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**U.S. SECURITIES AND EXCHANGE COMMISSION****Washington, D.C. 20549**
**FORM 10 — QSB**
(Mark One)
þ Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
**For the quarterly period ended June 30, 2004**
o Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from                     to                       Commission file number333-     **UNITED COMMUNITY BANKSHARES OF FLORIDA, INC.** (Exact Name of Small Business Issuer as Specified in Its Charter)     Florida   04-3691059     (State or Other Jurisdiction   (I.R.S. Employerof Incorporation or Organization)   (Identification No. 1411 Edgewater Drive, Suite 100Orlando, Florida 32804 (Address of Principal Executive Offices) (407) 447-0386 (Issuer’s Telephone Number, Including Area Code) (Former Name, Former Address and Former Fiscal Year, if Changed, Since Last Report)
     Check whether the issuer: (1) filed all reports required to be filed bySection 12,13 or 15(d) Of the Exchange Act during the past 12 months (or for such shorter period thatthe registrant was Required to file such reports), and (2) has been subject to such filingrequirements for the past 90 Days:
     YES þ  NO o
     State the number of shares outstanding of each of the issuer’s classes of common equity, asof the latest practicable date;   Common Stock, par value $.01 per share 3,256,888 Shares   (class) Outstanding at August 2, 2004

 

**UNITED COMMUNITY BANKSHARES OF FLORIDA, INC.**
INDEX               **Page****PART I.**   **FINANCIAL INFORMATION**    **Item 1.**   **Financial Statements**                          Consolidated Balance Sheets (unaudited) at June 30, 2004 and December 31, 2003  2                       Consolidated Statements of Operations (unaudited) for the Six Months ended and three months ended June 30,                         2004and 2003  3                       Consolidated Statements of Changes in Shareholders’ Equity (unaudited) for the Six Months Ended June 30,                         2004 and 2003  4                       Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2004 and 2003  5                       Notes to Consolidated Financial Statements (unaudited)  6-7 **Item 2.**   **Management's Discussion and Analysis of Financial Condition And Results of Operations**  8-12 **Item 3.**   **Controls and Procedures**  12 **PART II.**   **OTHER INFORMATION**    **Item 4.**   **Submission of Matters to a Vote of Security Holders**  13 **Item 6.**   **Exhibits and Reports on Form 8-K**  13 **SIGNATURES**  14  Amendment to Bylaws of United Community Bankshares of Florida, Inc. CeSection 302 Certification of the President & CEO Section 302 Certification of the Treasurer Section 906 Certification of the President & CEO Section 906 Certification of the Treasurer
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**PART 1. Financial Information**
Item 1. Financial Statements
**UNITED COMMUNITY BANKSHARES OF FLORIDA, INC.**
**Consolidated Balance Sheets****(Unaudited)**           **June 30,** **December 31,**  **2004** **2003**  **($ in thousands, except share amounts)****Assets**        Cash and due from banks $24,222  $11,009 Interest-bearing demand deposits in other banks  9,772   9,694 Federal funds sold  52,202   39,926             86,196   60,629 Total cash and cash equivalents        Securities available for sale  47,842   56,386 Loans, net of allowance for loan losses of $2,869 in 2004 and$2,526 in 2003  224,355   198,480 Premises and equipment, net  5,607   5,410 Federal Home Loan Bank stock, at cost  —   106 Accrued interest receivable  951   991 Deferred tax asset  1,295   974 Other Assets  1,627   1,348          **Total Assets** $367,873  $324,324          **Liabilities and Shareholders’ Equity**        Liabilities:        Noninterest-bearing demand deposits $55,884  $42,348 Savings and NOW deposits  37,075   30,033 Money-market deposits  119,893   89,970 Time deposits  119,515   124,221             332,367   286,572 Total Deposits        Other liabilities  879   902 Other Borrowings  2,432   5,174          Total Liabilities  335,678   292,648          Shareholders’ Equity:        Preferred stock  —   — Commonstock, $.01 par value; 20 million shares authorized; 3,256,888 shares issued and outstanding  33   33 Additional paid-in capital  31,970   31,970 Retained Earnings (deficit)  828   (38)Accumulated other comprehensive income (loss)  (636)  (289)         Total Shareholders’ equity  32,195   31,676          **Total liabilities and Shareholders’ equity** $367,873  $324,324          
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**UNITED COMMUNITY BANKSHARES OF FLORIDA, INC.**
**Consolidated Statements of Operations****(Unaudited)**                   **Six Months Ended** **Three Months Ended**  **June 30,** **June 30,**  **2004** **2003** **2004** **2003**  **($ in thousands, except share amounts)****($ in thousands, except share amounts)** Interest income:                Loans $6,703  $5,472  $3,380  $2,877 Securities  732   664   340   308 Other interest-earning assets  287   342   178   191                  Total interest income  7,722   6,478   3,898   3,376                  Interest expense:                Deposits  2,712   2,837   1,396   1,497 Other borrowings  8   3   5   2                  Total interest expense  2,720   2,840   1,401   1,499                  Net interest income  5,002   3,638   2,497   1,877 Provision for loan losses  386   222   226   102                  Net interest income after provision for loan losses  4,616   3,416   2,271   1,775                  Noninterest income:                Service charges and fees  244   249   122   132 Gain on sale of Other Real Estate  5   28   —   3 Gain on sale of securities available for sale  —   5   —   —                  Total noninterest income  249   282   122   135                  Noninterest expense:                Salaries and employee benefits  1,631   1,459   839   738 Occupancy expense  638   325   281   170 Other  1,183   1,314   529   613                  Total noninterest expense  3,452   3,098   1,649   1,521                  Income before income taxes  1,413   600   744   389 Income taxes  547   245   277   152                  Net income $866  $355  $467  $237                  Basic earnings per share $0.27  $0.12  $0.15  $0.08                  Fully diluted earnings per share $0.26  $0.11  $0.14  $0.07                  Dividends per share  —   —   —   —                  
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**UNITED COMMUNITY BANKSHARES OF FLORIDA, INC.**
**Consolidated Statements of Changes in Shareholders’ Equity****(Unaudited)(In thousands)**                                   **Accumulated** ** **      **Additional**     **Other** **Total**  **Common** **Paid-in** **Retained Earnings** **Comprehensive** **Shareholders'**  **Stock** **Capital** **(Deficit)** **Income (Loss)** **Equity**Balance December 31, 2002 $20  $19,980  $(919) $387  $19,468                      Comprehensive Income:                    Net income  —   —   355   —   355 Net change in unrealizedgain on securities availablefor sale  —   —   —   (139)  (139)                     Comprehensive income  —   —   —   —   216                      Issuance ofcommon shares in acquisition  11   9,742           9,753 Issuance of Common Sharesin Employee/Director Offering  2   2,248   —   —   2,250                      Balance at June 30, 2003 $33  $31,970  $(564) $248  $31,687                      Balance December 31, 2003 $33  $31,970  $(38) $(289) $31,676                      Comprehensive Income:                    Net income  —   —   866   —   866 Net change in unrealizedloss on securities availablefor sale  —   —   —   (347)  (347)                     Comprehensive income  —   —   —   —   519                      Balance at June 30, 2004 $33  $31,970  $828  $(636) $32,195                      
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**UNITED COMMUNITY BANKSHARES OF FLORIDA, INC.**
**Consolidated Statements of Cash Flows****(Unaudited)**           **Six Months Ended**  **June 30,**  **2004** **2003**  **($ in thousands)**Cash flows from operating activities:        Net Income $866  $355 Adjustments to reconcile net income to net cash provided byoperating activities:        Depreciation and amortization  288   246 Provision for loan loss  386   222 Net amortization of securities available for sale  362   481 Deferred income taxes  (111)  167 Gain on sale of securities available for sale  —   (5)Changes in balances of:        Interest Receivable  40   (87)Interest Payable  49   (203)Other accounts — net  (159)  (143)         Net cash provided by operating activities  1,721   1,033          Cash flows from investing activities:        Purchase of securities available for sale  (3,078)  (48,748)Sales and calls of securities available for sale  —   7,717 Repayment of securities available for sale  10,559   13,517 Net increase in loans  (26,261)  (11,578)Purchase of premises and equipment  (427)  (50)         Net cash used in investing activities  (19,207)  (39,142)         Cash flows from financing activities:        Net increase in deposits  45,795   48,736 Net increase (decrease) in other borrowings  (2,742)  1,074 Sale of Common Stock  —   2,250          Net cash provided by financing activities  43,053   52,060          Net increase in cash and cash equivalents  25,567   13,951 Cash and cash equivalents at beginning of period  60,629   24,566 Cash and cash equivalents acquired in acquisition $—   25,593          Cash and cash equivalents at end of period $86,196  $64,110          Supplemental disclosure of cash flow information:        Cash paid during the period for interest $2,671  $3,043          Cash paid during the period for income tax $839  $317          
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**UNITED COMMUNITY BANKSHARES OF FLORIDA, INC.**
**Notes to Consolidated Financial Statements (unaudited)**
**(1)** **Description of Business and Basis of Presentation.**
United Community Bankshares of Florida, Inc. (the Holding Company) wasincorporated as aFlorida Corporation on April 15, 2002. On January 13, 2003, the HoldingCompany acquired100% of the outstanding shares of United Heritage Bank and CommunityUnited Bank (theBanks) (collectively, the Company) pursuant to approval by the FederalReserve to acquire theBanks through an exchange of Holding Company common shares for theoutstanding shares inthe Banks. This transaction has been accounted for as a combination ofinterests under commoncontrol as it relates to the acquisition of United Heritage Bank, and as apurchase transaction as itrelates to Community United Bank. On March 26, 2004, Community UnitedBank was merged into United Heritage Bank, changing the holding companystatus from that of a multi-bank holding company to a one-bank holdingcompany.
The Holding Company’s principal business is the ownership and operation ofthe Bank. The Bankis incorporated under the laws of the State of Florida and is a FloridaBanking Corporation. TheBank provides a variety of community banking services to businesses andindividuals throughits seven banking offices throughout Central Florida. The Bank’s depositsare insured by theFDIC to the extent provided by law.
The accompanying consolidated financial statements include the accounts oftheHolding Company and the Bank. All significant intercompany accounts havebeen eliminated inconsolidation. The income and expense of Community United Bank fromJanuary 13, 2003 through June 30, 2003 are included in the accompanyingconsolidated statement of operations for the six months ending June 30,2003. Earnings during the 13 days of January 2003 before the purchase areconsidered to be insignificant when presenting the comparison analysis initem (2).The consolidated financial statements at December 31, 2003 include theaccounts of the Holding Company and United Heritage Bank for the entireperiod, and of Community United Bank (except for the first 13 days ofJanuary 2003).
**(2)** **Earnings per Share**
Basic earnings per share have been computed on the basis of the weightedaveragenumber of shares of common stock outstanding during the periods.Additional shares issuable under the stock option plans (using thetreasury stock method) have been added to the weighted average shares forpurposes of computing fully diluted earnings per share purposes, asfollows:           **Six months ending**  **June 2004** **June 2003**Weighted average shares outstanding  3,256,888   3,071,310 Additional shares issuable under the stock option plans  38,580   32,347          Weighted average shares for fully diluted purposes  3,295,468   3,103,657                     **Three months ending**  **June 2004** **June 2003**Weighted average shares outstanding  3,256,888   3,225,981 Additional shares issuable under the stock option plans  38,580   32,816          Weighted average shares for fully diluted purposes  3,295,468   3,258,797          
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**UNITED COMMUNITY BANKSHARES OF FLORIDA, INC.**
**Notes to Consolidated Financial Statements (unaudited), Continued**
**(3)** **Pro forma effect of Stock Options**
As permitted by applicable accounting principles, management has electedto disclose ratherthan to record the compensatory effect of stock options granted toemployee and directors. The pro forma effect has been determined by useof the Black — Scholes option pricing model, assuming no volatility,minimal dividends and average lives and exercise probability by optionclass. At June 30, 2004 employees and directors held options for 487,404shares of common stock, compared to 335,992 shares and 194,080 shares atMarch 31, 2004 and June 30, 2003, respectively. On April 1, 2004, optionsfor 141,912 shares were granted to certain of the Company’s directorsunder the stock option plan approved by the shareholders. The estimatedpro forma impact of these options on compensation and net income isapproximately $544,000 for the entire 2004 year. For purposes of this proforma disclosure, 50% of this amount, or $272,000 has been assigned to thefirst half of 2004 as though the options were granted in the first quarterof 2004 and applied evenly throughout the 2004 year. These options weregranted at $12.00 each, are immediately exercisable, and expire ten yearsafter the date of grant. In addition, employee options for 9,500 shareswere issued on June 24, 2004 at $12 each, begin vesting in 2005 over 60months, and expire ten years after the date of the grant.
Had the effect of the above options been recorded, the estimated effect oncompensation and income would have been as follows:                   **Six months ending** **Three months ending**  **June 2004** **June 2003** **June 2004** **June 2003****($in thousands, except share amounts)**                Compensation as recorded $1,631  $1,459  $839  $738 Pro forma effect of options  300   28   150   28                  Pro forma compensation $1,931  $1,487  $989  $766                  Net Income as reported $866  $355  $467  $237 Pro forma effect of options  (300)  (28)  (150)  (.14)                 Pro forma net income $566  $327  $317  $223                  Basic earnings per share $.27  $.12  $.15  $.08 Pro forma effect of options  (.09)  (.01)  (.05)  (.01)                 Pro forma basic EPS $.18  $.11  $.10  $.07                  Fully diluted earnings per share $.26  $.11  $.14  $.07 Pro forma effect of options  (.09)  —   (.05)  —                  Pro forma fully diluted EPS $.17  $.11  $.09  $.07                  
**(4)** **Management Opinion**
In the opinion of management, the accompanying consolidated financialstatements contain all adjustments (consisting of normal recurringaccruals) necessary to present fairly the financial position at June 30,2004 and the results of operations for the six month and three monthperiods ended June 30, 2004. The results of operations for the six monthsended June 30, 2004 are not necessarily indicative of the results to beexpected for the year ending December 31, 2004, due to, among otherthings, the initial expenses associated with the merger of CommunityUnited Bank into United Heritage Bank.
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**UNITED COMMUNITY BANKSHARES OF FLORIDA, INC.**
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
**Critical Accounting Policy**
The accounting and financial reporting policies of Bank and the holding companyconform to accounting principles generally accepted in the United States ofAmerica and to general practices within the banking industry. The Company hasdetermined that its policy regarding the determination of its allowance forloan losses is a critical accounting policy in that it requires significantjudgments and involves complex estimates and the application of the policy hasa significant impact on the Company’s financial statements.
The allowance for loan losses is an estimate of the losses that may besustained in the Bank’s portfolio. The allowance has two basic components: (1)specific loss estimates for individually classified and impaired loans, andgeneral loss estimates on loans for which no impairment has been identified andlarge groups of smaller balance homogeneous loans. Specific loss estimates onindividual loans include subjective evaluations related to secondary sources ofrepayment for the loan which are principally collateral liquidation. Thegeneral loss allocations use historical loss ratio experience which may not beindicative of the actual losses present in the loan portfolio at a given pointin time.
While the basic methodology of the Bank’s loan loss allowance estimationprocess has not changed, management continuously re-evaluates the use ofhistorical loss factors, national and local economic trends, creditconcentrations and other relevant factors in determining the adequacy of theallowance for loan loss.
The estimation process associated with the allowance for loan losses can havesignificant effects in the estimated loan loss expense of a given period.Generally, the allowance for loan losses increases as the outstanding balanceof loans increase or the level of classified or impaired loans increases.Loans or portions of loans that are deemed uncollectible are charged againstand reduce the allowance.
**Financial Condition**
Management continuously monitors the financial condition of the Bank and theholding company in order to maintain sufficient capital to support theirrespective operations. Significant items affecting the Company’s financialcondition are discussed below.
**Asset Quality**
A major key to long-term earnings growth is the maintenance of a high-qualityloan portfolio. The Company’s directive in this regard is carried out throughits policies and procedures for extending credit to the Bank’s customers. Thegoal of these policies and procedures is to provide a sound basis for newcredit extensions and an early recognition of problem assets to allow the mostflexibility in their timely disposition.
Management has identified $385,425 or .17% of the total loan portfolio asnon-performing assets atJune 30, 2004. Additional reserves of $20,724 have been allocated for thenon-performing loans while management estimates a loss potential to be not morethan $23,000. However, there can be no assurance that losses will not exceedthis estimate. Additions to the allowance for loan losses are madeperiodically to maintain the allowance at an appropriate level based uponmanagement’s analysis of potential risk in the loan portfolio. The amount ofthe loan loss provision will generally be determined by an evaluation of thelevel of loans outstanding, the level of non-performing loans, historical loanloss experience, delinquency trends, the amount of actual losses charged to thereserve in a given period, and assessment of present and anticipated economicconditions.
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**UNITED COMMUNITY BANKSHARES OF FLORIDA, INC.**
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
**Liquidity**
The Company’s primary sources of cash during the six months ended June 30, 2004were from net deposit inflows of $45,795,000 and $10,559,000 in principal andinterest payments on mortgage-backed securities. Cash was primarily used tooriginate loans, net of principal repayments, totaling $26,261,000 and toincrease liquidity reserves by $25,567,000. At June 30, 2004, the Company hadunused commitments with an original maturity exceeding one year of $33,138,000.At June 30, 2004, the Bank exceeded its regulatory liquidity requirements.
**Capital Resources**
The Company is required to maintain certain consolidated regulatory capitalratios. The following is a summary at June 30, 2004 and 2003 of theconsolidated regulatory capital requirements for the entities to remain wellcapitalized, compared to actual capital on a percentage basis:                               **Regulatory**              **Requirement for**  **June** **December** **June** **Well capitalized**  **2004** **2003** **2003** **Entities****Consolidated**                Total capital to risk-weighted assets  12.31%  13.95%  15.59%  10.00%Tier 1 capital to risk-weighted assets  11.25%  12.86%  14.58%  6.00%Tier 1 capital to total assets — leverage ratio  8.47%  9.32%  10.08%  5.00%
**Selected Ratios**
     The following ratios are presented for the dates and periods indicated:               **Six Months** **Year Ended** **Six Months**  **Ended June** **December 31,** **Ended June**  **30, 2004** **2003** **30, 2003**Average equity as a percentage of Average Assets  9.15%  10.34%  10.69%Equity to total assets at end of period  8.75%  9.77%  10.24%Return on average assets (1)  0.51%  0.29%  0.25%Return on average equity (1)  5.53%  2.85%  2.36%Nonperforming loans and foreclosed real estate asa percentage of total assets at end of period  0.10%  0.15%  0.16%
(1) Annualized for the six months ended June 30.
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**UNITED COMMUNITY BANKSHARES OF FLORIDA, INC.**
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
     **Results of Operations**
     **General.**Net income for the six months ended June 30, 2004 was$866,000 or $.27 per share compared to $355,000 or $.12 per share for thesix months ended June 30, 2003. The increase in the Company’s earningswas primarily due to an increase in net interest income, partially offsetby an increase in noninterest expenses and the loan loss provision. Theresults of operations for the six months ended June 30, 2004 are notnecessarily indicative of the results to be expected for the year endingDecember 31, 2004. Net income for the 2nd quarter improved over the firstquarter of 2004 by $68,000 and improved by $230,000 over the same periodlast year.
     The merger of Community United Bank on March 26, 2004 into UnitedHeritage Bank accounted for nonrecurring expenses of approximately$123,000 in conversion and other merger related costs during the firstquarter of 2004. Other expenses also increased for the quarter endingJune 30, 2004 due to the normal growth of the Bank.
     **Interest Income and Expense.**Interest income increased by$1,244,000, from $6,478,000 for the six months ended June 30, 2003 to$7,722,000 for the six months ended June 30, 2004. Interest income onloans increased $1,231,000 primarily due to an increase in the averageloan portfolio balance from $160 million for the six months ended June 30,2003 to $207 million for the comparable period in 2004. This waspartially offset by a decrease in the weighted-average yield on loans from6.88% in 2003 to 6.50% in 2004. Interest on securities increased $68,000primarily due to an increase in the average securities portfolio balancefrom $48 million in 2003 to $52 million in 2004, and also an increase inthe weighted average yield from 2.77 % in 2003 to 2.83% in 2004. Interestincome on other interest-earning assets decreased $63,000 due to asubstantial decrease in yield from 1.21% in 2003 to 0.91% in 2004.
     Interest expense on interest-bearing liabilities decreased to $2,720,000for the six months ended June 30, 2004 from $2,840,000 for the six monthsended June 30, 2003. Interest expense on interest-bearing liabilitiesdecreased due to a decrease in the weighted rate paid from 2.57% in 2003to 2.06% in 2004, partially offset by an increase in averageinterest-bearing liabilities of $42,262,000.
     Net interest income for the six months ended June 30, 2004 increased$1,364,000 over the same period ended June 30, 2003. Net interest incomefor the quarter ending June 30, 2004 also increased $620,000 over the samequarter in 2003.
     The following table sets forth, for the periods indicated, informationregarding (I) the total dollar amount of interest income for the Companyfrom interest-earning assets and the resultant average yields; (II) thetotal dollar amount of interest expense on interest-bearing liabilitiesand the resultant average cost; (III) net interest income; (V) netinterest margin.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)                           **Six Months Ended June 30,****Results of Operations (Continued)** **2004** **2003**      **Interest** **Average**     **Interest** **Average**  **Average** **and** **Yield/** **Average** **and** **Yield/**  **Balance** **Dividends** **Rate** **Balance** **Dividends** **Rate**  **(in thousands)**     **(in thousands)**    Interest-earning assets;                        Loans $207,456   6,703   6.50% $160,479   5,472   6.88%Securities  52,022   732   2.83%  48,426   664   2.77%Other interest-earning assets (1)  63,731   287   0.91%  57,074   342   1.21%                         Total interest-earning assets  323,209   7,722   4.80%  265,979   6,478   4.91%                         Noninterest-earning assets  20,954           18,289                                  Total Assets $344,163          $284,268                                  Interest-bearing liabilities:                        Savings, NOW, money marketdeposit accounts  138,997   1,049   1.52%  111,463   934   1.69%Time deposits  122,878   1,663   2.72%  110,130   1,903   3.48%Other interest-bearing liabilities (2)  3,189   8   0.50%  1,209   3   0.50%                         Total interest-bearing liabilities  265,064   2,720   2.06%  222,802   2,840   2.57%                         Noninterest-bearing deposits  45,594           30,045         Noninterest-bearing liabilities  2,024           1,027         Shareholders’ equity  31,481           30,394                                  Total liabilities andshareholders’ equity $344,163          $284,268                                  Net interest income     $5,002          $3,638                              Interest-rate spread (3)          2.74%          2.34%                         Net interest margin (4)          3.11%          2.76%                         Ratio of average interest-earning assets toaverage interest-bearing liabilities  1.22           1.19                                  
(1) Includes Federal Funds sold and interest-bearing deposits in other banks. (2) Includes securities sold under agreements to repurchase. (3) Interest-rate spread represents the difference between the average yield on interest-earning assets andthe average rate of interest-bearing liabilities. (4) Net interest margin is net interest income divided by average interest-earning assets.
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**UNITED COMMUNITY BANKSHARES OF FLORIDA, INC.**
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
     **Results of Operations (Continued)**
     **Provision for Loan Losses.**The provision for loan losses is chargedto operations to bring the total allowance to a level deemed appropriateby management and is based upon historical experience, the volume and typeof lending conducted by the Company, industry standards, the amount ofnonperforming loans, general economic conditions, particularly as theyrelate to the Company’s market areas, and other factors related to thecollectibility of the Company’s loan portfolio. The provision was$386,000 for the six months ended June, 2004 and $222,000 for thecomparable period in 2003. Management believes the approximate $2.8million balance in the allowance for loan losses at June 30, 2004 isadequate.
     **Noninterest Income.**Noninterest income was $249,000 for the firstsix months of 2004 compared to $282,000 for the comparable period in 2003.The decrease of $33,000 from 2003 to 2004 relates primarily to a gain onthe sale of other real estate during the first quarter of 2003.
     **Noninterest Expenses.**Noninterest expenses increased $354,000 duringthe six month period ended June 30, 2004 from $3,098,000 to $3,452,000.Approximately 35% of this increase is attributable to expenses associatedwith the conversion of systems in connection with the merger of the twobanks. The balance of this increase is associated with the normal growthof the Bank.
     **Provision for Income Taxes.**The income tax expense for the sixmonths ended June 30, 2004 was $547,000 compared to a $245,000 tax expensefor the comparable 2003 period, or an increase of $302,000. The Companyuses the liability method for accounting for deferred income taxes. Thedifference in the actual income tax rates and those which might beexpected by applying the federal statutory rate of 34% to income beforeincome taxes is primarily attributable to state income taxes and expensesrecorded for financial reporting purposes that are not deductible forincome tax purposes.
Item 3. Controls and Procedures
a.   Evaluation of disclosure controls and proceduresThe Company maintains controls and procedures designed to ensure thatinformation required to be disclosed in the reports that the Company filesor submits under the Securities Exchange Act of 1934 is recorded,processed, summarized and reported within the time periods specified inthe rules and forms of the Securities and Exchange Commission. Based upontheir evaluation of those controls and procedures, the President and ChiefExecutive officer and the Treasurer of the Company concluded that theCompany’s disclosure controls and procedures are adequate as of June 30,2004.
b.   Changes in internal controlsThe Company made no significant changes in its internal controls or inother factors that could significantly affect these controls subsequent tothe date of the evaluation of those controls by the President and ChiefExecutive officer and the Treasurer.
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**UNITED COMMUNITY BANKSHARES OF FLORIDA, INC.**
**PART II. OTHER INFORMATION**
Item 4. Submission of Matters to a Vote of Security Holders
Annual Meeting April 26, 2004 **-**Election of all four Directors of theHolding Company (Messrs. James L. Hewitt, J. Michael Hattaway, Vincent G.Hughes, and David G. Powers). There were 1,916,371 votes for thereelection, 0 against, and 0 abstained.
Item 6. Exhibits and Reports on Form 8-K
(a) **Exhibits**   **Exhibit No.** **Description of Exhibit**3.1 Amendment to Bylaws of United Community Bankshares of Florida, Inc.   31.1 Certification of President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002   31.2 Certification of Treasurer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002   32.1 Certification of President and Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002   32.2 Certification of Treasurer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002   
(b) **Reports on****Form 8-K****.**There were no reports on Form 8-K filed during the three months ended June 30, 2004.
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**UNITED COMMUNITY BANKSHARES OF FLORIDA, INC.**
**SIGNATURES**
Pursuant to the requirements of the Securities Exchange Act of 1934, theRegistrant has duly caused this report to be signed on its behalf by theundersigned duly authorized.           **UNITED COMMUNITY BANKSHARES OF FLORIDA, INC.**