing and equipment necessary to operate new branches. Since branch expansion
is a key part of the Company's growth plans, purchasers of Common Stock should
expect non-interest expense to increase.

RELIANCE ON JACKSON HEWITT RELATIONSHIP

The Bank receives substantial income each year from the Tax Refund Program
under which the Bank makes Tax Refund Products available to customers of Jackson
Hewitt. The agreement with Jackson Hewitt was recently extended through October
31, 1999, subject to automatic renewal. There is no assurance that this
agreement will be further extended. Failure to continue this program will have a
material adverse effect on the Company's income and profitability. Moreover,
revenues from the Tax Refund Program have permitted the Company to expand
aggressively while maintaining profitable operations that compare favorably with
its peers. If the Jackson Hewitt agreement were not renewed, the Company would
be unable to maintain its existing expansion strategy while simultaneously
achieving current levels of return on average equity.

ADVERSE IMPACT OF INTERNAL REVENUE SERVICE POLICIES

The Bank receives substantial income each year from the Tax Refund Program.
From time to time, the United States Department of the Treasury and the Internal
Revenue Service (the "IRS") initiate policy and rule changes related to the
methods of providing refunds to taxpayers. These changes and initiatives, if
any, could significantly impact the demand for these Tax Refund Products. See
"Business--Products and Services--Tax Refund Products."

LIMITED PUBLIC MARKET FOR COMMON STOCK

The Common Stock is traded on the Nasdaq/NMS. Trading volume has averaged
12,078 shares per day for the nine months ended September 30, 1997. Accordingly,
a regular and active market has not yet

10
<PAGE>
developed. Upon completion of the Offering, the number of outstanding shares of
Common Stock will increase by at least one million shares. However, the Company
can give no assurance that an active market will develop, or such a market, if
established, can be sustained. In addition, the price of the Common Stock may
remain susceptible to short-term volatility caused by large trades. See "Market
For Common Stock and Related Shareholder Matters."

COMPETITION

The Bank faces significant competition from many other banks, savings
institutions and other financial institutions that have branch offices or
otherwise operate in the Bank's market area, as well as many other companies now
offering a variety of financial services. Many of these competitors have
substantially greater financial resources than the Bank including a larger
capital base that allows them to attract customers seeking larger loans than the
Bank is able to make. The market for Tax Refund Products is relatively new and
the Company expects the market for Tax Refund Products to become more
competitive. Such competition may adversely affect the Bank's market share and
profit margins for Tax Refund Products. See "Business--Competition."

ECONOMIC CONDITIONS AND RELATED UNCERTAINTIES

Commercial banking is affected, directly and indirectly, by local, domestic
and international economic and political conditions, and by government monetary
and fiscal policies. Conditions such as inflation, recession, unemployment,
volatile interest rates, tight money supply, scarce natural resources, real
estate values, international conflicts and other factors beyond the control of
the Company and the Bank may adversely affect the potential profitability of the
Company and the Bank. Management does not expect any one particular factor to
affect the Bank's results of operations. However, a continued downtrend in
several areas, such as real estate, construction and consumer spending, could
have an adverse impact on the Bank's ability to maintain or increase
profitability.

FEDERAL AND STATE GOVERNMENT REGULATION

The operations of the Company and the Bank are heavily regulated and will be
affected by present and future legislation and by the policies established from
time to time by various federal and state regulatory authorities. In particular,
the monetary policies of the FRB have had a significant effect on the operating
results of banks in the past, and are expected to continue to do so in the
future. See "Business-- Supervision and Regulation."

RELIANCE ON EXISTING MANAGEMENT

The operations of the Company to date have been largely dependent on
existing management. The loss to the Company of one or more of its existing
executive officers could have a material adverse effect on its business and
results of operations. The Company has entered into employment agreements with
the executive officers of the Company and the Bank. See "Management--Executive
Officers," "--Employment Agreements."

11
<PAGE>
USE OF PROCEEDS

The net proceeds from the sale of Common Stock offered hereby are estimated
to be $10.9 million after deduction of the underwriting discount and estimated
expenses ($12.6 million if the Underwriter's over-allotment option is exercised
in full). The Company intends to contribute the majority of the net proceeds to
the Bank. The Bank expects the proceeds to be used to fund branch expansion and
support growth in its loan and securities portfolios. The Company intends to
retain a portion of the proceeds for general corporate purposes including, but
not limited to, possible future acquisitions and capital contributions to
existing and possible future subsidiaries of the Company. The Company presently
has no agreements regarding future acquisitions. The precise amounts and timing
of the application of cash proceeds will depend, among other things, upon the
funding requirements of the Bank and the availability of other funds. Pending
application, the Company expects to invest the net proceeds in short-term
government or investment grade obligations.

MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS

MARKET INFORMATION

Shares of the Common Stock are traded in the over-the-counter market and are
quoted on the Nasdaq/NMS under the symbol "FRBK." The Common Stock began trading
on Nasdaq/NMS on December 4, 1996. Prior to that date, the Common Stock was
quoted on the Nasdaq SmallCap Market. The table below presents the range of high
and low trade prices reported for the Common Stock on Nasdaq/NMS or on the
Nasdaq SmallCap Market, as the case may be, for the periods indicated. Market
quotations reflect inter-dealer prices, without retail mark-up, markdown, or
commission, and may not necessarily reflect actual transactions. All price
information in the following table has been adjusted retroactively to reflect a
20% stock dividend paid on April 15, 1997. As of September 30, 1997, there were
297 holders of record of the Common Stock. On November 10, 1997, the closing
price of a share of Common Stock on the Nasdaq/NMS was $12.375. For periods
prior to the Merger, the prices disclosed in the table are those of ExecuFirst.

<TABLE>
<CAPTION>
YEAR QUARTER HIGH LOW
- --------- ----------- --------- ---------
<S> <C> <C> <C>
1997 4th(1) $ 13.75 $ 11.00
3rd 11.75 10.63
2nd 12.00 8.50
1st 10.25 7.80

1996 4th 8.90 6.25
3rd 6.98 4.66
2nd 6.15 4.69
1st 5.42 3.75

1995 4th 5.41 3.54
3rd 4.58 2.92
2nd 3.54 2.92
1st 3.23 2.50
</TABLE>

- ------------------------

(1) For the partial quarter until November 10, 1997.

12
<PAGE>
DIVIDEND POLICY

The Company has not paid any cash dividends on its Common Stock. At the
present time, the Company does not foresee paying cash dividends to shareholders
and intends to retain all earnings to fund the growth of the Company and the
Bank. The Company paid a 20% stock dividend on April 15, 1997. The payment of
dividends in the future, if any, will depend upon earnings, capital levels, cash
requirements, the financial condition of the Company and the Bank, applicable
government regulations and policies and other factors deemed relevant by the
Company's Board of Directors, including the amount of cash dividends payable to
the Company by the Bank. The principal source of income and cash flow for the
Company, including cash flow to pay cash dividends on the Common Stock, is
dividends from the Bank. Various federal and state laws, regulations and
policies limit the ability of the Bank to pay cash dividends to the Company. For
certain limitations on the Bank's ability to pay cash dividends to the Company,
see "Business--Supervision and Regulation."

13
<PAGE>
CAPITALIZATION

The following tables present the consolidated capitalization and certain
capital ratios of the Company at September 30, 1997 and as adjusted as of such
date to give effect to the issuance and sale of the shares of Common Stock
offered hereby (after giving effect to the estimated underwriting discount, the
payment of estimated issuance expenses and assuming no exercise of the
Underwriter's over-allotment option) at a public offering price of $12.00 per
share. This table should be read in conjunction with the Consolidated Financial
Statements and the Notes thereto set forth elsewhere herein.

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
------------------------
HISTORICAL AS ADJUSTED
----------- -----------
<S> <C> <C>
(IN THOUSANDS)
Long-term borrowings..................................................................... $ 5,600 $ 5,600
----------- -----------
Shareholders' equity:
Common Stock, par value $.01 per share; 20,000,000 shares authorized, 3,446,309 shares
issued and outstanding on September 30, 1997; 4,446,309 shares as adjusted........... 34 44
Additional paid-in capital............................................................. 13,793 24,683
Retained earnings (less unrealized depreciation on securities available for sale)...... 7,654 7,654
----------- -----------
Total shareholders' equity............................................................... $ 21,481 $ 32,381
----------- -----------
Total long-term debt and shareholders' equity............................................ $ 27,081 $ 37,981
----------- -----------
----------- -----------
</TABLE>

<TABLE>
<CAPTION>
CAPITAL RATIOS
-------------------------------------------------------
<S> <C> <C> <C>
MINIMUM
ACTUAL AT REGULATORY
SEPTEMBER 30, 1997 AS ADJUSTED(1) REQUIREMENT(2)
------------------- --------------- -----------------
Capital Ratios:
Tier 1 capital to risk-weighted assets...................... 10.97% 16.03%(3) 4.00%(3)
Total capital to risk-weighted assets....................... 11.97 17.00(3) 8.00(3)
Leverage ratio(4)(5)........................................ 7.25 10.58 5.00
</TABLE>

- ------------------------

(1) Assumes that the Company's total assets will increase by the amount of the
estimated net proceeds from the issuance and sale of the Common Stock
offered hereby.

(2) Based on the risk-based capital guidelines of the FRB, a bank holding
company, such as the Company, is required to maintain a Tier 1 capital to
risk-weighted assets ratio of 4.00% and a total capital to risk-weighted
assets ratio of 8.00%. The Bank is subject to similar capital requirements
also adopted by the FRB. At September 30, 1997, the Company and the Bank
each exceeded their respective regulatory requirements. See
"Business--Supervision and Regulation."

(3) Assumes a risk-weighting factor of 64% (the average risk-weighting factor
for the Company's total assets at September 30, 1997) for the net proceeds
from the issuance and sale of the Common Stock offered hereby. See
"Business--Supervision and Regulation" for a discussion of risk-based
capital guidelines and the FRB's minimum leverage ratio requirement.

(4) The leverage ratio is defined as the ratio of Tier 1 capital to average
total assets.

(5) Based on the FRB's guidelines, a bank holding company, such as the Company,
generally is required to maintain a leverage ratio of 3% plus an additional
amount of at least 100 to 200 basis points.

14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

On June 7, 1996 Republic, parent company of Republic Bank, merged with and
into ExecuFirst, parent company of First Executive Bank. In the Merger,
ExecuFirst issued 1,604,411 shares (56% of the combined total) of its common
stock to Republic's shareholders. Effective upon the Merger, ExecuFirst changed
its name to First Republic Bancorp, Inc. The Company subsequently changed its
name to Republic First Bancorp, Inc. Upon completion of the Merger, Republic's
shareholders owned a majority of the outstanding shares of the consolidated
company's stock. As a result, the transaction was accounted for as a reverse
acquisition of ExecuFirst by Republic solely for accounting and financial
reporting purposes. The operations of ExecuFirst have been included in the
Company's financial statements since the date of the Merger. Therefore, the
Consolidated Financial Statements for the periods prior to 1996 are those of
Republic only, and may not be comparable to the Consolidated Financial
Statements for 1996 and 1997. Historical shareholders' equity of Republic prior
to the Merger has been retroactively restated for the equivalent number of
shares received in the Merger after giving effect to the differences in par
value of the respective stock of each company.

Republic Bank and First Executive Bank each opened in 1988, with similar
marketing strategies. At the signing of the merger agreement, each had assets of
approximately $130 million. Republic Bank had two offices in Center City
Philadelphia and an office in Ardmore, Montgomery County and First Executive
Bank had two offices in Center City Philadelphia. After the Merger, the Bank
initiated a more aggressive branch expansion and marketing program targeting
customers of larger financial institutions that were recently acquired. The Bank
opened branches on City Line Avenue, Philadelphia and in East Norriton,
Montgomery County in the first half of 1997. Additionally, the Bank will open a
seventh branch office in Abington, Montgomery County in November 1997. The Bank
has formed a planning committee to evaluate prospective locations for new
branches which meet the committee's criteria. The planning committee currently
has 15 sites under review.

Future growth plans include the opening of three new branch offices per year
in 1998 and 1999. Management's goal in establishing these new branches is to
achieve deposits at each branch of at least $35.0 million in three years or
less. The Company's net income historically has been affected by new branch
openings because the Company incurs incremental non-interest expense when
opening a new branch office. Because the Company is substantially larger in 1997
than it was when it previously opened branches in 1992 and 1995, management
expects that the incremental non-interest expense resulting from such openings
as a percentage of net income will be substantially less in 1997 and future
years than it was in the past.

The Company's Tax Refund Program is a significant component of the Company's
net income and provides capital to support the Bank's rapid branch expansion.
The Tax Refund Program generated $2.2 million and $2.1 million in revenue during
1997 and 1996, respectively. The Tax Refund Program earnings are realized
primarily in the first quarter of the year. These pretax earnings constituted
approximately 70% and 75% of the Company's first quarter 1997 and 1996 pretax
earnings, respectively, and 51.2% of the Company's pretax earnings for the year
ended December 31, 1996. Revenue generated by the Tax Refund Program accounted
for 11.5% and 14.6% of total revenues for the nine months ended September 30,
1997 and 1996, respectively. Management has been encouraged by the success of
the Tax Refund Program and looks forward to continuing participation in the
future. The Company recently signed an extension (with automatic renewals) of
the Tax Refund Program agreement with its partner, Jackson Hewitt, ensuring the
Company's participation through the April 1999 tax season. See "Risk
Factors--Reliance on Jackson Hewitt Relationship."

15
<PAGE>
The following discussion and analysis of financial condition and results of
operations of the Company should be read in conjunction with the Company's
Consolidated Financial Statements and the Notes thereto, included elsewhere
herein.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

OVERVIEW

The Company's net income increased $627,000, or 26.4%, to $3.0 million for
the nine months ended September 30, 1997, from $2.4 million for the nine months
ended September 30, 1996. The earnings increased primarily due to an increase in
net interest income. Although net income for the comparative periods increased,
primary and fully-diluted earnings per share for the nine months ended September
30, 1997 were $0.79 and $0.78 compared to $0.85 and $0.83, respectively, for the
nine months ended September 30, 1996, due to the Merger which resulted in a
materially greater number of average shares outstanding for the nine months
ended September 30, 1997.

ANALYSIS OF NET INTEREST INCOME

Historically, the Company's earnings have depended primarily upon the Bank's
net interest income, which is the difference between interest earned on
interest-earning assets and interest paid on interest-bearing liabilities. Net
interest income is affected by changes in the mix of the volume and rates of
interest-earning assets and interest-bearing liabilities. The following table
provides an analysis of net interest income on an annualized tax-equivalent
basis, setting forth for the periods (i) average assets, liabilities, and
shareholders' equity, (ii) interest income earned on interest-earnings assets
and interest expense paid on interest-bearing liabilities, (iii) average yields
earned on interest-earning assets and average rates paid on interest-bearing
liabilities, and (iv) the Bank's net interest margin (net interest income as a
percentage of average total interest-earning assets). All averages are computed
based on daily balances. Nonaccrual loans are included in average loans
receivable.

16
<PAGE>

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------
1997 1996
------------------------------------ ------------------------------------
INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE(1) RATE(2) BALANCE EXPENSE(1) RATE(2)
---------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Interest-earning assets:
Federal funds sold....................... $ 7,514 $ 300 5.34% $ 31,741 $ 1,195 5.03%
Securities............................... 84,048 4,192 6.65 53,471 2,462 6.14
Loans receivable......................... 180,019 12,316 9.15 112,735 8,245 9.78
---------- ----------- ----- ---------- ----------- -----
Total interest-earning assets............ 271,581 16,808 8.28 197,947 11,902 8.04
Other assets.............................. 32,318 17,799
---------- ----------
Total assets.............................. $ 303,899 $ 215,746
---------- ----------
---------- ----------
Interest-bearing liabilities:
Demand deposits, non-interest bearing.... $ 52,502 $ -- N/A $ 32,104 $ -- N/A
Demand deposits, interest-bearing........ 8,525 159 2.49% 4,327 82 2.53%
Money market and savings deposits........ 28,761 692 3.21 15,961 467 3.90
Time deposits............................ 173,690 7,587 5.84 138,437 6,101 5.89
---------- ----------- ----- ---------- ----------- -----
Total deposits........................... 263,478 8,438 4.28 190,829 6,650 5.60
Total interest-bearing deposits.......... 210,976 8,438 5.35 158,725 6,650 5.60
Other borrowed funds..................... 13,665 621 6.08 3,400 210 8.26
---------- ----------- ----- ---------- ----------- -----
Total interest-bearing liabilities....... 224,641 9,059 5.39 162,125 6,860 5.66
---------- ----------- ----- ---------- ----------- -----
Other liabilities......................... 6,459 7,302
Shareholders' equity...................... 20,297 14,215
---------- ----------
Total liabilities and shareholders'
equity.................................. $ 303,899 $ 215,746
---------- ----------
---------- ----------
Net interest income....................... $ 7,749 $ 5,042
----------- -----------
----------- -----------
Net interest spread....................... 3.90% 3.32%
----- -----
----- -----
Net interest margin(3).................... 3.82 3.41
----- -----
----- -----
</TABLE>

- ------------------------------
(1) Includes loan fee income.

(2) Yields on investments are calculated based on amortized costs; all yields
are annualized.

(3) Represents the difference between interest earned and interest paid, divided
by average total interest earning assets.

RATE/VOLUME ANALYSIS OF CHANGES IN NET INTEREST INCOME

17
<PAGE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------
1997 VS. 1996
-----------------------------------
CHANGE DUE TO
-----------------------------------
AVERAGE AVERAGE INCREASE
VOLUME RATE (DECREASE)
--------- ----------- -----------
<S> <C> <C> <C>
(IN THOUSANDS)
Interest earned on:
Federal funds sold............................................................ $ (984) $ 89 $ (895)
Securities.................................................................... 1,448 282 1,730
Loans receivable.............................................................. 4,800 (729) 4,071
--------- ----- -----------
Total interest income........................................................... 5,264 (358) 4,906
Interest paid on:
Demand deposits, money market and savings deposits............................ 426 (124) 302
Time deposits................................................................. 1,557 (71) 1,486
Other borrowed funds.......................................................... 501 (90) 411
--------- ----- -----------
Total interest expense.......................................................... 2,484 (285) 2,199
--------- ----- -----------
Net interest income........................................................... $ 2,780 $ (73) $ 2,707
--------- ----- -----------
--------- ----- -----------
</TABLE>

The Company's net interest margin increased 41 basis points to 3.82% for the
nine months ended September 30, 1997 from 3.41% for the nine months ended
September 30, 1996. This increase was primarily due to an increase in the
average volume of interest-earning assets. The average yield on interest-earning
assets increased 24 basis points to 8.28% for the nine months ended September
30, 1997 from 8.04% for the nine months ended September 30, 1996. The average
rate on interest-bearing liabilities decreased by 27 basis points to 5.39% for
the nine months ended September 30, 1997 from 5.66% for the nine months ended
September 30, 1996.

The Company's net interest income increased $2.7 million, or 53.7%, to $7.7
million for the nine months ended September 30, 1997 from $5.0 million for the
nine months ended September 30, 1996. The increase in net interest income was
primarily due to an increase in average interest-earning assets due, in part, to
the Merger and also as a result of increased business development. The Company's
total interest income increased $4.9 million, or 41.2%, to $16.8 million for the
nine months ended September 30, 1997 from $11.9 million for the nine months
ended September 30, 1996. Interest and fees on loans increased $4.1 million, or
49.4%, to $12.3 million for the nine months ended September 30, 1997 from $8.2
million for the nine months ended September 30, 1996, largely as a result of an
increase in average loan balances of $67.3 million, or 59.7%, to $180.0 million
for the nine months ended September 30, 1997 from $112.7 million for the nine
months ended September 30, 1996. The yield on the loan portfolio declined 63
basis points to 9.15% for the nine months ended September 30, 1997 from 9.78%
for the nine months ended September 30, 1996. This decrease was due primarily to
the change in the composition of the loan portfolio and a higher level of
non-accrual loans, both as a result of the Merger, as well as more competitive
pricing for commercial loan products. Also contributing to the increase in total
interest income was an increase in interest and dividend income on securities of
$1.7 million, or 70.3%, to $4.2 million for the nine months ended September 30,
1997 from $2.5 million for the nine months ended September 30, 1996. This
increase in investment income was the result of a combination of an increase in
the average balance of securities owned of $30.5 million, or 57.0%, to $84.0
million for the nine months ended September 30, 1997 from $53.5 million for the
nine months ended September 30, 1996, and an increase in yield on the average
balance in securities held to 6.65% for the nine months ended September 30, 1997
from 6.14% for the nine months ended September 30, 1996.

The increase in the average balance of securities is the result of leveraged
funding programs employed by the Company that use Federal Home Loan Bank
("FHLB") advances to fund securities purchases. The purpose of these programs is
to target growth in net interest income while managing liquidity, credit,

18
<PAGE>
market and interest rate risk. From time to time, a specific leveraged funding
program may attempt to achieve current earnings benefits by funding security
portfolio increases partially with short-term FHLB advances with the expectation
that future growth in deposits will replace the FHLB advances at maturity.

The increase in average yield on interest-earning assets was largely the
result of the Company's strategy to reduce its investment in overnight funds,
better utilize its borrowing capacity with FHLB advances, and minimize lower
yield assets needed for short-term liquidity needs.

The Company's total interest expense increased $2.2 million, or 32.1%, to
$9.1 million for the nine months ended September 30, 1997 from $6.9 million for
the nine months ended September 30, 1996. This increase was due to an increase
in the volume of average interest-bearing liabilities of $62.5 million, or
38.6%, to $224.6 million for the nine months ended September 30, 1997 from
$162.1 million for the nine months ended September 30, 1996. The average rate
paid on interest-bearing liabilities decreased 27 basis points to 5.39% for the
nine months ended September 30, 1997 from 5.66% for the nine months ended
September 30, 1996 due to an decrease in money market and time deposits.

Interest expense on certificates of deposit increased $1.5 million, or
24.4%, to $7.6 million for the nine months ended September 30, 1997 from $6.1
million for the nine months ended September 30, 1996. This increase was due to
an increase in the average volume of certificates of deposit in the amount of
$35.3 million, or 25.5%, to $173.7 million for the nine months ended September
30, 1997 from $138.4 million for the nine months ended September 30, 1996,
partially offset by decreases in the average interest rates to 5.84% from 5.89%,
for the comparative periods.

Interest expense on FHLB advances was $621,000 for the nine months ended
September 30, 1997. The Company had no FHLB advances for the nine months ended
September 30, 1996. In 1997, $13.7 million of FHLB advances funded purchases of
securities and origination of loans as part of an ongoing leveraged funding
program designed to increase earnings while also managing interest rate risk and
liquidity. Additionally, the Company utilized FHLB borrowings to fund the Tax
Refund Program in 1997. The Company used brokered certificates of deposit to
fund the Tax Refund Program in 1996. The Company incurred no interest expense on
subordinated debt in the nine months ended September 30, 1997 compared to
$233,000 in the nine months ended September 30, 1996 as this debt was retired
during the fourth quarter of 1996.

PROVISION FOR LOAN LOSSES

The provision for loan losses is charged to operations to bring the total
allowance for loan losses to a level considered appropriate by management. The
level of the allowance for loan losses is determined by management based upon
its evaluation of the known as well as inherent risks within the Bank's loan
portfolio. Management's periodic evaluation is based upon an examinaiton of the
portfolio, past loss experience, current economic conditions, the results of the
most recent regulatory examinations and other relevant factors. The provision
for loan losses increased $85,000, or 154%, to $140,000 for the nine months
ended September 30, 1997 from $55,000 for the nine months ended September 30,
1996. Non-performing assets were 1.18% of total assets at September 30, 1997,
compared to 0.81% at December 31, 1996. Delinquencies were 0.36% of total loans
at September 30, 1997, compared to 0.75% at December 31, 1996.

NON-INTEREST INCOME

Total other income increased $312,000, or 13.5%, to $2.6 million for the
nine months ended September 30, 1997 from $2.3 million for the nine months ended
September 30, 1996. The increase was due primarily to a $159,000 increase in Tax
Refund Program income associated with an increase in Tax Refund Product sales in
the 1997 tax return season compared to the 1996 tax return season. Additionally,
Bank service fees increased $117,000 due to the increase in deposit account
activity on higher average levels of deposit balances as a result of the Merger.

19
<PAGE>
NON-INTEREST EXPENSES

Total other expenses increased $2.2 million, or 58.9%, to $5.9 million for
the nine months ended September 30, 1997 from $3.7 million for the nine months
ended September 30, 1996. Salaries and benefits increased $1.1 million, or
57.5%, to $3.1 million for the nine months ended September 30, 1997 from $2.0
million for the nine months ended September 30, 1996. The increase was due
primarily to an increase in staff as a result of the Merger as well as increases
associated with the expansion of the branches and business development staff.
Occupancy and equipment expenses increased $228,000, or 35.7%, to $867,000 for
the nine months ended September 30, 1997 from $639,000 for the nine months ended
September 30, 1996 as a result of opening additional branch offices. Other
operating expenses increased $806,000, or 70.8%, to $2.0 million for the nine
months ended September 30, 1997 from $1.1 million for the nine months ended
September 30, 1996. Other operating expenses encompass all expenses not
otherwise categorized, and include items such as data processing costs,
professional fees, advertising costs, printing and supplies, insurance and other
miscellaneous expenses. The primary reason for increases in other operating
expenses was the growth of the Bank associated with the Merger and increased
expenses related to the opening of new branch offices.

PROVISION FOR INCOME TAXES

The provision for income taxes increased $148,000, or 12.4%, to $1.3 million
for the nine months ended September 30, 1997 from $1.2 million for the nine
months ended September 30, 1996. The increase of $148,000 results from the
increase in pre-tax income from 1996 to 1997.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

OVERVIEW

For the year ended December 31, 1996, the Company reported net income of
$2.7 million, or $0.92 in primary earnings per share and $0.88 in fully-diluted
earnings per share, compared to net income of $603,000, or $0.31 in primary
earnings per share and $0.31 in fully-diluted earnings per share, for the year
ended December 31, 1995. The increase in the Company's results during 1996 was
primarily the result of the Merger and the Bank's participation in the Tax
Refund Program, which generated $2.1 million in revenues during the year ended
December 31, 1996. The Bank did not participate in the Tax Refund Program during
1995 due to the uncertain impact of IRS policy changes. Net interest income
increased $3.2 million, or 79.2%, to $7.2 million for the year ended December
31, 1996 from $4.0 million for the year ended December 31, 1995. This increase
was primarily due to the increase in interest-earning assets as a result of the
Merger.

ANALYSIS OF NET INTEREST INCOME

The following table provides an analysis of net interest income on an
annualized tax-equivalent basis, setting forth for the periods (i) average
assets, liabilities, and shareholders' equity, (ii) interest income earned on
interest-earnings assets and interest expense paid on interest-bearing
liabilities, (iii) average yields earned on interest-earning assets and average
rates paid on interest-bearing liabilities, and (iv) the Bank's net interest
margin (net interest income as a percentage of average total interest-earning
assets).

20
<PAGE>
All averages are computed based on daily balances. Nonaccrual loans are included
in average loans receivable.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------
1996 1995 1994
----------------------------------- ------------------------------------- ------------------------
INTEREST INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/
BALANCE EXPENSE(1) RATE(2) BALANCE EXPENSE(1) RATE(2) BALANCE EXPENSE(1)
--------- ----------- ----------- --------- ------------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Interest-earning assets:
Federal funds sold.......... $ 26,488 $ 1,346 5.08% $ 2,953 $ 176 5.96% $ 7,465 $ 278
Securities.................. 60,389 3,759 6.23 34,687 2,016 5.81 26,263 1,442
Loans receivable............ 132,294 11,798 8.92 78,489 7,710 9.82 69,838 5,521
--------- ----------- --- --------- ------ --- --------- ------
Total interest-earning
assets.................... 219,171 16,903 7.71 116,129 9,902 8.53 103,566 7,241
Other assets.................. 3,029 4,139 3,332
--------- --------- ---------
Total assets.................. $ 222,200 $ 120,268 $ 106,898
--------- --------- ---------
--------- --------- ---------
Interest-bearing liabilities:
Demand deposits,
non-interest bearing...... $ 23,909 $ 8,939 $ 7,260
Demand deposits, interest-
bearing................... 5,623 140 2.49% 1,504 33 2.19% 1,478 30
Money market and savings
deposits.................. 21,594 674 3.12 13,878 516 3.72 17,377 637
Time deposits............... 148,834 8,663 5.82 81,404 5,004 6.15 68,152 2,997
--------- ----------- --- --------- ------ --- --------- ------
Total deposits(3)........... 199,960 9,477 4.73 105,725 5,553 5.25 94,267 3,664
--------- ----------- --- --------- ------ --- --------- ------
Total interest-bearing
deposits.................. 176,051 9,477 5.38 96,786 5,553 5.74 87,007 3,664
Other borrowed funds........ 2,920 238 8.15 4,431 338 7.63 3,691 280
Total interest-bearing
liabilities............... 202,880 9,715 4.79 110,156 5,891 5.35 97,958 3,944
--------- ----------- --- --------- ------ --- --------- ------
Other liabilities............. 4,124 1,845 1,298
Shareholders' equity.......... 15,196 8,267 7,642
--------- --------- ---------
Total liabilities and
shareholders' equity........ $ 222,200 $ 120,268 $ 106,898
--------- --------- ---------
--------- --------- ---------
Net interest income........... $ 7,188 $ 4,011 $ 3,297
----------- ------ ------
----------- ------ ------
Net interest spread........... 2.92% 3.18%
--- ---
--- ---
Net interest margin(4)........ 3.28 3.45
--- ---
--- ---

YIELD/
RATE(2)
-----------
<S> <C>

Interest-earning assets:
Federal funds sold.......... 3.72%
Securities.................. 5.49
Loans receivable............ 7.91
---
Total interest-earning
assets.................... 6.99
Other assets..................

Total assets..................

Interest-bearing liabilities:
Demand deposits,
non-interest bearing......
Demand deposits, interest-
bearing................... 2.30%
Money market and savings
deposits.................. 3.61
Time deposits............... 4.41
---
Total deposits(3)........... 3.89
---
Total interest-bearing
deposits.................. 4.14
Other borrowed funds........ 7.60
Total interest-bearing
liabilities............... 4.03
---
Other liabilities.............
Shareholders' equity..........

Total liabilities and
shareholders' equity........

Net interest income...........

Net interest spread........... 2.96%
---
---
Net interest margin(4)........ 3.18
---
---
</TABLE>

- ------------------------------

(1) Includes loan fee income.

(2) Yields on investments are calculated based on amortized costs; all yields
are annualized.

(3) Excludes borrowed funds.

(4) Represents the difference between interest earned and interest paid, divided
by average total interest earning assets.

21
<PAGE>
RATE/VOLUME ANALYSIS OF CHANGES IN NET INTEREST INCOME

Net interest income may also be analyzed by segregating the volume and rate
components of interest income and interest expense. The following table sets
forth an analysis of volume and rate changes in net interest income for the
periods indicated. For purposes of this table, changes in interest income and
interest expense are allocated to volume and rate categories based upon the
respective percentage changes in average balances and average rates.
<TABLE>
<CAPTION>
1996 VS. 1995 1995 VS. 1994
--------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
CHANGE DUE TO CHANGE DUE TO
--------------------------------- ---------------------------------

<CAPTION>
AVERAGE AVERAGE INCREASE AVERAGE AVERAGE INCREASE
VOLUME RATE (DECREASE) VOLUME RATE (DECREASE)
--------- ----------- --------- --------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Federal funds sold............................ $ 1,200 $ (30) $ 1,170 $ (220) $ 118 $ (102)
Securities.................................... 1,585 158 1,743 510 65 575
Loans receivable.............................. 4,865 (777) 4,088 741 1,448 2,189
--------- ----------- --------- --------- --------- -----------
Total interest income........................... 7,650 (649) 7,001 1,031 1,631 2,662
Interest paid on:
Demand deposits, money market and savings
deposits.................................... 352 (87) 265 (124) 11 (113)
Time deposits................................. 3,942 (283) 3,659 660 1,342 2,002
Other borrowed funds............................ (100) -- (100) 56 1 57
--------- ----------- --------- --------- --------- -----------
Total interest expense........................ 4,194 (370) 3,824 592 1,354 1,946
--------- ----------- --------- --------- --------- -----------
Net interest income........................... $ 3,456 $ (279) $ 3,177 $ 439 $ 277 $ 716
--------- ----------- --------- --------- --------- -----------
--------- ----------- --------- --------- --------- -----------
</TABLE>

The Company's total interest income increased $7.0 million, or 70.7%, to
$16.9 million for the year ended December 31, 1996 from $9.9 million for the
year ended December 31, 1995. The average balance of interest-earning assets
increased $103.1 million, or 88.7%, to $219.2 million for the year ended
December 31, 1996 from $116.1 million for the year ended December 31, 1995. The
yield on interest-earning assets decreased 82 basis points to 7.71% for the year
ended December 31, 1996 from 8.53% for the year ended December 31, 1995. Total
interest expense increased $3.8 million, or 64.9%, to $9.7 million for the year
ended December 31, 1996 from $5.9 million for the year ended December 31, 1995.
The average balance of interest-bearing liabilities increased $92.7 million, or
84.2%, to $202.9 million for the year ended December 31, 1996 from $110.2
million for the year ended December 31, 1995. The average rate on
interest-bearing liabilities decreased 56 basis points to 4.79% for the year
ended December 31, 1996 from 5.35% for the year ended December 31, 1995. The
increases in interest income and interest expense were principally the result of
a higher volume of interest-earning assets and interest-bearing liabilities in
1996 as a result of the Merger. The ratio of interest expense to interest income
was 57.5% for the year ended December 31, 1996 compared to a ratio of 59.5% for
the year ended December 31, 1995. The Merger was also primarily responsible for
the changes in average rate in 1996 as compared to 1995.

PROVISION FOR LOAN LOSSES

The provision for loan losses is charged to operations to bring the total
allowance for loan losses to a level considered appropriate by management. The
level of the allowance for loan losses is determined by management based upon
its evaluation of the known as well as inherent risks within the Bank's loan
portfolio. Management's periodic evaluation is based upon an examination of the
portfolio, past loss experience, current economic conditions, the results of the
most recent regulatory examinations and other relevant factors. The provision
for loan losses decreased $68,000, or 30%, to $155,000 for the year ended
December 31, 1996 from $223,000 for the year ended December 31, 1995.
Non-performing assets were

22
<PAGE>
0.81% of total assets at December 31, 1996, compared to 0.63% at December 31,
1995. Delinquencies were 1.78% of total loans at December 31, 1996, compared to
0.86% at December 31, 1995.

NON-INTEREST INCOME

Non-interest income increased $2.5 million to $2.6 million for the year
ended December 31, 1996 from $155,000 for the year ended December 31, 1995.
Non-interest income as a percentage of gross revenues was 13.4% and 1.5% for the
years ended December 31, 1996 and 1995, respectively. This increase was due to
the Bank's participation in the Tax Refund Program in 1996. The Bank did not
participate in the Tax Refund program during 1995.

NON-INTEREST EXPENSE

Salaries and employee benefits increased $1.3 million, or 80.4%, to $2.9
million for the year ended December 31, 1996 from $1.6 million for the year
ended December 31, 1995. This increase was the result of additions in staffing
due to the Merger, as well as non-recurring severance costs.

Occupancy and equipment expenses increased $337,000, or 59.7%, to $901,000
for the year ended December 31, 1996 from $564,000 for the year ended December
31, 1995. These expenses were comprised mainly of rental, equipment and
maintenance expense. Professional fees declined $45,000, or 13.8%, to $282,000
for the year ended December 31, 1996 from $327,000 for the year ended December
31, 1995 as the result of management's efforts to reduce the use of outside
consultants.

Other expenses increased $960,000, or 169.6%, to $1.5 million for the year
ended December 31, 1996 from $566,000 for the year ended December 31, 1995.
Major components of this category included advertising, insurance other than
premises, and general/administrative expenses. The year-to-year increase of
$960,000 is attributable to increased operating costs resulting from the Merger
and the increased size of the Company.

PROVISION FOR INCOME TAXES

The provision for income taxes increased $1.1 million to $1.4 million for
the year ended December 31, 1996 from $291,000 for the year ended December 31,
1995. The effective tax rate was 33.2% for the year ended December 31, 1996
compared to 32.6% for the year ended December 31, 1995.

FINANCIAL CONDITION

SEPTEMBER 30, 1997 COMPARED TO DECEMBER 31, 1996

Total assets increased $29.4 million, or 10.7%, to $303.2 million at
September 30, 1997 from $273.8 million at December 31, 1996. The increase in
assets was the result of higher levels of loans and securities, which were
funded by the net increase in borrowings in the nine months ended September 30,
1997. Net loans increased $14.4 million, or 8.5%, to $184.4 million at September
30, 1997 from $170.0 million at December 31, 1996. Securities increased $20.2
million, or 24.9%, to $101.1 million at September 30, 1997 from $81.0 million at
December 31, 1996. The increase was due primarily to the purchase of $20.0
million in securities as part of the Company's leveraged funding strategy which
is intended to increase earnings.

Cash and due from banks, interest-bearing deposits, which are held at the
Federal Home Loan Bank of Pittsburgh, and federal funds sold are all liquid
funds. The aggregate amount in these three categories decreased by $8.2 million,
or 52.9%, to $7.3 million at September 30, 1997 from $15.5 million at December
31, 1996 because the Company redeployed these funds into higher yielding loans
and securities. This redeployment of liquid assets was done in anticipation of
the utilization of the Company's borrowing capacity with the FHLB.

23
<PAGE>
Bank premises and equipment, net of accumulated depreciation, increased $1.2
million, or 170.9.%, to $1.9 million at September 30, 1997 from $711,000 at
December 31, 1996. The increase was attributable mainly to the construction of
the Bank's new branch offices.

Total liabilities increased $26.3 million, or 10.3%, to $281.7 million at
September 30, 1997 from $255.4 million at December 31, 1996. During the nine
months ended September 30, 1997, deposits, the Company's primary source of
funds, decreased $2.2 million, or 0.9%, to $247.9 million at September 30, 1997
from $250.1 million at December 31, 1996. The aggregate of transaction accounts,
which include demand, money market and savings accounts, decreased $2.0 million,
or 2.9%, to $68.0 million at September 30, 1997 from $70.0 million at December
31, 1996. Certificates of deposit declined $157,000, or 0.1%, to $179.8 million
at September 30, 1997 from $180 million at December 31, 1996. During the first
quarter of 1997 higher costing certificates of deposit were allowed to run-off
in favor of lower cost borrowings at the FHLB. This run-off was later partially
replaced by the growth in deposits from the new branches.

FHLB borrowings were $27.3 million at September 30, 1997. There were no FHLB
borrowings at December 31, 1996. The increase was primarily the result of the
Company's leveraged funding strategy of utilizing short-term and long-term FHLB
advances to purchase investment securities and to fund new loan originations.

DECEMBER 31, 1996 COMPARED TO DECEMBER 31, 1995

The Company's total assets increased $142.7 million, or 108.8%, to $273.8
million at December 31, 1996 from $131.1 million at December 31, 1995. This
increase was primarily due to the Merger. The Company's asset mix remained
relatively stable. Net loans receivable increased $84.8 million, or 99.5%, to
$170.0 million at December 31, 1996 from $85.2 million at December 31, 1995. Net
loans represented 62.1% and 65.0% of total assets at December 31, 1996 and 1995,
respectively. Total investment securities increased $42.6 million, or 111.1%, to
$81.0 million at December 31, 1996 from $38.4 million at December 31, 1995.
Investment securities represented 29.6% and 29.3% of total assets at December
31, 1996 and 1995, respectively. Total deposits increased $133.6 million, or
114.8%, to $250.1 million at December 31, 1996 from $116.4 million at December
31, 1995. Loans receivable generally represent the highest earning assets of a
bank's portfolio. The ratio of loans receivable to total deposits was
approximately 68.0% at December 31, 1996 compared to approximately 73.2% at
December 31, 1995.

INTEREST RATE RISK MANAGEMENT

Interest rate risk management involves managing the extent to which
interest-sensitive assets and interest-sensitive liabilities are matched. The
Bank typically defines interest-sensitive assets and interest-sensitive
liabilities as those that reprice within one year or less. Maintaining an
appropriate match is a method of avoiding wide fluctuations in net interest
margin during periods of changing interest rates.

The difference between interest-sensitive assets and interest-sensitive
liabilities is known as the "interest-sensitivity gap" ("GAP"). A positive GAP
occurs when interest-sensitive assets exceed interest-sensitive liabilities
repricing in the same time periods, and a negative GAP occurs when
interest-sensitive liabilities exceed interest-sensitive assets repricing in the
same time periods. A negative GAP ratio suggests that a financial institution
may be better positioned to take advantage of declining interest rates rather
than increasing interest rates, and a positive GAP ratio suggests the converse.

Shortcomings are inherent in a simplified and static GAP analysis that may
result in an institution with a negative GAP having interest rate behavior
associated with an asset-sensitive balance sheet. For example, although certain
assets and liabilities may have similar maturities or periods to repricing, they
may react in different degrees to changes in market interest rates. Furthermore,
repricing characteristics of certain assets and liabilities may vary
substantially within a given time period. In the event of a change in interest
rates, prepayment and early withdrawal levels could also deviate significantly
from those assumed in calculating GAP in the manner presented in the table
below.

24
<PAGE>
The Bank attempts to manage its assets and liabilities in a manner that
stabilizes net interest income under a broad range of interest rate
environments. Adjustments to the mix of assets and liabilities are made
periodically in an effort to provide dependable and steady growth in net
interest income regardless of the behavior of interest rates.

The following table presents a summary of the Bank's interest rate
sensitivity GAP at September 30, 1997. For purposes of this table, the Bank has
used assumptions based on industry data and historical experience to calculate
the expected maturity of loans because, statistically, certain categories of
loans are prepaid before their maturity date, even without regard to interest
rate fluctuations. Additionally certain prepayment assumptions were made with
regard to investment securities based upon the expected prepayment of the
underlying collateral of the mortgage backed securities.

<TABLE>
<CAPTION>
0-90 91-180 181-365 1-5
DAYS DAYS DAYS YEARS OVER 5 YRS TOTAL
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Interest sensitive assets:
Securities.............................. $ 33,365 $ 6,903 $ 6,427 $ 24,765 $ 31,712 $ 103,172
Loans receivable........................ 84,136 6,833 14,831 54,036 26,498 186,334
---------- ---------- ---------- ---------- ---------- ----------
Total................................... 117,501 13,736 21,258 78,801 58,210 289,506
---------- ---------- ---------- ---------- ---------- ----------

Cumulative total........................ $ 117,501 $ 131,237 $ 152,495 $ 231,296 $ 289,506
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Interest sensitive liabilities:
Demand interest-bearing(1).............. $ 4,117 $ -- $ -- $ 2,058 $ 2,058 $ 8,233
Savings accounts(1)..................... 1,034 -- -- -- 1,033 2,067
Money market accounts(1)................ 11,887 -- -- 5,943 5,943 23,773
FHLB borrowings......................... 18,621 1,325 1,800 5,600 -- 27,346
Time deposits........................... 40,503 23,327 63,840 52,195 5 179,870
---------- ---------- ---------- ---------- ---------- ----------

Total................................... 76,162 24,652 65,640 65,796 9,039 241,289
---------- ---------- ---------- ---------- ---------- ----------

Cumulative total........................ $ 76,162 $ 100,814 $ 166,454 $ 232,250 $ 241,289
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Interest rate sensitivity GAP........... $ 41,339 $ (10,916) $ (44,382) $ 13,005 $ 49,171 $ 48,217

Cumulative GAP.......................... $ 41,339 $ 30,423 $ (13,959) $ (954) $ 48,217
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Interest sensitive assets/
interest sensitive liabilities......... 1.5x 1.3x 0.9x 1.0x 1.2x

Cumulative GAP/
total earning assets................... 14.3% 10.5% -4.8% -0.3% 16.7%
</TABLE>

- ------------------------

(1) For interest rate sensitivity purposes 50% of these deposits are assumed to
reprice within one year.

CAPITAL

The Company's Tier l capital to risk-weighted assets ratio was 10.97% at
September 30, 1997 compared to 10.08% at December 31, 1996. These ratios
exceeded the Tier 1 regulatory capital requirement of 4.00%. The Company's total
capital to risk-weighted assets ratio was 11.97% at September 30, 1997 compared
to 11.25% at December 31, 1996. These ratios exceeded the total risk-based
capital regulatory requirement of 8.00%. The Company's leverage ratio was 7.25%
at September 30, 1997, compared to 6.65% at December 31, 1996. The increase in
the Company's leverage ratio was due to the

25
<PAGE>
Company's higher level of earnings in the nine months ended September 30, 1997.
The Company remains categorized as "well capitalized" under applicable Federal
regulations. The Bank is subject to similar capital requirements adopted by the
FRB. At September 30, 1997, the Bank's capital exceeded all regulatory
requirements and the Bank remains categorized as "well capitalized" under
applicable federal regulations.

LIQUIDITY

Financial institutions must maintain liquidity to meet day-to-day
requirements of depositors and borrowers, take advantage of market
opportunities, and provide a cushion against unforeseen needs. Liquidity needs
can be met by either reducing assets or increasing liabilities. Sources of asset
liquidity are provided by cash and amounts due from banks, interest-bearing
deposits with banks, and federal funds sold.

The Company's liquid assets totaled $7.3 million at September 30, 1997
compared to $15.5 million at December 31, 1996. Maturing and repaying loans are
another source of asset liquidity. At September 30, 1997, the Bank estimated
that an additional $15.8 million of loans will mature or repay in the next six-
month period ended March 31, 1998.

Liability liquidity can be met by attracting deposits with competitive
rates, buying federal funds or utilizing the facilities of the Federal Reserve
System or the Federal Home Loan Bank System. The Bank utilizes a variety of
these methods of liability liquidity. At September 30, 1997, the Bank had $70
million in unused lines of credit available to it under informal arrangements
with correspondent banks compared to $99 million at December 31, 1996. These
lines of credit enable the Bank to purchase funds for short-term needs at
current market rates.

At September 30, 1997, the Company had outstanding commitments (including
unused lines of credit and letters of credit) of $16.7 million. Certificates of
deposit which are scheduled to mature within one year totaled $127.7 million at
September 30, 1997, and borrowings that are scheduled to mature within the same
period amounted to $21.7 million. The Company anticipates that it will have
sufficient funds available to meet its current commitments.

As of September 30, 1997, capital expenditures that were anticipated for the
remainder of 1997 included approximately $400,000 required to complete the site
improvements and construction of a full-service branch in Abington, Montgomery
County. These cost estimates also include furniture, fixtures and equipment
costs necessary to operate this office.

26
<PAGE>
EFFECTS OF INFLATION

The majority of assets and liabilities of a financial institution are
monetary in nature. Therefore, a financial institution differs greatly from most
commercial and industrial companies that have significant investments in fixed
assets or inventories. Management believes that the most significant impact of
inflation on financial results is the Company's ability to react to changes in
interest rates. As discussed previously, management attempts to maintain an
essentially balanced position between rate sensitive assets and liabilities over
a one year time horizon in order to protect net interest income from being
affected by wide interest rate fluctuations.

NEW FINANCIAL ACCOUNTING STANDARDS

MORTGAGE SERVICING RIGHTS

In 1995, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards (hereafter, a "Statement") No. 122,
"Accounting for Mortgage Servicing Rights," which amends Statement No. 65,
"Accounting for Certain Mortgage Banking Activities." This Statement applies to
all mortgage banking activities in which a mortgage loan is originated or
purchased and then sold or securitized with the right to service the loan
retained by the seller. The total cost of the mortgage loan is allocated between
the mortgage servicing rights and the mortgage loan based on their relative fair
values. The mortgage servicing rights are capitalized as assets and amortized
over the period of estimated net servicing income. Additionally, these servicing
rights are subject to an impairment analysis based on their fair value in future
periods. This Statement was effective for transactions in which mortgage loans
are sold or securitized beginning January 1, 1996. For the year ended December
31, 1996 and for the nine months ended September 30, 1997, the impact of this
Statement on the Company was immaterial.

STOCK-BASED COMPENSATION

In 1996, the Company adopted Statement No. 123, "Accounting for Stock-based
Compensation." This Statement provides the Company with a choice of how to
account for the issuance of stock options and other stock grants. This Statement
encourages companies to account for stock options at their fair value and
recognize the expense as compensation over the service period, but also permits
companies to follow existing accounting rules under Accounting Principles Board
("APB") Opinion No. 25. Companies electing to follow APB Opinion No. 25 rules
are required to disclose pro forma net income and earnings per share information
as if the new fair value approach had been adopted. The Company is continuing to
follow existing accounting rules under APB Opinion No. 25 for options granted,
with pro forma disclosure in the footnotes to the Company's Consolidated
Financial Statements.

EARNINGS PER SHARE

In February 1997 the FASB issued SFAS No. 128, "Earnings Per Share." This
Statement establishes standards for computing and presenting earnings per share
("EPS") and applies to entities with publicly held common stock or potential
common stock. This Statement simplifies the standards for computing EPS
previously found in APB Opinion No. 15, "Earnings per Share," and makes them
comparable to international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation. This Statement requires restatement of all prior
period EPS data presented upon adoption.

27
<PAGE>
The pro forma effect of Statement No. 128 on EPS of the Company is shown in
the following table:

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED FOR THE YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
-------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
HISTORICAL EPS(1)
Primary.............................................................. $ 0.79 $ 0.85 $ 0.92 $ 0.31 $ 0.42
Fully-diluted........................................................ 0.78 0.83 0.88 0.31 0.42
PRO FORMA EPS(1)
Basic................................................................ $ 0.87 $ 0.92 $ 0.97 $ 0.31 $ 0.42
Diluted.............................................................. 0.79 0.88 0.92 0.31 0.42
</TABLE>

- ------------------------

(1) Adjusted to reflect a 20% stock dividend paid on April 15, 1997.

REPORTING COMPREHENSIVE INCOME

In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income." This Statement establishes standards for the reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. Statement No. 130 requires that all items that are
required to be recognized as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. This Statement does not require a specific format for that
financial statement but requires that an enterprise display an amount
representing total comprehensive income for the period in that financial
statement. Statement No. 130 is effective for fiscal years beginning after
December 15, 1997. The impact of this Statement on the Company would be to
require additional disclosures in the Company's financial statements.

OPERATING SEGMENT DISCLOSURE

In June 1997, the FASB issued Statement No. 131, "Disclosures About Segments
of an Enterprise and Related Information." Statement No. 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. Statement No. 131 is effective for periods beginning after December
15, 1997. The impact, if any, of this Statement on the Company would be to
require additional disclosures in the Company's financial statements.

28
<PAGE>
BUSINESS

GENERAL

The Company is a Pennsylvania corporation headquartered in Philadelphia,
Pennsylvania and is a registered bank holding company for the Bank, a
Pennsylvania-chartered commercial bank, which is the Company's wholly-owned
subsidiary. The Bank is a member of the Federal Reserve System and the Bank's
deposits are insured by the FDIC to the fullest extent provided by law. The
Company was the surviving corporation in the Merger, and the Bank was the
surviving bank in the merger of Republic Bank with and into First Executive
Bank, each of which was completed in June 1996. The Bank serves the Greater
Philadelphia area and is the third largest bank headquartered in Philadelphia.
The Bank presently conducts banking activities through its six branches,
including three located in Center City Philadelphia and one each in Ardmore and
East Norriton, Montgomery County and one located on City Line Avenue,
Philadelphia County. A seventh branch is scheduled to open in Abington,
Montgomery County in November 1997. At September 30, 1997, the Company had total
consolidated assets, deposits, net loans and shareholders' equity of $303.2
million, $247.9 million, $184.4 million and $21.4 million, respectively.

The Bank is engaged in the Tax Refund Program through a contractual
relationship with Jackson Hewitt to provide Tax Refund Products to Jackson
Hewitt customers. Through the Tax Refund Program, the Bank offers Tax Refund
Products to qualifying Jackson Hewitt customers, which provides the Bank with
significant interest and fee income.

MARKET OVERVIEW

The Bank's primary market service area consists of the Greater Philadelphia
region, including Center City Philadelphia and the northern and western suburban
communities located principally in Montgomery County. To a lesser extent, the
Bank also serves the surrounding counties of Bucks, Chester and Delaware in
Pennsylvania, southern New Jersey and northern Delaware.

As of June 30, 1996, there were 37 different banking institutions operating
approximately 330 branch offices and having total deposits of approximately
$24.0 billion in Philadelphia. The four largest of these institutions with
respect to total deposits operated over 63% of the area's branch offices and had
approximately 78% of the area's deposits. The Bank had the 12th largest deposit
market share in the City of Philadelphia as of June 30, 1996, with deposits of
$223.9 million.

The Bank is a leading provider of Tax Refund Products. There are a limited
number of banks that provide this service nationwide. Management believes that
the demand for Tax Refund Products will grow as a result of the IRS' intention
to encourage electronic filing of tax returns and the increasing complexity of
tax forms. The Bank generates significant revenue from the Tax Refund Program.
Recently, the Company and Jackson Hewitt extended the Tax Refund Program through
October 31, 1999, subject to automatic renewal provisions. See "--Products and
Services--Tax Refund Products."

OPERATING STRATEGY

The Company's objective is for the Bank to become the primary alternative to
the large banks that dominate the Greater Philadelphia market. The Company's
management team has developed a business strategy consisting of the following
key elements to achieve this objective:

EXPANDING THE BRANCH SYSTEM. Management plans to develop a cohesive network
of branches that will be within a ten minute drive of most of the major
commercial centers in its marketplace. Management intends to build this network
by opening three branches each year through 1999 that are strategically located
in commercial corridors of suburban Philadelphia. The Bank's Abington branch,
scheduled to open in November 1997, is a prime example of this strategy. This
branch is located in a major suburban commercial center and is easily accessible
from a major local traffic artery. The branch manager has significant banking
experience and contacts in the targeted community. The efforts of this manager
will be

29
<PAGE>
supported by marketing assistance from loan officers assigned to that community.
In addition, the Company will consider acquisition opportunities that will
enhance earnings and growth capabilities. The Company expects to fund this
expansion through, among other things, revenue generated from the Tax Refund
Program. See "Risk Factors--Reliance on Jackson Hewitt Relationship."

PROVIDING ATTENTIVE AND PERSONALIZED SERVICE. The Company believes that a
very attractive niche exists serving small- to medium-sized business customers
not adequately served by the larger competitors. The Company believes this
segment of the market responds very positively to the attentive and highly
personalized service provided by the Bank. The Bank offers individuals and
small- to medium-sized businesses a wide array of banking products, informed and
friendly service, extended operating hours, consistently applied credit
policies, and local, timely decision making. The banking industry is
experiencing a period of rapid consolidation and many local branches have been
acquired by large out-of-market institutions. The ensuing changes in these
banking institutions have resulted in a change in their product offerings and
the degree of personal attention they provide to their customers. The Company
has capitalized on these dynamics by offering a community banking alternative
and tailoring its product offering to fill voids created as larger competitors
increase the price of products and services or de-emphasize such products and
services.

MAINTAINING SUPERIOR OPERATING RESULTS. The Company's long-term goal is to
maintain a return on average equity in excess of 15% while maintaining a 15%
asset growth rate. The Company expects to fund significant expansion and
simultaneously meet its operating goals, in part, because of the income earned
through the Tax Refund Program. To accomplish these goals the strategy is for
the Bank to maintain sufficient margins on incremental growth through efficient
utilization and leveraging of capital.

ATTRACTING AND RETAINING HIGHLY EXPERIENCED PERSONNEL. The Bank's executive
officers and other personnel have substantial employment experience with larger
banks in the region. When opening new branches, as in the case of the Abington
office, the Bank extensively screens and trains its employees to ensure the
staff has the necessary ability and contacts in the community to foster rapid
growth. The Company seeks to instill a sales and service oriented culture in its
personnel in order to build customer relationships and maximize cross-selling
opportunities. The Company offers meaningful sales-based incentives to all its
customer contact employees.

CAPITALIZING ON MARKET DYNAMICS. In the past two years, banks controlling
over 45% of the deposits in the Bank's primary market areas have been acquired
by large and super-regional bank holding companies. The ensuing cultural changes
in these banking institutions have resulted in a change in their product
offerings and the degree of personal attention they provide. The Company has
sought to capitalize on these changes by offering a community banking
alternative. As a result, the Company believes it has a tremendous opportunity
to increase its market share.

DEVELOPING SPECIALIZED PRODUCTS. The Company has built the Tax Refund
Program into a significant source of income. Management will continue to explore
and develop other opportunities to provide specialized banking products and
services that command higher profit margins.

PRODUCTS AND SERVICES

TRADITIONAL BANKING PRODUCTS AND SERVICES. The Bank offers a range of
commercial and retail banking services to its customers, including commercial
loans, commercial loans secured by real estate, personal and business checking
and savings accounts, certificates of deposit, residential mortgages and
consumer loans. The Bank's commercial loan customers typically borrow between
$250,000 and $750,000. The Bank attempts to offer a high level of personalized
service to both its commercial and consumer customers. In addition, the Bank
provides travelers' checks, money orders and other typical banking services. The
Bank is a member of the MAC and PLUS networks in order to provide customers with
access to automated

30
<PAGE>
teller machines worldwide. The Bank makes credit cards available to its
customers through correspondent banking institutions.

TAX REFUND PRODUCTS. The Bank is engaged in the Tax Refund Program through
a contractual relationship with Jackson Hewitt. Through the Tax Refund Program,
the Bank provides Tax Refund Products to qualifying Jackson Hewitt customers.
The Tax Refund Products, ACRs and RALs, enable taxpayers to receive tax refunds
faster than if they filed their tax returns by mail. An ACR enables a taxpayer
to have a refund directly deposited into a bank account, established by the Bank
solely for this purpose, within two to three weeks after filing a tax return. A
RAL is a recourse loan secured by the taxpayer's federal income tax refund and
is made within one or two days after filing a tax return. During the 1997 tax
season, the Bank provided approximately 234,000 ACRs and 103,000 RALs to Jackson
Hewitt customers.

The Bank receives a processing fee for each ACR and RAL it provides. When
the Bank provides a RAL, it receives an additional fee that is equal to 4% of
the RAL. If the IRS does not deposit the expected refund into the bank account
established for its receipt because, among other reasons, the taxpayer owes back
taxes, the amount due under a RAL will not be paid without instituting
individual collection actions against the taxpayer. The risk of RAL default in
excess of 4% is apportioned between the Bank and Jackson Hewitt on a 35%/65%
basis, respectively. The default rate did not exceed 4% in 1997 or 1996.

The Bank participated in the Tax Refund Program in 1997 and 1996, but did
not participate in 1995 due to a significant change by the IRS in the
administration of the electronic filing and refund program, which was
subsequently changed the following year. The Tax Refund Program generated $2.2
million and $2.1 million in revenue during 1997 and 1996, respectively. The Tax
Refund Program earnings are realized primarily in the first quarter of the year.
These pretax earnings constituted approximately 70% and 89% of the Company's
first quarter 1997 and 1996 pretax earnings, respectively, and 51.2% of the
Company's pretax earnings for the year ended December 31, 1996. Revenue
generated by the Tax Refund Program accounted for 11.5% and 14.6% of total
revenues in the nine months ended September 30, 1997 and 1996, respectively. See
"Risk Factors--Reliance on Jackson Hewitt Relationship."

The Bank has adopted stringent underwriting standards, instituted
independent credit checks, set loan limits based on past history and increased
pricing to reflect the risk associated with RALs. In addition, the Bank
participates in cross-collection arrangements with other RAL lenders. Under
these arrangements, the banks share information regarding the identity of, and
amounts payable by, delinquent RAL borrowers. By sharing this information the
banks are able to identify these individuals in later tax seasons should they
obtain a RAL from a tax preparation company. RAL borrowers are advised in
advance that should they become identified as owing any portion of a RAL from a
prior tax season, any tax refunds attributable to such borrower will be offset
first against the prior debt.

BRANCH EXPANSION PLANS AND GROWTH STRATEGY

The Company plans to achieve growth and market penetration by expanding the
Bank's branch network into markets with a significant number of commercial
businesses. The Bank has an aggressive branch expansion plan and expects to open
three branches per year in 1998 and 1999 and is currently considering 15 sites
as possible locations for new branches. Management's goal when establishing a
new branch is to achieve deposits of at least $35.0 million in three years or
less. The Bank opened its Ardmore, City Line Avenue and East Norriton branches
in November 1995, March 1997 and May 1997, respectively. As of September 30,
1997, these branches had $21.6 million, $5.4 million and $4.2 million in
deposits, respectively. The Bank will open its seventh branch office in
Abington, Montgomery County in November 1997.

31
<PAGE>
LOAN PORTFOLIO

The Company's loan portfolio consists of commercial loans, commercial real
estate loans, commercial loans secured by one-to-four family residential
property, as well as residential, home equity loans and consumer loans.
Commercial loans are primarily term loans made to small- to medium-sized
businesses and professionals for working capital purposes. The majority of these
commercial loans are collateralized by real estate and further secured by other
collateral and personal guarantees. The Bank's commercial loans average from
$250,000 to $750,000 in amount.

The Company's net loans increased $14.4 million, or 8.5%, to $184.4 million
at September 30, 1997 from $170.0 million at December 31, 1996, which were
funded by an increase in borrowings.

The following table sets forth the Company's gross loans by major categories
for the periods indicated:

LOAN PORTFOLIO COMPOSITION

<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
----------------------- ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ----------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Commercial:
Real estate secured.................. $ 68,794 $ 59,169 $ 62,016 $ 34,353 $ 22,979 $ 16,160 $ 12,628
Non-real estate secured/ unsecured... 37,778 42,458 45,007 23,183 27,429 29,653 33,669
---------- ----------- ---------- --------- --------- --------- ---------
Total commercial................... 106,572 101,627 107,023 57,536 50,408 45,813 46,297
Residential real estate................ 73,582 54,604 61,240 26,781 20,493 16,279 12,502
Consumer and other..................... 6,180 4,569 3,831 1,546 1,182 829 994
---------- ----------- ---------- --------- --------- --------- ---------
Total loans........................ $ 186,334 $ 160,800 $ 172,094 $ 85,863 $ 72,083 $ 62,921 $ 59,793
---------- ----------- ---------- --------- --------- --------- ---------
---------- ----------- ---------- --------- --------- --------- ---------
</TABLE>

LOAN MATURITY AND INTEREST RATE SENSITIVITY

The amount of loans outstanding by category as of the dates indicated, which
are due in (i) one year or less, (ii) more than one year through five years and
(iii) over five years, is shown in the following table. Loan balances are also
categorized according to their sensitivity to changes in interest rates.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997 AT DECEMBER 31, 1996
---------------------------------------------- -----------------------------------
MORE THAN MORE THAN
ONE YEAR ONE YEAR
THROUGH OVER THROUGH OVER
ONE YEAR FIVE FIVE TOTAL ONE YEAR FIVE FIVE
OR LESS YEARS YEARS LOANS OR LESS YEARS YEARS
----------- ----------- --------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Commercial............................. $ 12,735 $ 65,674 $ 28,163 $ 106,572 $ 20,028 $ 62,254 $ 24,741
Residential real estate................ 4,843 36,295 32,444 73,582 7,562 34,179 19,499
Consumer and other..................... 359 2,356 3,465 6,180 607 1,946 1,278
----------- ----------- --------- --------- ----------- ----------- ---------
Total.............................. $ 17,937 $ 104,325 $ 64,072 $ 186,334 $ 28,197 $ 98,379 $ 45,518
----------- ----------- --------- --------- ----------- ----------- ---------
----------- ----------- --------- --------- ----------- ----------- ---------

Loans with fixed rate.................. $ 10,873 $ 72,451 $ 27,853 $ 111,177 $ 9,163 $ 58,761 $ 21,257
Loans with floating rate............... 7,064 31,874 36,219 75,157 19,034 39,618 24,261
----------- ----------- --------- --------- ----------- ----------- ---------
Total.............................. $ 17,937 $ 104,325 $ 64,072 $ 186,334 $ 28,197 $ 98,379 $ 45,518
----------- ----------- --------- --------- ----------- ----------- ---------
----------- ----------- --------- --------- ----------- ----------- ---------
Percent composition by maturity........ 9.63% 55.99% 34.38% 100.00% 16.38% 57.10% 26.45%
Fixed rate loans as a percentage of
total loans maturing................. 60.62 69.45 43.47 59.67 32.50 59.73 46.70
Floating rate loans as a percentage of
total loans maturing................. 39.38 30.55 56.53 40.33 67.50 40.27 53.30

TOTAL
LOANS
---------
<S> <C>

Commercial............................. $ 107,023
Residential real estate................ 61,240
Consumer and other..................... 3,831
---------
Total.............................. $ 172,094
---------
---------
Loans with fixed rate.................. $ 89,181
Loans with floating rate............... 82,913
---------
Total.............................. $ 172,094
---------
---------
Percent composition by maturity........ 100.00%
Fixed rate loans as a percentage of
total loans maturing................. 51.82
Floating rate loans as a percentage of
total loans maturing................. 48.18
</TABLE>

32
<PAGE>
In the ordinary course of business, loans maturing within one year may be
renewed, in whole or in part, as to principal amount, at interest rates
prevailing at the date of renewal.

At September 30, 1997, 59.67% of total loans were fixed rate compared to
51.82% at December 31, 1996. See "Management's Discussion and Analysis Of
Financial Condition and Results of Operations-- Interest Rate Risk Management."

CREDIT QUALITY

The Bank's written lending policies require underwriting, loan documentation
and credit analysis standards to be met prior to funding. In addition, a senior
loan officer reviews all loan applications. The Board of Directors reviews the
status of loans monthly to ensure that proper standards are maintained.

Loans, including impaired loans, are generally classified as nonaccrual if
they are past due as to maturity or payment or principal or interest for a
period of more than 90 days, unless such loans are well-secured and in the
process of collection. Loans that are on a current payment status or past due
less than 90 days may also be classified as nonaccrual if repayment in full of
principal and/or interest is in doubt.

Loans may be returned to accrual status when all principal and interest
amounts contractually due are reasonably assured of repayment within an
acceptable period of time, and there is a sustained period of repayment
performance (generally a minimum of six months) by the borrower, in accordance
with the contractual terms of interest and principal.

While a loan is classified as nonaccrual or as an impaired loan and the
future collectability of the recorded loan balance is doubtful, collections of
interest and principal are generally applied as a reduction to principal
outstanding. When the future collectability of the recorded loan balance is
expected, interest income may be recognized on a cash basis. In the case where a
nonaccrual loan had been partially charged off, recognition of interest on a
cash basis is limited to that which would have been recognized on the recorded
loan balance at the contractual interest rate. Cash interest receipts in excess
of that amount are recorded as recoveries to the allowance for loan losses until
prior charge-offs have been fully recovered.

The following summary shows information concerning loan delinquency and
other non-performing assets at the dates indicated.

<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
-------------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Loans accruing, but past due 90 days or more... $ 284 $ 436 $ 27 $ 11 $ 196 $ 256 $ 441
Nonaccrual loans............................... 1,363 1,971 1,892 526 878 274 --
Total non-performing loans..................... 1,647 2,407 1,919 537 1,074 530 441
Foreclosed real estate......................... 1,944 364 295 295 -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total non-performing assets(1)............. $ 3,591 $ 2,771 $ 2,214 $ 832 $ 1,074 $ 530 $ 441
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Non-performing loans as a percentage of total
loans, net of unearned income(1)............. 0.88% 1.50% 1.12% 0.63% 1.49% 0.84% 0.74%
Non-performing assets as a percentage of total
assets....................................... 1.18 1.07 0.81 0.63 1.01 0.52 0.54
</TABLE>

- ------------------------

(1) Non-performing loans are comprised of (i) loans that are on a nonaccrual
basis, (ii) accruing loans that are 90 days or more past due and (iii)
restructured loans. Non-performing assets are composed of non-performing
loans and foreclosed real estate (assets acquired in foreclosure).

33
<PAGE>
The following summary shows the impact on interest income of nonperforming
loans for the periods indicated:

At September 30, 1997, the Company had no foreign loans and no loan
concentrations exceeding 10% of total loans except for credits extended to real
estate agents and managers in the aggregate amount of $37.5 million, which
represented 20% of gross loans receivable. Loan concentrations are considered to
exist when there are amounts loaned to a multiple number of borrowers engaged in
similar activities that would cause them to be similarly impacted by economic or
other conditions.

Foreclosed real estate is initially recorded at fair value, net of estimated
selling costs at the date of foreclosure, thereby establishing a new cost basis.
After foreclosure, valuations are periodically performed by management and the
assets are carried at the lower of cost or fair value, less estimated costs to
sell. Revenues and expenses from operations and changes in the valuation
allowance are included in other expenses.

Potential problem loans consist of loans that are included in performing
loans, but for which potential credit problems of the borrowers have caused
management to have serious doubts as to the ability of such borrowers to
continue to comply with present repayment terms. At September 30, 1997, all
identified potential problem loans are included in the preceding table.

The Bank had no credit exposure to "highly leveraged transactions" at
September 30, 1997, as defined by the FRB.

34
<PAGE>
ALLOWANCE FOR LOAN LOSSES

A detailed analysis of the Company's allowance for loan losses for the nine
month periods ended September 30, 1997 and 1996 and for each of the years in the
five year period ended December 31, 1996 is as follows:

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
---------------------- --------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Balance at beginning of period.............. $ 2,092 $ 680 $ 680 $ 650 $ 460 $ 340 $ 355
Charge-offs:
Commercial................................ 332 238 293 162 136 64 75
Real estate............................... -- -- -- 50 --
Consumer.................................. 44 33 98 -- 8 23 2
---------- ---------- ---------- --------- --------- ---------- ----------
Total charge-offs....................... 376 271 391 212 144 87 77
Recoveries:
Commercial................................ 69 19 101 16 6 -- --
Real estate............................... -- -- -- 2 -- -- --
Consumer.................................. 6 14 19 1 5
---------- ---------- ---------- --------- --------- ---------- ----------
Total recoveries........................ 75 33 120 19 11 -- --
---------- ---------- ---------- --------- --------- ---------- ----------
Net charge-offs............................. 301 238 271 193 133 87 77
Acquisition of ExecuFirst................... -- 1,528 1,528 -- -- -- --
Provision for loan losses................... 140 55 155 223 323 207 62
---------- ---------- ---------- --------- --------- ---------- ----------
Balance at end of period.................. $ 1,931 $ 2,025 $ 2,092 $ 680 $ 650 $ 460 $ 340
---------- ---------- ---------- --------- --------- ---------- ----------
---------- ---------- ---------- --------- --------- ---------- ----------
Average loans outstanding(1).............. $ 180,019 $ 112,735 $ 132,294 $ 78,489 $ 69,838 $ 62,489 $ 58,173
---------- ---------- ---------- --------- --------- ---------- ----------
---------- ---------- ---------- --------- --------- ---------- ----------
As a percent of average loans(1):
Net charge-offs........................... 0.17% 0.21% 0.20% 0.25% 0.19% 0.14% 0.13%
Provision for loan losses................. 0.07 0.05 0.12 0.28 0.46 0.33 0.11
Allowance for loan losses................. 1.07 1.80 1.58 0.87 0.93 0.74 0.58
Allowance for possible loan losses to:
Total loans, net of unearned income....... 1.04% 1.26% 1.22% 0.79% 0.90% 0.73% 0.57%
Total non-performing loans................ 117.24 84.13 109.02 126.63 60.52 86.79 77.10
</TABLE>

- ------------------------

(1) Includes nonaccruing loans.

35
<PAGE>
Management makes a monthly determination as to an appropriate provision from
earnings necessary to maintain an allowance for loan losses that is adequate for
potential yet undetermined losses. The Company's Board of Directors periodically
reviews the status of all nonaccrual and impaired loans, loans criticized by the
Bank's regulators and internal loan review officer, who reviews both the loan
portfolio and the overall adequacy of the loan loss reserve. During the review
of the loan loss reserve, the Board of Directors considers specific loans, pools
of similar loans, historical charge-off activity, and a supplemental reserve
allocation as a measure of conservatism for any unforeseen loan loss reserve
requirements. The sum of these components is compared to the loan loss reserve
balance. Any additions deemed necessary to the loan loss reserve balance are
charged to operating expenses.

The unallocated allowance decreased $405,000, or 80.4%, to $99,000 at
September 30, 1997 from $504,000 at September 30, 1996, primarily as the result
of a decline in non-performing loans.

The Company has an existing loan review program which monitors the loan
portfolio on an ongoing basis. Loan review is conducted by a loan review officer
and is reported quarterly to the Board of Directors. The Board of Directors
reviews the finding of the loan review program on a monthly basis. Based on the
recommendations of this program, past performance of the Bank's loan portfolio
and general economic conditions, management believes that the reserve for loan
losses is reasonable and would be adequate to absorb potential losses related to
problem assets.

Determining the appropriate level of the allowance for loan losses at any
given date is difficult, particularly in a continually changing economy. In
management's opinion, the allowance for loan losses was adequate at September
30, 1997. However, there can be no assurance that, if asset quality deteriorates
in future periods, additions to the allowance for loan losses will not be
required.

The Bank's management is unable to determine in what loan category future
charge-offs and recoveries may occur. The following schedule sets forth the
allocation of the allowance for loan losses among various categories. At
September 30, 1997, approximately 59.0% of the allowance for loan losses is
allocated to general risk to protect the Bank against potential yet undetermined
losses. The allocation is based upon historical experience. The entire allowance
for loan losses is available to absorb future loan losses in any loan category.

<TABLE>
<CAPTION>
AT SEPTEMBER 30,
----------------------------------------------
1997 1996
---------------------- ----------------------
PERCENTAGE PERCENTAGE
OF LOANS OF LOANS
IN EACH IN EACH
CATEGORY CATEGORY
AMOUNT TO LOANS(1) AMOUNT TO LOANS(1)
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Allocation of allowance for loan losses:
Commercial........................................................ $ 1,699 57.19% $ 1,378 63.20%
Residential real estate........................................... 20 39.49 23 33.96
Consumer and other................................................ 113 3.32 120 2.84
Unallocated....................................................... 99 504
--------- ---------
Total........................................................... $ 1,931 $ 2,025
--------- ---------
--------- ---------
</TABLE>

36
<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993
-------------------------- -------------------------- -------------------------- --------------------------
PERCENT PERCENT PERCENT PERCENT
OF LOANS OF LOANS OF LOANS OF LOANS
IN EACH IN EACH IN EACH IN EACH
CATEGORY CATEGORY CATEGORY CATEGORY
AMOUNT TO LOANS(1) AMOUNT TO LOANS(1) AMOUNT TO LOANS(1) AMOUNT TO LOANS(1)
----------- ------------- ----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Allocation of
allowance for
loan losses:
Commercial....... $ 1,573 62.19% $ 161 67.01% $ 146 69.93% $ 203 66.34%
Residential real
estate......... 21 35.59 40 31.19 44 28.43 103 33.66
Consumer and
other.......... 90 2.22 9 1.80 8 1.64 -- --
Unallocated...... 408 470 452 154
----------- ----- ----- -----
Total.......... $ 2,092 $ 680 $ 650 $ 460
----------- ----- ----- -----
----------- ----- ----- -----

1992
--------------------------
PERCENT
OF LOANS
IN EACH
CATEGORY
AMOUNT TO LOANS(1)
----------- -------------
<S> <C> <C>

Allocation of
allowance for
loan losses:
Commercial....... $ 76 45.78%
Residential real
estate......... 90 54.22
Consumer and
other.......... -- --
Unallocated...... 174
-----
Total.......... $ 340
-----
-----
</TABLE>

- ------------------------
(1) Loans net of unearned income.

SECURITIES PORTFOLIO

The Company's securities portfolio is intended to provide liquidity, reduce
interest rate risk and contribute to earnings while exposing the Company to
reduced credit risk. As a result of the Merger, the securities portfolio has
grown substantially. The securities portfolio has also grown through the use of
leverage provided by FHLB advances.

A summary of securities available for sale and securities held to maturity
at September 30, 1997 and 1996 and at December 31, 1996, 1995, and 1994 follows.

<TABLE>
<CAPTION>
SECURITIES SECURITIES
AVAILABLE FOR SALE AVAILABLE FOR SALE
AT SEPTEMBER 30, AT DECEMBER 31,
-------------------- -------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
U.S. Treasury................................................. $ -- $ 1,499 $ 998 $ -- $ --
U.S. Government Agencies...................................... 3,159 6,135 4,128 4,320 --
Mortgage-backed and asset-backed securities (1)............... -- -- 770 -- --
Other securities (2).......................................... -- -- -- -- --
--------- --------- --------- --------- ---------
Total amortized cost of securities............................ $ 3,159 $ 7,634 $ 5,896 $ 4,320 $ --
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total fair value of securities................................ $ 3,162 $ 7,627 $ 5,900 $ 4,348 $ --
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

<TABLE>
<CAPTION>
SECURITIES SECURITIES
HELD TO MATURITY HELD TO MATURITY
AT SEPTEMBER 30, AT DECEMBER 31,
-------------------- -------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
U.S. Treasury................................................. $ -- $ -- $ -- $ 1,002 $ 2,016
U.S. Government Agencies...................................... 30,792 33,138 49,214 7,002 --
Mortgage-backed and asset-backed securities (1)............... 63,323 35,263 23,682 25,215 25,402
Other securities (2).......................................... 3,837 2,034 2,158 785 791
--------- --------- --------- --------- ---------
Total amortized cost of securities............................ $ 97,952 $ 70,435 $ 75,054 $ 34,004 $ 28,209
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total fair value of securities................................ $ 98,536 $ 70,206 $ 75,307 $ 33,846 $ 26,481
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

- ------------------------------

(1) All of these obligations consist of U.S. Government Agency issued
securities.

(2) Comprised mostly of FHLB stock and Federal Reserve Bank stock.

37
<PAGE>
The following table presents the maturity distribution and weighted average
yield of the securities portfolio of the Company at September 30, 1997 and
December 31, 1996.
<TABLE>
<CAPTION>
AVAILABLE FOR SALE AT SEPTEMBER 30, 1997
---------------------------------------------------------------------------------------
AFTER 10
AFTER 5 YEARS BUT YEARS OR
AFTER 1 YEAR BUT NO
WITHIN 1 YEAR WITHIN 5 YEARS WITHIN 10 YEARS MATURITY
------------------------ ------------------------ ------------------------ ---------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT
----------- ----- ----------- ----- ----------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Amortized cost:
U.S. Treasury......................... $ -- --% $ -- --% $ -- --% $ --
U.S. Government Agencies.............. -- -- -- -- 2,276 6.91 886
Mortgage-backed securities............ -- -- -- -- -- -- --
Other securities...................... -- -- -- -- -- -- --
--
----------- --- --- ----------- --- ---------
Total securities available for sale... $ -- --% $ -- --% $ 2,276 6.91% $ 886
--
--
----------- --- --- ----------- --- ---------
----------- --- --- ----------- --- ---------

TOTAL
------------------------
YIELD AMOUNT YIELD
----- ----------- -----
<S> <C> <C> <C>

Amortized cost:
U.S. Treasury......................... --% $ -- --%
U.S. Government Agencies.............. 7.35 3,162 7.03
Mortgage-backed securities............ -- -- --
Other securities...................... -- -- --

--- ----------- ---
Total securities available for sale... 7.35% $ 3,162 7.03%

--- ----------- ---
--- ----------- ---
</TABLE>
<TABLE>
<CAPTION>
AVAILABLE FOR SALE AT DECEMBER 31, 1996
---------------------------------------------------------------------------------------
AFTER 10
AFTER 5 YEARS BUT YEARS OR
AFTER 1 YEAR BUT NO
WITHIN 1 YEAR WITHIN 5 YEARS WITHIN 10 YEARS MATURITY
------------------------ ------------------------ ------------------------ ---------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT
----------- ----- ----------- ----- ----------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Amortized cost:
U.S. Treasury......................... $ 1,001 5.88% $ -- --% $ -- --% $ --
U.S. Government Agencies.............. 500 4.53 -- -- 2,570 7.15 1,061
Mortgage-backed securities............ -- -- -- -- -- -- 768
Other securities...................... -- -- -- -- -- -- --
--
----------- --- --- ----------- --- ---------
Total securities available for sale... $ 1,501 5.43% $ -- --% $ 2,570 7.15% $ 1,829
--
--
----------- --- --- ----------- --- ---------
----------- --- --- ----------- --- ---------

TOTAL
------------------------
YIELD AMOUNT YIELD
----- ----------- -----
<S> <C> <C> <C>

Amortized cost:
U.S. Treasury......................... --% $ 1,001 5.88%
U.S. Government Agencies.............. 7.08 4,131 6.81
Mortgage-backed securities............ 5.53 768 5.53
Other securities...................... -- -- --

--- ----------- ---
Total securities available for sale... 6.43% $ 5,900 6.49%

--- ----------- ---
--- ----------- ---
</TABLE>
<TABLE>
<CAPTION>
HELD TO MATURITY AT SEPTEMBER 30, 1997
-----------------------------------------------------------------------------------
AFTER 10
YEARS OR
AFTER 1 YEAR BUT AFTER 5 YEARS BUT NO
WITHIN 1 YEAR WITHIN 5 YEARS WITHIN 10 YEARS MATURITY
------------------------ ---------------------- ---------------------- ---------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT
----------- ----- --------- ----- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Amortized cost:
U.S. Treasury......................... $ -- --% $ -- --% $ -- --% $ --
U.S. Government Agencies.............. -- -- 7,398 6.96 19,317 7.31 4,077
Mortgage-backed securities............ -- -- 2,506 5.61 9,093 6.80 51,724
Other securities...................... -- -- 805 6.81 100 7.50 2,932
----------- --- --------- --- --------- --- ---------
Total securities held to maturity..... -- --% $ 10,709 6.63% $ 28,510 7.15% $ 58,733
----------- --- --------- --- --------- --- ---------
----------- --- --------- --- --------- --- ---------

TOTAL
----------------------
YIELD AMOUNT YIELD
----- --------- -----
<S> <C> <C> <C>

Amortized cost:
U.S. Treasury......................... --% $ -- --%
U.S. Government Agencies.............. 7.78 30,792 7.29
Mortgage-backed securities............ 6.56 63,323 6.36
Other securities...................... 5.99 3,837 6.20
--- --------- ---
Total securities held to maturity..... 6.62% $ 97,952 6.78%
--- --------- ---
--- --------- ---
</TABLE>
<TABLE>
<CAPTION>
HELD TO MATURITY AT DECEMBER 31, 1996
---------------------------------------------------------------------------------
AFTER 10
YEARS OR
AFTER 1 YEAR BUT AFTER 5 YEARS BUT NO
WITHIN 1 YEAR WITHIN 5 YEARS WITHIN 10 YEARS MATURITY
---------------------- ---------------------- ---------------------- ---------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT
----------- --------- --------- ----- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Amortized cost:
U.S. Treasury......................... $ -- --% $ -- --% $ -- --% $ --
U.S. Government Agencies.............. -- -- 15,986 6.68 33,228 7.35 --
Mortgage-backed securities............ -- -- -- -- -- -- 23,682
Other securities...................... -- -- -- -- -- -- 2,158
----------- --------- --------- --- --------- --- ---------
Total securities held to maturity..... $ -- --% $ 15,986 6.68% $ 33,228 7.35% $ 25,840
----------- --------- --------- --- --------- --- ---------
----------- --------- --------- --- --------- --- ---------

TOTAL
----------------------
YIELD AMOUNT YIELD
----- --------- -----
<S> <C> <C> <C>

Amortized cost:
U.S. Treasury......................... --% $ -- --%
U.S. Government Agencies.............. -- 49,214 7.13
Mortgage-backed securities............ 5.14 23,682 5.14
Other securities...................... 6.00 2,158 6.00
--- --------- ---
Total securities held to maturity..... 5.21% $ 75,054 6.75%
--- --------- ---
--- --------- ---
</TABLE>

DEPOSIT STRUCTURE

Of the total daily average deposits of approximately $263.5 million held by
the Bank during the nine months ended September 30, 1997, approximately $52.5
million, or 19.9%, represented non-interest bearing deposits, compared to
approximately $32.1 million, or 16.8%, of approximately $190.8 million total
daily average deposits during 1996. Total deposits at September 30, 1997
consisted of approximately $34.0

38
<PAGE>
million in non-interest-bearing demand deposits, approximately $8.2 million in
interest-bearing demand deposits, approximately $25.8 million in savings
deposits and money market accounts, approximately $152.9 million in time
deposits under $100,000, and approximately $26.9 million in time deposits
greater than $100,000. In general, the Bank pays higher interest rates on time
deposits over $100,000 in principal amount. Due to the nature of time deposits
and changes in the interest rate market generally, it should be expected that
the Bank's deposit liabilities may fluctuate from period-to-period.

The following table is a distribution of the average balances of the Bank's
deposits and the average rates paid thereon, for the nine month periods ended
September 30, 1997 and 1996 and the three years ended December 31, 1996, 1995
and 1994.

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------ ----------------------------------------------------------------
1997 1996 1996 1995 1994
-------------------- -------------------- -------------------- -------------------- --------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE BALANCE RATE BALANCE RATE
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Money market and
savings deposits... $ 28,761 3.21% $ 15,961 3.90% $ 21,594 3.12% $ 13,878 3.72% $ 17,377 3.61%
Time deposits........ 173,690 5.82 138,437 5.89 148,834 5.82 81,404 6.15 68,152 4.41
Demand deposits,
interest-bearing... 8,525 2.49 4,327 2.53 5,623 2.49 1,504 2.19 1,478 2.30
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total interest-
bearing deposits... $ 210,976 5.33% $ 158,725 5.60% $ 176,051 5.38% $ 96,786 5.74% $ 87,007 4.14%
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>

The following is a breakdown, by maturities, of the Company's time
certificates of deposit issued in denominations of $100,000 or more as of
September 30, 1997 and 1996 and December 31, 1996, 1995 and 1994.

<TABLE>
<CAPTION>
CERTIFICATES OF $100,000 OR MORE
-----------------------------------------------------
AT SEPTEMBER 30, AT DECEMBER 31.
-------------------- -------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Maturing in:
Three months or less............................... $ 4,204 $ 12,930 $ 10,654 $ 1,700 $ 5,850
Over three months through six months............... 5,722 5,305 4,381 983 1,825
Over six months through twelve months.............. 8,259 7,262 6,120 1,358 2,809
Over twelve months................................. 8,738 7,730 8,072 4,029 --
--------- --------- --------- --------- ---------
Total............................................ $ 26,923 $ 33,227 $ 29,227 $ 8,070 $ 10,484
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

BORROWINGS

The Company has two lines of credit totaling $7.0 million available for the
purchase of federal funds from corresponding banks. In addition, the Company has
a collateralized line of credit with the Federal Home Loan Bank of Pittsburgh
with a maximum borrowing capacity of $102.0 million. This maximum borrowing
capacity is subject to change on a quarterly basis. As of September 30, 1997,
there were $27.3 million of borrowings outstanding.

COMPETITION

The Bank faces significant competition from other commercial banks, savings
banks, savings and loan associations and several other financial or investment
service institutions in the communities it serves. Several of these institutions
are affiliated with major banking and financial institutions that are
substantially larger and have greater financial resources than the Company and
the Bank. As the financial services industry continues to consolidate,
competition affecting the Bank may increase. For most of the services

39
<PAGE>
that the Bank performs there is also competition from credit unions and issuers
of commercial paper and money market funds. Such institutions, as well as
brokerage firms, consumer finance companies, insurance companies and pension
trusts, are important competitors for various types of financial services.

PROPERTY

The Company leases approximately 18,000 square feet on the tenth and
eleventh floors of 1608 Walnut Street, Philadelphia, Pennsylvania. The space is
occupied by both the Company and the Bank and is used for executive offices,
Bank operations and commercial lending. A new lease was signed effective
February 1, 1997 with a term of 10 and one-half years with annual rent expense
of $84,217, payable monthly. In addition to the base rent and building operation
expenses, the Company is required to pay all real estate taxes, assessments, and
sewer costs, water charges, excess levies, license and permit fees under its
lease and to maintain insurance on the premises. Pursuant to the terms of its
lease, the Company has a right of first refusal to purchase the leased premises.
Management believes that its present space is adequate, but that future staffing
needs may require the Bank to secure additional space and the Bank is presently
exploring several options in this area.

The Bank also occupies under lease approximately 3,600 square feet on the
ground floor and 2,900 square feet in the mezzanine at the northwest corner of
Three Penn Center at 1515 Market Street, Philadelphia, Pennsylvania. This space
contains a banking floor, lobby and operations center. The initial term expires
on March 31, 1998 and contains three options to renew, the first for a
three-year period and the second and third for five years each at the then
prevailing market rates. The annual rent for such location for 1996 was $28,082,
payable monthly.

The Bank leases approximately 1,743 square feet on the ground floor at 1601
Walnut Street, Philadelphia, Pennsylvania. This space contains a banking area
and safe. The initial 10 year term of the lease expires July 2006 and contains
one renewal option of five years. The annual rent for such location for 1996 was
$42,600, payable monthly.

The Bank leases approximately 780 square feet in the lower level of Pepper
Pavilion at Graduate Hospital, 19th and Lombard Streets, Philadelphia,
Pennsylvania. The space contains a banking area, lobby, office and safe. The
initial five-year term on such lease expired June 30, 1997, and the Company
exercised its renewal option for five years. The annual rent for such location
for 1996 was $26,000, payable monthly.

The Bank leases approximately 798 square feet on the ground floor and 903
square feet on the 2nd floor at 233 East Lancaster Avenue, Ardmore,
Pennsylvania. The space contains a banking area and business development office.
The initial five-year term of the lease expires in September 2000. The annual
rent for such location for 1996 was $38,694, payable monthly.

The Bank leases an approximately 2,200 square foot building at 4190 City
Line Avenue, Philadelphia, Pennsylvania. The space contains a retail banking
facility. The initial 10 year term of the lease expires January 2007. The annual
rent for such location for 1996 was $55,000, payable monthly.

The Bank leases an approximately 4,500 square foot building at 75 East
Germantown Avenue, East Norriton, Pennsylvania. The space contains a banking
area and business development office. The initial 10 year term of the lease
expires in December 2006. The annual rent for 1997 is $66,000, payable monthly.

The Bank purchased an approximately 2,800 square foot facility for its
future Abington, Montgomery County location at 1480 York Road, Abington,
Pennsylvania. It is expected to house the branch facility and a possible loan
administration office.

40
<PAGE>
LEGAL PROCEEDINGS

The Bank, along with a number of other financial institutions, has recently
been made a party to a lawsuit brought by a New Jersey bank claiming damages of
approximately $200,000 arising out of a series of mortgage loans made to a
borrower who apparently procured one or more of these loans fraudulently. The
Bank does not believe it has any liability arising from this transaction and
intends to vigorously defend this claim.

The Company and the Bank are from time to time a party (plaintiff or
defendant) to lawsuits that are in the normal course of business. While any
litigation involves an element of uncertainty, management, after reviewing
pending actions with its legal counsel, is of the opinion that the liability of
the Company and the Bank, if any, resulting from such actions will not have a
material effect on the financial condition or results of operations of the
Company and the Bank.

SUPERVISION AND REGULATION

Various requirements and restrictions under the laws of the United States
and the Commonwealth of Pennsylvania affect the Company and the Bank.

GENERAL

The Company is a bank holding company subject to supervision and regulation
by the FRB under the Bank Holding Company Act of 1956, as amended. As a bank
holding company, the Company's activities and those of its subsidiary are
limited to the business of banking and activities closely related or incidental
to banking, and the Company may not directly or indirectly acquire the ownership
or control of more than 5% of any class of voting shares or substantially all of
the assets of any company, including a bank, without the prior approval of the
FRB.

The Bank is subject to supervision and examination by applicable federal and
state banking agencies. The Bank is a member of the Federal Reserve System, and
therefore, subject to the regulations of the FRB. The Bank is also a
Pennsylvania-chartered bank subject to supervision and regulation by the
Pennsylvania Department of Banking.

In addition, because the FDIC insures the deposits of the Bank, the Bank is
subject to regulation by the FDIC. The Bank is also subject to requirements and
restrictions under federal and state law, including requirements to maintain
reserves against deposits, restrictions on the types and amounts of loans that
may be granted and the interest that may be charged thereon, and limitations on
the types of investments that may be made and the types of services that may be
offered. Various consumer laws and regulations also affect the operations of the
Bank. In addition to the impact of regulation, commercial banks are affected
significantly by the actions of the FRB in attempting to control the money
supply and credit availability in order to influence the economy.

HOLDING COMPANY STRUCTURE

The Bank is subject to restrictions under federal law which limit its
ability to transfer funds to the Company, whether in the form of loans, other
extensions of credit, investments or asset purchases. Such transfers by the Bank
to the Company are generally limited in amount to 10% of the Bank's capital and
surplus. Furthermore, such loans and extensions of credit are required to be
secured in specific amounts, and all transactions are required to be on an arm's
length basis. The Bank has never made any loan or extension of credit to the
Company nor has it purchased any assets from the Company.

Under FRB policy, the Company is expected to act as a source of financial
strength to the Bank and to commit resources to support the Bank, i.e., to
downstream funds to the Bank. This support may be required at times when, absent
such policy, the Company might not otherwise provide such support. Any capital
loans by the Company to the Bank are subordinate in right of payment to deposits
and to certain

41
<PAGE>
other indebtedness of the Bank. In the event of the Company's bankruptcy, any
commitment by the Company to a federal bank regulatory agency to maintain the
capital of the Bank will be assumed by the bankruptcy trustee and entitled to a
priority of payment.

REGULATORY RESTRICTIONS ON DIVIDENDS

Dividend payments by the Bank to the Company are subject to the Pennsylvania
Banking Code of 1965 (the "Banking Code"), the Federal Reserve Act, and the
Federal Deposit Insurance Act (the "FDIA"). Under the Banking Code, no dividends
may be paid except from "accumulated net earnings" (generally, undivided
profits). Under the FRB's regulations, the Bank cannot pay dividends that exceed
its net income from the current year and the preceding two years. Under the
FDIA, an insured bank may pay no dividends if the bank is in arrears in the
payment of any insurance assessment due to the FDIC. Under current banking laws,
the Bank would be limited to $3.3 million of dividends in 1997 plus an
additional amount equal to the Bank's net profit for 1997, up to the date of any
such dividend declaration.

State and federal regulatory authorities have adopted standards for the
maintenance of adequate levels of capital by banks. Adherence to such standards
further limits the ability of the Bank to pay dividends to the Company.

Other regulatory requirements and policies may also affect the payment of
dividends to the Company by the Bank. If, in the opinion of the FRB, the Bank is
engaged in, or is about to engage in, an unsafe or unsound practice (which,
depending on the financial condition of the Bank, could include the payment of
dividends), the FRB may require, after notice and hearing, that the Bank cease
and desist from such practice. The FRB has formal and informal policies
providing that insured banks and bank holding companies should generally pay
dividends only out of current operating earnings.

FDIC INSURANCE ASSESSMENTS

The FDIC has implemented a risk-related premium schedule for all insured
depository institutions that results in the assessment of premiums based on
capital and supervisory measures.

Under the risk-related premium schedule, the FDIC, on a semiannual basis,
assigns each institution to one of three capital groups (well capitalized,
adequately capitalized or under capitalized) and further assigns such
institution to one of three subgroups within a capital group corresponding to
the FDIC's judgment of the institution's strength based on supervisory
evaluations, including examination reports, statistical analysis and other
information relevant to gauging the risk posed by the institution. Only
institutions with a total capital to risk-adjusted assets ratio of 10.00% or
greater, a Tier 1 capital to risk-adjusted assets ratio of 6.0% or greater and a
Tier 1 leverage ratio of 5.0% or greater, are assigned to the well capitalized
group.

Over the last two years, FDIC insurance assessments have seen several
changes for both BIF and SAIF institutions. The most recent change occurred on
March 31, 1996, when the President signed into law a bill designed to remedy the
disparity between BIF and SAIF deposit premiums. The first part of the bill
called for the SAIF to be capitalized by a one-time assessment on all SAIF
insured deposits held as of September 30, 1995. This assessment, which was 65.7
cents per $100 in deposits, raised $4.7 billion to bring the SAIF up to its
required 1.25 reserve ratio. This special assessment, paid on November 30, 1996,
had no effect on the Bank. The second part of the bill remedied the future
anticipated shortfall with respect to the payment of FICO interest. For 1997
through 1999, the banking industry will help pay the FICO interest payments at
an assessment rate that is one-fifth the rate paid by thrifts. The FICO
assessment on BIF insured deposits is 1.29 cents per $100 in deposits; for SAIF
insured deposits it is 6.44 cents per $100 in deposits. Beginning January 1,
2000, the FICO interest payments will be paid pro-rata by banks and thrifts
based on deposits. At December 31, 1996, the Company estimated the FICO interest
assessment to be $30,000 for 1997. For the nine month period ended September 30,
1997, the Company paid FICO expenses of approximately $17,000. The Bank has not
been required to pay any FDIC insurance assessments since

42
<PAGE>
the fourth quarter of 1996 because BIF has met its statutorily required ratios
and the Bank is categorized as "well capitalized."

CAPITAL ADEQUACY

The FRB adopted risk-based capital guidelines for bank holding companies,
such as the Company. The required minimum ratio of total capital to
risk-weighted assets (including off-balance sheet activities, such as standby
letters of credit) is 8.0%. At least half of the total capital is required to be
Tier 1 capital, consisting principally of common shareholders' equity,
noncumulative perpetual preferred stock and minority interests in the equity
accounts of consolidated subsidiaries, less goodwill. The remainder, Tier 2
capital, may consist of a limited amount of subordinated debt and
intermediate-term preferred stock, certain hybrid capital instruments and other
debt securities, perpetual preferred stock, and a limited amount of the general
loan loss allowance.

In addition to the risk-based capital guidelines, the FRB established
minimum leverage ratio (Tier 1 capital to average total assets) guidelines for
bank holding companies. These guidelines provide for a minimum leverage ratio of
3% for those bank holding companies that have the highest regulatory examination
ratings and are not contemplating or experiencing significant growth or
expansion. All other bank holding companies are required to maintain a leverage
ratio of at least 1% to 2% above the 3% stated minimum. The Company is in
compliance with these guidelines. The FRB subjects the Bank to similar capital
requirements.

The risk-based capital standards are required to take adequate account of
interest rate risk, concentration of credit risk and the risks of
non-traditional activities.

INTERSTATE BANKING

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Law"), amended various federal banking laws to provide for
nationwide interstate banking, interstate bank mergers and interstate branching.
The interstate banking provisions allow for the acquisition by a bank holding
company of a bank located in another state.

Interstate bank mergers and branch purchase and assumption transactions were
allowed effective September 1, 1997; however, states may "opt-out" of the merger
and purchase and assumption provisions by enacting a law that specifically
prohibits such interstate transactions. States could, in the alternative, enact
legislation to allow interstate merger and purchase and assumption transactions
prior to September 1, 1997. States could also enact legislation to allow for de
novo interstate branching by out of state banks. In July 1995, Pennsylvania
adopted "opt-in" legislation which allows such transactions.

43
<PAGE>
MANAGEMENT

The following sets forth information concerning the Company's executive
officers.

<TABLE>
<CAPTION>
NAME AGE TITLE
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Rolf A. Stensrud..................................... 59 Director, President and Chief Executive Officer of
the Company and the Bank

George S. Rapp....................................... 45 Executive Vice President and Chief Financial and
Administrative Officer of the Company and the Bank

Kevin J. Gallagher................................... 40 Executive Vice President and Chief Lending Officer of
the Bank

Jerome D. McTiernan.................................. 53 Executive Vice President of the Bank
</TABLE>

The executive officers serve at the discretion of the Company's Board of
Directors.

ROLF A. STENSRUD has served as President and Chief Executive Officer of the
Company and the Bank since March 1, 1997. From June 1996 to February 1997, he
was Executive Vice president and Chief Operating Officer of the Company and
President and Co-Chief Executive Officer of the Bank. Prior to the Merger, he
served as President, Chief Executive Officer and Director of Republic
Bancorporation and Republic Bank since 1995 and 1988, respectively.

GEORGE S. RAPP has been Executive Vice President and Chief Financial and
Administrative Officer of the Company and the Bank since March 1, 1997. From the
Merger in June 1996 until February 1997, he served as Executive Vice President
and Chief Operating Officer of the Bank. From February 1995 until the Merger, he
served as Executive Vice President and Chief Operating Officer of ExecuFirst and
First Executive Bank. Prior to joining ExecuFirst, he served two years as
Executive Vice President and Chief Financial Officer at Old York Road Bancorp.

KEVIN J. GALLAGHER has served as Executive Vice President and Chief Lending
Officer of the Bank since the Merger. From 1993 to 1996, he served as Executive
Vice President and Chief Lending Officer of Republic Bank. He served as Senior
Vice President of Republic Bank from 1992 to 1993, and as a Vice President of
Republic Bank from 1988 to 1992.

JEROME D. MCTIERNAN has served as Executive Vice President of the Bank since
the Merger. From April 1992 to 1996, he served as Executive Vice President of
Republic Bank. From 1988 to 1992, he was a Senior Vice President of Republic
Bank.

44
<PAGE>
The following table sets forth information regarding the members of the
Company's Board of Directors.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION FOR THE PAST FIVE YEARS
DIRECTOR AND POSITION HELD WITH
NAME AGE SINCE THE COMPANY AND THE BANK
- ------------------------------------------------ --- ----------- ------------------------------------------------
<S> <C> <C> <C>
Harry D. Madonna, Esquire ...................... 55 1988 Chairman of the Board of the Company and the
Bank; Partner, Blank, Rome, Comisky & McCauley,
1977 to present
Michael J. Bradley.............................. 53 1988 Vice Chairman of the Board of the Company and
the Bank; formerly Executive Vice President,
Acute and Ambulatory Services, Mercy Health
Corporation of Southeastern Pennsylvania, 1995
to 1997; Principal, Paragon Management Group,
Inc. (management consulting), 1991 to present
Kenneth Adelberg................................ 45 1988 Director of the Company and the Bank; President
of The Hifi House Group of Companies (audio and
video electronics), 1976 to present
William W. Batoff............................... 62 1988 Director of the Company and the Bank; President,
Pioneer of Philadelphia Title Insurance Company,
1973 to 1993; Managing Director, William W.
Batoff Associates (government relations
consulting firm), 1996 to the present; Senior
Consultant, Cassidy & Associates (government
relations consulting firm), 1992 to 1996;
President, Acquire Investments, Inc. (business
and financial consulting firm), 1972 to present;
Sole Proprietor, Batoff Enterprise Real Estate
(real estate brokerage and management), 1975 to
present
Daniel S. Berman................................ 36 1988 Director of the Company and the Bank; President,
Berman Development Corporation (real estate
development), 1990 to present
John F. D'Aprix................................. 55 1991 Director of the Company and the Bank; formerly
President, Pennsylvania College of Podiatric
Medicine, March 1995 to May 1997; Chairman and
CEO of HouseCare America, Inc. (managed house
care), 1993 to present; Chairman Artran Scanning
Technology (imaging services), October, 1991 to
December, 1992
Sheldon E. Goldberg............................. 66 1989 Director of the Company and the Bank; Partner,
Investment Advisor, Cumberland Advisors,
Vineland, NJ (investment advisers), 1973 to
present; President, Cumberland Brokerage Corp.,
1990 to present; Chairman, National CD Sales,
1993 to present; Chairman, Matterhorn Asset
Management Corp., 1996 to present
</TABLE>

45
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION FOR THE PAST FIVE YEARS
DIRECTOR AND POSITION HELD WITH
NAME AGE SINCE THE COMPANY AND THE BANK
- ------------------------------------------------ --- ----------- ------------------------------------------------
<S> <C> <C> <C>
Gerald Levinson................................. 66 1989 Director of the Company and the Bank;
Independent Financial Consultant, July 1985 to
present; Director; The Lannett Company (public
pharmaceutical company), 1979 to January 1997
Eustace W. Mita................................. 43 1988 Director of the Company and the Bank; Chief
Operating Officer , HAC Group, Inc. (training
consulting), 1989 to present
Neal I. Rodin................................... 51 1988 Director of the Company and the Bank; President,
The Rodin Group (international real estate
investment); President, IFC (international
financing and investing), 1975 to present
James E. Schleif................................ 55 1993 Director of the Company and the Bank; Executive
Vice President, Administration and Finance,
Mercy Health System of Southeastern Pennsylvania
(health care organization), 1978 to present
Zeev Shenkman................................... 45 1997 Director of the Company and the Bank; Private
investor, formerly Executive Vice President and
Chief Financial Officer of Global Sports, Inc.
June 1996 to May 1997; Executive Vice President
and Chief Financial Officer of Today's Man, Inc.
1984 to 1995. Former director of ExecuFirst
Bancorp
Steven J. Shotz................................. 52 1988 Director of the Company and the Bank; President
of Quantum Group, Inc. (venture capital group),
1995 to present; President and Chief Executive
Officer, Shotz, Miller, Glusman, Footer &
Magarick, P.C. (accounting firm), 1980 to 1994
Rolf A. Stensrud................................ 59 1988 Director, President and Chief Executive Officer
of the Company and the Bank; former President
and Chief Executive Officer of Republic
Bancorporation and Republic Bank
Harris Wildstein, Esquire....................... 51 1988 Director of the Company and the Bank; President
of R&S Imports, Ltd. and
Vice President of HVW, Inc. (auto dealerships),
1977 to present
</TABLE>

46
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of September 30, 1997, the amount and
percentage of Common Stock owned by each person who is known to the Company to
own more than five percent (5%) of the Common Stock, each director, each named
executive officer, and all directors and executive officers of the Company as a
group.

<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER(1) OWNERSHIP(2)(3) OF CLASS
- --------------------------------------------------------------- --------------------------- -----------
<S> <C> <C>
Directors:
Kenneth Adelberg (4)(5)........................................ 80,665 2.32%
William W. Batoff(4)(6)........................................ 46,587 1.34
Daniel S. Berman(7)(8)......................................... 29,890 0.86
Michael J Bradley(9)(10)....................................... 53,000 1.53
John F. D'Aprix(7)............................................. 9,600 0.28
Sheldon Goldberg(4)(11)........................................ 54,900 1.58
Gerald Levinson(9)............................................. 9,602 0.28
Harry D. Madonna, Esquire(9)(12)............................... 250,829 6.97
Eustace W. Mita(7)(13)......................................... 58,713 1.69
Neal Rodin (9) (14)............................................ 95,431 2.75
James E. Schleif(7)............................................ 25,000 0.73
Zeev Shenkman(4)............................................... 141,012 4.09
Steven J. Shotz(9)(15)......................................... 143,434 4.05
Rolf A. Stensrud(4)(16)........................................ 70,006 2.00
Harris Wildstein, Esquire(7)(17)............................... 218,802 6.24

Other Named Executive Officers:
George S. Rapp(18)............................................. 7,200 0.21
Kevin J. Gallagher(19)......................................... 18,733 0.54
Jerome D. McTiernan(20)........................................ 12,048 0.35

All directors and executive officers as a group (18
persons)(21)................................................. 1,325,452 33.08%
</TABLE>

- ------------------------

(1) Unless otherwise indicated, the address of each beneficial owner is c/o
Republic First Bancorp, Inc., 1608 Walnut Street, Philadelphia, PA 19103.

(2) The securities "beneficially owned" by an individual are determined in
accordance with the definitions of "beneficial ownership" set forth in the
General Rules and Regulations of the Securities and Exchange Commission and
may include securities owned by or for the individual's spouse and minor
children and any other relative who has the same home, as well as securities
to which the individual has or shares voting or investment power or has the
right to acquire beneficial ownership within sixty (60) days after September
30, 1997. Beneficial ownership may be disclaimed as to certain of the
securities.

(3) Information furnished by the directors, executive officers, and the Company.

(4) A Class I director whose term expires in 1999.

(5) Includes 25,264 shares of Common Stock subject to options granted to Mr.
Adelberg which are currently exercisable.

(6) Includes 19,253 shares of Common Stock subject to options granted to Mr.
Batoff which are currently exercisable.

(7) A Class II director whose term expires in 2000.

(8) Includes 25,264 shares of Common Stock subject to options granted to Mr.
Berman which are currently exercisable.

(9) A Class III director whose term expires in 1998.

(10) Includes 18,000 shares of Common Stock subject to options granted to Mr.
Bradley which are currently exercisable.

(11) Includes 18,000 shares of Common Stock subject to options granted to Mr.
Goldberg which are currently exercisable.

(12) Includes 154,969 shares of Common Stock subject to options granted to Mr.
Madonna which are currently exercisable.

47
<PAGE>
(13) Includes 28,879 shares of Common Stock subject to options granted to Mr.
Mita which are currently exercisable.

(14) Includes 28,879 shares of Common Stock subject to options granted to Mr.
Rodin which are currently exercisable.

(15) Includes 91,318 shares of Common Stock subject to options granted to Mr.
Shotz which are currently exercisable.

(16) Includes 57,758 shares of Common Stock subject to options granted to Mr.
Stensrud which are currently exercisable.

(17) Includes 61,319 shares of Common Stock subject to options granted to Mr.
Wildstein which are currently exercisable.

(18) Includes 6,000 shares of Common Stock subject to options granted to Mr.
Rapp which are currently exercisable.

(19) Includes 15,624 shares of Common Stock subject to options granted to Mr.
Gallagher which are currently exercisable.

(20) Includes 9,624 shares of Common Stock subject to options granted to Mr.
McTiernan which are currently exercisable.

(21) The percent of class assumes all exercisable options issued to the
executive officers and non-employee directors have been exercised and,
therefore, on a pro forma basis, 4,006,460 shares of Common Stock would be
outstanding.

48
<PAGE>
EXECUTIVE COMPENSATION

Set forth below is information concerning the annual compensation for
services in all capacities to the Company and the Bank for the fiscal years
ended December 31, 1996, 1995 and 1994 of each person who, during 1996, served
as (i) the chief executive officer of the Company or (ii) an executive officer
of the Company and the Bank to the extent such executive officers' total annual
salary and bonus exceeded $100,000. There were no other executive officers for
whom disclosure would have been provided but for the fact that such individuals
were not serving at the end of the 1996 fiscal year.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------------
AWARDS
ANNUAL COMPENSATION --------------------------
--------------------------------------------- SECURITIES PAYOUTS
OTHER RESTRICTED UNDER- -----------
ANNUAL STOCK LYING LTIP
SALARY BONUS COMPEN- AWARD(S) OPTIONS/ PAYOUTS
NAME AND PRINCIPAL POSITION YEAR ($) ($) SATION ($) SARS(#) $
- -------------------------------------- --------- ---------- --------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Zvi H. Muscal (1)..................... 1996 $ 220,000 $ 0 $ 9,000 $ 0 0 $ 0
Former Chief Executive Officer of 1995 220,000 0 15,000 0 12,000 0
the Company and the Bank 1994 220,000 35,000 15,000 0 12,000 0

Rolf A. Stensrud...................... 1996 175,000 50,000 0 0 0 0
President and Chief Executive 1995 165,000 50,000 0 0 0 0
Officer of the Company and the Bank 1994 155,000 0 17,615 0 23,827 0

George S. Rapp........................ 1996 105,000 15,000 0 0 6,000 0
Executive Vice President and Chief 1995 105,000 0 0 0 0 0
Financial Officer of the Company and 1994 N/A N/A N/A N/A N/A N/A
the Bank

Kevin J. Gallagher.................... 1996 105,000 31,069 0 0 6,000 0
Executive Vice President and Chief 1995 95,000 0 0 0 0 0
Lending Officer of the Bank 1994 85,000 0 0 0 0 0

Jerome D. McTiernan................... 1996 95,000 10,000 0 0 0 0
Executive Vice President of the Bank 1995 90,000 0 0 0 0 0
1994 85,000 0 0 0 0 0

ALL
OTHER
COMPEN-
SATION
NAME AND PRINCIPAL POSITION ($)
- -------------------------------------- ---------
<S> <C>
Zvi H. Muscal (1)..................... $ 16,036(2)
Former Chief Executive Officer of 16,036
the Company and the Bank 16,036
Rolf A. Stensrud...................... 8,950(2)
President and Chief Executive 0
Officer of the Company and the Bank 0
George S. Rapp........................ 0
Executive Vice President and Chief 0
Financial Officer of the Company and N/A
the Bank
Kevin J. Gallagher.................... 0
Executive Vice President and Chief 0
Lending Officer of the Bank 0
Jerome D. McTiernan................... 0
Executive Vice President of the Bank 0
0
</TABLE>

- ------------------------

(1) Mr. Zvi H. Muscal resigned his position as Chief Executive Officer of the
Company and the Bank effective February 28, 1997.

(2) Represent payments made to long term retirement plans established for the
benefit of the named executive.

OPTIONS GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information concerning stock options
granted during the fiscal year ended December 31, 1996 for the named executives.

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PERCENTAGE OF TOTAL EXERCISE OR
UNDERLYING OPTIONS OPTIONS GRANTED BASE PRICE
NAME GRANTED (#) TO EMPLOYEES IN FISCAL YEAR ($/SHARE) EXPIRATION DATE
- ----------------------------------- ------------------- ----------------------------- ------------- ----------------
<S> <C> <C> <C> <C>
Zvi H. Muscal...................... 0 0 -- --
Rolf A. Stensrud................... 0 0 -- --
Jerome D. McTiernan................ 0 0 -- --
George S. Rapp..................... 6,000 2.7% $ 6.49 October 2006
Kevin J. Gallagher................. 6,000 2.7 6.49 October 2006
</TABLE>

49
<PAGE>
The following table sets forth information concerning the exercise of
options to purchase Common Stock by the named executive officers during the
fiscal year ended December 31, 1996 as well as the number of securities
underlying unexercised options and the potential value of unexercised options as
of December 31, 1996.

AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
UNDERLYING NUMBER OF SECURITIES IN-THE-MONEY OPTIONS
SHARES(#) ACQUIRED OPTIONS AT FISCAL YEAR-END (#) AT FISCAL YEAR-END($)
NAME ON EXERCISE EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ------------------------- --------------------- ----------------------------------------- --------------------------
<S> <C> <C> <C>
Zvi H. Muscal............ 0 60,000/0 $300,930/$0
Rolf A. Stensrud......... 0 48,132/0 302,871/0
Jerome D. McTiernan...... 0 8,020/0 50,465/0
George S. Rapp........... 0 6,000/0 11,237/0
Kevin J. Gallagher....... 0 13,020/0 61,702/0
</TABLE>

- ------------------------

(1) "In-the-money options" are stock options with respect to which the market
value of the underlying shares of Common Stock exceeded the exercise price
at December 31, 1996. The value of such options is determined by subtracting
the aggregate exercise price for such options from the aggregate fair market
value of the underlying shares of Common Stock on December 31, 1996.

COMPENSATION PAID TO DIRECTORS

Each director of the Company also serves as a director of the Bank. The
Company's director compensation plan throughout 1996 provided that each director
would receive $500 for each Board meeting and $250 for each Committee meeting
attended. Pursuant to such plan, a total of $92,950 in director fees was accrued
and a total of $83,200 was paid for services rendered during 1996. No director
received more than $12,400 in 1996. In addition, in connection with the Merger,
Republic directors were granted options to purchase Common Stock as follows: Mr.
Madonna, 102,022 options; Mr. Bradley, 18,000 options; Mr. Adelberg, 1,200
options; Mr. Berman, 1,200 options; Mr. Goldberg, 18,000 options, Mr. Shotz,
48,000 options; and Mr. Wildstein, 18,000 options. Mr. Madonna's options have an
exercise price of $5.30 per share and the other listed options have an exercise
price of $6.41 per share.

EXECUTIVE EMPLOYMENT AGREEMENTS

Mr. Rolf A. Stensrud currently serves as President and Chief Executive
Officer of the Company and the Bank under the terms and conditions of an
employment agreement with the Company and the Bank (the "Stensrud Agreement").
The Stensrud Agreement provides for an initial term of three years expiring in
June, 1999 and will automatically renew for successive one-year terms until
terminated by the parties. Under the Stensrud Agreement, Mr. Stensrud receives
an annual base salary of $175,000 per year. In addition, Mr. Stensrud is
entitled to: (i) reimbursement for entertainment and travel expenses in
connection with his duties, including expenses for one lunch club and annual
dues for one golf club; (ii) participate in any bonus, stock purchase or grant,
stock option, deferred compensation or other compensation plans maintained by
the Bank or the Company for its senior executives; (iii) receive such basic
medical, hospitalization and major medical insurance coverage for himself and
his dependents as the Bank or the Company maintains for its executives; and (iv)
use of an automobile provided by the Bank. If Mr. Stensrud's employment is
terminated for reasons other than for engaging in conduct detrimental to the
Bank, Mr. Stensrud will be entitled to receive his salary and benefits for
certain specified periods of time. The Stensrud Agreement provides for the
non-disclosure by Mr. Stensrud of confidential information acquired by him in
the context of his employment.

George S. Rapp currently serves as Executive Vice President and Chief
Financial and Administrative Officer of the Company and the Bank under the terms
of an employment agreement (the "Rapp Agreement"). The Rapp Agreement provides
that Mr. Rapp is employed as Executive Vice President and

50
<PAGE>
Chief Financial and Administrative Officer of the Company and the Bank at an
annual base salary of $112,500, which may not be terminated by the Company and
the Bank prior to March 31, 1998. Thereafter, the Company and the Bank may
terminate the Rapp Agreement on one year's notice, and Mr. Rapp may terminate
this Agreement upon 30 days' notice. Mr. Rapp is also eligible to receive an
annual bonus at the discretion of the Board of Directors and to participate in
any executive or employee stock option, bonus or other compensation plan and all
other employee benefit plans. The Company provides Mr. Rapp with an automobile
allowance and the reimbursement of certain expenses related to the use of such
automobile in connection with his employment.

Kevin J. Gallagher currently serves as Executive Vice President and Chief
Lending Officer of the Bank under the terms of an employment agreement (the
"Gallagher Agreement"). The Gallagher Agreement has a one-year term at an annual
base salary of $112,500. The term of the Agreement will be automatically
extended for successive one-year periods unless terminated by either party upon
90 days written notice prior to the end of any such year. Mr. Gallagher is also
eligible to receive an annual bonus at the discretion of the Board of Directors
and to participate in the Company's Stock Option Plan and all other employee
benefit plans. The Company provides Mr. Gallagher with an automobile allowance
and the reimbursement of certain expenses related to the use of such automobile
in connection with his employment.

Jerome D. McTiernan currently serves as Executive Vice President of the Bank
under the terms of an employment agreement (the "McTiernan Agreement"). The
McTiernan Agreement provides that Mr. McTiernan is employed as Executive Vice
President at an annual base salary of $100,000, until terminated by the Bank or
Mr. McTiernan. The Agreement may be terminated by the Bank on twelve months'
written notice or by Mr. McTiernan on 30 days' notice. Mr. McTiernan is also
eligible to receive an annual bonus at the discretion of the Board of Directors
and to participate in the Company's Stock Option Plan and all other employee
benefit plans. The Company maintains a life insurance policy for the benefit of
Mr. McTiernan's designated beneficiaries and provides him with use of an
automobile and the reimbursement of certain expenses related to the use of such
automobile in connection with his employment.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain directors and executive officers of the Company and/or their
affiliates have loans outstanding from the Bank totaling in the aggregate $7.3
million. All such loans were made in the ordinary course of the Bank's business,
were made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for the comparable transactions with
unrelated persons and, in the opinion of management, do not involve more than
the normal risk of collectability or present other unfavorable features.

DESCRIPTION OF COMMON STOCK

The following is a summary of the material provisions of the Company's
Articles of Incorporation and Bylaws. This summary does not purport to be
complete and is qualified in its entirety by reference to such instruments, each
of which is an exhibit to the Registration Statement of which this Prospectus
forms a part.

AUTHORIZED CAPITAL STOCK

The Company has 20,000,000 authorized shares of Common Stock and 10,000,000
authorized shares of preferred stock. As of September 30, 1997, 3,446,309 shares
of Common Stock were outstanding and no shares of preferred stock were
outstanding.

Holders of Common Stock are entitled to one vote for each share held of
record on each matter submitted to a vote at a meeting of shareholders. Each
share of Common Stock is entitled to share, pro rata, in dividends and in the
Company's assets in the event of dissolution or liquidation of the Company.
Holders of shares of Common Stock do not possess any preemptive rights and are
not entitled to cumulate

51
<PAGE>
votes in elections of directors. The outstanding shares of Common Stock are
fully paid and nonassessable. No option, warrant, privilege or right has been
issued or is outstanding other than the options granted under the Company's
stock option plans. See "Executive Compensation" and "Compensation Paid to
Directors."

SPECIAL CHARTER AND PENNSYLVANIA CORPORATE LAW PROVISIONS

The Company's Articles of Incorporation and Bylaws contain certain
provisions that may have the effect of deterring or discouraging, among other
things, a nonnegotiated tender or exchange offer for the Common Stock, a proxy
contest for control of the Company, the assumption of control of the Company by
a holder of a large block of the Common Stock and the removal of the Company's
management. These provisions: (1) divide the Board of Directors into three
classes serving staggered three-year terms; (2) require that shares with at
least 75% of total voting power approve any merger or consolidation, with or
into a related person (a person or entity who, together with any affiliates or
associates, owns 10% or more of the outstanding voting stock of the Company,
except as otherwise permitted in the Company's Articles of Incorporation) or any
sale, lease, exchange transfer or other disposition of all or substantially all
of the assets of the Company to a related person (collectively a "Business
Combination") and other similar transactions; (3) terminate all voting rights of
any shareholder who acquires or owns more than 10% of the Common Stock unless
waived by the Board of Directors; (4) require that shares with at least 60% of
total voting power approve any amendment of those provisions of the Articles of
Incorporation pertaining to the election of directors, shareholder approval of a
Business Combination and termination of voting rights for shareholders who own
more than 10% of Common Stock; (5) permit the Board of Directors to oppose a
tender offer or other offer for the Company's securities on the basis of factors
other than the economic benefit to shareholders; (6) eliminate cumulative voting
in elections of directors; (7) require that shares with at least 75% of total
voting power approve any substantive amendment of the Bylaws; and (8) require
advance notice of nominations for the election of directors.

The Company is subject to provisions of the Pennsylvania Business
Corporation Law (the "BCL") which are triggered, in general, if any person or
group acquires, or discloses an intent to acquire, 20% or more of the voting
power of a covered corporation, other than pursuant to a registered firm
commitment underwriting or, in certain cases, pursuant to the approving vote of
the board of directors. The relevant provisions are contained in Subchapters
25E-H of the BCL.

Subchapter 25E of the BCL (relating to control transactions) provides that
if any person or group acquires 20% or more of the voting power of a covered
corporation, the remaining shareholders may demand from such person or group the
fair value of their shares, including a proportionate amount of any control
premium.

Subchapter 25F of the BCL (relating to business combinations) delays for
five years and imposes conditions upon "business combinations" between an
"interested shareholder" and the corporation. The term "business combination" is
defined broadly to include various transactions utilizing a corporation's assets
for purchase price amortization or refinancing purposes. For this purpose, an
"interested shareholder" is defined generally as the beneficial owner of at
least 20% of a corporation's voting shares.

Subchapter 25G of the BCL (relating to control share acquisitions) prevents
a person who has acquired 20% or more of the voting power of a covered
corporation from voting such shares unless the "disinterested" shareholders
approve such voting rights. Failure to obtain such approval exposes the owner to
the risk of a forced sale of the shares to the issuer. Even if shareholder
approval is obtained, the corporation is also subject to Subchapters 25I and J
of the BCL. Subchapter 25I provides for a minimum severance payment to certain
employees terminated within two years of the approval. Subchapter 25J prohibits
the abrogation of certain labor contracts prior to their stated date of
expiration.

Subchapter 25H of the BCL (relating to disgorgement) applies in the event
that (i) any person or group publicly discloses that the person or group may
acquire control of the corporation or (ii) a person or group acquires (or
publicly discloses an offer or intent to acquire) 20% or more of the voting
power of the Company and, in either case, sells shares within 18 months
thereafter. Any profits from sales of equity

52
<PAGE>
securities of the corporation by the person or group during the 18-month period
belong to the corporation if the securities that were sold were acquired during
the 18-month period or within 24 months prior thereto.

Subchapters 25E-H of the BCL contain a wide variety of transnational and
status exemptions, exclusions and safe harbors. The Company is subject to the
provisions of Subchapters 25E through H.

In addition, the fiduciary duty standards applicable to the Board of
Directors under the BCL may have the effect of deterring or discouraging, among
other things, a nonnegotiated tender or exchange offer for the Common Stock, a
proxy contest for control of the Company, the assumption of control of the
Company by a holder of a large block of Common Stock and the removal of the
Company's management.

To the extent applicable to the Company at the present time, this
legislation generally (1) expands the factors and groups (including
shareholders) that the Board of Directors can consider in determining whether a
certain action is in the best interests of the Company; (2) provides that the
Board need not consider the interests of any particular group as dominant or
controlling; (3) provides that directors, in order to satisfy the presumption
that they have acted in the best interests of the Company, need not satisfy any
greater obligation or higher burden of proof with respect to actions relating to
an acquisition or potential acquisition of control; (4) provides that actions
relating to acquisitions of control that are approved by a majority of
"disinterested directors" are presumed to satisfy the directors' standard of
care unless it is proven by clear and convincing evidence that the directors did
not assent to such action in good faith after reasonable investigation; and (5)
provides that the fiduciary duty of directors is solely to the Company and may
be enforced by the Company or by a shareholder in a derivative action, but not
by a shareholder directly. One of the effects of these fiduciary duty provisions
may be to make it more difficult for a shareholder to successfully challenge the
actions of the Board of Directors in a potential change in control context.

UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting Agreement
(the form of which is filed as an Exhibit to the Registration Statement of which
this Prospectus is a part), the Company has agreed to sell to Janney Montgomery
Scott Inc. (the "Underwriter"), and the Underwriter has agreed to purchase from
the Company, 1,000,000 shares of Common Stock.

In the Underwriting Agreement, the Underwriter has agreed, subject to the
terms and conditions set forth therein, to purchase all the shares of the Common
Stock offered hereby (other than those subject to the over-allotment option
described below) if any shares are purchased. The Underwriter has advised the
Company that it initially plans to offer the shares of Common Stock to the
public at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $0.43 per share. The Underwriter may allow and such dealers may reallow a
concession not in excess of $0.10 per share to other dealers. After the
Offering, the public offering price and the concessions to selected dealers may
be changed.

The Company has granted the Underwriter an option, exercisable within 30
days of the date of this Prospectus, to purchase up to 150,000 additional shares
of Common Stock from the Company at the same price per share as the initial
1,000,000 shares of Common Stock to be purchased by the Underwriter. The
Underwriter may exercise such option only to cover over-allotments in the sale
of the shares of Common Stock that the Underwriter has agreed to purchase.

The Company and its directors and executive officers have agreed that they
will not, with certain exceptions, publicly sell or otherwise dispose of any
shares of Common Stock, except the shares of the Common Stock offered hereby,
for 180 days from the date of this Prospectus without the prior written consent
of the Underwriter.

The Underwriting Agreement provides that the Company will indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act, or contribute to payments the Underwriter may be required to
make in respect thereof. The Underwriting Agreement also provides for the
payment

53
<PAGE>
of a $100,000 nonaccountable expense allowance to the Underwriter to cover
expenses incurred by the Underwriter in connection with the Offering.

The public offering price of the Common Stock offered hereby was determined
by negotiation between the Company and the Underwriter. Among the factors
considered in determining the public offering price, in addition to the lack of
a regular and active market for the Common Stock, are certain financial
information of the Company, an assessment of the Company's prospects and factors
relating to the market value of the Company and other publicly traded financial
institutions.

INDEMNIFICATION

Pennsylvania law provides that a Pennsylvania corporation may indemnify
directors, officers, employees and agents of the corporation against liabilities
they may incur in such capacities for any action taken or any failure to act,
whether or not the corporation would have the power to indemnify the person
under any provision of law, unless such action or failure to act is determined
by a court to have constituted recklessness or willful misconduct. Pennsylvania
law also permits the adoption of a Bylaw amendment, approved by shareholders,
providing for the elimination of a director's liability for monetary damages for
any action taken or any failure to take any action unless (1) the director has
breached or failed to perform the duties of his office and (2) the breach or
failure to perform constitutes self-dealing, willful misconduct or recklessness.

The Bylaws of the Company provide for (1) indemnification of directors,
officers, employees and agents of the registrant and its subsidiaries and (2)
the elimination of a director's liability for monetary damages, to the fullest
extent permitted by Pennsylvania law.

Directors and officers also are insured against certain liabilities for
their actions, as such, by an insurance policy obtained by the Company.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to the directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.

54
<PAGE>
LEGAL MATTERS

Spector Gadon & Rosen, P.C., Philadelphia, Pennsylvania will pass upon the
validity of the shares offered hereby for the Company. Stevens & Lee, Wayne,
Pennsylvania, will pass upon certain legal matters for the Underwriter.

EXPERTS

The consolidated financial statements appearing in this Prospectus for the
year ended December 31, 1996 have been audited by Coopers & Lybrand L.L.P.,
independent accountants as indicated in their reports appearing elsewhere
herein, and are included in reliance upon such reports and given upon the
authority of such firm as experts in accounting and auditing.

The consolidated financial statements appearing in this Prospectus for the
year ended December 31, 1995 have been audited by Deloitte & Touche LLP,
independent auditors as stated in their report appearing herein, and have been
so included in reliance upon the report of such firm and given upon their
authority as experts in accounting and auditing.

55
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OF
REPUBLIC FIRST BANCORP, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

REPUBLIC FIRST BANCORP, INC. AND FIRST REPUBLIC BANK:

<TABLE>
<CAPTION>
<S> <C>
Financial Statements (Unaudited)
Consolidated Balance Sheets--As of September 30, 1997 and December 31, 1996........ F-2
Consolidated Statements of Income--For the nine months ended September 30, 1997 and
1996............................................................................. F-3
Consolidated Statements of Cash Flows--For the nine months ended September 30, 1997
and 1996......................................................................... F-4
Consolidated Statement of Shareholders' Equity--For the nine months ended September
30, 1997......................................................................... F-5
Notes to Consolidated Financial Statements......................................... F-6
Financial Statements (Audited)
Independent Auditors' Report....................................................... F-9
Independent Auditors' Report....................................................... F-10
Consolidated Balance Sheets--As of December 31, 1996 and 1995...................... F-11
Consolidated Statements of Income--For the years ended December 31, 1996 and
1995............................................................................. F-12
Consolidated Statements of Cash Flows--For the years ended December 31, 1996 and
1995............................................................................. F-13
Consolidated Statements of Shareholders' Equity--For the years ended December 31,
1996 and 1995.................................................................... F-14
Notes to Consolidated Financial Statements......................................... F-15
</TABLE>

F-1
<PAGE>
REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
(UNAUDITED)
ASSETS:
Cash and due from banks.................................................... $ 5,237,000 $ 7,716,000
Interest--bearing deposits with banks...................................... 2,058,000 665,000
Federal funds sold......................................................... 0 7,115,000
------------------ -----------------
Total cash and cash equivalents.......................................... 7,295,000 15,496,000

Securities available for sale, at fair value............................... 3,162,000 5,900,000
Securities held to maturity, at amortized cost (Fair value of $98,536,000
and $75,307,000)......................................................... 97,952,000 75,054,000

Loans receivable, net...................................................... 184,403,000 170,002,000
Premises and equipment, net................................................ 1,926,000 711,000
Real estate owned, net..................................................... 1,944,000 295,000
Accrued income and other assets............................................ 6,484,000 6,337,000
------------------ -----------------

Total Assets............................................................... $ 303,166,000 $ 273,795,000
------------------ -----------------
------------------ -----------------

LIABILITIES AND SHAREHOLDERS' EQUITY:

LIABILITIES:

Deposits:
Demand--non-interest-bearing............................................... $ 33,961,000 $ 32,611,000
Demand--interest-bearing................................................... 8,233,000 10,181,000
Money market and savings................................................... 25,840,000 27,240,000
Time....................................................................... 152,947,000 150,800,000
Time over $100,000......................................................... 26,923,000 29,227,000
------------------ -----------------
Total Deposits........................................................... 247,904,000 250,059,000

Other Borrowings........................................................... 27,346,000 0
Accrued expenses and other liabilities..................................... 6,435,000 5,365,000
------------------ -----------------

Total Liabilities.......................................................... 281,685,000 255,424,000
------------------ -----------------

SHAREHOLDERS' EQUITY:

Common stock, par value $.01 per share; 20,000,000 shares authorized;
shares issued and outstanding 3,446,309 and 3,417,509 as of September 30,
1997 and December 31, 1996 respectively.................................. 34,000 34,000

Additional paid in capital................................................. 13,793,000 13,687,000
Retained earnings.......................................................... 7,651,000 4,647,000
Unrealized gain on securities available for sale, net of deferred taxes.... 3,000 3,000
------------------ -----------------
Total Shareholders' Equity................................................. 21,481,000 18,371,000
------------------ -----------------

Total Liabilities and Shareholders' Equity................................. $ 303,166,000 $ 273,795,000
------------------ -----------------
------------------ -----------------
</TABLE>

(See notes to consolidated financial statements)

F-2
<PAGE>
REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

FOR THE PERIODS ENDED SEPTEMBER 30,
(UNAUDITED)

<TABLE>
<CAPTION>
QUARTER TO DATE NINE MONTHS TO DATE
-------------------------- ---------------------------
1997 1996 1997 1996
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans............................ $ 4,364,000 $ 3,693,000 $ 12,316,000 $ 8,245,000
Interest on federal funds sold........................ 10,000 66,000 300,000 1,195,000
Interest on investments............................... 1,565,000 1,213,000 4,192,000 2,462,000
------------ ------------ ------------- ------------
Total Interest Income................................. 5,939,000 4,972,000 16,808,000 11,902,000
------------ ------------ ------------- ------------
INTEREST EXPENSE:
Demand--interest-bearing.............................. 49,000 50,000 159,000 82,000
Money market and savings.............................. 233,000 209,000 692,000 467,000
Time.................................................. 2,285,000 1,960,000 6,373,000 4,908,000
Time over $100,000.................................... 390,000 398,000 1,214,000 1,193,000
Subordinated Debt..................................... 0 70,000 0 210,000
Other Borrowings...................................... 373,000 0 621,000 0
------------ ------------ ------------- ------------
Total Interest Expense.................................. 3,330,000 2,687,000 9,059,000 6,860,000
------------ ------------ ------------- ------------
Net interest income..................................... 2,609,000 2,285,000 7,749,000 5,042,000
Provision for loan losses............................... 30,000 30,000 140,000 55,000
------------ ------------ ------------- ------------
Net interest income after provision for loan losses..... 2,579,000 2,255,000 7,609,000 4,987,000
------------ ------------ ------------- ------------
NON-INTEREST INCOME:
Service fees.......................................... 129,000 115,000 291,000 174,000
Tax refund program revenue............................ 5,000 0 2,239,000 2,080,000
Other income.......................................... 18,000 51,000 96,000 60,000
------------ ------------ ------------- ------------
152,000 166,000 2,626,000 2,314,000
------------ ------------ ------------- ------------
NON-INTEREST EXPENSES:
Salaries and Benefits................................. 1,056,000 845,000 3,083,000 1,958,000
Occupancy/Equipment................................... 315,000 281,000 867,000 639,000
Other expenses........................................ 561,000 571,000 1,944,000 1,138,000
------------ ------------ ------------- ------------
1,932,000 1,697,000 5,894,000 3,735,000
------------ ------------ ------------- ------------
Income before income taxes.............................. 799,000 724,000 4,341,000 3,566,000
------------ ------------ ------------- ------------
Provision for income taxes.............................. 274,000 224,000 1,337,000 1,189,000
------------ ------------ ------------- ------------
NET INCOME.............................................. $ 525,000 $ 500,000 $ 3,004,000 $ 2,377,000
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
NET INCOME PER SHARE:
Primary............................................... $ 0.14 $ 0.14 $ 0.79 $ 0.85
Fully diluted......................................... $ 0.14 $ 0.13 $ 0.78 $ 0.83
------------ ------------ ------------- ------------
AVERAGE COMMON SHARES AND CSE OUTSTANDING:
Primary............................................... 3,846,497 3,663,111 3,815,186 2,791,819
Fully diluted......................................... 3,858,398 3,730,890 3,855,189 2,867,286
------------ ------------ ------------- ------------
</TABLE>

(See notes to consolidated financial statements)

F-3
<PAGE>
REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30,

(UNAUDITED)

<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................................................... $ 3,004,000 $ 2,377,000
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses..................................................... 140,000 55,000
Write down of other real estate owned......................................... 70,000
Depreciation and amortization................................................. 302,000 183,000
(Increase) decrease in accrued income and other assets........................ (147,000) 663,000
Increase (decrease) in accrued expenses and other liabilities................ 1,070,000 (153,000)
-------------- --------------
Net cash provided by operating activities....................................... 4,439,000 3,125,000
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities:
Available for sale............................................................ (1,950,000) 0
Held to Maturity.............................................................. (37,386,000) (26,901,000)
Proceeds from principal receipts, sales, and maturities of securities........... 19,074,000 17,684,000
Net (increase) in loans......................................................... (14,715,000) (372,000)
Cash Proceeds from acquisitions................................................. 0 12,155,000
Purchase of other real estate owned............................................. (1,406,000) 0
Premises and equipment expenditures............................................. (1,448,000) (137,000)
-------------- --------------
Net cash provided by (used in) investing activities............................. (37,831,000) 2,429,000
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) in demand, money market, and savings deposits.................... (1,998,000) (4,589,000)
Net increase in borrowed funds.................................................. 27,346,000 0
Net increase (decrease) in time deposits........................................ (157,000) 8,823,000
-------------- --------------
Net cash provided by financing activities....................................... 25,191,000 4,234,000
-------------- --------------
Increase (decrease) in cash and cash equivalents.................................. (8,201,000) 9,788,000

Cash and cash equivalents, beginning of period.................................... 15,496,000 3,856,000
-------------- --------------
Cash and cash equivalents, end of period.......................................... $ 7,295,000 $ 13,644,000
-------------- --------------
-------------- --------------
Supplemental disclosure:
Interest paid................................................................... $ 8,699,000 $ 6,327,000
-------------- --------------
-------------- --------------
Non-cash transactions:
Net transfers to real estate owned from loans................................... $ 539,000 0
-------------- --------------
-------------- --------------
Changes in unrealized gain on securities available for sale..................... 0 ($ 26,000)
-------------- --------------
-------------- --------------
</TABLE>

(See notes to consolidated financial statements)

F-4
<PAGE>
REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN

SHAREHOLDERS' EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND

FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
ADDITIONAL SECURITIES TOTAL
COMMON PAID IN RETAINED AVAILABLE SHAREHOLDERS'
STOCK CAPITAL EARNINGS FOR SALE EQUITY
--------- ------------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1995..................... 22,000 $ 6,647,000 1,934,000 $ 19,000 $ 8,622,000
Acquisition of Execufirst Bancorp, Inc........ 12,000 7,040,000 0 0 7,052,000
Net income for the year....................... 0 0 2,713,000 0 2,713,000
Change in unrealized gain on securities
available for sale.......................... 0 0 0 (16,000) (16,000)
Balance December 31, 1996..................... 34,000 13,687,000 4,647,000 3,000 18,371,000
--------- ------------- ------------ ----------- -------------
Net Income For the Period..................... 0 0 3,004,000 0 3,004,000
Stock options exercised....................... 106,000 0 0 106,000
--------- ------------- ------------ ----------- -------------
Balance September 30, 1997.................... $ 34,000 $ 13,793,000 7,651,000 $ 3,000 $ 21,481,000
--------- ------------- ------------ ----------- -------------
--------- ------------- ------------ ----------- -------------
</TABLE>

(See notes to consolidated financial statements)

F-5
<PAGE>
REPUBLIC FIRST BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

In the opinion of Republic First Bancorp, Inc. ("the Company"), the
accompanying unaudited financial statements contain all adjustments (including
normal recurring accruals) necessary to present fairly the financial position as
of September 30, 1997, the results of operations for the three and nine months
ended, September 30, 1997 and 1996, and the cash flows for the nine months ended
September 30, 1997 and 1996. The interim results of operations may not be
indicative of the results of operations for the full year. The accompanying
unaudited financial statements should be read in conjunction with the Company's
audited financial statements, and the notes thereto, included in the Company's
1996 annual report.

The Company is a one-bank holding company organized and incorporated under
the laws of the Commonwealth of Pennsylvania. Its solely-owned subsidiary, First
Republic Bank (the "Bank"), offers a variety of banking services to individuals
and businesses throughout the Greater Philadelphia and South Jersey area through
its offices and branches in Philadelphia and Montgomery Counties.

On June 7, 1996 Republic Bancorporation ("Republic"), parent company of
Republic Bank, its sole subsidiary, merged with and into ExecuFirst Bancorp,
Inc., ("ExecuFirst") parent company of First Executive Bank, its sole
subsidiary. Republic exchanged all of its common stock, for approximately
1,604,411 shares (approximately 56% of the combined total) of ExecuFirst's
common stock. Effective upon the merger, ExecuFirst changed its name to First
Republic Bancorp, Inc. The Company subsequently changed its name to Republic
First Bancorp, Inc. Upon completion of the merger, Republic's shareholders owned
a majority of the outstanding shares of the consolidated Company's stock. As a
result, the transaction was accounted for as a reverse acquisition of ExecuFirst
by Republic solely for accounting and financial reporting purposes. Therefore,
Consolidated Statements of Income and Consolidated Statements of Cash Flows for
the nine months and three months ended September 30, 1996 are those of Republic
from the date of the merger through September 30, 1996 and may not be comparable
to the current year Consolidated Statements. The operations of ExecuFirst have
been included in the Company's financial statements since the date of
acquisition. Historical shareholders' equity and earnings per share of Republic
prior to the merger have been retroactively restated (a recapitalization) for
the equivalent number of shares received in the merger after giving effect to
any differences in par value of the respective stock of ExecuFirst and Republic.

The September 30, 1997 and December 31, 1996 Consolidated Balance Sheets
include the effect of the merger on a purchase accounting basis based on the
fair market value of ExecuFirst's common stock at a price of $5.75 per share,
the estimated market value of the stock for a reasonable period before and after
November 17, 1995, the announcement date of the merger. The purchase price
calculated for accounting purposes amounted to $7,052,000, which is the result
of multiplying the $5.75 per share market value of ExecuFirst by the outstanding
share of ExecuFirst of approximately 1,226,000 (prior to subsequent dividends)
at the announcement date of the merger, plus acquisition expenses incurred by
Republic, as a result of the merger, in the amount of $1,193,000.

The purchase price has been allocated to the respective assets acquired and
the liabilities based on their estimated fair market values, net of applicable
income tax effects. Negative goodwill in the amount of $1,045,000 was generated
for purchase accounting purposes and was applied against (i) bank premises and
equipment in the amount of $276,000, (ii) other real estate owned in the net
amount of $84,000, and (iii) the net deferred tax asset in the amount of
$685,000. No negative goodwill remains after application to these non-current
assets.

F-6
<PAGE>
REPUBLIC FIRST BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. RECLASSIFICATIONS:

Certain items in the 1996 financial statements were reclassified to conform
to 1997 presentation format.

Additionally, the Company declared a six for five stock split effected in
the form of a dividend on March 4, 1997 for all shareholders of record of the
Company on that date. Average common shares and common share equivalents, and
all other share presentations have been retroactively restated as if the
dividend was declared at the beginning of each respective period presented
herein.

3. EARNINGS PER SHARE:

Earnings per common share, and common equivalent shares, are based on the
weighted average number of common shares and common equivalent shares
outstanding during the periods. Stock options are included as share equivalents
when dilutive. These common stock equivalents had a dilutive effect for the nine
months and three months ended September 30, 1997 and 1996.

In February 1997 the FASB issued SFAS No. 128, "Earnings Per Share." This
Statement establishes standards for computing and presenting earnings per share
(EPS) and applies to entities with publicly held common stock or potential
common stock. This Statement simplifies the standards for computing earnings per
share previously found in APB Opinion No. 15, Earnings Per Share, and makes them
comparable to international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation. This Statement requires restatement of all prior
period EPS data presented upon adoption. Had the Company adopted SFAS No. 128 as
of September 30, 1997, pro forma basic earnings per share would have been $0.14
and $0.15 for the three months ended September 30, 1997 and 1996, respectively,
and $0.87 and $0.92 for the nine months ended September 30, 1997 and 1996,
respectively.

4. INVESTMENT SECURITIES:

The Company classifies certain investments under one of the following
categories: "held-to- maturity" which is accounted for at historical cost,
adjusted for accretion of discounts and amortization of premiums;
"available-for-sale" which is accounted for at fair market value, with
unrealized gains and losses reported as a separate component of shareholders'
equity; or "trading" which is accounted for at fair market value, with
unrealized gains and losses reported as a component of net income. The Bank does
not hold "trading" securities.

At September 30, 1997, the Bank had identified certain investment securities
that are being held for indefinite periods of time, including securities that
will be used as part of the Bank's asset/liability management strategy and that
may be sold in response to changes in interest rates, prepayments and similar
factors. These securities are classified as available-for-sale and are intended
to increase the flexibility of the Bank's asset/liability management.
Available-for-sale securities consist of US Government Agency securities and
other investments. The book and market values of securities available-for-sale
was $3,159,000 and $3,162,000 respectively, as of September 30, 1997. The net
unrealized gain on securities available-for-sale, as of this date, was $3,000.

F-7
<PAGE>
REPUBLIC FIRST BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table represents the carrying and estimated fair values of
Investment Securities at September 30, 1997.

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
AVAILABLE-FOR-SALE ($000) COST GAIN LOSS FAIR VALUE
- ------------------------------------------------------------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
US Government Agencies............................................ $ 3,159 $ 7 $ (4) $ 3,162
Other............................................................. -- -- -- --
----------- ----- ----- -----------
TOTAL AVAILABLE-FOR-SALE.......................................... $ 3,159 $ 7 $ (4) $ 3,162
----------- ----- ----- -----------
----------- ----- ----- -----------
</TABLE>

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
HELD-TO-MATURITY ($000) COST GAIN LOSS FAIR VALUE
- ------------------------------------------------------------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Mortgage-backed Securities........................................ $ 30,792 $ 26 $ (52) $ 30,766
US Government Agencies............................................ 63,323 846 (236) 63,933
Other............................................................. 3,837 -- -- 3,837
----------- ----- ----- -----------
TOTAL HELD-TO-MATURITY............................................ $ 97,952 $ 872 $ (288) $ 98,536
----------- ----- ----- -----------
----------- ----- ----- -----------
</TABLE>

F-8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors

of First Republic Bancorp, Inc.

We have audited the accompanying consolidated balance sheet of First
Republic Bancorp, Inc. and Subsidiary as of December 31, 1996, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all materials respects, the consolidated financial position
of First Republic Bancorp, Inc. and Subsidiary as of December 31, 1996 and the
consolidated results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center

Philadelphia, Pennsylvania

January 30, 1997 (except as to the
information in Note 17 for
which the date is March 4, 1997)

F-9
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors of

Republic Bancorporation, Inc.:

We have audited the accompanying consolidated balance sheet of Republic
Bancorporation, Inc. and subsidiaries (the "Bank") as of December 31, 1995, and
the related consolidated statements of income, shareholders' equity, and cash
flows for each of the two years in the period ended December 31, 1995. These
financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Bank at December 31, 1995, and
the results of their operations and their cash flows for each of the two years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles.

[LOGO]

March 1, 1996

(Except Note 1 related to the merger

which is dated June 7, 1996 and except

Note 17 relating to the stock split effected

in the form of a dividend which is dated

March 4, 1997)

F-10
<PAGE>
REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ASSETS:
1996 1995
--------- ---------
<S> <C> <C>
Cash and due from banks................................................. $ 7,716 $ 2,884
Interest-bearing deposits with banks.................................... 665 39
Federal funds sold...................................................... 7,115 933
--------- ---------
Total cash and cash equivalents..................................... 15,496 3,856
Securities available for sale, at fair value............................ 5,900 4,348
Securities held to maturity, at amortized cost.......................... 75,054 34,004
Loans receivable, net................................................... 170,002 85,183
Premises and equipment, net............................................. 711 321
Real estate owned, net.................................................. 295 295
Accrued income and other assets......................................... 6,337 3,056
--------- ---------
Total Assets........................................................ $ 273,795 $ 131,063
--------- ---------
--------- ---------

LIABILITIES AND SHAREHOLDERS' EQUITY:

Liabilities:
Deposits:
Demand--non-interest-bearing............................................ $ 32,611 $ 12,570
Demand--interest-bearing................................................ 10,181 1,429
Money market and savings................................................ 27,240 11,598
Time.................................................................... 150,800 82,757
Time over $100,000...................................................... 29,227 8,070
--------- ---------
Total Deposits...................................................... 250,059 116,424
Subordinated debt....................................................... 0 3,400
Accrued expenses and other liabilities.................................. 5,365 2,617
--------- ---------
Total Liabilities................................................... 255,424 122,441
--------- ---------

Commitments and contingencies (Note 10)

SHAREHOLDERS' EQUITY:

Common stock, par value $.01 per share; 20,000,000 shares authorized;
shares issued and outstanding 3,417,509 and 1,925,293 as of December
31, 1996 and 1995 respectively........................................ 34 22
Additional paid in capital.............................................. 13,687 6,647
Retained earnings....................................................... 4,647 1,934
Unrealized gain on securities available for sale, net of deferred
taxes................................................................. 3 19
--------- ---------
Total Shareholders' Equity.......................................... 18,371 8,622
--------- ---------
Total Liabilities and Shareholders' Equity........................ $ 273,795 $ 131,063
--------- ---------
--------- ---------
</TABLE>

(See notes to consolidated financial statements)

F-11
<PAGE>
REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

(DOLLARS IN THOUSAND, EXCEPT FOR PERSHARE DATA)

<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Interest Income
Interest and fees on loans............................................... $ 11,798 $ 7,710 $ 5,521
Interest on federal funds sold........................................... 1,346 176 278
Interest on deposits in banks............................................ 20 0 0
Interest on investments.................................................. 3,739 2,016 1,442
---------- ---------- ----------
16,903 9,902 7,241
---------- ---------- ----------
Interest Expense:
Demand - Interest bearing................................................ 140 33 30
Money market and savings................................................. 674 516 637
Time..................................................................... 7,069 4,485 2,398
Time over $100,000....................................................... 1,594 519 599
Other borrowings......................................................... 0 62 25
Subordinated debt........................................................ 238 276 255
---------- ---------- ----------
9,715 5,891 3,944
---------- ---------- ----------
Net interest income........................................................ 7,188 4,011 3,297
Provision for possible loan losses......................................... 155 223 323
---------- ---------- ----------
Net interest income after provision for
possible loan losses..................................................... 7,033 3,788 2,974
---------- ---------- ----------
Non-interest income:
Service fees............................................................. 170 155 219
Refant program revenue................................................... 2,080 0 877
Other income............................................................. 364 0 0
---------- ---------- ----------
2,614 155 1,096
---------- ---------- ----------
Non-interest expenses:
Salaries and employee benefits........................................... 2,872 1,592 1,284
Occupancy expenses....................................................... 696 470 425
Professional fees........................................................ 282 327 354
Equipment................................................................ 205 94 96
Other operating expenses................................................. 1,526 566 674
---------- ---------- ----------
5,581 3,049 2,833
---------- ---------- ----------
Income before income taxes................................................. 4,066 894 1,237
Provision for income taxes................................................. 1,353 291 430
---------- ---------- ----------
Net income................................................................. $ 2,713 $ 603 $ 807
---------- ---------- ----------
---------- ---------- ----------
Earnings per common share:
Primary.................................................................. $ 0.92 $ 0.31 $ 0.42
Fully diluted............................................................ $ 0.88 $ 0.31 $ 0.42
Weighted average common shares outstanding
and common stock equivalents
Primary.................................................................. 2,961,225 1,925,293 1,925,293
Fully diluted............................................................ 3,164,944 1,925,293 1,925,293
</TABLE>

See notes to consolidated financial statements)

F-12
<PAGE>
REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

(DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................................. $ 2,713 $ 603 $ 807
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for possible loan losses......................................... 155 223 323
Depreciation and amortization.............................................. 62 89 82
Amortization of securities................................................. 131 57 28
Realized gain on sale of real estate owned................................. (18) 0 0
Decrease (increase) in accrued income and other assets..................... 824 (697) (349)
Increase (decrease) in accrued expenses and other liabilities.............. 693 1,354 (344)
----------- ---------- ----------
Net cash provided by operating activities.................................. 4,560 1,629 547
----------- ---------- ----------
Cash flows from investing activities:
Acquisition of ExecuFirst Bancorp, Inc..................................... 11,952 0 0
Purchase of securities:
Available for sale....................................................... (1,000) (4,022) 0
Held to maturity......................................................... (24,650) (6,330) (2,141)
Proceeds from maturities and calls of securities:
Available for sale....................................................... 1,500 0 0
Held to maturity......................................................... 5,500 0 0
Principal collected on MBS's and CMO's:
Available for sale....................................................... 691 0 0
Held to maturity......................................................... 6,517 180 383
Net increase in loans...................................................... (11,937) (14,043) (9,295)
Proceeds from the sale of real estate owned................................ 86 0 0
Premises and equipment expenditures........................................ (556) (401) (73)
----------- ---------- ----------
Net cash used in investing activities...................................... (11,897) (24,616) (11,126)
----------- ---------- ----------
Cash flows from financing activities:
Net increase in demand and money market.................................... 7,628 5,570 2,266
Net increase (decrease) in time deposits................................... 14,749 22,888 (3,284)
Issuance (redemption of) subordinated debt................................. (3,400) 0 3,400
Net increase (decrease) in borrowed funds.................................. 0 (5,583) 1,583
----------- ---------- ----------
Net cash provided by financing activities.................................. 18,977 22,875 3,965
----------- ---------- ----------
Increase (decrease) in cash and cash equivalents............................. 11,640 (112) (6,614)
Cash and cash equivalents, beginning of period............................... 3,856 3,968 10,582
----------- ---------- ----------
Cash and cash equivalents, end of period..................................... 15,496 3,856 3,968
Supplemental disclosures:
Interest paid.............................................................. 8,409 4,571 3,890
Income taxes paid.......................................................... 1,105 290 443
Non-cash investing and financing activities:
Acquisition of ExecuFirst Bancorp, Inc.:
FMV of assets acquired................................................... (108,415) 0 0
FMV of liabilities assumed............................................... 113,315 0 0
Stock issued............................................................. 7,052 0 0
----------- ---------- ----------
Total cash received, net of merger related costs......................... 11,952 0 0
----------- ---------- ----------
Non-monetary transfers from loans to real estate owned..................... $ 68 $ 70 $ 0
</TABLE>

(See notes to consolidated financial statements)

F-13
<PAGE>
REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

(DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
UNREALIZED
GAIN
ADDITIONAL ON SECURITIES TOTAL
COMMON PAID IN RETAINED AVAILABLE SHAREHOLDERS'
STOCK CAPITAL EARNINGS FOR SALE EQUITY
------------- ----------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Balance January 1, 1994............................. $ 22 $ 6,647 $ 524 $ 0 $ 7,193
Net income for the year............................. 0 0 807 0 807
--- ----------- ----------- --- -------------
Balance December 31, 1994........................... 22 6,647 1,331 0 8,000
Net income for the year............................. 0 0 603 0 603
Unrealized gain on securities available for sale.... 0 0 0 19 19
--- ----------- ----------- --- -------------
Balance December 31, 1995........................... 22 6,647 1,934 19 8,622
Acquisition of Execufirst Bancorp, Inc.............. 12 7,040 0 0 7,052
Net income for the year............................. 0 0 2,713 0 2,713
Change in unrealized gain on securities available
for sale.......................................... 0 0 (16) (16)
--- ----------- ----------- --- -------------
Balance December 31, 1996........................... $ 34 $ 13,687 $ 4,647 $ 3 $ 18,371
--- ----------- ----------- --- -------------
--- ----------- ----------- --- -------------
</TABLE>

(See notes to consolidated financial statements)

F-14
<PAGE>
REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. SHAREHOLDERS' EQUITY:

In accordance with the Pennsylvania Banking Code, cash dividends by the Bank
may be declared and only paid out of accumulated net earnings, as defined by the
Code. At December 31, 1996, there were no dividends declared or paid.

The Bank is subject to the Federal Reserve Board's risk-based capital
leverage ratio guidelines. These guidelines require all state-chartered member
banks to maintain total capital equal to at least 8% of risk-weighted total
assets, Tier 1 capital (common stock, additional paid-in capital and retained
earnings) equal to 4% of risk-weighted total assets, and a Tier 1 leverage ratio
of 5%. At December 31, 1996, the aforementioned ratios are as follows:

REGULATORY CAPITAL REQUIREMENTS:

The following table presents the Bank's capital ratios at December 31,:

<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Tier I Capital............................................. $ 18,034,000 $ 8,600,000
Tier II Capital............................................ $ 2,092,000 $ 4,080,000
-------------- --------------
Total Capital.............................................. $ 20,126,000 $ 12,680,000

Total Average Quarterly Assets............................. $ 271,009,000 $ 130,699,000

Total Risk-Weighted Assets (1)............................. $ 178,834,000 $ 102,423,000

Tier I Risk-Based Capital Ratio (2)........................ 10.08% 8.40%
Required Tier I Risk-Based Capital Ratio................... 4.00% 4.00%
-------------- --------------
Excess Tier I Risk-Based Capital Ratio..................... 6.08% 4.40%

Total Risk-Based Capital Ratio (3)......................... 11.25% 12.38%
Required Total Risk-Based Capital Ratio.................... 8.00% 8.00%
-------------- --------------
Excess Total Risk-Based Capital Ratio...................... 3.25% 4.38%

Tier I Leverage Ratio (4).................................. 6.65% 6.58%
Required Tier I Leverage Ratio............................. 5.00% 5.00%
-------------- --------------
Excess Tier I Leverage Ratio............................... 1.65% 1.58%
</TABLE>

- ------------------------

(1) INCLUDES OFF-BALANCE SHEET ITEMS AT CREDIT-EQUIVALENT VALUES.

(2) TIER I RISK-BASED CAPITAL RATIO IS DEFINED AS THE RATIO OF TIER I CAPITAL TO
TOTAL RISK-WEIGHTED ASSETS.

(3) TOTAL RISK-BASED CAPITAL RATIO IS DEFINED AS THE RATIO OF TIER I AND TIER II
CAPITAL TO TOTAL RISK-WEIGHTED ASSETS.

(4) TIER I LEVERAGE RATIO IS DEFINED AS THE RATIO OF TIER I CAPITAL TO TOTAL
AVERAGE QUARTERLY ASSETS.

13. RETIREMENT PLAN:

The Company maintains a Supplemental Retirement Plan for its Chief Executive
Officer which provides for payments of approximately $100,000 a year, commencing
for a ten-year period upon

F-26
<PAGE>
REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. RETIREMENT PLAN: (CONTINUED)
retirement or death. A life insurance contract has been purchased to insure
against all or a portion of the payments which may be required prior to the
anticipated retirement date of the officer.

The Bank has a defined contribution plan pursuant to the provision of 401(k)
of the Internal Revenue Code. The Plan covers all full-time employees who meet
age and service requirements. The plan provides for elective employee
contributions up to 6% of compensation and a 50% matching Company or Bank
contribution limited to 3%. The total expense relating to the plan was $47,000
and $33,000 in 1996 and 1995, respectively. There was no expense in 1994.

14. FAIR VALUE OF FINANCIAL INSTRUMENTS:

The disclosure of the fair value of all financial instruments is required,
whether or not recognized on the balance sheet, for which it is practical to
estimate fair value. In cases where quoted market prices are not available, fair
values are based on assumptions including future cash flows and discount rates.
Accordingly, the fair value estimates cannot be substantiated, may not be
realized, and do not represent the underlying value of the Company.

The Company uses the following methods and assumptions to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value:

CASH AND CASH EQUIVALENTS:

The carrying value is a reasonable estimate of fair value.

SECURITIES HELD TO MATURITY AND SECURITIES AVAILABLE FOR SALE:

For investment securities with a quoted market price, fair value is equal to
quoted market prices. If a quoted market price is not available, fair value is
estimated using quoted market prices for similar securities.

LOANS:

For variable-rate loans that reprice frequently and with no significant
change in credit risk, fair value is the carrying value. For other categories of
loans such as commercial and industrial loans, real estate mortgage and consumer
loans, fair value is estimated based on discounting the estimated future cash
flows using the current rates at which similar loans would be made to borrowers
with similar collateral and credit ratings and for similar remaining maturities.

DEPOSIT LIABILITIES:

For checking, savings and money market accounts, fair value is the amount
payable on demand at the reporting date. For time deposits, fair value is
estimated using the rates currently offered for deposits of similar remaining
maturities.

COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT:

For commitments and standby letters of credit, the recorded fee amount is a
reasonable estimate of fair value because the majority of the Bank's commitments
to extend credit and standby letters of credit carry current market rates if
converted to loans.

F-27
<PAGE>
REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. FAIR VALUE OF FINANCIAL INSTRUMENTS: (CONTINUED)
At December 31, 1996, the carrying amount and the estimated fair value of
the Company's financial instruments are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------------ ----------------------------
<S> <C> <C> <C> <C>
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------------- -------------- ------------- -------------
Financial Assets
Cash and cash equivalents....................... $ 15,496,000 $ 15,496,000 $ 3,856,000 $ 3,856,000
Securities available for sale................... 5,900,000 5,900,000 4,348,000 4,348,000
Securities held to maturity..................... 75,054,000 75,307,000 34,004,000 33,846,000
Loans receivable, net........................... 170,002,000 170,513,000 85,183,000 86,400,000
Financial Liabilities:
Deposits:
Demand, savings, and money market............... $ 70,032,000 $ 70,032,000 $ 25,597,000 $ 25,597,000
Time............................................ 180,027,000 181,167,000 90,827,000 88,982,000
Subordinated Debt............................... 0 0 3,400,000 3,446,000
</TABLE>

15. PARENT COMPANY FINANCIAL INFORMATION:

The following financial statements for First Republic Bancorp, Inc.
(formally known as Republic Bancorporation) should be read in conjunction with
the consolidated financial statements and the other notes related to the
consolidated financial statements. Republic Bancorporation was formed on August
2, 1995, and therefore, comparative financial statements are not presented for
the year ended December 31, 1994.

F-28
<PAGE>
REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15. PARENT COMPANY FINANCIAL INFORMATION: (CONTINUED)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
ASSETS:
Cash....................................................................................... $ 84 $ 0
Investment in subsidiary, at equity........................................................ 18,287 8,577
Other Assets............................................................................... 0 45
--------- ---------
Total Assets............................................................................. $ 18,371 $ 8,622
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY:
LIABILITIES:
Total Liabilities........................................................................ $ 0 $ 0
SHAREHOLDERS' EQUITY:
Common stock............................................................................. 34 22
Additional paid in capital............................................................... 13,687 6,647
Retained earnings........................................................................ 4,647 1,934
Unrealized gain on securities available for sale, net of deferred tax.................... 3 19
--------- ---------
Total Shareholders' Equity............................................................. 18,371 8,622
--------- ---------
Total Liabilities and Shareholders' Equity............................................... $ 18,371 $ 8,622
--------- ---------
--------- ---------
</TABLE>

STATEMENTS OF INCOME AND CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Income....................................................................................... $ 0 $ 0
Expenses..................................................................................... 0 0
Equity in undistributed income of subsidiary................................................. 2,713 603
--------- ---------
Net income................................................................................... 2,713 603
Shareholders' equity, beginning of year...................................................... 8,622 8,000
Change in unrealized gain on securities available for sale................................... (16) 19
Acquisition of ExecuFirst Bancorp, Inc....................................................... 7,052 0
--------- ---------
Shareholders' equity, end of year............................................................ $ 18,371 $ 8,622
--------- ---------
</TABLE>

F-29
<PAGE>
REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15. PARENT COMPANY FINANCIAL INFORMATION: (CONTINUED)
REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income..................................................................................... $ 2,713 $ 603
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed income of subsidiary................................................. (2,713) (603)
--------- ---------
Net cash provided by operating activities.................................................... 0 0
--------- ---------
Cash flows from investing activities:
Acquisition of ExecuFirst Bancorp, Inc......................................................... 84 0
--------- ---------
Net cash provided by investing activities.................................................... 84 0
--------- ---------
Increase in cash............................................................................... 84 0
Cash, beginning of period...................................................................... 0 0
--------- ---------
Cash, end of period............................................................................ $ 84 $ 0
--------- ---------
--------- ---------
</TABLE>

16. STOCK OPTIONS:

The Company maintains a Stock Option Plan (the "Plan") under which the
Company grants options to its employees and directors. Under the terms of the
plan, 500,000 shares of common stock are reserved for such options. The Plan
provides that the exercise price of each option granted equals the market price
of the Company's stock on the date of grant. Any option granted vests within one
year and has a maximum term of ten years. All options are granted upon approval
of the Stock Option Committee of the Board of Directors, consisting of three
disinterested members (as defined under Rule 16b-3 of the Securities Exchange
Act of 1934, as amended). Stock Options are issued to promote the interests of
the Company by providing incentives to (i) designated officers and other
employees of the Company or a Subsidiary Corporation (as defined herein), (ii)
non-employee members of the Company's Board of Directors and (iii) independent
contractors and consultants who may perform services for the Company. The
Company believes that the Plan causes participants to contribute materially to
the growth of the Company, thereby benefiting the Company's shareholders.

Prior to the merger of Republic Bancorporation and ExecuFirst Bancorp, Inc.,
various grants of stock options were issued pursuant to the then existing plans
of each Corporation.

In addition to the shares reserved under the plan, 102,023 options were
granted outside of the Plan to a director of the Company, as a result of the
merger between Republic Bancorporation and ExecuFirst Bancorp, Inc. These
options have a grant date of June 7, 1996. The options will vest within one year
of the grant date, and will expire on June 7, 2006. Shares outstanding under
option and option price per share have been retroactively restated (a
recapitalization) for the equivalent number of shares received in the

F-30
<PAGE>
REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. STOCK OPTIONS: (CONTINUED)
merger after giving effect to any differences in par value of the issuer's and
acquirer's stock. Changes in total shares are as follows:

<TABLE>
<CAPTION>
RANGE OF WEIGHTED
EXERCISE AVERAGE
DECEMBER 31, 1996: SHARES PRICES EXERCISE PRICE
- --------------------------------------------------------------------- --------- ---------------- ---------------
<S> <C> <C> <C>
Outstanding at beginning of year..................................... 375,419 $2.58 to $4.13 $ 3.14
Granted during year*................................................. 219,622 $5.30 to $6.41 5.89
Acquisition of Execufirst Bancorp, Inc............................... 79,200 $3.33 to $5.11 4.03
Exercised during year................................................ 0 0
Forfeited during year................................................ 0 0
--------- ---------------- -----
Outstanding at end of year........................................... 674,241 $2.58 to $6.41 $ 4.14
Options exercisible at end of year................................... 454,619 $2.58 to $5.11
</TABLE>

- ------------------------

* Includes 102,023 options issued outside the Plan.

At December 31, 1995 and 1994, the Company had outstanding and exercisible
options of 375,419 at exercise prices per share between $2.58 and $4.13 per
share. There were no options granted or exercised during 1995 and 1994.

The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, ("SFAS No. 123"), "Accounting for Stock
Based Compensation", but applies APB Opinion No. 25, "Accounting for Stock
Issued to Employees and related Interpretations in accounting for its Plan.
Accordingly, no compensation has been recognized for options granted under the
Plan. If the Company had elected to recognize compensation based on the fair
value at the grant dates for awards under its Plan, consistent with the method
prescribed by SFAS No. 123, net income and earnings per share would have been
changed to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996
--------------------------
<S> <C> <C>
AS REPORTED PRO FORMA
------------ ------------
Net income...................................................... $ 2,713,000 $ 2,089,000
Primary earnings per share...................................... $0.92 $0.71
Fully diluted earnings per share................................ $0.88 $0.67
</TABLE>

Note: The pro forma disclosure shown above is not representative of the effects
on net income and earnings per share in future years because it includes
an incremental fair value of outstanding options that had been granted
under the previous existing plans of Republic Bancorporation and
ExecuFirst Bancorp, Inc. Excluding the impact of these options which have
been converted into the surviving plan under First Republic Bancorp, Inc.,
pro forma net income, primary earnings per share and fully diluted
earnings per share disclosures would have been $2,543,000 and $0.86 and
$0.82, respectively.

The fair value of each option granted (including the converted options under
the Republic Bancorporation and ExecuFirst Bancorp, Inc. plans) is estimated on
the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions used for grant in 1996; dividend yield of
0%, expected volatility of 35%, risk-free interest rate of 6.6% and an expected
life of 6.3 years.

F-31
<PAGE>
REPUBLIC FIRST BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. STOCK OPTIONS: (CONTINUED)
There were no options granted in 1995 under the previous existing plans of
Republic Bancorporation and ExecuFirst Bancorp, Inc.

17. SUBSEQUENT EVENT:

The Company declared a six for five stock split effected in the form of a
dividend on March 4, 1997 for all shareholders of record of the Company on that
date. Average common shares and common share equivalents, and all other share
presentations have been retroactively restated as if the dividend was declared
at the earliest period presented herein.

F-32
<PAGE>
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NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF. UNTIL DECEMBER 26, 1997 ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

------------------------

TABLE OF CONTENTS

<TABLE>
<S> <C>
Available Information................. 2
Prospectus Summary.................... 5
Risk Factors.......................... 10
Use of Proceeds....................... 12
Market for Common Stock and Related
Shareholder Matters................. 12
Capitalization........................ 14
Management's Discussion and Analysis
of Financial Condition and Results
of
Operations.......................... 15
Business.............................. 29
Management............................ 44
Security Ownership of Certain
Beneficial Owners and Management.... 47
Executive Compensation................ 49
Certain Relationships and Related
Transactions........................ 51
Description of Common Stock........... 51
Underwriting.......................... 53
Indemnification....................... 54
Legal Matters......................... 55
Experts............................... 55
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

1,000,000 SHARES

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COMMON STOCK

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PROSPECTUS

---------------------

NOVEMBER 11, 1997

[LOGO]

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