##### Table of Contents

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



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Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange
Act of 1934



For the Quarterly Period Ended September 30,
2004



Commission File Number 000-50091



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BANCSHARES OF FLORIDA, INC.



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A Florida Corporation



IRS Employer Identification No. 59-3535315



1185 Immokalee Road

Naples, Florida 34110

(239) 254-2100



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



The number of shares outstanding of the Registrants common stock, as of November 10, 2004: 4,835,632 shares of $.01 par value common
stock.



Transitional Small Business Disclosure Format (check
one)    Yes ̈No  x



Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange
Act Rule12b2). 2)    Yes ̈No  x



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##### Table of Contents

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

Index



|         |  |                       |  |                                                                                                                                                                                                     |  |     
|-------- |  | --------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|         |  |                       |  |                                                                                                                                                                                                     |  | Page
|         |  |                      
|PART I.  |  | Financial Information |  |                                                                                                                                                                                                    
|         |  |                       | 
|         |  | Item 1.               |  | Financial Statements (Unaudited)                                                                                                                                                                    |  |     
|         |  |                       | 
|         |  |                       |  | Condensed Consolidated Balance Sheets At September 30, 2004 and December 31, 2003                                                                                                                  |  | 1   
|         |  |                       | 
|         |  |                       |  | Condensed Consolidated Statements of Operations -Three and nine month periods ended September 30, 2004 and 2003                                                                                     |  | 2   
|         |  |                       | 
|         |  |                       |  | Condensed Consolidated Statements of Stockholders Equity -Year ended December 31, 2003 and nine months ended September 30, 2004                                                                    |  | 3   
|         |  |                       | 
|         |  |                       |  | Condensed Consolidated Statements of Comprehensive Income (Loss) -Three and nine month Periods ended September 30, 2004 and 2003                                                                    |  | 3   
|         |  |                       | 
|         |  |                       |  | Condensed Consolidated Statements of Cash Flows -Nine month Periods ended September 30, 2004 and 2003                                                                                               |  | 4   
|         |  |                       | 
|         |  |                       |  | Notes to Condensed Consolidated Financial Statements                                                                                                                                                |  | 5   
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operation                                                                                                                |  |     
|         |  |                       | 
|         |  |                       |  | Overview                                                                                                                                                                                            |  | 12  
|         |  |                       | 
|         |  |                       |  | Critical Accounting Policies                                                                                                                                                                        |  | 12  
|         |  |                       | 
|         |  |                       |  | Discussion of the Three Months Ended September 30, 2004
Compared to the Three Months Ended September 30, 2003 and June 30, 2004 And Discussion of the Nine Months Ended September 30, 2004 and 2003 |  | 13  
|         |  |                       | 
|         |  |                       |  | Liquidity and Capital Resources                                                                                                                                                                     |  | 28  
|         |  |                       | 
|         |  |                       |  | Quantitative and Qualitative Disclosures about Market Risk                                                                                                                                          |  | 32  
|         |  |                       | 
|         |  | Item 3.               |  | Controls and Procedures                                                                                                                                                                             |  | 33  
|         |  |                      
|PART II. |  | Other Information     |  |                                                                                                                                                                                                    
|         |  |                       | 
|         |  | Item 6.               |  | Exhibits                                                                                                                                                                                            |  | 34  
|         |  |                       | 
|         |  |                       |  | Signatures                                                                                                                                                                                          |  | 36  



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##### Table of Contents

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2004 and December 31, 2003

(In Thousands, except share and per share data)



|                                                                                                                                                                                                                                                                         |  |                    |         |   |                  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------ | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                                                                                                                         |  | September 30, 2004 |         |   | December 31,2003 |  
|                                                                                                                                                                                                                                                                         |  | (unaudited)        |         |   |                  |  
|ASSETS                                                                                                                                                                                                                                                                   |  |                    |         |   |                  |   |         |  
|Cash and due from banks                                                                                                                                                                                                                                                  |  | $                  | 11,225  |   |                  | $ | 8,299   |  
|Interest bearing deposits in other banks                                                                                                                                                                                                                                 |  |                    | 102     |   |                  |   | 46      |  
|Federal funds sold                                                                                                                                                                                                                                                       |  |                    | 30,553  |   |                  |   | 79      |  
|                                                                                                                                                                                                                                                                         |  |                    |         |   |                  |   |         |  
|TOTAL CASH AND CASH EQUIVALENTS                                                                                                                                                                                                                                          |  |                    | 41,880  |   |                  |   | 8,424   |  
|                                                                                                                                                                                                                                                                         |  |                    |         |   |                  |   |         |  
|Securities available for sale, at fair value                                                                                                                                                                                                                             |  |                    | 10,196  |   |                  |   | 8,072   |  
|                                                                                                                                                                                                                                                                         |  |                   
|Loans                                                                                                                                                                                                                                                                    |  |                    | 284,599 |   |                  |   | 200,490 |  
|Less:                                                                                                                                                                                                                                                                    |  |                    |         |   |                  |   |         |  
|Allowance for loan losses                                                                                                                                                                                                                                                |  |                    | 2,368   |   |                  |   | 1,568   |  
|Unearned income and deferred loan fees                                                                                                                                                                                                                                   |  |                    | 170     |   |                  |   | 115     |  
|                                                                                                                                                                                                                                                                         |  |                    |         |   |                  |   |         |  
|NET LOANS                                                                                                                                                                                                                                                                |  |                    | 282,061 |   |                  |   | 198,807 |  
|                                                                                                                                                                                                                                                                         |  |                    |         |   |                  |   |         |  
|Restricted securities, Federal Home Loan Bank and Federal Reserve Bank stock, at cost                                                                                                                                                                                    |  |                    | 1,039   |   |                  |   | 739     |  
|Premises and equipment                                                                                                                                                                                                                                                   |  |                    | 6,730   |   |                  |   | 4,724   |  
|Accrued interest receivable                                                                                                                                                                                                                                              |  |                    | 943     |   |                  |   | 788     |  
|Intangible asset                                                                                                                                                                                                                                                         |  |                    | 974     |   |                  |   |        |  
|Other assets                                                                                                                                                                                                                                                             |  |                    | 821     |   |                  |   | 1,056   |  
|                                                                                                                                                                                                                                                                         |  |                    |         |   |                  |   |         |  
|TOTAL ASSETS                                                                                                                                                                                                                                                             |  | $                  | 344,644 |   |                  | $ | 222,610 |  
|                                                                                                                                                                                                                                                                         |  |                    |         |   |                  |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                                                                     |  |                    |         |   |                  |   |         |  
|Liabilities:                                                                                                                                                                                                                                                             |  |                    |         |   |                  |   |         |  
|Deposits                                                                                                                                                                                                                                                                 |  | $                  | 298,878 |   |                  | $ | 201,154 |  
|Subordinated debt                                                                                                                                                                                                                                                        |  |                    | 2,000   |   |                  |   |        |  
|Accrued interest payable                                                                                                                                                                                                                                                 |  |                    | 124     |   |                  |   | 41      |  
|Accrued expenses and other liabilities                                                                                                                                                                                                                                   |  |                    | 807     |   |                  |   | 195     |  
|                                                                                                                                                                                                                                                                         |  |                    |         |   |                  |   |         |  
|TOTAL LIABILITIES                                                                                                                                                                                                                                                        |  |                    | 301,809 |   |                  |   | 201,390 |  
|                                                                                                                                                                                                                                                                         |  |                    |         |   |                  |   |         |  
|                                                                                                                                                                                                                                                                         |  |                   
|Stockholders Equity:                                                                                                                                                                                                                                                    |  |                    |         |   |                  |   |         |  
|Series A Preferred stock, par value $.01 per share, aggregate liquidation preference of $3.5 million; 50,000 shares authorized, 35,396 shares
issued and outstanding at September 30, 2004; no shares designated, authorized, issued or outstanding at December 31, 2003 |  |                    | 3,540   |   |                  |   |        |  
|Undesignated Preferred stock, par value $.01 per share, 950,000 and 1,000,000 shares authorized, no shares issued and outstanding at September
30, 2004 and December 31, 2003, respectively                                                                              |  |                    |        |   |                  |   |        |  
|Common stock, par value $.01 per share, 20,000,000 shares authorized, 4,835,632 and 3,079,199 shares issued and outstanding                                                                                                                                              |  |                    | 48      |   |                  |   | 31      |  
|Additional paid-in capital                                                                                                                                                                                                                                               |  |                    | 49,698  |   |                  |   | 29,634  |  
|Accumulated deficit                                                                                                                                                                                                                                                      |  |                    | (10,416 | ) |                  |   | (8,389  | )
|Accumulated other comprehensive loss                                                                                                                                                                                                                                     |  |                    | (35     | ) |                  |   | (56     | )
|                                                                                                                                                                                                                                                                         |  |                    |         |   |                  |   |         |  
|TOTAL STOCKHOLDERS EQUITY                                                                                                                                                                                                                                               |  |                    | 42,835  |   |                  |   | 21,220  |  
|                                                                                                                                                                                                                                                                         |  |                    |         |   |                  |   |         |  
|TOTAL LIABILITIES & STOCKHOLDERS EQUITY                                                                                                                                                                                                                                 |  | $                  | 344,644 |   |                  | $ | 222,610 |  
|                                                                                                                                                                                                                                                                         |  |                    |         |   |                  |   |         |  



See accompanying notes
to condensed consolidated financial statements.



1



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##### Table of Contents

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Nine-Months Ended September 30, 2004 and 2003

(In Thousands, except share and per share data)



|                                                                    |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|------------------------------------------------------------------- |  | ------------------------------- | --------- | - | ------------------------------ | - | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                                                    |  | (unaudited)                     |          
|                                                                    |  | Three-months endedSeptember 30, |           |   | Nine-months endedSeptember 30, |  
|                                                                    |  | 2004                            |           |   | 2003                           |   |           | 2004 |  |   | 2003      |  
|INTEREST INCOME                                                     |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|Interest and fees on loans                                          |  | $                               | 3,755     |   |                                | $ | 2,153     |      |  | $ | 9,909     |   |  | $ | 5,811     |  
|Interest on securities available for sale                           |  |                                 | 80        |   |                                |   | 79        |      |  |   | 209       |   |  |   | 217       |  
|Interest on federal funds sold                                      |  |                                 | 60        |   |                                |   | 21        |      |  |   | 89        |   |  |   | 61        |  
|Interest on other interest earning assets                           |  |                                 | 12        |   |                                |   |          |      |  |   | 33        |   |  |   | 105       |  
|                                                                    |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|TOTAL INTEREST INCOME                                               |  |                                 | 3,907     |   |                                |   | 2,253     |      |  |   | 10,240    |   |  |   | 6,194     |  
|                                                                    |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|INTEREST EXPENSE                                                    |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|Interest on deposits                                                |  |                                 | 1,288     |   |                                |   | 801       |      |  |   | 3,394     |   |  |   | 2,410     |  
|Interest on short term borrowings and subordinated debt             |  |                                 | 29        |   |                                |   | 6         |      |  |   | 40        |   |  |   | 6         |  
|                                                                    |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|TOTAL INTEREST EXPENSE                                              |  |                                 | 1,317     |   |                                |   | 807       |      |  |   | 3,434     |   |  |   | 2,416     |  
|                                                                    |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|NET INTEREST INCOME                                                 |  |                                 | 2,590     |   |                                |   | 1,446     |      |  |   | 6,806     |   |  |   | 3,778     |  
|PROVISION FOR LOAN LOSSES                                           |  |                                 | 263       |   |                                |   | 81        |      |  |   | 827       |   |  |   | 582       |  
|                                                                    |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                 |  |                                 | 2,327     |   |                                |   | 1,365     |      |  |   | 5,979     |   |  |   | 3,196     |  
|                                                                    |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|NONINTEREST INCOME                                                  |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|Mortgage banking                                                    |  |                                 | 117       |   |                                |   | 91        |      |  |   | 208       |   |  |   | 265       |  
|Trust fees                                                          |  |                                 | 277       |   |                                |   | 128       |      |  |   | 778       |   |  |   | 317       |  
|Service charges and fees                                            |  |                                 | 217       |   |                                |   | 161       |      |  |   | 569       |   |  |   | 361       |  
|Gains on sales of AFS securities, net                               |  |                                 |          |   |                                |   |          |      |  |   | 5         |   |  |   | 9         |  
|                                                                    |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|TOTAL NONINTEREST INCOME                                            |  |                                 | 611       |   |                                |   | 380       |      |  |   | 1,560     |   |  |   | 952       |  
|                                                                    |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|NONINTEREST EXPENSES                                                |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|Salaries and employee benefits                                      |  |                                 | 1,746     |   |                                |   | 1,055     |      |  |   | 4,516     |   |  |   | 3,257     |  
|Occupancy expenses                                                  |  |                                 | 577       |   |                                |   | 341       |      |  |   | 1,486     |   |  |   | 1,028     |  
|Equipment rental, depreciation & maintenance                        |  |                                 | 217       |   |                                |   | 204       |      |  |   | 587       |   |  |   | 587       |  
|General operating                                                   |  |                                 | 1,254     |   |                                |   | 596       |      |  |   | 2,837     |   |  |   | 1,602     |  
|                                                                    |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|TOTAL NONINTEREST EXPENSES                                          |  |                                 | 3,794     |   |                                |   | 2,196     |      |  |   | 9,426     |   |  |   | 6,474     |  
|                                                                    |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|LOSS BEFORE INCOME TAXES                                            |  |                                 | (856      | ) |                                |   | (451      | )    |  |   | (1,887    | ) |  |   | (2,326    | )
|INCOME TAXES                                                        |  |                                 |          |   |                                |   |          |      |  |   |          |   |  |   |          |  
|                                                                    |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|NET LOSS                                                            |  | $                               | (856      | ) |                                | $ | (451      | )    |  | $ | (1,887    | ) |  | $ | (2,326    | )
|                                                                    |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|LOSS PER SHARE AVAILABLE TO COMMON SHAREHOLDERS (Basic and Diluted) |  | $                               | (0.22     | ) |                                | $ | (0.15     | )    |  | $ | (0.58     | ) |  | $ | (0.80     | )
|                                                                    |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  
|WEIGHTED AVERAGE SHARES OUTSTANDING                                 |  |                                 | 4,220,137 |   |                                |   | 3,079,199 |      |  |   | 3,467,324 |   |  |   | 2,904,474 |  
|                                                                    |  |                                 |           |   |                                |   |           |      |  |   |           |   |  |   |           |  



See accompanying notes
to condensed consolidated financial statements.



2



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##### Table of Contents

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

For the Year Ended December 31, 2003 and

the Nine-Months Ended September 30, 2004

(In Thousands, except share and per share data; unaudited)



|                                                                                     |  |                 |  |              |       |                           |           |                    |   |    |                                       |   |        |       |   |         |   |  |   |     |   |  |   |        |  
|------------------------------------------------------------------------------------ |  | --------------- |  | ------------ | ----- | ------------------------- | --------- | ------------------ | - | -- | ------------------------------------- | - | ------ | ----- | - | ------- | - |  | - | --- | - |  | - | ------ | -
|                                                                                     |  | Preferred Stock |  | Common Stock |       | Additional Paid InCapital |           | AccumulatedDeficit |   |    | AccumulatedComprehensiveIncome (Loss) |   |        | Total |  
|                                                                                     |  | SharesIssued    |  | Amount       |       | SharesIssued              |           | Amount             |   |    |                                       |  
|Balance, December 31, 2002                                                           |  |                |  | $            |      |                           | 2,079,199 |                    | $ | 21 |                                       | $ | 20,661 |       | $ | (5,680  | ) |  | $ | 4   |   |  | $ | 15,006 |  
|Net loss                                                                             |  |                |  |              |      |                           |          |                    |   |   |                                       |   |       |       |   | (2,709  | ) |  |   |    |   |  |   | (2,709 | )
|Common stock issued, net of offering cost of $1,017                                  |  |                |  |              |      |                           | 1,000,000 |                    |   | 10 |                                       |   | 8,973  |       |   |        |   |  |   |    |   |  |   | 8,983  |  
|Changes in fair value on available for sale securities, net of tax                   |  |                |  |              |      |                           |          |                    |   |   |                                       |   |       |       |   |        |   |  |   | (60 | ) |  |   | (60    | )
|                                                                                     |  |                 |  |              |       |                           |           |                    |   |    |                                       |   |        |       |   |         |   |  |   |     |   |  |   |        |  
|Balance, December 31, 2003                                                           |  |                |  |              |      |                           | 3,079,199 |                    |   | 31 |                                       |   | 29,634 |       |   | (8,389  | ) |  |   | (56 | ) |  |   | 21,220 |  
|Net loss                                                                             |  |                |  |              |      |                           |          |                    |   |   |                                       |   |       |       |   | (1,887  | ) |  |   |    |   |  |   | (1,887 | )
|Preferred stock issued, net of offering cost of $1,017                               |  | 34,000          |  |              | 3,400 |                           |          |                    |   |   |                                       |   |       |       |   |        |   |  |   |    |   |  |   | 3,400  |  
|Exercise of stock options & warrants                                                 |  |                |  |              |      |                           | 31,433    |                    |   |   |                                       |   | 314    |       |   |        |   |  |   |    |   |  |   | 314    |  
|Common stock issued, net of offering cost of $1,698                                  |  |                |  |              |      |                           | 1,725,000 |                    |   | 17 |                                       |   | 19,750 |       |   |        |   |  |   |    |   |  |   | 19,767 |  
|Preferred stock dividends paid at a quarterly rate of 0.02 shares of preferred stock |  | 1,396           |  |              | 140   |                           |          |                    |   |   |                                       |   |       |       |   | (140    | ) |  |   |    |   |  |   |       |  
|Changes in fair value on available for sale securities, net of tax                   |  |                |  |              |      |                           |          |                    |   |   |                                       |   |       |       |   |        |   |  |   | 21  |   |  |   | 21     |  
|                                                                                     |  |                 |  |              |       |                           |           |                    |   |    |                                       |   |        |       |   |         |   |  |   |     |   |  |   |        |  
|Balance, September 30, 2004                                                          |  | 35,396          |  | $            | 3,540 |                           | 4,835,632 |                    | $ | 48 |                                       | $ | 49,698 |       | $ | (10,416 | ) |  | $ | (35 | ) |  | $ | 42,835 |  
|                                                                                     |  |                 |  |              |       |                           |           |                    |   |    |                                       |   |        |       |   |         |   |  |   |     |   |  |   |        |  



BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In Thousands, unaudited)



|                                                                                                |  |                                 |      |   |                                |   |      |      |  |   |        |   |  |   |        |  
|----------------------------------------------------------------------------------------------- |  | ------------------------------- | ---- | - | ------------------------------ | - | ---- | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                                |  | Three-months endedSeptember 30, |      |   | Nine-months endedSeptember 30, |  
|                                                                                                |  | 2004                            |      |   | 2003                           |   |      | 2004 |  |   | 2003   |  
|Net loss                                                                                        |  | $                               | (856 | ) |                                | $ | (451 | )    |  | $ | (1,887 | ) |  | $ | (2,326 | )
|Other comprehensive income (loss):                                                              |  |                                 |      |   |                                |   |      |      |  |   |        |   |  |   |        |  
|Unrealized gains (losses) on available for sale securities:                                     |  |                                 |      |   |                                |   |      |      |  |   |        |   |  |   |        |  
|Unrealized holding gains (losses) arising during the period, net of taxes                       |  |                                 | 185  |   |                                |   | (126 | )    |  |   | 26     |   |  |   | (80    | )
|Less reclassification adjustment for gains (losses) realized in net income (loss), net of taxes |  |                                 |     |   |                                |   |     |      |  |   | (5     | ) |  |   | 9      |  
|                                                                                                |  |                                 |      |   |                                |   |      |      |  |   |        |   |  |   |        |  
|Net unrealized gains (losses)                                                                   |  |                                 | 185  |   |                                |   | (126 | )    |  |   | 21     |   |  |   | (71    | )
|                                                                                                |  |                                 |      |   |                                |   |      |      |  |   |        |   |  |   |        |  
|Comprehensive loss                                                                              |  | $                               | (671 | ) |                                | $ | (577 | )    |  | $ | (1,866 | ) |  | $ | (2,397 | )
|                                                                                                |  |                                 |      |   |                                |   |      |      |  |   |        |   |  |   |        |  



See accompanying notes
to condensed consolidated financial statements.



3



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##### Table of Contents

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine-Months Ended September 30, 2004 and 2003

(In Thousands)



|                                                                                          |  |                                |         |   |      |   |         |  
|----------------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                                          |  | (unaudited)                    |        
|                                                                                          |  | Nine-Months EndedSeptember 30, |        
|                                                                                          |  | 2004                           |         |   | 2003 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                      |  |                                |         |   |      |   |         |  
|Net loss                                                                                  |  | $                              | (1,887  | ) |      | $ | (2,325  | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |                                |         |   |      |   |         |  
|Depreciation and amortization                                                             |  |                                | 509     |   |      |   | 494     |  
|Provision for loan losses                                                                 |  |                                | 827     |   |      |   | 582     |  
|Amortization of deferred loan fees and discounts                                          |  |                                | 5       |   |      |   | 58      |  
|Amortization of premiums and discounts on investments, net                                |  |                                | 25      |   |      |   |        |  
|Gains on sales of securities available for sale, net                                      |  |                                | (5      | ) |      |   | (9      | )
|Increase in accrued interest receivable                                                   |  |                                | (155    | ) |      |   | (146    | )
|Decrease (increase) in other assets                                                       |  |                                | 271     |   |      |   | (462    | )
|Increase in accrued interest payable                                                      |  |                                | 83      |   |      |   | 2       |  
|Increase in accrued expenses and other liabilities                                        |  |                                | 542     |   |      |   | 102     |  
|                                                                                          |  |                                |         |   |      |   |         |  
|NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                       |  |                                | 215     |   |      |   | (1,704  | )
|                                                                                          |  |                                |         |   |      |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                                      |  |                                |         |   |      |   |         |  
|Acquisition of net assets, net of cash acquired                                           |  |                                | 561     |   |      |   |        |  
|Net increase in loans                                                                     |  |                                | (84,086 | ) |      |   | (57,748 | )
|Proceeds from the sale of securities available for sale                                   |  |                                |        |   |      |   | 4,342   |  
|Proceeds from principal repayments on securities available for sale                       |  |                                |        |   |      |   | 979     |  
|Purchase of securities available for sale                                                 |  |                                | (2,123  | ) |      |   | (8,088  | )
|Purchase of restricted securities                                                         |  |                                | (300    | ) |      |   | (202    | )
|Purchase of premises and equipment                                                        |  |                                | (1,883  | ) |      |   | (272    | )
|                                                                                          |  |                                |         |   |      |   |         |  
|NET CASH USED IN INVESTING ACTIVITIES                                                     |  |                                | (87,831 | ) |      |   | (60,989 | )
|                                                                                          |  |                                |         |   |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                                      |  |                                |         |   |      |   |         |  
|Net increase in deposits                                                                  |  |                                | 97,724  |   |      |   | 37,835  |  
|(Payment of) Increase in short term borrowings                                            |  |                                | (2,133  | ) |      |   | 4,000   |  
|Proceeds from subordinated debt issuance                                                  |  |                                | 2,000   |   |      |   |        |  
|Net proceeds from issuance of Series A preferred stock                                    |  |                                | 3,400   |   |      |   |        |  
|Net proceeds from issuance of common stock                                                |  |                                | 20,081  |   |      |   | 9,160   |  
|                                                                                          |  |                                |         |   |      |   |         |  
|NET CASH PROVIDED BY FINANCING ACTIVITIES                                                 |  |                                | 121,072 |   |      |   | 50,995  |  
|                                                                                          |  |                                |         |   |      |   |         |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                      |  |                                | 33,456  |   |      |   | (11,698 | )
|CASH AND CASH EQUIVALENTS:                                                                |  |                                |         |   |      |   |         |  
|Beginning of period                                                                       |  |                                | 8,424   |   |      |   | 26,373  |  
|                                                                                          |  |                                |         |   |      |   |         |  
|End of period                                                                             |  | $                              | 41,880  |   |      | $ | 14,675  |  
|                                                                                          |  |                                |         |   |      |   |         |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                          |  |                                |         |   |      |   |         |  
|Cash paid during the year for:                                                            |  |                                |         |   |      |   |         |  
|Interest                                                                                  |  | $                              | 3,351   |   |      | $ | 2,414   |  
|                                                                                          |  |                                |         |   |      |   |         |  
|Noncash Transactions:                                                                     |  |                                |         |   |      |   |         |  
|Increase in fair value on securities available for sale                                   |  | $                              | 21      |   |      | $ | (71     | )
|                                                                                          |  |                                |         |   |      |   |         |  
|Dividends paid on preferred stock                                                         |  | $                              | 140     |   |      | $ |        |  
|                                                                                          |  |                                |         |   |      |   |         |  



See accompanying notes
to condensed consolidated financial statements.



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##### Table of Contents

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



NOTE 1Organization and Basis of Presentation



Organization:



Bancshares of Florida Inc., (Bancshares), was incorporated in Florida in September 1998 to serve as a holding company for Bank of Florida,
N.A., a national banking association then in organization. (Bancshares and its subsidiaries are collectively referred to in this report as the Company).



For approximately the first eleven months following its incorporation, the main activities of Bancshares centered on
applying for a national bank charter, applying to become a bank holding company, hiring and training bank employees, preparing the banking facilities and premises for opening, and conducting an initial public offering of common stock to raise a
minimum of $10 million to fund the startup of Bank of Florida, N.A. By August 1999, Bancshares had received subscriptions to purchase common stock in an amount in excess of the required minimum, and on August 24, 1999, Bank of Florida, N.A.,
commenced operations at its office located at 3401 Tamiami Trail North in Naples, Florida.



Bank of Florida, N.A. is a full-service commercial bank. The bank offers a wide range of interest bearing and non-interest bearing accounts, including commercial and retail checking accounts, money market accounts,
individual retirement accounts, regular interest bearing statement savings accounts, certificates of deposit, commercial loans, real estate loans, home equity loans and consumer/installment loans. In addition, Bank of Florida, N.A. provides such
consumer services as U.S. Savings Bonds, travelers checks, cashiers checks, safe deposit boxes, bank by mail services, direct deposit and automated teller services (ATMs) as well as cash management and internet banking services.



On April 18, 2000, Florida Trust Company was incorporated under the laws of
the State of Florida as a wholly-owned subsidiary of Bank of Florida, N.A. Florida Trust Company applied to the Comptroller of the Currency and was approved to engage in fiduciary services and estate planning consultation on August 23, 2000. In
October 2002, Florida Trust Company applied to the Florida Department of Financial Services and upon that applications approval in March 2003, Bancshares acquired Florida Trust Company from Bank of Florida, N.A. On July 16, 2004, Florida Trust
Company received approval from the Florida Department of Financial Services to change its name to Bank of Florida Trust Company as a means to improve the name recognition of the subsidiary with Bancshares and its banking affiliates. As a subsidiary
of Bancshares, Bank of Florida Trust Company offers investment management, trust administration, estate planning, and financial planning services.



On July 16, 2002, Bank of Florida, a newly formed state-chartered commercial bank, opened in Ft. Lauderdale, Florida. Bank of Florida opened with over $7
million in capital and offers a wide range of interest bearing and non-interest bearing accounts, including commercial and retail checking accounts, money market accounts, individual retirement accounts, regular interest bearing statement savings
accounts, certificates of deposit, commercial loans, real estate loans, home equity loans and consumer/installment loans. In addition, Bank of Florida provides such consumer services as U.S. Savings Bonds, travelers checks, cashiers checks,
safe deposit boxes, bank by mail services, direct deposit and automatic teller services as well as cash management and internet banking services.



On November 5, 2004, Bank of Florida, Tampa Bay opened for business with over $8 million in capital. The Bank offers a wide range of interest-bearing and
non-interest-bearing accounts, including commercial and retail checking accounts, money market accounts, individual retirement accounts, regular interest bearing statement savings accounts, certificates of deposit, commercial loans, real estate
loans, home equity loans and consumer/installment loans. In addition, Bank of Florida, Tampa Bay provides such consumer services as U.S.



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##### Table of Contents

Savings Bonds, travelers checks, cashiers checks, safe deposit boxes, bank by mail services, direct deposit and
automatic teller services as well as cash management and internet banking services. (Bank of Florida, Tampa Bay, Bank of Florida, N.A (Naples) and Bank of Florida (Ft. Lauderdale) are collectively referred to in this report as the
Banks).



Basis of Presentation:



The unaudited interim condensed consolidated financial statements for the
periods ended September 30, 2004 and 2003 included herein have been prepared in accordance with the instructions for Form 10-QSB under the Securities Exchange Act of 1934, as amended, and Item 310(b) of Regulation S-B under the Securities Act of
1933, as amended. Certain information and footnote disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to
such rules and regulations relating to interim financial statements.



The financial information included herein is unaudited; however, such information reflects all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for
the interim periods. Results for interim periods are not necessarily indicative of the results of operations for the full year or any other interim period.



The Companys significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in its 2003 Annual
Report on Form 10-KSB filed with the Securities and Exchange Commission. For interim reporting purposes, the Company follows the same basic accounting policies and considers each interim period as an integral part of an annual period. The unaudited
condensed consolidated financial statements included herein should be read in conjunction with the financial statements and related footnotes included in the Companys 2003 Form 10-KSB.



Stock-based Compensation:



The Company applies the intrinsic-value-based method of accounting
prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including Financial Accounting Standards Board (FASB) Interpretation No. 44, Accounting for
Certain Transactions involving Stock Compensation, and Interpretation of APB Opinion No.25, to account for its fixed-plan stock options. Under this method, compensation expense is recorded on the date of grant only if the current market price
of the underlying stock exceeded the exercise price. FASB Statement No. 123, Accounting for Stock-Based Compensation and FASB Statement No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure, an Amendment of FASB
Statement No. 123, established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based compensation plans. As permitted by existing standards, the Company has elected to continue to apply the
intrinsic-value-based method of accounting described above, and has adopted only the disclosure requirements of Statement 123, as amended.



Effective December 15, 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 148 Accounting for Stock-Based
CompensationTransition and Disclosure. This statement amends SFAS No. 123, Accounting for Stock-Based Compensation. It provides alternative methods of transition for an entity that voluntarily changes to the fair value based
method of accounting for stock-based employee compensation. It also amends the disclosure provision of SFAS No. 123 to require prominent disclosure about the effects on reported net income of an entitys accounting policy decisions with respect
to stock-based employee compensation.



The per share weighted
average fair value of stock options granted during the three months ended September 30, 2004 and 2003 was $7.88 and $5.15, respectively, and for the nine months ended September 30, 2004 and 2003 was $7.31 and $5.00, respectively, on the date of
grant using the Black Scholes option-pricing model with the following weighted average assumptions:



|                        |  |                                         |   |  |                                        |   |  |          |   |  |          |  
|----------------------- |  | --------------------------------------- | - |  | -------------------------------------- | - |  | -------- | - |  | -------- | -
|                        |  | For the three monthsended September 30, |   |  | For the nine monthsended September 30, |  
|                        |  | 2004                                    |   |  | 2003                                   |   |  | 2004     |   |  | 2003     |  
|Expected dividend yield |  | 0.00                                    | % |  | 0.00                                   | % |  | 0.00     | % |  | 0.00     | %
|Expected volatility     |  | 30.00                                   | % |  | 0.00                                   | % |  | 30.00    | % |  | 0.00     | %
|Risk free interest rate |  | 4.16                                    | % |  | 3.84                                   | % |  | 3.92     | % |  | 3.76     | %
|Expected life           |  | 10 years                                |   |  | 10 years                               |   |  | 10 years |   |  | 10 years |  



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##### Table of Contents

Had compensation cost for the Companys stock option plan been determined under SFAS No. 123, based
on the fair market value at the grant dates, the Companys proforma net loss and net loss per share would have been as follows (in thousands):



|                                                                                                                                    |  |                                         |       |   |                                        |   |       |      |  |   |        |   |  |   |        |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- | ----- | - | -------------------------------------- | - | ----- | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                                                                    |  | For the three monthsended September 30, |       |   | For the nine monthsended September 30, |  
|                                                                                                                                    |  | 2004                                    |       |   | 2003                                   |   |       | 2004 |  |   | 2003   |  
|Net loss as reported                                                                                                                |  | $                                       | (856  | ) |                                        | $ | (451  | )    |  | $ | (1,887 | ) |  | $ | (2,325 | )
|Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                                         | (33   | ) |                                        |   | (4    | )    |  |   | (133   | ) |  |   | (12    | )
|                                                                                                                                    |  |                                         |       |   |                                        |   |       |      |  |   |        |   |  |   |        |  
|Proforma net loss                                                                                                                   |  | $                                       | (889  | ) |                                        | $ | (455  | )    |  | $ | (2,020 | ) |  | $ | (2,337 | )
|                                                                                                                                    |  |                                         |       |   |                                        |   |       |      |  |   |        |   |  |   |        |  
|Basic and diluted net loss per share as reported                                                                                    |  | $                                       | (0.22 | ) |                                        | $ | (0.15 | )    |  | $ | (0.58  | ) |  | $ | (0.80  | )
|Basic and diluted proforma net loss per share                                                                                       |  | $                                       | (0.23 | ) |                                        | $ | (0.15 | )    |  | $ | (0.62  | ) |  | $ | (0.80  | )



New Accounting Pronouncements:



The Company has reviewed all new accounting
pronouncements issued through September 30, 2004 and has determined that none of them would have a material impact on the consolidated financial condition or results of operations.



In December 2003, the FASB issued a revised Interpretation No. 46, Consolidation of Variable Interest Entities, and
Interpretation of Accounting Research Bulletin No. 51,(FIN 46R). FIN 46R requires the consolidation of entities in which an enterprise absorbs a majority of the entitys expected losses, receives a majority of the
entitys expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. Currently, entities are generally consolidated by an enterprise when it has a controlling financial interest through
ownership of a majority voting interest in the entity. The provisions of FIN 46R are generally effective for existing (prior to February 1, 2003) variable interest relationships of a public entity no later than the end of the first reporting period
that ends after March 15, 2004. However, prior to the required application of this interpretation, a public entity that is not a small business issuer shall apply FIN 46R to those entities that are considered to be special-purpose entities no later
than the end of the first reporting period that ends after December 15, 2003. The Company applied the portion of FIN 46R that is applicable to special purpose entities effective December 31, 2003, with no material effect, and applied the remainder
of FIN 46R starting in the first quarter 2004 financial statements with no material effect.



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##### Table of Contents

In May 2003, the FASB issued SFAS No. 150 (Statement 150), Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No.
150 requires that an issuer classify a financial instrument that is within the scope of SFAS No. 150 as a liability. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. The Company has presented the Series A Preferred Stock issue in the financial statements in accordance with SFAS No. 150 where applicable.



Losses Per Common Share:



Basic loss per share represents net loss available to common shareholders
divided by the weighted-average number of common shares outstanding during the year. Because we reported net losses in 2004 and 2003, all potentially dilutive securities were anti-dilutive and basic and diluted loss per share were the same in those
periods.



At September 30, 2004, there were 399,899 common
stock options and 303,856 warrants, respectively, that were anti-dilutive and therefore not included in the above calculation. At September 30, 2003, there were 259,150 common stock options and 191,856 warrants, respectively that were anti-dilutive
and therefore not included in the above calculation.



Components used in computing loss per share for the three and nine months ended September 30, 2004 are summarized as follows (in thousands, except share data):



|                                                    |  |                                          |        |   |                           |           |              |   |       |           |  |   |                           |   |              |           |  |   |       |  
|--------------------------------------------------- |  | ---------------------------------------- | ------ | - | ------------------------- | --------- | ------------ | - | ----- | --------- |  | - | ------------------------- | - | ------------ | --------- |  | - | ----- | -
|                                                    |  | For the Three months ended September 30, |       
|                                                    |  | 2004                                     |        |   | 2003                      |          
|                                                    |  | NetIncome                                |        |   | WeightedSharesOutstanding |           | LossPerShare |   |       | NetIncome |  |   | WeightedSharesOutstanding |   | LossPerShare |          
|Net loss                                            |  | $                                        | (856   | ) |                           |           |              |   |       |           |  | $ | (451                      | ) |              |           |  |   |       |  
|Less dividends paid on the Series A Preferred Stock |  |                                          | (69    | ) |                           |           |              |   |       |           |  |   |                          |   |              |           |  |   |       |  
|                                                    |  |                                          |        |   |                           |           |              |   |       |           |  |   |                           |   |              |           |  |   |       |  
|Loss available to common shareholders               |  | $                                        | (925   | ) |                           | 4,220,137 |              | $ | (0.22 | )         |  | $ | (451                      | ) |              | 3,079,199 |  | $ | (0.15 | )
|                                                    |  |                                          |        |   |                           |           |              |   |       |           |  |   |                           |   |              |           |  |   |       |  
|                                                    | 
|                                                    |  | For the Nine months ended September 30,  |       
|                                                    |  | 2004                                     |        |   | 2003                      |          
|                                                    |  | NetIncome                                |        |   | WeightedSharesOutstanding |           | LossPerShare |   |       | NetIncome |  |   | WeightedSharesOutstanding |   | LossPerShare |          
|Net loss                                            |  | $                                        | (1,887 | ) |                           |           |              |   |       |           |  | $ | (2,326                    | ) |              |           |  |   |       |  
|Less dividends paid on the Series A Preferred Stock |  |                                          | (140   | ) |                           |           |              |   |       |           |  |   |                          |   |              |           |  |   |       |  
|                                                    |  |                                          |        |   |                           |           |              |   |       |           |  |   |                           |   |              |           |  |   |       |  
|Loss available to common shareholders               |  | $                                        | (2,027 | ) |                           | 3,467,324 |              | $ | (0.58 | )         |  | $ | (2,326                    | ) |              | 2,904,474 |  | $ | (0.80 | )
|                                                    |  |                                          |        |   |                           |           |              |   |       |           |  |   |                           |   |              |           |  |   |       |  



NOTE 2Segment Information



The Company has five reportable segments: Bank of
Florida, N.A., based in Naples, Florida; Bank of Florida, based in Fort Lauderdale, Florida; Bank of Florida, Tampa Bay (In Organization), based in Tampa, Florida; Bank of Florida Trust Company, based in Naples, Florida; and Bancshares of Florida,
Inc., the parent corporation.



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##### Table of Contents

Measurement of Segment Profit or Loss and Segment Assets:



The Companys reportable business segments are strategic business units
that offer distinctive products and services that are marketed through different channels. These are managed separately because of their management, marketing and distribution requirements.



The following presents financial information of reportable segments as of and
for the three-month periods ended September 30, 2004 and 2003 and June 30, 2004 as well as for the nine-month periods ended September 30, 2004 and 2003. The Other column includes executive management and finance and accounting expense;
expense for acquisitions, capital-raising, shareholder/investor relations, and various professional services; and entries necessary to reconcile the identified segments to the reported consolidated amounts. When performance of these segments is
reported in the text of Managements Discussion and Analysis of Financial Condition and Results of Operations and in similar texts, figures are stated net of the latter eliminating entries (in thousands).



|                            |  |                           |         |                               |   |         |                                          |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  
|--------------------------- |  | ------------------------- | ------- | ----------------------------- | - | ------- | ---------------------------------------- |  | - | -------------------------- | - |  | ----- | ----- | - | ------------------------- | - | ------- | - |  | - | ------- | -
|For the Three Months Ended: |  | Bank ofFlorida,N.A.Naples |         | Bank ofFlorida, Ft.Lauderdale |   |         | Bank ofFlorida,Tampa Bay(InOrganization) |  |   | Bank ofFloridaTrustCompany |   |  | Other |       |   | Bancsharesof Florida,Inc. |  
|September 30, 2004          |  |                           |         |                               |   |         |                                          |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  
|Net interest income         |  | $                         | 1,720   |                               | $ | 831     |                                          |  | $ |                           |   |  | $     | 16    |   |                           | $ | 23      |   |  | $ | 2,590   |  
|Noninterest income          |  |                           | 255     |                               |   | 79      |                                          |  |   |                           |   |  |       | 277   |   |                           |   |        |   |  |   | 611     |  
|Provision for loan losses   |  |                           | 176     |                               |   | 87      |                                          |  |   |                           |   |  |       |      |   |                           |   |        |   |  |   | 263     |  
|Noninterest expense         |  |                           | 1,449   |                               |   | 732     |                                          |  |   | 181                        |   |  |       | 285   |   |                           |   | 1,147   |   |  |   | 3,794   |  
|                            |  |                           |         |                               |   |         |                                          |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  
|Net income (loss)           |  | $                         | 350     |                               | $ | 91      |                                          |  | $ | (181                       | ) |  | $     | 8     |   |                           | $ | (1,124  | ) |  | $ | (856    | )
|                            |  |                           |         |                               |   |         |                                          |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  
|End of Period assets        |  | $                         | 219,170 |                               | $ | 117,960 |                                          |  | $ | 2,450                      |   |  | $     | 2,320 |   |                           | $ | 2,744   |   |  | $ | 344,644 |  
|                            |  |                           |         |                               |   |         |                                          |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  
|June 30, 2004               |  |                           |         |                               |   |         |                                          |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  
|Net interest income         |  | $                         | 1,489   |                               | $ | 738     |                                          |  | $ |                           |   |  | $     | 13    |   |                           | $ |        |   |  | $ | 2,240   |  
|Noninterest income          |  |                           | 216     |                               |   | 34      |                                          |  |   |                           |   |  |       | 258   |   |                           |   |        |   |  |   | 508     |  
|Provision for loan losses   |  |                           | 170     |                               |   | 60      |                                          |  |   |                           |   |  |       |      |   |                           |   |        |   |  |   | 230     |  
|Noninterest expense         |  |                           | 1,356   |                               |   | 708     |                                          |  |   |                           |   |  |       | 248   |   |                           |   | 726     |   |  |   | 3,038   |  
|                            |  |                           |         |                               |   |         |                                          |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  
|Net income (loss)           |  | $                         | 179     |                               | $ | 4       |                                          |  | $ |                           |   |  | $     | 23    |   |                           | $ | (726    | ) |  | $ | (520    | )
|                            |  |                           |         |                               |   |         |                                          |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  
|End of Period assets        |  | $                         | 210,056 |                               | $ | 84,892  |                                          |  | $ |                           |   |  | $     | 1,592 |   |                           | $ | 803     |   |  | $ | 297,343 |  
|                            |  |                           |         |                               |   |         |                                          |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  
|September 30, 2003          |  |                           |         |                               |   |         |                                          |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  
|Net interest income         |  | $                         | 1,109   |                               | $ | 323     |                                          |  | $ |                           |   |  | $     | 14    |   |                           | $ |        |   |  | $ | 1,446   |  
|Noninterest income          |  |                           | 201     |                               |   | 51      |                                          |  |   |                           |   |  |       | 128   |   |                           |   |        |   |  |   | 380     |  
|Provision for loan losses   |  |                           | 20      |                               |   | 61      |                                          |  |   |                           |   |  |       |      |   |                           |   |        |   |  |   | 81      |  
|Noninterest expense         |  |                           | 1,201   |                               |   | 578     |                                          |  |   |                           |   |  |       | 217   |   |                           |   | 200     |   |  |   | 2,196   |  
|                            |  |                           |         |                               |   |         |                                          |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  
|Net income (loss)           |  | $                         | 89      |                               | $ | (265    | )                                        |  | $ |                           |   |  | $     | (75   | ) |                           | $ | (200    | ) |  | $ | (451    | )
|                            |  |                           |         |                               |   |         |                                          |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  
|End of Period assets        |  | $                         | 145,409 |                               | $ | 58,545  |                                          |  | $ |                           |   |  | $     | 2,641 |   |                           | $ | (13,520 | ) |  | $ | 193,075 |  
|                            |  |                           |         |                               |   |         |                                          |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  



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|                           |  |                           |         |   |                               |   |         |                                           |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  
|-------------------------- |  | ------------------------- | ------- | - | ----------------------------- | - | ------- | ----------------------------------------- |  | - | -------------------------- | - |  | ----- | ----- | - | ------------------------- | - | ------- | - |  | - | ------- | -
|For the Nine Months Ended: |  | Bank ofFlorida,N.A.Naples |         |   | Bank ofFlorida, Ft.Lauderdale |   |         | Bank ofFlorida, TampaBay (InOrganization) |  |   | Bank ofFloridaTrustCompany |   |  | Other |       |   | Bancsharesof Florida,Inc. |  
|September 30, 2004         |  |                           |         |   |                               |   |         |                                           |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  
|Net interest income        |  | $                         | 4,542   |   |                               | $ | 2,190   |                                           |  | $ |                           |   |  | $     | 51    |   |                           | $ | 23      |   |  | $ | 6,806   |  
|Noninterest income         |  |                           | 635     |   |                               |   | 147     |                                           |  |   |                           |   |  |       | 778   |   |                           |   |        |   |  |   | 1,560   |  
|Provision for loan losses  |  |                           | 500     |   |                               |   | 327     |                                           |  |   |                           |   |  |       |      |   |                           |   |        |   |  |   | 827     |  
|Noninterest expense        |  |                           | 4,076   |   |                               |   | 2,086   |                                           |  |   | 181                        |   |  |       | 784   |   |                           |   | 2,299   |   |  |   | 9,426   |  
|                           |  |                           |         |   |                               |   |         |                                           |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  
|Net income (loss)          |  | $                         | 601     |   |                               | $ | (76     | )                                         |  | $ | (181                       | ) |  | $     | 45    |   |                           | $ | (2,276  | ) |  | $ | (1,887  | )
|                           |  |                           |         |   |                               |   |         |                                           |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  
|End of Period assets       |  | $                         | 219,170 |   |                               | $ | 117,960 |                                           |  | $ | 2,450                      |   |  | $     | 2,320 |   |                           | $ | 2,744   |   |  | $ | 344,644 |  
|                           |  |                           |         |   |                               |   |         |                                           |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  
|September 30, 2003         |  |                           |         |   |                               |   |         |                                           |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  
|Net interest income        |  | $                         | 3,007   |   |                               | $ | 744     |                                           |  | $ |                           |   |  | $     | 27    |   |                           | $ |        |   |  | $ | 3,778   |  
|Noninterest income         |  |                           | 550     |   |                               |   | 85      |                                           |  |   |                           |   |  |       | 317   |   |                           |   |        |   |  |   | 952     |  
|Provision for loan losses  |  |                           | 332     |   |                               |   | 250     |                                           |  |   |                           |   |  |       |      |   |                           |   |        |   |  |   | 582     |  
|Noninterest expense        |  |                           | 3,577   |   |                               |   | 1,875   |                                           |  |   |                           |   |  |       | 633   |   |                           |   | 389     |   |  |   | 6,474   |  
|                           |  |                           |         |   |                               |   |         |                                           |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  
|Net loss                   |  | $                         | (352    | ) |                               | $ | (1,296  | )                                         |  | $ |                           |   |  | $     | (289  | ) |                           | $ | (389    | ) |  | $ | (2,326  | )
|                           |  |                           |         |   |                               |   |         |                                           |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  
|End of Period assets       |  | $                         | 145,409 |   |                               | $ | 58,545  |                                           |  | $ |                           |   |  | $     | 2,641 |   |                           | $ | (13,520 | ) |  | $ | 193,075 |  
|                           |  |                           |         |   |                               |   |         |                                           |  |   |                            |   |  |       |       |   |                           |   |         |   |  |   |         |  



NOTE 3Stockholders
Equity



During 2004, the Company authorized the issuance
and sale of up to 50,000 shares of Series A Preferred Stock, par value $0.01, to only accredited investors. During March 2004, the Company issued 34,000 shares of the Series A Preferred Stock for consideration of $3,400,000 at an offering price of
$100 per share.



The shares of Series A Preferred Stock have no
voting rights, but have a liquidation value of $100 per share. Dividends are payable on the first day of each quarter, payable in arrears. The dividends are payable at a quarterly rate of 0.02 shares of Series A Preferred Stock. The Company may
redeem the shares of Series A Preferred Stock at its discretion at any time. The redemption price for the shares of Series A Preferred Stock is based on a declining premium scale, for which the redemption price is $105 per share in the first year
following issuance, and such redemption price decreases by $1.00 in each subsequent year.



On July 30, 2004, the Company completed a common stock offering, selling 1,500,000 shares of common stock at $12.50 per share. On August 18, 2004, the underwriter, Advest, Inc., acquired an additional 225,000 shares
at $12.50 per share. After underwriting discounts and commissions and other offering expenses, the Company received $19.8 million in proceeds.



NOTE 4Merger with Horizon Financial Corp.



On September 28, 2004, Bancshares of Florida, Inc. terminated an Agreement and Plan of Merger with Horizon Financial Corp., the parent of an
$87.4-million-asset federal savings bank based in Pembroke Pines, Florida. The transaction was terminated after the Company received notice from Horizon that the Office of Thrift Supervision (OTS) is requiring that Horizons wholly
owned subsidiary, Horizon Bank, FSB, enter into an agreement with the OTS. The Board of Directors and management believe that this action is in the best interest of the Company and its shareholders. As a result, the Company expensed $312,000 of
costs incurred on the proposed acquisition during the quarter ended September 30, 2004.



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NOTE 5Loans



The following table sets forth the details of the loan portfolio at September 30, 2004 and December 31, 2003 (in thousands).



|                  |  |                   |         |                  |   |        
|----------------- |  | ----------------- | ------- | ---------------- | - | -------
|                  |  | September 30,2004 |         | December 31,2003
|Commercial loans  |  | $                 | 35,842  |                  | $ | 34,217 
|Real estate loans |  |                   | 214,134 |                  |   | 135,443
|Lines of credit   |  |                   | 22,273  |                  |   | 20,748 
|Consumer loans    |  |                   | 12,350  |                  |   | 10,082 
|                  |  |                   |         |                  |   |        
|Total             |  | $                 | 284,599 |                  | $ | 200,490
|                  |  |                   |         |                  |   |        



At September 30, 2004,
the Company had non-accrual loans with a total balance of $438,000, up from a balance of $47,000 at December 31, 2003. At September 30, 2004 and December 31, 2003, the Company did not hold any loans that were classified as impaired.



The following table presents movement in the allowance for loan losses during
the nine months ended September 30, 2004 and 2003 (in thousands).



|                          |  |               |       |   |      |   |       |  
|------------------------- |  | ------------- | ----- | - | ---- | - | ----- | -
|                          |  | September 30, |      
|                          |  | 2004          |       |   | 2003 |  
|Beginning balance         |  | $             | 1,568 |   |      | $ | 907   |  
|Provision for loan losses |  |               | 827   |   |      |   | 582   |  
|Charge-offs               |  |               | (37   | ) |      |   | (27   | )
|Recoveries                |  |               | 10    |   |      |   | 5     |  
|                          |  |               |       |   |      |   |       |  
|Ending balance            |  | $             | 2,368 |   |      | $ | 1,467 |  
|                          |  |               |       |   |      |   |       |  



NOTE 6Bank of Florida, Tampa
Bay



On July 27, 2004, the Company acquired 100% ownership
of Bank of Florida, Tampa Bay (In Organization) that had not yet been incorporated or commenced its planned principal operations. For this acquisition, the Company paid $300,000 in cash to an investor group. The acquisition was consummated as a
means for Bancshares to expand its business in Florida and provide traditional banking services in the Tampa Bay area.



The Company does not believe this acquisition is a business combination pursuant to the provisions of SFAS No. 141, Accounting for Business
Combinations, but rather an acquisition of net assets. Accordingly, the excess of the fair value of the liabilities assumed over the fair value of the assets acquired was allocated to an amortizable identifiable intangible. The following table
sets forth the assets acquired and liabilities assumed in the acquisition:



|                                    |  |   |        |  
|----------------------------------- |  | - | ------ | -
|Cash                                |  | $ | 861    |  
|Equipment                           |  |   | 632    |  
|Intangible asset  Bank charter (1) |  |   | 974    |  
|Other assets                        |  |   | 69     |  
|Accounts payable                    |  |   | (103   | )
|Notes payable                       |  |   | (2,133 | )
|                                    |  |   |        |  
|Purchase price of net assets        |  | $ | 300    |  
|Cash Acquired                       |  |   | (861   | )
|                                    |  |   |        |  
|Net cash acquired                   |  | $ | (561   | )
|                                    |  |   |        |  

---

|(1) | Identifiable intangible assets will be amortized on a straight-line basis over a period of 25 years.
|--- | ----------------------------------------------------------------------------------------------------



As a result of the acquisition, the Company named certain individuals of the investor group as directors of Bank of Florida,
Tampa Bay. These directors have been awarded warrants to purchase 85,333 shares of common



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stock at an exercise price of $12.50. Twenty percent of the warrants will become exercisable on the date that the bank
opens for business and twenty percent will become exercisable on each of the four succeeding anniversaries of that date. All of the warrants will expire five years from the date the bank opens for business. The Company may call the warrants if it or
any of its subsidiaries is the subject of a formal capital call by a governmental regulatory agency.



NOTE 7Subordinated Debt



During June of 2004, Bank of Florida, N.A. issued $2 million in subordinated debt to a local community bank. Interest is payable monthly at a rate of prime less one percent during the first sixty days, prime plus zero percent for the next
sixty days, and prime plus one percent thereafter. The interest rate at September 30, 2004 was 4.75%. This debt matures and is payable in full in June of 2010. Bank of Florida, N.A. may prepay the debt at its option (and with the approval of the
Office of the Comptroller of the Currency, if necessary) without penalty but with accrued interest.



The subordinated debt issue qualifies as Tier II capital for regulatory purposes for the Companys Bank of Florida, N.A. subsidiary and for
Bancshares of Florida, Inc.



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations



OVERVIEW



Bancshares of Florida,
Inc. was incorporated in Florida in September 1998 to serve as a holding company for Bank of Florida, N.A., which opened as a full service commercial bank in August 1999. Its primary customer base is businesses, professionals, and entrepreneurs with
commercial real estate borrowing needs. The Bank also provides technology-based cash management and other depository services. In April 2000, Bank of Florida Trust Company was incorporated under the laws of the State of Florida as a wholly-owned
subsidiary of Bank of Florida, N.A.; it became a subsidiary of the holding company in March 2003. Bank of Florida Trust Company offers investment management, trust administration, estate planning, and financial planning services largely to its
commercial borrowers and other high net worth individuals. The Companys overall focus is to develop a total financial services relationship with its client base. In July 2002, Bank of Florida, a newly formed state-chartered commercial bank,
commenced operations in Ft. Lauderdale, Florida, focusing on the same kind of customer base in its market as the founding bank and in July 2004, the Bank of Florida, Tampa Bay (In Organization) was purchased and opened for business on November 5,
2004. The holding company structure provides flexibility for expansion of the Companys banking business through possible acquisition of other financial institutions and provision of support and additional banking-related services to its
subsidiary banks.



The primary market areas of the Company are
Collier and Lee Counties on the southwest coast of Florida (served by Bank of Florida, N.A.) and Broward, Palm Beach, and parts of Miami-Dade Counties on the southeast coast (served by Bank of Florida). With the opening of a de novo bank in the
Tampa Bay market in November 2004, Hillsborough and Pinellas Counties became another primary market area to be served on the west coast. The high population growth and income demographics of the counties in which the Company operates support its
plans to grow loans, deposits, and wealth management revenues with limited, highly selective, full-service locations. These counties together constitute nearly 50% of the deposit market share in the state of Florida.



CRITICAL ACCOUNTING POLICIES



The
Companys consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. The financial information contained within these statements is, to a significant extent, based
on approximate measures of the financial effects of transactions and events that have already occurred. Critical accounting policies are those that involve the most complex and subjective decisions and assessments, and have the greatest potential
impact on the Companys stated results of operations. In



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managements opinion, the Companys critical accounting policies deal with the following area: the
establishment of the Companys allowance for loan losses, as explained in detail in the Provision and Allowance for Loan Losses sections of this discussion and analysis.



Our allowance for loan loss methodology incorporates a variety of risk considerations, both quantitative and qualitative in
establishing an allowance for loan loss that management believes is appropriate at each reporting date. Quantitative factors include our historical loss experience, peer bank loss experience, delinquency and charge-off trends, collateral values,
changes in nonperforming loans, loan concentrations and other factors. Qualitative factors include the general economic conditions in our state. Size and complexity of individual credits in relation to loan structure, existing loan policies and pace
of portfolio growth are other qualitative factors that are considered in the methodology. As we add new products and increase the complexity of our loan portfolio, we shall enhance our methodology accordingly. Management may report a materially
different amount for the provision for loan losses in the statement of operations to change the allowance for loan losses if its assessment of the above factors were different. This discussion and analysis should be read in conjunction with our
consolidated financial statements and the accompanying notes presented elsewhere herein as well as with portions of this Managements Discussion and Analysis section. Although management believes the levels of the allowance as of September 30,
2004 and December 31, 2003 were adequate to absorb probable losses inherent in the loan portfolio, a decline in local economic conditions, or other factors, could result in increasing losses that cannot be reasonably predicted at this time.



This discussion presents managements analysis of the
financial condition and results of operations of the Company for each of the three month and nine month periods ended September 30, 2004 and 2003 and the three month period ended June 30, 2004 and includes the statistical disclosures required by SEC
Guide 3 (Statistical Disclosure by Bank Holding Companies). The discussion should be read in conjunction with the consolidated financial statements of the Company and the notes related thereto which appear elsewhere in this document.
Except as otherwise indicated, all references to peer banks pertain to a group of 980 bank holding companies nationwide having assets less than $300 million and their associated composite financial results for the three months ended June
30, 2004 (the most recently available disclosure), as provided by the Federal Reserve Boards Division of Banking Supervision and Regulation in the Bank Holding Company Performance Report.



DISCUSSION OF THE THREE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2003 AND JUNE 30, 2004 AND DISCUSSION OF THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2004 AND SEPTEMBER 30, 2003



Management Summary



The Company reported a third quarter 2004 net loss of $856,000 or $0.22 per
common share, an increase of $405,000 or $0.07 per common share from third quarter 2003s results. Of the net loss, $312,000 represents the write-off of deferred acquisition expenses related to its proposed merger with Horizon Financial Corp.,
which Bancshares terminated on September 28, 2004 due to adverse changes in the condition of Horizon. For the first nine months of 2004, the net loss was $1,887,000, a reduction of 19% from the comparable 2003 period, while the loss per common share
decreased 28% to $0.58 per common share. Compared to second quarter 2004, the third quarter 2004 net loss increased by $336,000 or $0.03 per common share. Nearly all of the change was caused by the termination of the Horizon transaction. In
addition, $418,000 was expensed in the quarter related to the Companys expansion into Palm Beach County and Tampa Bay.



The Company grew earning assets by 18% over second quarter 2004, bringing total assets to $345 million, up 79% in the last twelve months. This
quarters growth was driven by an increase in loans of $21 million or 8% to $285 million, the fifth of the last six quarters where growth has exceeded $20 million. Based on an analysis of independent banks in Florida in the Companys size
group for the four quarters ended June 30, 2004, the Companys rate of loan growth of 79% has been nearly three times as fast as the average. Moreover, the Companys asset quality has been excellent by peer standards and remained so in the
third quarter at 0.15% of nonperforming loans to loans outstanding. Assets under advice at the Bank of Florida Trust Company have also grown dramatically, up 69% in the last twelve months to $186 million.



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Growth in top-line revenue remained strong, up $458,000 or 17% over the second quarter 2004 level.
Top-line revenue is the sum of the Companys lending or spread income business (interest income less interest expense) plus its fee income business (excluding net securities gains/losses), both of which often pertain to the same customer base
and can be matched against the underlying noninterest expense to generate those revenue components. The bulk of the growth in top-line revenue for the quarter was from net interest income, reflective of higher earning assets and a now-stable net
interest margin, made possible by a 21 basis point increase in loan yield. Noninterest income (excluding net securities gains/losses) rose $108,000 or 22% over second quarter 2004, largely due to higher mortgage banking fees.



Lastly, the Company reduced the combined net loss of its banking and trust
company business segments, including related parent company support, to $126,000 in the third quarter compared to a net loss of $338,000 in second quarter 2004. This improvement, which is explained in detail in the Results of Operations
section below, shows the strength of the core Naples and Fort Lauderdale markets and their ability to absorb in advance the cost of building a management and operations infrastructure capable of supporting expansion into additional geographic
markets.



On July 28, 2004, the Company completed a secondary
common stock offering of 1.5 million shares, priced at $12.50 per share. In addition, the underwriter, Advest, Inc., exercised its option to purchase an additional 225,000 shares of common stock to cover over-allotments on August 18, 2004. Proceeds
from the offering, net of underwriting discounts and commissions and other offering expenses, were received in the amount of $19.8 million. This brought total shares outstanding to approximately 4.8 million common shares, with a book value per share
of $8.13. In conjunction with this offering, the Companys common stock became listed on the Nasdaq National Market under the symbol BOFL, which was the Companys symbol as previously listed on the Nasdaq SmallCap Market.



Bancshares third quarter 2004 achievements by subsidiary are highlighted
below:



| | Bank of Florida, N.A. (Naples), reached $219 million in assets as of September 30, 2004, with earnings positive for the fifth consecutive quarter at $351,000, which compares to
total earnings for the prior four quarters of $456,000. Loans rose $7 million (up 4%) in the last 90 days to $198 million, while deposits reached $200 million for the first time, up $12 million or 7%. Approximately $7 million in loans and $2 million
in deposits are expected to be transferred to the Tampa Bay bank upon opening.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Bank of Florida (Ft. Lauderdale), with quarter-end assets of $118 million, was profitable for a second consecutive quarter with net income of $92,000, following breakeven of $4,000
in its eighth quarter of operation. Loans rose $13 million (up 19%) in the last 90 days to $86 million, while deposits climbed at a faster pace, up $28 million or 36% to $107 million. The bank is expected to return to a loss position beginning in
the fourth quarter of 2004 because of the opening of its Palm Beach County location and a new branch in the Coral Ridge area of Fort Lauderdale in November. The Fort Lauderdale bank incurred approximately $38,000 in pre-opening expenses for the
Coral Ridge branch in the third quarter while the parent company absorbed $237,000 in expenses of the future Palm Beach location, consistent with the previous plan to integrate the Palm Beach operation into the Horizon transaction.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Bank of Florida Trust Company produced a third consecutive positive earnings quarter at $6,000, bringing year-to-date net income to $40,000 compared to a $292,000 loss for the first
nine months of 2003. Assets under advice reached $186 million, an increase of $76 million or 69% compared to September 30, 2003 and a rise of $24 million or 15% in the last 90 days. Bank of Florida Trust Company commenced operations in August 2000.
While quarterly break-even has been achieved, occasional modest losses may be realized at the trust company until it is of sufficient size to absorb the cost of sales or relationship managers needed to support new affiliate banking markets;
historically, there is a 7-10 month lag before compensating revenue is derived.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | Bank of Florida, Tampa Bay (In Organization) was purchased from an investor group on July 27, 2004, and until its opening on November 5, 2004, incurred various expenses for staff,
occupancy, and other activities in preparation for the opening. During the third quarter, the latter expenses amounted to $181,000; no revenues were earned.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The unallocated bank holding company loss was $1,124,000 for the quarter compared to losses of $726,000 in second quarter 2004 and $200,000 in third quarter 2003. The third quarter
2004 net loss includes $237,000 in start-up expenses of our future Palm Beach County operation, and write-off of $312,000 in deferred acquisition expense following termination of the Horizon acquisition. The second quarter net loss includes $182,000
in Palm Beach start-up costs. Excluding the above expenses from the parent company loss results in $575,000 in net expense in third quarter 2004, $544,000 in second quarter 2004, and $200,000 in third quarter 2003 (which contained no expansion
expenses similar to those in 2004). The increases in these remaining costs reflect planned growth in the parent company infrastructure to provide cost-effective services to the subsidiaries as well as to pursue the Companys strategic growth
plan to operate in multiple geographic markets.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Financial
Condition



|                                                    |  |                                       |           |   |                     |           |   |  |           |    |  |       |   
|--------------------------------------------------- |  | ------------------------------------- | --------- | - | ------------------- | --------- | - |  | --------- | -- |  | ----- | --
|                                                    |  | AT SEPTEMBER 30,                      |           |   | INCREASE/(DECREASE) |          
|                                                    |  | 2004                                  |           |   | 2003                |           |  
|                                                    |  | (IN THOUSANDS, EXCEPT PER SHARE DATA) |          
|Total assets                                        |  | $                                     | 344,644   |   |                     | 193,075   |   |  | 151,569   |    |  | 78.5  | % 
|Cash and cash equivalents                           |  |                                       | 41,880    |   |                     | 14,675    |   |  | 27,205    |    |  | 185.4 | % 
|Interest-earning assets                             |  |                                       | 326,387   |   |                     | 180,342   |   |  | 146,045   |    |  | 81.0  | % 
|Investment securities                               |  |                                       | 10,196    |   |                     | 9,328     |   |  | 868       |    |  | 9.3   | % 
|Loans held for investment                           |  |                                       | 284,599   |   |                     | 163,648   |   |  | 120,951   |    |  | 73.9  | % 
|Allowance for loan losses                           |  |                                       | 2,368     |   |                     | 1,467     |   |  | 901       |    |  | 61.4  | % 
|Deposit accounts                                    |  |                                       | 298,878   |   |                     | 167,181   |   |  | 131,697   |    |  | 78.8  | % 
|Stockholders equity                                |  |                                       | 42,835    |   |                     | 21,587    |   |  | 21,248    |    |  | 98.4  | % 
|                                                    |  |                                       |           |   |                     |           |   |  |           |    |  |       |   
|Total shares outstanding                            |  |                                       | 4,835,632 |   |                     | 3,079,199 |   |  | 1,756,433 |    |  | 57.0  | % 
|Book value per share                                |  |                                       | 8.13      |   |                     | 7.01      |   |  | 1.12      |    |  | 16.0  | % 
|                                                    |  |                                       |           |   |                     |           |   |  |           |    |  |       |   
|Allowance for loan losses to total loans            |  |                                       | 0.83      | % |                     | 0.90      | % |  | (0.07     | )% |  | (7.2  | )%
|Allowance for loan losses to nonperforming loans    |  |                                       | 540.68    | % |                     | 729.68    | % |  | (189.00   | )% |  | (25.9 | )%
|Nonperforming loans to total loans                  |  |                                       | 0.15      | % |                     | 0.12      | % |  | 0.03      | %  |  | 25.3  | % 
|Nonperforming assets to total assets                |  |                                       | 0.13      | % |                     | 0.10      | % |  | 0.03      | %  |  | 22.0  | % 
|                                                    |  |                                       |           |   |                     |           |   |  |           |    |  |       |   
|Leverage (Tier 1 to average total assets)           |  |                                       | 12.90     | % |                     | 11.62     | % |  | 1.28      | %  |  | 11.0  | % 
|Assets under advice  Bank of Florida Trust Company |  | $                                     | 185,873   |   |                     | 110,000   |   |  | 75,873    |    |  | 69.0  | % 



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|                                                    |  |                                       |           |   |                     |           |   |   |           |    |   |       |   
|--------------------------------------------------- |  | ------------------------------------- | --------- | - | ------------------- | --------- | - | - | --------- | -- | - | ----- | --
|                                                    |  | AT                                    |           |   | INCREASE/(DECREASE) |          
|                                                    |  | SEPT 30,2004                          |           |   | JUNE 30,2004        |           |   | $ |           |    | % |      
|                                                    |  | (IN THOUSANDS, EXCEPT PER SHARE DATA) |          
|Total assets                                        |  | $                                     | 344,644   |   |                     | 297,343   |   |   | 47,301    |    |   | 15.9  | % 
|Cash and cash equivalents                           |  |                                       | 41,880    |   |                     | 20,051    |   |   | 21,829    |    |   | 108.9 | % 
|Interest-earning assets                             |  |                                       | 326,387   |   |                     | 276,979   |   |   | 49,408    |    |   | 17.8  | % 
|Investment securities                               |  |                                       | 10,196    |   |                     | 6,281     |   |   | 3,915     |    |   | 62.3  | % 
|Loans held for investment                           |  |                                       | 284,599   |   |                     | 263,746   |   |   | 20,853    |    |   | 7.9   | % 
|Allowance for loan losses                           |  |                                       | 2,368     |   |                     | 2,132     |   |   | 236       |    |   | 11.1  | % 
|Deposit accounts                                    |  |                                       | 298,878   |   |                     | 265,102   |   |   | 33,776    |    |   | 12.7  | % 
|Stockholders equity                                |  |                                       | 42,835    |   |                     | 23,575    |   |   | 19,260    |    |   | 81.7  | % 
|                                                    |  |                                       |           |   |                     |           |   |   |           |    |   |       |   
|Total shares outstanding                            |  |                                       | 4,835,632 |   |                     | 3,094,199 |   |   | 1,741,433 |    |   | 56.3  | % 
|Book value per share                                |  |                                       | 8.13      |   |                     | 6.52      |   |   | 1.61      |    |   | 24.7  | % 
|                                                    |  |                                       |           |   |                     |           |   |   |           |    |   |       |   
|Allowance for loan losses to total loans            |  |                                       | 0.83      | % |                     | 0.81      | % |   | 0.02      | %  |   | 2.9   | % 
|Allowance for loan losses to nonperforming loans    |  |                                       | 540,68    | % |                     | 168.67    | % |   | 372.01    | %  |   | 220.6 | % 
|Nonperforming loans to total loans                  |  |                                       | 0.15      | % |                     | 0.48      | % |   | (0.33     | )% |   | (67.9 | )%
|Nonperforming assets to total assets                |  |                                       | 0.13      | % |                     | 0.42      | % |   | (0.30     | )% |   | (70.1 | )%
|                                                    |  |                                       |           |   |                     |           |   |   |           |    |   |       |   
|Leverage (Tier 1 to average total assets)           |  |                                       | 12.90     | % |                     | 8.12      | % |   | 4.78      | %  |   | 58.9  | % 
|Assets under advice  Bank of Florida Trust Company |  | $                                     | 185,873   |   |                     | 162,185   |   |   | 23,688    |    |   | 14.6  | % 



Loans in the
Companys combined banks rose by $121 million or 74% over the last twelve months to $285 million. During the third quarter, loans grew $21 million, marking the fifth consecutive quarter where loan growth was in excess of $20 million. Reflective
of the Companys business model focusing on businesses, professionals, and entrepreneurs, commercial loans, largely secured by commercial real estate, comprised the bulk of loan growthup $107 million (92%) in the past year and $21 million
in the last three months to $223 million, accounting for 78% of loans outstanding at September 30, 2004. The remaining loans at quarter end were comprised of $30 million in residential mortgage loans (11% of total loans), $25 million in home equity
and other consumer lines of credit (9% of total loans), and $6 million in consumer installment loans (2% of total loans).



Asset quality remained excellent by peer standards with nonperforming loans at 0.15% of loans outstanding as of September 30, 2004. This level is more in
line with the Companys historic norm of less than 25 basis points following 0.48% at June 30, 2004, largely reflective of a single customer for which most of the exposure was collected in July. Specifically, nonperforming loans declined to
$438,000 at quarter end from a high of $1.3 million at June 30, 2004. Net charge-offs were $28,000 or 0.04% of loans outstanding for the quarter and 0.02% year-to-date, unchanged from the first nine months of 2003. Loan loss provision expense rose
by $33,000 or 14% over second quarter 2004 reflective of loan growth. Coverage of the loan loss allowance over nonperformers at quarter end was 5.4 times, in comparison to coverage of 1.7 times and 7.3 times 90 days and one year earlier,
respectively.



Investment securities and overnight investments
rose $28.6 million during the quarter to $40.7 million at September 30, 2004, primarily due to an increase in short-term investments from the Companys secondary offering and from the growth in deposits. Compared to 12 months earlier, total
investments have grown by $24.7 million. The bulk of the increase in funds will be used to capitalize the expansion into the Tampa Bay market and to continue to fund the growth of the Company by redeployment into higher yielding assets.



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Total earning assets rose $49.4 million or 18% during the quarter to $326.4 million at September 30, 2004.
Total loans increased by $20.8 million, while securities and other overnight investments rose the remaining $28.6 million. Funds from the common stock offering during the quarter, coupled with deposit growth, were invested into shorter term
instruments. Compared to one year earlier, earning assets grew by $146.0 million or 81%. Of that amount, $121.0 million was growth in loans, representing a 74% increase. Because of the combined increase in investments and funds sold, a large portion
of which is likely to be temporary as indicated above, the ratio of loans to earning assets decreased to 87% versus 95% and 91% at June 30, 2004 and September 30, 2003, respectively.



Deposits rose $132 million or 79% over the last twelve months to $299 million. Average deposits rose $21 million or 8%
compared to second quarter 2004, with nearly all of the growth in certificates of deposit; national market CDs comprised $11 million of this growth. The Company is committed to expanding its deposit base with less reliance on higher-cost CDs, which
presently constitute 51% of average deposits versus 14% for noninterest-bearing checking accounts. This latter source of funds is targeted to increase based on a newly-activated program to market the Companys cash management products and
on-line banking capabilities, which also have the potential to generate additional fee income.



Stockholders equity at $42.8 million was $21.2 million higher compared to September 30, 2003 and $19.3 million greater than at June 30, 2004. These changes resulted from the common stock offering
during the current quarter, which netted proceeds of $19.8 million after underwriting discounts and commissions and other offering expenses, and a $3.4 million preferred stock issuance to accredited investors on March 30, 2004, partially offset by
losses for the period, net of minor changes in other capital accounts.



The
Companys Tier 1 leverage ratio increased 478 basis points during the quarter and 128 basis points in the last 12 months to 12.90% at September 30, 2004, well above the minimum for well-capitalized bank holding companies of 5.0%. The change
reflects the increases to capital noted above, partially offset by 16% and 79% growth in total assets during the two periods, respectively.



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##### Table of Contents

Results of Operations



Third Quarter 2004 Compared to Third Quarter 2003



|                                                        |  |                                         |           |   |                     |           |    |   |           |    |   |       |   
|------------------------------------------------------- |  | --------------------------------------- | --------- | - | ------------------- | --------- | -- | - | --------- | -- | - | ----- | --
|                                                        |  | FOR THE THREE MONTHSENDED SEPTEMBER 30, |           |   | INCREASE/(DECREASE) |          
|                                                        |  | (IN THOUSANDS, EXCEPT PER SHARE DATA)   |          
|                                                        |  | 2004                                    |           |   | 2003                |           |    | $ |           |    | % |      
|Total interest income                                   |  | $                                       | 3,907     |   |                     | 2,253     |    |   | 1,654     |    |   | 73.4  | % 
|Total interest expense                                  |  |                                         | 1,317     |   |                     | 807       |    |   | 510       |    |   | 63.2  | % 
|                                                        |  |                                         |           |   |                     |           |    |   |           |    |   |       |   
|Net interest income before provision                    |  |                                         | 2,590     |   |                     | 1,446     |    |   | 1,144     |    |   | 79.1  | % 
|Provision for loan losses                               |  |                                         | 263       |   |                     | 81        |    |   | 182       |    |   | 224.7 | % 
|                                                        |  |                                         |           |   |                     |           |    |   |           |    |   |       |   
|Net interest income after provision                     |  |                                         | 2,327     |   |                     | 1,365     |    |   | 962       |    |   | 70.5  | % 
|Noninterest income                                      |  |                                         | 611       |   |                     | 380       |    |   | 231       |    |   | 60.8  | % 
|Gains on sale of investment securities                  |  |                                         |          |   |                     |          |    |   |          |    |   | 0.0   | % 
|Noninterest expense                                     |  |                                         | 3,794     |   |                     | 2,196     |    |   | 1,598     |    |   | 72.8  | % 
|Provision for income taxes                              |  |                                         |          |   |                     |          |    |   |          |    |   |      |   
|                                                        |  |                                         |           |   |                     |           |    |   |           |    |   |       |   
|Net loss                                                |  |                                         | (856      | ) |                     | (451      | )  |   | (405      | )  |   | (89.8 | )%
|                                                        |  |                                         |           |   |                     |           |    |   |           |    |   |       |   
|Basic loss per share                                    |  |                                         | (0.22     | ) |                     | (0.15     | )  |   | (0.07     | )  |   | (46.7 | )%
|Diluted loss per share                                  |  | $                                       | (0.22     | ) |                     | (0.15     | )  |   | (0.07     | )  |   | (46.7 | )%
|Weighted average shares used for diluted loss per share |  |                                         | 4,220,137 |   |                     | 3,079,199 |    |   | 1,140,938 |    |   | 37.1  | % 
|                                                        |  |                                         |           |   |                     |           |    |   |           |    |   |       |   
|Top-line revenue                                        |  | $                                       | 3,201     |   |                     | 1,826     |    |   | 1,375     |    |   | 75.3  | % 
|Net interest margin                                     |  |                                         | 3.36      | % |                     | 3.33      | %  |   | 0.03      | %  |   | 0.9   | % 
|Efficiency ratio                                        |  |                                         | 118.53    | % |                     | 120.26    | %  |   | (1.73     | )% |   | (1.4  | )%
|Average equity to average assets                        |  |                                         | 11.55     | % |                     | 11.77     | %  |   | (0.22     | )% |   | (1.9  | )%
|Average loans held for investment to average deposits   |  |                                         | 97.03     | % |                     | 94.58     | %  |   | 2.45      | %  |   | 2.6   | % 
|Net charge-offs to average loans                        |  |                                         | 0.04      | % |                     | (0.01     | )% |   | 0.05      | %  |   | n/a   |   



The primary reasons for the $405,000
or 90% increase in the Companys third quarter 2004 net loss to $856,000 compared to the same quarter last year were the $312,000 write-off of deferred acquisition expenses related to the proposed merger with Horizon Financial Corp. as
discussed earlier, coupled with $418,000 of expense related to the Companys expansion into Palm Beach County and Tampa Bay. The balance of the third quarter net loss, which represents the Companys existing banking and trust company
business segments and related parent company expense, decreased by $325,000 or 72% to $126,000. Increased net interest income after provision for loan losses of $962,000 (up 70%) and higher noninterest income of $231,000 (up 60%) more than offset
higher noninterest expense (up $868,000 or 40%, excluding $730,000 in costs noted above).



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Third Quarter 2004 Compared to Second Quarter 2004



|                                                        |  |                                       |           |   |                     |           |   |   |           |   |   |       |   
|------------------------------------------------------- |  | ------------------------------------- | --------- | - | ------------------- | --------- | - | - | --------- | - | - | ----- | --
|                                                        |  | FOR THE THREE MONTHSENDED             |           |   | INCREASE/(DECREASE) |          
|                                                        |  | (IN THOUSANDS, EXCEPT PER SHARE DATA) |          
|                                                        |  | SEPT. 30,2004                         |           |   | JUNE 30,2004        |           |   | $ |           |   | % |      
|Total interest income                                   |  | $                                     | 3,907     |   |                     | 3,368     |   |   | 539       |   |   | 16.0  | % 
|Total interest expense                                  |  |                                       | 1,317     |   |                     | 1,128     |   |   | 189       |   |   | 16.8  | % 
|                                                        |  |                                       |           |   |                     |           |   |   |           |   |   |       |   
|Net interest income before provision                    |  |                                       | 2,590     |   |                     | 2,240     |   |   | 350       |   |   | 15.6  | % 
|Provision for loan losses                               |  |                                       | 263       |   |                     | 230       |   |   | 33        |   |   | 14.3  | % 
|                                                        |  |                                       |           |   |                     |           |   |   |           |   |   |       |   
|Net interest income after provision                     |  |                                       | 2,327     |   |                     | 2,010     |   |   | 317       |   |   | 15.8  | % 
|Noninterest income                                      |  |                                       | 611       |   |                     | 503       |   |   | 108       |   |   | 21.5  | % 
|Gains on sale of investment securities                  |  |                                       |          |   |                     | 5         |   |   | (5        | ) |   | n/a   |   
|Noninterest expense                                     |  |                                       | 3,794     |   |                     | 3,038     |   |   | 756       |   |   | 24.9  | % 
|Provision for income taxes                              |  |                                       |          |   |                     |          |   |   |          |   |   |      |   
|                                                        |  |                                       |           |   |                     |           |   |   |           |   |   |       |   
|Net loss                                                |  |                                       | (856      | ) |                     | (520      | ) |   | (336      | ) |   | (64.6 | )%
|                                                        |  |                                       |           |   |                     |           |   |   |           |   |   |       |   
|Basic loss per share                                    |  |                                       | (0.22     | ) |                     | (0.19     | ) |   | (0.03     | ) |   | (15.8 | )%
|Diluted loss per share                                  |  | $                                     | (0.22     | ) |                     | (0.19     | ) |   | (0.03     | ) |   | (15.8 | )%
|Weighted average shares used for diluted loss per share |  |                                       | 4,220,137 |   |                     | 3,094,199 |   |   | 1,125,938 |   |   | 36.4  | % 
|                                                        |  |                                       |           |   |                     |           |   |   |           |   |   |       |   
|Top-line revenue                                        |  | $                                     | 3,201     |   |                     | 2,743     |   |   | 458       |   |   | 16.7  | % 
|Net interest margin                                     |  |                                       | 3.36      | % |                     | 3.36      | % |   | 0.00      | % |   | 0.0   | % 
|Efficiency ratio                                        |  |                                       | 118.53    | % |                     | 110.75    | % |   | 7.78      | % |   | 7.0   | % 
|Average equity to average assets                        |  |                                       | 11.55     | % |                     | 8.26      | % |   | 3.29      | % |   | 39.8  | % 
|Average loans held for investment to average deposits   |  |                                       | 97.03     | % |                     | 95.95     | % |   | 1.08      | % |   | 1.1   | % 
|Net charge-offs to average loans                        |  |                                       | 0.04      | % |                     | 0.00      | % |   | 0.04      | % |   | n/a   |   



Compared to second quarter 2004, the
third quarter 2004 net loss increased by $336,000 or $0.03 per share. Nearly all of the change was caused by the $312,000 write-off of the Horizon pre-acquisition transaction costs. In addition, there was $236,000 more expense in the quarter related
to the Companys expansion into Palm Beach County and Tampa Bay. The balance of the third quarter 2004 net loss, which represents the Companys existing banking and trust company business segments and related parent company expense,
decreased by $212,000 or 63% to $126,000. Increased net interest income after provision for loan losses of $317,000 (up 16%) and higher noninterest income (excluding net securities gains) of $108,000 (up 22%) more than offset higher noninterest
expense (up $208,000 or 7%, excluding $548,000 in increased costs noted above).



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##### Table of Contents

Year to-Date 2004 Compared to Year-to-Date 2003



|                                                        |  |                                       |           |   |                     |           |   |   |         |    |   |       |   
|------------------------------------------------------- |  | ------------------------------------- | --------- | - | ------------------- | --------- | - | - | ------- | -- | - | ----- | --
|                                                        |  | FOR THE NINE MONTHSENDED              |           |   | INCREASE/(DECREASE) |          
|                                                        |  | (IN THOUSANDS, EXCEPT PER SHARE DATA) |          
|                                                        |  | SEPT. 30,2004                         |           |   | SEPT. 30,2003       |           |   | $ |         |    | % |      
|Total interest income                                   |  | $                                     | 10,240    |   |                     | 6,194     |   |   | 4,046   |    |   | 65.3  | % 
|Total interest expense                                  |  |                                       | 3,434     |   |                     | 2,416     |   |   | 1,018   |    |   | 42.1  | % 
|                                                        |  |                                       |           |   |                     |           |   |   |         |    |   |       |   
|Net interest income before provision                    |  |                                       | 6,806     |   |                     | 3,778     |   |   | 3,028   |    |   | 80.1  | % 
|Provision for loan losses                               |  |                                       | 827       |   |                     | 582       |   |   | 245     |    |   | 42.1  | % 
|                                                        |  |                                       |           |   |                     |           |   |   |         |    |   |       |   
|Net interest income after provision                     |  |                                       | 5,979     |   |                     | 3,196     |   |   | 2,783   |    |   | 87.1  | % 
|Noninterest income                                      |  |                                       | 1,555     |   |                     | 943       |   |   | 612     |    |   | 64.9  | % 
|Gains on sale of investment securities                  |  |                                       | 5         |   |                     | 9         |   |   | (4      | )  |   | (44.4 | )%
|Noninterest expense                                     |  |                                       | 9,426     |   |                     | 6,474     |   |   | 2,952   |    |   | 45.6  | % 
|Provision for income taxes                              |  |                                       |          |   |                     |          |   |   |        |    |   |      |   
|                                                        |  |                                       |           |   |                     |           |   |   |         |    |   |       |   
|Net loss                                                |  |                                       | (1,887    | ) |                     | (2,326    | ) |   | 439     |    |   | 18.8  | % 
|                                                        |  |                                       |           |   |                     |           |   |   |         |    |   |       |   
|Basic loss per share                                    |  |                                       | (0.58     | ) |                     | (0.80     | ) |   | 0.22    |    |   | 27.5  | % 
|Diluted loss per share                                  |  | $                                     | (0.58     | ) |                     | (0.80     | ) |   | 0.22    |    |   | 27.5  | % 
|Weighted average shares used for diluted loss per share |  |                                       | 3,467,324 |   |                     | 2,904,474 |   |   | 562,850 |    |   | 19.4  | % 
|Top-line revenue                                        |  |                                       | 8,361     |   |                     | 4,721     |   |   | 3,640   |    |   | 77.1  | % 
|Net interest margin                                     |  |                                       | 3.39      | % |                     | 3.24      | % |   | 0.15    | %  |   | 4.6   | % 
|                                                        |  |                                       |           |   |                     |           |   |   |         |    |   |       |   
|Efficiency ratio                                        |  |                                       | 112.74    | % |                     | 137.11    | % |   | (24.37  | )% |   | (17.8 | )%
|Average equity to average assets                        |  |                                       | 9.88      | % |                     | 12.06     | % |   | (2.18   | )% |   | (18.1 | )%
|Average loans held for investment to average deposits   |  |                                       | 96.20     | % |                     | 90.34     | % |   | 5.86    | %  |   | 6.5   | % 
|Net charge-offs to average loans                        |  |                                       | 0.02      | % |                     | 0.02      | % |   | 0.00    | %  |   | 0.0   | % 



The primary reason for the $439,000 or
19% reduction in the Companys year-to-date 2004 net loss to $1.887 million compared to the same period last year was the $3.6 million or 77% climb in top-line revenue, which more than offset increased noninterest expense of $3.0 million (up
46%) and higher loan loss provision of $245,000 (up 42%). As noted above, the Company incurred Horizon termination costs and expense related to expansion into Tampa Bay and Palm Beach County during the 2004 period. The balance of noninterest expense
rose $2.0 million or 31%, reducing the net loss related to the Companys existing banking and trust company business segments and related parent company expense by $1.4 million or 58% to $968,000.



Discussion of Changes by Income Statement Line Item for the Above Quarterly and
Year-to-Date Periods



The Company monitors the change intop-line revenue against the change in noninterest expense (overhead) as a key indicator of progress toward reaching profitability. Since the costs of terminating the Horizon agreement and expanding into Palm Beach County and Tampa Bay are
not related to the generation of revenue in the Companys core Naples and Fort Lauderdale markets, comparison of overhead growth versus top-line revenue growth is considered more useful excluding these non-core market expenses. As such,
top-line revenue in third quarter 2004 climbed 75% over third quarter 2003 versus a 40% rise in overhead expense. Compared to second quarter 2004, top-line revenue rose 17%, more than twice the 7% rise in overhead. And for the first nine months of
2004, the rate of increase in top-line revenue was also more than double the rate of increase in overhead, 77% versus 34%. The relationship of overhead to top-line revenue is also measured by the efficiency ratio, which is discussed below.



Net interest income, the larger of the two components of
top-line revenue, rose $1.1 million or 79% in third quarter 2004 versus the same quarter last year, while noninterest income (excluding net securities gains/losses)



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climbed $231,000 or 61%. The greatest portion of the latter increase was due to higher trust fees (up $149,000 or 116%,
due to 69% more assets under advice), followed by greater service charges and fees (up $56,000 or 35%, due to continued growth in customer accounts). Compared to second quarter 2004, net interest income rose $350,000 or 16% while noninterest income
(excluding net securities gains/losses) climbed $108,000 or 22%. Higher mortgage banking fees comprised $74,000 of this increase, with growth in deposit service charges and trust fees sharing the balance about equally. For the year-to-date, net
interest income climbed $3.0 million or 80% compared to a $612,000 or 65% rise in noninterest income (excluding net securities gains/losses). A $461,000 or 145% increase in trust fees explains the bulk of the latter improvement followed by $208,000
more (up 58%) in service charges and fees. The Company is actively executing a strategy to increase its penetration of the mortgage market in its soon-to-be four primary geographic markets, replacing its previous plan to utilize the Horizon
acquisition to accomplish this objective.



The most significant reason for
third quarter net interest income growth over the same period a year ago was a $133 million or 77% increase in average earning assets, explaining virtually all of the $1.144 million rise in net interest income. The net interest
margin increased three basis points to 3.36%; though the spread between earning asset yields and interest-bearing liabilities narrowed by two basis points to 2.95%, this compression was more than offset by a reduced mix of interest-bearing
liabilities supporting earning assets made possible by a 1.8 percentage point increase in the average mix of noninterest-bearing checking accounts to 13.1%. The net interest margin for the first nine months of 2004 increased 14 basis points over the
comparable 2003 period due primarily to a widening of the interest rate spread (up 18 basis points) and improvement in the noninterest-bearing checking account mix. The combination of the latter improved mix and growth in average earning assets (up
$113 million or 72% on average) explains all of the $3.028 million rise in year-to-date net interest income over the prior year.



Growth in third quarter 2004 average earning assets versus second quarter 2004 (up $38 million or 14%) also accounts for nearly all of the $350,000 increase in net
interest income between the two periods. The impact of three quarter-point prime rate increases during the third quarter, the most recent of which occurred on September 22, produced an estimated $133,000 increase in loan interest income, which was
further expanded by $349,000 due to higher loan volume. Approximately 55% of the Companys loans immediately adjust to a prime rate increase, resulting in a 21 basis point higher loan yield in the quarter versus second quarter 2004. Interest
income also increased due to higher short-term investments from the Companys secondary offering, but due to this type of investments lower yield, the increase in overall earning asset yield was limited to two basis points. Taken together
with a 12 basis point increase in the cost of interest bearing deposits due to a greater mix of CDs as a funding source, the net interest margin in the third quarter remained unchanged from the second quarter 2004 level of 3.36%, after falling in
the two previous quarters.



Total noninterest expense in the
third quarter increased $1.6 million or 73% over the same quarter last year. The primary source of the increase ($947,000 or 59%, including the termination of the Horizon agreement) related to holding company expansion, consistent with
providing additional cost-effective services to the Companys subsidiaries as they expand into multiple geographic markets. A significantly greater share of executive managements efforts has been directed toward acquisitions,
capital-raising activities, shareholder/investor relations, and overall risk management, with higher on-staff accounting and finance expense as well as greater outside auditing, legal, and consulting fees.



As noted in the Management Summary above, there was $418,000 in third quarter
expense related to the Palm Beach County and Tampa Bay expansion along with $312,000 of merger termination costs, and $208,000 in second quarter start-up costs of the new Palm Beach County location and temporary accounting expense. The remaining
third quarter 2004 parent company noninterest expense included parent company costs of $598,000, an $80,000 or 15% increase over second quarter 2004; in addition, there was a $154,000 increase in Company-wide overhead pertaining to the banking and
trust subsidiaries. Selected additions to staff in the operations function, higher occupancy expense due to the opening of a new operations center and additional headquarters space, and investor presentation costs related to the July/August common
equity offering explain most of the increase in parent company expense. Third quarter 2003 parent



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company expense, which contained no such expenses noted in 2004, was $200,000. For the first nine months of 2004, total
noninterest expense was $9.4 million compared to $6.5 million, up 46% or $2.952 million. Parent company expense of $3.0 million comprised $1.9 million or 65% of the increase, including $804,000 in market expansion, temporary accounting expense, and
merger termination costs.



Total noninterest expense of the banking and
trust subsidiaries increased $470,000 or 24% in the third quarter versus the same period last year. Personnel expense accounted for $230,000 of the increase (up 19%), reflecting overall merit increases and selected additions to staff,
largely in lending-related areas. The combination of higher occupancy and general operating expense explains the $240,000 balance (up 14% and 28%, respectively). The increased occupancy largely reflects higher lease expense (primarily in the Ft.
Lauderdale affiliate), utilities and property tax. General expense rose due to additional forms and supplies, internal audit and compliance costs, data processing expense, and miscellaneous losses.



The preceding reasons also explain the $861,000 or 14% change in noninterest expense for the
banking and trust subsidiaries for the first nine months of 2004 compared to the prior year. Personnel expense rose $278,000 or 9%, occupancy increased $180,000 or 18%, and general operating was up $403,000 or 21%. Compared to second quarter 2004,
third quarter overhead rose $154,000 or 7%. The bulk of the increase was in personnel (up $87,000 or 8%), reflecting additional support staff in the Naples bank and a higher bonus accrual, and in general operating costs (up $100,000 or 18%), offset
by miscellaneous net decreases in other categories.



Despite the increase in
overhead of an expanding company, the third quarter 2004 efficiency ratio was virtually unchanged compared to the same period last year because of the strong 75% climb in top-line revenue. The third quarter 2004 efficiency ratio was 96% when
adjusted to exclude merger termination costs and Tampa Bay/Palm Beach County expansion activities, all of which the Company considers not a consistent comparison with the 2003 period. The third quarter efficiency ratio improved by seven percentage
points from second quarter 2004 after adjusting both periods for the noncomparable expenses noted above. For the first nine months of 2004, the efficiency ratio was 113% (101% adjusted for the aforementioned items) compared to 137% for the first
nine months of last year.



Loan loss provision expense in third
quarter 2004 increased by $33,000 or 14% from second quarter 2004 to $263,000, consistent with 8% loan growth and replenishment of the allowance for $28,000 in net charge-offs during the period. The resulting allowance was $2.368 million, up
$236,000 or 11% since June 30, 2004 and up $901,000 or 61% from September 30, 2003. The ratio of the allowance for loan losses to loans outstanding increased 0.02 percentage points from 90 days earlier to 0.83% at September 30, 2004 and was .07
percentage points lower than one year earlier. See the asset quality section of the Financial Condition segment of this MD&A for a discussion of the adequacy of the loan loss allowance. Compared to third quarter 2003, the loan loss
provision rose $182,000 or 225%. The provision for the first nine months of 2004 was $827,000, a $245,000 or 42% increase over the same period last year, reflective of the increase in the loan portfolio and inherent losses.



Average Balances, Income and Expenses, and Rates



The following tables represent, for the three-month and nine-month periods indicated,
certain information related to our average balance sheet and its annualized average yields on assets and annualized average costs of liabilities. Such yields are derived by dividing income or expense by the average balance of the corresponding
assets or liabilities. Average balances have been derived from daily averages. Discussion of these tables is included above in the net interest income sections of the Results of Operations.



22



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##### Table of Contents

|                                                                        |  |                                          |         |                      |      |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|----------------------------------------------------------------------- |  | ---------------------------------------- | ------- | -------------------- | ---- | ----- | ----------------- |  | ---- | -------------- |  | -------------------- | ------- |  | ----------------- | ----- | - |  | ---- | -
|                                                                        |  | For the Three-Months Ended September 30, |        
|                                                                        |  | 2004                                     |         |                      | 2003 |      
|                                                                        |  | AverageBalance                           |         | InterestandDividends |      |       | AverageYield/Rate |  |      | AverageBalance |  | InterestandDividends |         |  | AverageYield/Rate |      
|Assets:                                                                 |  |                                          |         |                      |      |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Earning Assets:                                                         |  |                                          |         |                      |      |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Interest Earning Deposits                                               |  | $                                        |        |                      | $    |      |                   |  | 0.00 | %              |  | $                    | 46      |  | $                 |      |   |  | 1.90 | %
|Securities (3)                                                          |  |                                          | 14,956  |                      |      | 60    |                   |  | 1.59 | %              |  |                      | 9,926   |  |                   | 78    |   |  | 3.13 | %
|Federal Funds Sold                                                      |  |                                          | 16,411  |                      |      | 92    |                   |  | 2.23 | %              |  |                      | 9,147   |  |                   | 21    |   |  | .91  | %
|Loans                                                                   |  |                                          | 274,185 |                      |      | 3,755 |                   |  | 5.43 | %              |  |                      | 153,391 |  |                   | 2,153 |   |  | 5.57 | %
|                                                                        |  |                                          |         |                      |      |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Total Interest-Earning assets                                           |  |                                          | 305,552 |                      |      | 3,907 |                   |  | 5.07 | %              |  |                      | 172,510 |  |                   | 2,253 |   |  | 5.18 | %
|Non Interest-earning assets                                             |  |                                          | 20,181  |                      |      |       |                   |  |      |                |  |                      | 13,858  |  |                   |       |   |  |      |  
|                                                                        |  |                                          |         |                      |      |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Total Assets                                                            |  | $                                        | 325,733 |                      |      |       |                   |  |      |                |  | $                    | 186,368 |  |                   |       |   |  |      |  
|                                                                        |  |                                          |         |                      |      |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Liabilities:                                                            |  |                                          |         |                      |      |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Interest-bearing liabilities:                                           |  |                                          |         |                      |      |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|NOW & Money Market                                                      |  | $                                        | 93,040  |                      |      | 280   |                   |  | 1.20 | %              |  | $                    | 68,767  |  | $                 | 208   |   |  | 1.20 | %
|Savings                                                                 |  |                                          | 3,669   |                      |      | 15    |                   |  | 1.58 | %              |  |                      | 1,117   |  |                   | 1     |   |  | 0.41 | %
|Time Deposit                                                            |  |                                          | 145,825 |                      |      | 993   |                   |  | 2.70 | %              |  |                      | 72,867  |  |                   | 596   |   |  | 3.22 | %
|Other Borrowings                                                        |  |                                          | 4,294   |                      |      | 29    |                   |  | 2.65 | %              |  |                      | 1,826   |  |                   | 6     |   |  | 1.21 | %
|                                                                        |  |                                          |         |                      |      |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Total interest-bearing liabilities                                      |  | $                                        | 246,828 |                      |      | 1,317 |                   |  | 2.12 | %              |  | $                    | 144,577 |  | $                 | 807   |   |  | 2.21 | %
|                                                                        |  |                                          |         |                      |      |      
|Demand deposits                                                         |  |                                          | 40,051  |                      |      |       |                   |  |      |                |  |                      | 19,431  |  |                   |       |   |  |      |  
|Other non-interest bearing liabilities                                  |  |                                          | 1,226   |                      |      |       |                   |  |      |                |  |                      | 416     |  |                   |       |   |  |      |  
|                                                                        |  |                                          |         |                      |      |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Total non-interest bearing liabilities                                  |  |                                          | 41,277  |                      |      |       |                   |  |      |                |  |                      | 19,847  |  |                   |       |   |  |      |  
|                                                                        |  |                                          |         |                      |      |      
|Stockholders Equity                                                    |  |                                          | 37,628  |                      |      |       |                   |  |      |                |  |                      | 21,944  |  |                   |       |   |  |      |  
|                                                                        |  |                                          |         |                      |      |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Total Liabilities & Stockholders Equity                                |  | $                                        | 325,733 |                      |      |       |                   |  |      |                |  | $                    | 186,368 |  |                   |       |   |  |      |  
|                                                                        |  |                                          |         |                      |      |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Net interest income                                                     |  |                                          |         |                      | $    | 2,590 |                   |  |      |                |  |                      |         |  |                   | 1,446 |   |  |      |  
|                                                                        |  |                                          |         |                      |      |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Interest-rate spread (1)                                                |  |                                          |         |                      |      |       |                   |  | 2.95 | %              |  |                      |         |  |                   |       |   |  | 2.97 | %
|Net Interest margin (2)                                                 |  |                                          |         |                      |      |       |                   |  | 3.36 | %              |  |                      |         |  |                   |       |   |  | 3.33 | %
|Ratio of average interest-bearing liabilities to average earning assets |  |                                          |         |                      |      | 80.8  | %                 |  |      |                |  |                      |         |  |                   | 83.8  | % |  |      |  

---

|(1) | Interest rate spread is the average rate earned on total interest-earning assets less the average rate paid on interest-bearing liabilities.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Net interest margin is net interest income divided by total interest-earning assets.
|--- | ------------------------------------------------------------------------------------

|(3) | Securities include required investments in Federal Home Loan Bank and Federal Reserve Bank stock which earn dividends paid on a quarterly and semi-annual basis, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



23



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##### Table of Contents

|                                                                                 |  |                             |         |                      |               |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|-------------------------------------------------------------------------------- |  | --------------------------- | ------- | -------------------- | ------------- | ----- | ----------------- |  | ---- | -------------- |  | -------------------- | ------- |  | ----------------- | ----- | - |  | ---- | -
|                                                                                 |  | For the Three-Months Ended, |        
|                                                                                 |  | September 30, 2004          |         |                      | June 30, 2004 |      
|                                                                                 |  | AverageBalance              |         | InterestandDividends |               |       | AverageYield/Rate |  |      | AverageBalance |  | InterestandDividends |         |  | AverageYield/Rate |      
|Assets:                                                                          |  |                             |         |                      |               |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Earning Assets:                                                                  |  |                             |         |                      |               |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Interest Earning Deposits                                                        |  | $                           |        |                      | $             |      |                   |  | 0.00 | %              |  | $                    | 47      |  | $                 |      |   |  | 0.43 | %
|Securities (3)                                                                   |  |                             | 14,956  |                      |               | 60    |                   |  | 1.59 | %              |  |                      | 7,434   |  |                   | 78    |   |  | 4.20 | %
|Federal Funds Sold                                                               |  |                             | 16,411  |                      |               | 92    |                   |  | 2.23 | %              |  |                      | 8,610   |  |                   | 17    |   |  | 0.80 | %
|Loans                                                                            |  |                             | 274,185 |                      |               | 3,755 |                   |  | 5.43 | %              |  |                      | 251,302 |  |                   | 3,273 |   |  | 5.22 | %
|                                                                                 |  |                             |         |                      |               |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Total Interest-Earning assets                                                    |  |                             | 305,552 |                      |               | 3,907 |                   |  | 5.07 | %              |  |                      | 267,392 |  |                   | 3,368 |   |  | 5.05 | %
|Non Interest-earning assets                                                      |  |                             | 20,181  |                      |               |       |                   |  |      |                |  |                      | 23,040  |  |                   |       |   |  |      |  
|                                                                                 |  |                             |         |                      |               |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Total Assets                                                                     |  | $                           | 325,733 |                      |               |       |                   |  |      |                |  | $                    | 290,432 |  |                   |       |   |  |      |  
|                                                                                 |  |                             |         |                      |               |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Liabilities:                                                                     |  |                             |         |                      |               |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Interest-bearing liabilities:                                                    |  |                             |         |                      |               |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|NOW & Money Market                                                               |  | $                           | 93,040  |                      |               | 280   |                   |  | 1.20 | %              |  | $                    | 95,318  |  | $                 | 266   |   |  | 1.12 | %
|Savings                                                                          |  |                             | 3,669   |                      |               | 15    |                   |  | 1.58 | %              |  |                      | 1,713   |  |                   | 4     |   |  | 0.99 | %
|Time Deposit                                                                     |  |                             | 145,825 |                      |               | 993   |                   |  | 2.70 | %              |  |                      | 126,099 |  |                   | 847   |   |  | 2.70 | %
|Other Borrowings                                                                 |  |                             | 4,294   |                      |               | 29    |                   |  | 2.65 | %              |  |                      | 2,839   |  |                   | 10    |   |  | 1.36 | %
|                                                                                 |  |                             |         |                      |               |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Total interest-bearing liabilities                                               |  | $                           | 246,828 |                      |               | 1,317 |                   |  | 2.12 | %              |  | $                    | 225,969 |  | $                 | 1,128 |   |  | 2.00 | %
|                                                                                 |  |                             |         |                      |               |      
|Demand deposits                                                                  |  |                             | 40,051  |                      |               |       |                   |  |      |                |  |                      | 38,792  |  |                   |       |   |  |      |  
|Other non-interest bearing liabilities                                           |  |                             | 1,226   |                      |               |       |                   |  |      |                |  |                      | 1,694   |  |                   |       |   |  |      |  
|                                                                                 |  |                             |         |                      |               |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Total non-interest bearing liabilities                                           |  |                             | 41,277  |                      |               |       |                   |  |      |                |  |                      | 40,486  |  |                   |       |   |  |      |  
|                                                                                 |  |                             |         |                      |               |      
|Stockholders Equity                                                             |  |                             | 37,628  |                      |               |       |                   |  |      |                |  |                      | 23,977  |  |                   |       |   |  |      |  
|                                                                                 |  |                             |         |                      |               |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Total Liabilities & Stockholders Equity                                         |  | $                           | 325,733 |                      |               |       |                   |  |      |                |  | $                    | 290,432 |  |                   |       |   |  |      |  
|                                                                                 |  |                             |         |                      |               |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Net interest income                                                              |  |                             |         |                      | $             | 2,590 |                   |  |      |                |  |                      |         |  |                   | 2,240 |   |  |      |  
|                                                                                 |  |                             |         |                      |               |       |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Interest-rate spread (1)                                                         |  |                             |         |                      |               |       |                   |  | 2.95 | %              |  |                      |         |  |                   |       |   |  | 3.05 | %
|Net Interest margin (2)                                                          |  |                             |         |                      |               |       |                   |  | 3.36 | %              |  |                      |         |  |                   |       |   |  | 3.36 | %
|Ratio of average interest-bearing liabilities to average interest-earning assets |  |                             |         |                      |               | 80.8  | %                 |  |      |                |  |                      |         |  |                   | 84.5  | % |  |      |  

---

|(1) | Interest rate spread is the average rate earned on total interest-earning assets less the average rate paid on interest-bearing liabilities.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Net interest margin is net interest income divided by total interest-earning assets.
|--- | ------------------------------------------------------------------------------------

|(3) | Securities include required investments in Federal Home Loan Bank and Federal Reserve Bank stock which earn dividends paid on a quarterly and semi-annual basis, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



24



---

##### Table of Contents

|                                                                                 |  |                                         |         |                      |      |        |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|-------------------------------------------------------------------------------- |  | --------------------------------------- | ------- | -------------------- | ---- | ------ | ----------------- |  | ---- | -------------- |  | -------------------- | ------- |  | ----------------- | ----- | - |  | ---- | -
|                                                                                 |  | For the Nine-Months Ended September 30, |        
|                                                                                 |  | 2004                                    |         |                      | 2003 |       
|                                                                                 |  | AverageBalance                          |         | InterestandDividends |      |        | AverageYield/Rate |  |      | AverageBalance |  | InterestandDividends |         |  | AverageYield/Rate |      
|Assets:                                                                          |  |                                         |         |                      |      |        |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Earning Assets:                                                                  |  |                                         |         |                      |      |        |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Interest Earning Deposits                                                        |  | $                                       | 31      |                      | $    |       |                   |  | 0.21 | %              |  | $                    | 4,975   |  | $                 | 80    |   |  | 2.14 | %
|Securities (3)                                                                   |  |                                         | 10,443  |                      |      | 242    |                   |  | 3.08 | %              |  |                      | 9,670   |  |                   | 242   |   |  | 3.33 | %
|Federal Funds Sold                                                               |  |                                         | 9,850   |                      |      | 89     |                   |  | 1.20 | %              |  |                      | 7,597   |  |                   | 61    |   |  | 1.07 | %
|Loans                                                                            |  |                                         | 248,022 |                      |      | 9,909  |                   |  | 5.32 | %              |  |                      | 133,472 |  |                   | 5,811 |   |  | 5.80 | %
|                                                                                 |  |                                         |         |                      |      |        |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Total Interest-Earning assets                                                    |  |                                         | 268,345 |                      |      | 10,240 |                   |  | 5.08 | %              |  |                      | 155,714 |  |                   | 6,194 |   |  | 5.32 | %
|Non Interest-earning assets                                                      |  |                                         | 22,049  |                      |      |        |                   |  |      |                |  |                      | 13,298  |  |                   |       |   |  |      |  
|                                                                                 |  |                                         |         |                      |      |        |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Total Assets                                                                     |  | $                                       | 290,395 |                      |      |        |                   |  |      |                |  | $                    | 169,012 |  |                   |       |   |  |      |  
|                                                                                 |  |                                         |         |                      |      |        |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Liabilities:                                                                     |  |                                         |         |                      |      |        |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Interest-bearing liabilities:                                                    |  |                                         |         |                      |      |        |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|NOW & Money Market                                                               |  | $                                       | 93,795  |                      |      | 822    |                   |  | 1.17 | %              |  | $                    | 60,198  |  | $                 | 670   |   |  | 1.48 | %
|Savings                                                                          |  |                                         | 2,139   |                      |      | 20     |                   |  | 1.23 | %              |  |                      | 1,153   |  |                   | 4     |   |  | 0.44 | %
|Time Deposit                                                                     |  |                                         | 124,305 |                      |      | 2,552  |                   |  | 2.73 | %              |  |                      | 68,483  |  |                   | 1,736 |   |  | 3.38 | %
|Other Borrowings                                                                 |  |                                         | 2,510   |                      |      | 40     |                   |  | 2.12 | %              |  |                      | 615     |  |                   | 6     |   |  | 1.21 | %
|                                                                                 |  |                                         |         |                      |      |        |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Total interest-bearing liabilities                                               |  | $                                       | 222,749 |                      |      | 3,434  |                   |  | 2.05 | %              |  | $                    | 130,450 |  | $                 | 2,416 |   |  | 2.47 | %
|                                                                                 |  |                                         |         |                      |      |       
|Demand deposits                                                                  |  |                                         | 37,567  |                      |      |        |                   |  |      |                |  |                      | 17,917  |  |                   |       |   |  |      |  
|Other non-interest bearing liabilities                                           |  |                                         | 1,397   |                      |      |        |                   |  |      |                |  |                      | 265     |  |                   |       |   |  |      |  
|                                                                                 |  |                                         |         |                      |      |        |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Total non-interest bearing liabilities                                           |  |                                         | 38,964  |                      |      |        |                   |  |      |                |  |                      | 18,182  |  |                   |       |   |  |      |  
|                                                                                 |  |                                         |         |                      |      |       
|Stockholders Equity                                                             |  |                                         | 28,682  |                      |      |        |                   |  |      |                |  |                      | 20,380  |  |                   |       |   |  |      |  
|                                                                                 |  |                                         |         |                      |      |        |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Total Liabilities & Stockholders Equity                                         |  | $                                       | 290,395 |                      |      |        |                   |  |      |                |  | $                    | 169,012 |  |                   |       |   |  |      |  
|                                                                                 |  |                                         |         |                      |      |        |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Net interest income                                                              |  |                                         |         |                      | $    | 6,806  |                   |  |      |                |  |                      |         |  |                   | 3,778 |   |  |      |  
|                                                                                 |  |                                         |         |                      |      |        |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Interest-rate spread (1)                                                         |  |                                         |         |                      |      |        |                   |  | 3.03 | %              |  |                      |         |  |                   |       |   |  | 2.85 | %
|Net Interest margin (2)                                                          |  |                                         |         |                      |      |        |                   |  | 3.38 | %              |  |                      |         |  |                   |       |   |  | 3.24 | %
|Ratio of average interest-bearing liabilities to average interest-earning assets |  |                                         |         |                      |      | 83.0   | %                 |  |      |                |  |                      |         |  |                   | 83.8  | % |  |      |  

---

|(1) | Interest rate spread is the average rate earned on total interest-earning assets less the average rate paid on interest-bearing liabilities.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Net interest margin is net interest income divided by total interest-earning assets.
|--- | ------------------------------------------------------------------------------------

|(3) | Securities include required investments in Federal Home Loan Bank and Federal Reserve Bank stock which earn dividends paid on a quarterly and semi-annual basis, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



25



---

##### Table of Contents

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO SEPTEMBER 30, 2003

INCREASE (DECREASE) DUE TO CHANGE IN (IN THOUSANDS)



|                                         |  |        |       |      |   |     |        |  |   |       |  
|---------------------------------------- |  | ------ | ----- | ---- | - | --- | ------ |  | - | ----- | -
|                                         |  | VOLUME |       | RATE |   |     | CHANGE | 
|Increase (decrease) in interest income:  |  |        |       |      |   |     |        |  |   |       |  
|Federal funds sold                       |  | $      | 41    |      | $ | 30  |        |  | $ | 71    |  
|Other investments1                       |  |        | 20    |      |   | (39 | )      |  |   | (19   | )
|Loans2                                   |  |        | 1,654 |      |   | (52 | )      |  |   | 1,602 |  
|                                         |  |        |       |      |   |     |        |  |   |       |  
|Total interest income                    |  |        | 1,715 |      |   | (61 | )      |  |   | 1,654 |  
|                                         |  |        |       |      |   |     |        |  |   |       |  
|Increase (decrease) in interest expense: |  |        |       |      |   |     |        |  |   |       |  
|Savings deposits                         |  |        | 10    |      |   | 3   |        |  |   | 13    |  
|Time deposits                            |  |        | 497   |      |   | (96 | )      |  |   | 401   |  
|Other interest-bearing deposits          |  |        | 73    |      |   | (1  | )      |  |   | 72    |  
|Other borrowings                         |  |        | 16    |      |   | 7   |        |  |   | 23    |  
|                                         |  |        |       |      |   |     |        |  |   |       |  
|Total interest expense                   |  |        | 597   |      |   | (87 | )      |  |   | 510   |  
|                                         |  |        |       |      |   |     |        |  |   |       |  
|Total change in net interest income      |  | $      | 1,118 |      | $ | 26  |        |  | $ | 1,144 |  
|                                         |  |        |       |      |   |     |        |  |   |       |  

---

|1 | Tax-exempt income, to the extent included in the amounts above, is not reflected on a tax equivalent basis.
|- | -----------------------------------------------------------------------------------------------------------

|2 | For purpose of this analysis, non-accruing loans, if any, are included in the average balances.
|- | -----------------------------------------------------------------------------------------------



FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO JUNE 30, 2004

INCREASE (DECREASE) DUE TO CHANGE IN (IN THOUSANDS)



|                                         |  |        |     |   |      |   |     |        |  |   |     |  
|---------------------------------------- |  | ------ | --- | - | ---- | - | --- | ------ |  | - | --- | -
|                                         |  | VOLUME |     |   | RATE |   |     | CHANGE | 
|Increase (decrease) in interest income:  |  |        |     |   |      |   |     |        |  |   |     |  
|Federal funds sold                       |  | $      | 44  |   |      | $ | 31  |        |  | $ | 75  |  
|Other investments1                       |  |        | 31  |   |      |   | (49 | )      |  |   | (18 | )
|Loans2                                   |  |        | 349 |   |      |   | 133 |        |  |   | 482 |  
|                                         |  |        |     |   |      |   |     |        |  |   |     |  
|Total interest income                    |  |        | 424 |   |      |   | 115 |        |  |   | 539 |  
|                                         |  |        |     |   |      |   |     |        |  |   |     |  
|Increase (decrease) in interest expense: |  |        |     |   |      |   |     |        |  |   |     |  
|Savings deposits                         |  |        | 7   |   |      |   | 3   |        |  |   | 10  |  
|Time deposits                            |  |        | 144 |   |      |   | 2   |        |  |   | 146 |  
|Other interest-bearing deposits          |  |        | (4  | ) |      |   | 18  |        |  |   | 14  |  
|Other borrowings                         |  |        | 10  |   |      |   | 9   |        |  |   | 19  |  
|                                         |  |        |     |   |      |   |     |        |  |   |     |  
|Total interest expense                   |  |        | 157 |   |      |   | 32  |        |  |   | 189 |  
|                                         |  |        |     |   |      |   |     |        |  |   |     |  
|Total change in net interest income      |  | $      | 267 |   |      | $ | 83  |        |  | $ | 350 |  
|                                         |  |        |     |   |      |   |     |        |  |   |     |  

---

|1 | Tax-exempt income, to the extent included in the amounts above, is not reflected on a tax equivalent basis.
|- | -----------------------------------------------------------------------------------------------------------

|2 | For purpose of this analysis, non-accruing loans, if any, are included in the average balances.
|- | -----------------------------------------------------------------------------------------------



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FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO SEPTEMBER 30, 2003

INCREASE (DECREASE) DUE TO CHANGE IN (IN THOUSANDS)



|                                         |  |        |       |      |   |      |        |  |   |       |  
|---------------------------------------- |  | ------ | ----- | ---- | - | ---- | ------ |  | - | ----- | -
|                                         |  | VOLUME |       | RATE |   |      | CHANGE | 
|Increase (decrease) in interest income:  |  |        |       |      |   |      |        |  |   |       |  
|Federal funds sold                       |  | $      | 20    |      | $ | 7    |        |  | $ | 27    |  
|Other investments1                       |  |        | 10    |      |   | (90  | )      |  |   | (80   | )
|Loans2                                   |  |        | 4,577 |      |   | (478 | )      |  |   | 4,098 |  
|                                         |  |        |       |      |   |      |        |  |   |       |  
|Total interest income                    |  |        | 4,607 |      |   | (561 | )      |  |   | 4,046 |  
|                                         |  |        |       |      |   |      |        |  |   |       |  
|Increase (decrease) in interest expense: |  |        |       |      |   |      |        |  |   |       |  
|Savings deposits                         |  |        | 9     |      |   | 7    |        |  |   | 16    |  
|Time deposits                            |  |        | 1,147 |      |   | (332 | )      |  |   | 815   |  
|Other interest-bearing deposits          |  |        | 294   |      |   | (141 | )      |  |   | 153   |  
|Other borrowings                         |  |        | 30    |      |   | 4    |        |  |   | 34    |  
|                                         |  |        |       |      |   |      |        |  |   |       |  
|Total interest expense                   |  |        | 1,480 |      |   | (462 | )      |  |   | 1,018 |  
|                                         |  |        |       |      |   |      |        |  |   |       |  
|Total change in net interest income      |  | $      | 3,127 |      | $ | (99  | )      |  | $ | 3,028 |  
|                                         |  |        |       |      |   |      |        |  |   |       |  

---

|1 | Tax-exempt income, to the extent included in the amounts above, is not reflected on a tax equivalent basis.
|- | -----------------------------------------------------------------------------------------------------------

|2 | For purpose of this analysis, non-accruing loans, if any, are included in the average balances.
|- | -----------------------------------------------------------------------------------------------



Provision and Allowance for Loan Losses



The allowance for loan losses is an estimated amount that management believes will be
adequate to absorb losses inherent in the loan portfolio based on evaluations of its collectibility. The evaluations take into consideration such factors as changes in the nature and volume of the portfolio, overall portfolio quality, specific
problem loans and commitments, and current anticipated economic conditions that may affect the borrowers ability to pay. Management also considers the results of independent internal and external credit reviews.



The allowance for credit losses is established through a provision for loan losses charged
against income. Loans are charged against the allowance when management believes that the collectibility of the principal is unlikely. While management uses the best information available to estimate probable losses on loans, future additions to the
allowance may be necessary based on changes in economic conditions. In determining the size of the allowance, management classifies the mix of the loan portfolio by commercial (within which there are six risk ratings), consumer (a single risk
rating), and mortgage (a single risk rating) as discussed in the loans section of Financial Condition. As of September 30, 2004, there were no loans against which specific loan loss allocations have been established beyond those
determined by the standard risk rating formula.



An analysis of the change in
the Companys allowance for possible loan losses and loan loss experience (charge-offs) is furnished in the following table for the three-month periods ended September 30, 2004, June 30, 2004 and September 30, 2003. See Note 5 for this table
format comparing year-to-date 2004 to year-to-date 2003.



|                                           |  |                   |       |   |              |   |                   |  |   |      
|------------------------------------------ |  | ----------------- | ----- | - | ------------ | - | ----------------- |  | - | -----
|                                           |  | September 30,2004 |       |   | June 30,2004 |   | September 30,2003
|Balance at beginning of period             |  | $                 | 2,132 |   |              | $ | 1,902             |  | $ | 1,381
|Provision for losses charged to operations |  |                   | 263   |   |              |   | 230               |  |   | 81   
|Consumer loan charge-offs                  |  |                   | (37   | ) |              |   |                  |  |   |      
|Recoveries                                 |  |                   | 10    |   |              |   |                  |  |   | 5    
|                                           |  |                   |       |   |              |   |                   |  |   |      
|Balance at end of period                   |  | $                 | 2,368 |   |              | $ | 2,132             |  | $ | 1,467
|                                           |  |                   |       |   |              |   |                   |  |   |      



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Discussion of the above table, including nonperforming loans, charge-off experience, and change in loan loss provision
expense, is contained above in the asset quality section of Financial Conditionand in the loan loss provision expense sections of Results of Operations.



The allocation of the allowance for loan losses by type of loan has corresponded to the
increases in loan balances by type (Dollars in thousands):



|                  |  |                            |       |                                          |      |   |                       |   |                                          |  |      |                           |  |                                          |       |  |      |  
|----------------- |  | -------------------------- | ----- | ---------------------------------------- | ---- | - | --------------------- | - | ---------------------------------------- |  | ---- | ------------------------- |  | ---------------------------------------- | ----- |  | ---- | -
|                  |  | September 30,2004Allowance |       | % of Loans inEach Categoryto Total Loans |      |   | June 30,2004Allowance |   | % of Loans inEach Categoryto Total Loans |  |      | December 31,2003Allowance |  | % of Loans inEach Categoryto Total Loans |      
|Type of Loan:     |  |                            |       |                                          |      |   |                       |   |                                          |  |      |                           |  |                                          |       |  |      |  
|Commercial loans  |  | $                          | 660   |                                          | 12.6 | % |                       | $ | 559                                      |  | 12.0 | %                         |  | $                                        | 468   |  | 17.1 | %
|Real estate loans |  |                            | 1,071 |                                          | 75.2 | % |                       |   | 997                                      |  | 75.6 | %                         |  |                                          | 677   |  | 67.6 | %
|Lines of credit   |  |                            | 410   |                                          | 7.8  | % |                       |   | 376                                      |  | 8.1  | %                         |  |                                          | 284   |  | 10.3 | %
|Consumer loans    |  |                            | 227   |                                          | 4.4  | % |                       |   | 200                                      |  | 4.3  | %                         |  |                                          | 139   |  | 5.0  | %
|                  |  |                            |       |                                          |      |   |                       |   |                                          |  |      |                           |  |                                          |       |  |      |  
|Total             |  | $                          | 2,368 |                                          | 100  | % |                       | $ | 2,132                                    |  | 100  | %                         |  | $                                        | 1,568 |  | 100  | %
|                  |  |                            |       |                                          |      |   |                       |   |                                          |  |      |                           |  |                                          |       |  |      |  



Selected Ratios



The following table below shows selected ratios for the three months ended as indicated.
Most of these ratios have been discussed in the above MD&A text.



|                                                                                 |  |                   |    |  |              |    |  |                   |   
|-------------------------------------------------------------------------------- |  | ----------------- | -- |  | ------------ | -- |  | ----------------- | --
|                                                                                 |  | September 30,2004 |    |  | June 30,2004 |    |  | September 30,2003 |   
|Return on average assets                                                         |  | (1.05             | )% |  | (0.72        | )% |  | (0.97             | )%
|Return on average equity                                                         |  | (9.10             | )% |  | (8.67        | )% |  | (8.22             | )%
|Interest-rate spread during the period                                           |  | 2.96              | %  |  | 3.05         | %  |  | 2.97              | % 
|Net interest margin                                                              |  | 3.36              | %  |  | 3.36         | %  |  | 3.33              | % 
|Net charge-offs during the period to average loans outstanding during the period |  | 0.04              | %  |  | 0.00         | %  |  | (0.01             | )%
|Allowance for loan losses to total loans                                         |  | 0.83              | %  |  | 0.81         | %  |  | 0.90              | % 
|Allowance for loan losses to nonperforming loans                                 |  | 540.68            | %  |  | 168.67       | %  |  | 729.68            | % 
|Nonperforming loans to total loans                                               |  | 0.15              | %  |  | 0.48         | %  |  | 0.12              | % 
|Nonperforming assets to total assets                                             |  | 0.13              | %  |  | 0.43         | %  |  | 0.10              | % 
|Average equity to average assets ratio                                           |  | 11.55             | %  |  | 8.26         | %  |  | 11.77             | % 



Liquidity and Capital Resources



Liquidity Management Liquidity management involves
monitoring sources and uses of funds in order to meet day-to-day cash flow requirements while maximizing profits. Liquidity represents the ability of a company to convert assets into cash or cash equivalents without significant loss and to raise
additional funds by increasing liabilities.



Liquidity management is made more
complicated because different balance sheet components are subject to scheduled maturities and varying degrees of management control. For example, the timing of maturities of certain holdings in the investment portfolio is very predictable and
subject to a high degree of control at the time of purchase; other investment holdings, such as mortgage-backed securities, are much less predictable due to



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sensitivity to financial market rates. Net deposit inflows and outflows, whether related to time deposits or nonmaturity
instruments such as money market accounts or demand deposits, are also difficult to predict, as they are greatly influenced by general interest rates, economic conditions and competition.



Asset liquidity is provided by cash and assets which are readily marketable, which can be pledged, or which will mature in the near future.
Liability liquidity is provided by access to core funding sources, principally the ability to generate customer deposits in our primary markets. In addition, liability liquidity is provided through the ability to borrow against approved lines of
credit, including Federal Funds purchased from correspondent banks and the Federal Home Loan Bank (FHLB). Such borrowings have historically been relatively small, averaging $2.3 million for third quarter 2004, $2.8 million for second quarter 2004,
and $1.8 million for third quarter 2003. At September 30, 2004, FHLB borrowings were zero versus $6.0 million at June 30, 2004 and $4.0 million at September 30, 2003.



Management regularly reviews the Banks liquidity position and has implemented internal policies which establish guidelines for sources
of asset-based liquidity and limit the total amount of purchased funds used to support the balance sheet and funding from non-core sources.



Short-Term Investments and Securities Available for Sale Short-term investments, which consist of federal funds sold and interest-bearing deposits, are a
component source of the Companys liquidity and are generally invested on an overnight basis. Both of the subsidiary banks enter into Federal Funds transactions with their principal correspondent banks, and primarily act as net sellers of such
funds. The sale of Federal Funds amounts to a short-term loan from the Banks to other banks.



Short-term investments averaged $16.4 million for third quarter 2004, about 79% higher than the $9.1 million average for third quarter 2003 and nearly twice the $8.6 million average in second quarter 2004. This higher
level represents the liquidity management policy of the Company commensurate with increased deposit levels and was additionally higher due to a share of the proceeds from the common stock offering completed in July/August 2004; funds from the latter
await near-term redeployment into Bank of Florida, Tampa Bay. At September 30, 2004, short-term investments were $30.6 million versus $5.9 million at June 30, 2004 and $6.7 million at September 30, 2003.



On a longer-term basis, the Company invests primarily in obligations of the United States, or
obligations guaranteed as to principal and interest by the United States, and in other taxable securities (no nontaxable securities are held at this time). Management determines the appropriate classification of investment securities at the time of
purchase. If management has the intent and the Company has the ability (or is required for regulatory reasons) to hold these securities until maturity or on a long-term basis, they are classified as held-to-maturity investments. Securities to be
held for indefinite periods of time and not intended to be held to maturity or on a long-term basis are classified as available-for-sale. The volume of sales of available-for-sale securities is based on several factors, including but not limited to
changes in interest rates, resultant prepayment risk, liquidity needs at the Banks and other factors related to interest rate and resultant prepayment risk.



All the Companys securities are presently classified as available-for-sale. Investment securities totaled $10.2 million at September 30, 2004, up 62% from $6.3
million at June 30, 2004 and up 9% from $9.3 million one year earlier. The increase reflects reinvestment of the balance of the proceeds from the summer common equity offering which will be used for future-down streaming to the subsidiary banks as
needed.



Deposits- Deposits from the Companys primary markets
provide a relatively stable funding source for its loan portfolio and other earning assets. Total deposits were $299 million at September 30, 2004, up $132 million or 79% from one year earlier and up $34 million or 13% over the last three months.
The proceeds of these deposits have been invested in longer term assets, primarily commercial real estate secured loans. The funding requirements for loans have continued to grow over the last twelve months, with loans outstanding increasing by $121
million or 74% to $285 million at September 30, 2004. During third quarter 2004, loans rose $21 million.



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Total deposits averaged $287 million in third quarter 2004, up 75% or $123 million from the same period last year and up
8% or $22 million from second quarter 2004. Non-interest bearing deposits represented 14% of average total deposits during third quarter 2004, rising $21 million or 106% over the same quarter last year, when they averaged 12% of total deposits.
Management continues to make a conscious effort to attract deposits from commercial relationships, including the sale of the Companys state-of-the-art cash management products and on-line banking capabilities, which also have the potential to
generate additional fee income.



The Company anticipates that a stable base of
deposits will be the primary source of funding to meet both its short-term and long-term liquidity needs in the future. However, as a result of the short-term nature of a substantial portion of the Companys deposit base, its cost of funds is
sensitive to fluctuations in rates of interest.



NOW and money market deposits,
a large portion of which can be sensitive to short-term interest rate movements, averaged $93 million in third quarter 2004, an increase of $24 million (up 35%) from third quarter 2003 and down slightly from $95 million during second quarter 2004.
The mix of this category to total average deposits has decreased to 32% in the most recent quarter, off from 42% in third quarter 2003 and 36% in second quarter 2004. The Company will need to maintain these deposits, or find alternative sources of
liquidity, in order to support its asset levels. Although management believes a substantial amount of the existing time deposits will renew, or substitute deposits will be originated, the need to retain this funding source may impact the
Companys ability to react to changes in market rates of interest. At an average of $146 million, time deposits were 51% of total deposits in third quarter 2004, up from a 44% mix for the same quarter last year, and a slight increase from a 48%
mix in second quarter 2004, when time deposits averaged $126 million.



Other
Sources of Funds- In addition to deposits within its geographic market place, the sources of funds available to the Banks for lending and other business purposes include loan repayments, sales of loans and securities, borrowings from the
Federal Home Loan Bank (FHLB), national market funding sources, and contributions from Bancshares. Loan repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are influenced significantly by
competition, general interest rates and money market conditions. Borrowings may be used on a short-term basis to compensate for reductions in other sources, such as deposits at less than projected levels, and are also used to fund the origination of
mortgage loans designated to be sold in the secondary markets.



Certificates of
deposits raised from national market funding sources (included in the CD discussion above) averaged $53 million in third quarter 2004, or 19% of total average deposits. This level compares to an average of $10 million or 6% of total average deposits
four quarters earlier and $44 million or 17% of total average deposits in second quarter 2004. Growth in average national market CDs accounted for $46 million of the $122 million in growth in total average deposits in third quarter 2004 compared to
third quarter 2003 and $12 million of $22 million of such growth versus second quarter 2004.



At September 30, 2004, the Company did not have any outstanding short-term (30-day) borrowings from the FHLB of its present $6.6 million line, and there was $18 million in other available lines from correspondents.
Another $33 million in FHLB borrowing capacity is in the process of being established based on collateral analysis at the Naples bank.



Capital- The Federal Reserve Board and bank regulatory agencies require bank holding companies and financial institutions to maintain capital at adequate levels
based on a percentage of assets and off-balance sheet exposures, adjusted for risk weights ranging from 0% to 100%. Under the risk-based standard, capital is classified into two tiers. Tier 1 capital consists of common stockholders equity,
excluding the unrealized gain (loss) on available-for-sale securities, minus certain intangible assets. Tier 2 capital consists of the general allowance for credit losses subject to certain limitations. An institutions qualifying capital base
for purposes of its risk-based capital ratio consists of the sum of its Tier 1 and Tier 2 capital. Bank holding companies and banks are also required to maintain capital at a minimum level based on total assets as defined by a leverage ratio.



30



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The regulators define five classifications for measuring capital levels, including well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered
(national market) deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required. The regulatory minimum requirements (adequately capitalized) are 4% for Tier 1, 8%
for total risk-based capital, and 4% for the Tier 1 leverage ratio. The minimum requirements for the first three classifications are:



|                       |  |                                 |   |  |                                 |   |  |   |  
|---------------------- |  | ------------------------------- | - |  | ------------------------------- | - |  | - | -
|                       |  | Capital to risk-weighted assets |   |  | Tier 1 capitalto average assets |  
|                       |  | Total                           |   |  | Tier 1                          |   | 
|Well capitalized       |  | 10                              | % |  | 6                               | % |  | 5 | %
|Adequately capitalized |  | 8                               | % |  | 4                               | % |  | 4 | %
|Undercapitalized       |  | 6                               | % |  | 3                               | % |  | 3 | %



The Company was considered well
capitalized as of September 30, 2004. During third quarter 2004, the Company completed a common stock offering in which a total of 1,725,000 shares was issued, raising an additional $19.8 million in capital after underwriting discounts and
commissions and other offering expenses. On June 25, 2004, the Naples bank issued $2 million in subordinated debt, enabling it to purchase a $5.5 million loan participation package from its sister Ft. Lauderdale bank, ensuring that the Company and
its subsidiaries retained their well-capitalized designation. On March 30, 2004, Bancshares of Florida, Inc. issued 34,000 shares of $0.01 par value Series A Preferred Stock at $100 per share to accredited investors, who were largely
Company insiders. The $3.4 million proceeds from this offering enabled the Company and its subsidiaries to retain their well-capitalized classification.



The following table reflects the actual capital levels and minimum required levels at September 30, 2004 (in thousands):



|                                         |  |        |        |       |                                            |   |        |                                                                                  |        |  |      |        |  |       |        |  |       |  
|---------------------------------------- |  | ------ | ------ | ----- | ------------------------------------------ | - | ------ | -------------------------------------------------------------------------------- | ------ |  | ---- | ------ |  | ----- | ------ |  | ----- | -
|                                         |  | Actual |        |       | MinimumRequired ForCapitalAdequacyPurposes |   |        | Minimum Required To Be WellCapitalized Under PromptCorrective Action Regulations |       
|                                         |  | Amount |        | Ratio |                                            |   | Amount |                                                                                  | Ratio  |  |      | Amount |  | Ratio |       
|Total capital (to risk weighted assets)  |  |        |        |       |                                            |   |        |                                                                                  |        |  |      |        |  |       |        |  |       |  
|Consolidated                             |  | $      | 46,264 |       | 15.78                                      | % |        | $                                                                                | 23,459 |  | 8.00 | %      |  | $     | 29,323 |  | 10.00 | %
|Bank of Florida, N.A.                    |  | $      | 20,551 |       | 10.33                                      | % |        | $                                                                                | 15,919 |  | 8.00 | %      |  | $     | 19,899 |  | 10.00 | %
|Bank of Florida                          |  | $      | 11,058 |       | 11.79                                      | % |        | $                                                                                | 7,501  |  | 8.00 | %      |  | $     | 9,376  |  | 10.00 | %
|Tier 1 capital (to risk weighted assets) |  |        |        |       |                                            |   |        |                                                                                  |        |  |      |        |  |       |        |  |       |  
|Consolidated                             |  | $      | 41,896 |       | 14.29                                      | % |        | $                                                                                | 11,729 |  | 4.00 | %      |  | $     | 17,594 |  | 6.00  | %
|Bank of Florida, N.A.                    |  | $      | 17,029 |       | 8.56                                       | % |        | $                                                                                | 7,960  |  | 4.00 | %      |  | $     | 11,939 |  | 6.00  | %
|Bank of Florida                          |  | $      | 10,212 |       | 10.89                                      | % |        | $                                                                                | 3,750  |  | 4.00 | %      |  | $     | 5,625  |  | 6.00  | %
|Tier 1 capital (to average assets)       |  |        |        |       |                                            |   |        |                                                                                  |        |  |      |        |  |       |        |  |       |  
|Consolidated                             |  | $      | 41,896 |       | 12.90                                      | % |        | $                                                                                | 12,990 |  | 4.00 | %      |  | $     | 16,238 |  | 5.00  | %
|Bank of Florida, N.A.                    |  | $      | 17,029 |       | 7.80                                       | % |        | $                                                                                | 8,736  |  | 4.00 | %      |  | $     | 10,920 |  | 5.00  | %
|Bank of Florida                          |  | $      | 10,212 |       | 10.61                                      | % |        | $                                                                                | 3,849  |  | 4.00 | %      |  | $     | 4,812  |  | 5.00  | %



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Quantitative and Qualitative Disclosures about Market Risk



Interest Sensitivity



The objective of interest sensitivity management is to minimize the risk associated with the effect of interest rate changes on the net
interest margin while maintaining net interest income at acceptable levels. Managing this risk involves monthly monitoring of the interest sensitive assets relative to interest sensitive liabilities over specific time intervals. All assets and
liabilities are evaluated as maturing at the earlier of re-pricing date or contractual maturity date. While liabilities without specific terms such as money market, NOW and savings accounts are generally considered core deposits for liquidity
purposes, they are deemed to re-price for purposes of interest rate sensitivity analysis. Management subjectively sets rates on all accounts.



At September 30, 2004, the Company had $213 million in interest sensitive assets compared to $215 million in interest sensitive liabilities that will mature or reprice
within a year, resulting in a negative gap position of $1.8 million or 0.8%. Within the first 90 days of a rate change, the Company is positively gapped by $63 million, reflecting, among other factors, that 62% of the portfolio will reprice during
that time period with a prime, treasury, or federal funds rate change or from reinvestment of cash flow. Beyond that time period, the cumulative impact of maturing CDs, net of maturing loans, creates a negatively gapped position.



A negative gap position is indicative of a bank that has a greater amount of interest
sensitive liabilities re-pricing (or maturing) than it does interest sensitive assets, in a given time interval. In this instance, the impact on net interest income would be positive in a declining rate environment and negative if rates were rising.
Conversely, a positive gap position represents a greater amount of interest sensitive assets re-pricing (or maturing). Thus, an increase in rates would positively impact net interest income, as the yield on interest-earning assets would increase
prior to the increase in the cost of interest bearing liabilities.



The
following is a consolidated maturity and repricing analysis of rate sensitive assets and liabilities as of September 30, 2004.



|                                                                                                |  |          |         |   |                        |   |         |             |  |   |            |   |  |       |         |   |  |   |        
|----------------------------------------------------------------------------------------------- |  | -------- | ------- | - | ---------------------- | - | ------- | ----------- |  | - | ---------- | - |  | ----- | ------- | - |  | - | -------
|                                                                                                |  | 0-90DAYS |         |   | 91-180DAYS             |   |         | 181-365DAYS |  |   | OVER 1YEAR |   |  | TOTAL
|                                                                                                |  |          |         |   | (Dollars in Thousands) |   |         |            
|Interest-earning assets:                                                                        |  |          |         |   |                        |   |         |             |  |   |            |   |  |       |         |   |  |   |        
|Federal funds sold                                                                              |  | $        | 30,553  |   |                        | $ |        |             |  | $ |           |   |  | $     |        |   |  | $ | 30,553 
|Due from banks and investment securities (including required investments in FHLB and FRB stock) |  |          | 5,561   |   |                        |   |        |             |  |   |           |   |  |       | 5,872   |   |  |   | 11,433 
|Loans                                                                                           |  |          | 167,751 |   |                        |   | 4,553   |             |  |   | 4,553      |   |  |       | 107,742 |   |  |   | 284,599
|                                                                                                |  |          |         |   |                        |   |         |             |  |   |            |   |  |       |         |   |  |   |        
|Total interest-earning assets                                                                   |  |          | 203,865 |   |                        |   | 4,553   |             |  |   | 4,553      |   |  |       | 113,614 |   |  |   | 326,585
|                                                                                                |  |          |         |   |                        |   |         |             |  |   |            |   |  |       |         |   |  |   |        
|Interest-bearing deposits (Non-CDs)                                                             |  |          | 108,377 |   |                        |   |        |             |  |   |           |   |  |       |        |   |  |   | 108,377
|Certificates of deposit                                                                         |  |          | 32,531  |   |                        |   | 34,779  |             |  |   | 39,075     |   |  |       | 46,196  |   |  |   | 152,581
|Other borrowings                                                                                |  |          |        |   |                        |   |        |             |  |   |           |   |  |       | 2,000   |   |  |   | 2,000  
|                                                                                                |  |          |         |   |                        |   |         |             |  |   |            |   |  |       |         |   |  |   |        
|Total interest-bearing liabilities                                                              |  |          | 140,908 |   |                        |   | 34,779  |             |  |   | 39,075     |   |  |       | 48,196  |   |  |   | 262,958
|                                                                                                |  |          |         |   |                        |   |         |             |  |   |            |   |  |       |         |   |  |   |        
|Interest Sensitivity Gap:                                                                       |  |          |         |   |                        |   |         |             |  |   |            |   |  |       |         |   |  |   |        
|Sensitive assets less rate sensitive liabilities                                                |  | $        | 62,957  |   |                        | $ | (30,226 | )           |  | $ | (34,522    | ) |  | $     | 65,418  |   |  | $ | 63,627 
|                                                                                                |  |          |         |   |                       
|Cumulative interest sensitivity gap                                                             |  |          | 62,957  |   |                        |   | 32,731  |             |  |   | (1,791     | ) |  |       | 63,627  |   |  |   |        
|                                                                                                |  |          |         |   |                       
|Interest sensitivity gap ratio                                                                  |  |          | 144.7   | % |                        |   | 13.1    | %           |  |   | 11.7       | % |  |       | 235.7   | % |  |   |        
|                                                                                                |  |          |         |   |                       
|Cumulative interest sensitivity gap ratio                                                       |  |          | 144.7   | % |                        |   | 118.6   | %           |  |   | 99.2       | % |  |       | 124.2   | % |  |   |        



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The impact on net interest income described above is general, as other factors would additionally maximize or minimize
the effect. For example, a change in the prime interest rate could effect an immediate change to rates on prime related assets, whereas a liability which reprices according to changes in Treasury rates might (1) lag in the timing of the change and
(2) change rates in an amount less than the change in the prime interest rate. In addition, in the case of an expanding balance sheet with the Companys characteristics, the 180 day period at which the gap turns negative could be continuously
pushed further out in a rising rate environment.



Management believes that the
current balance sheet structure of interest sensitive assets and liabilities does not represent a material risk to earnings or liquidity in the event of a change in market rates.



SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995



Certain statements in this quarterly Report on Form 10-QSB may contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements generally can be identified by the use of forward-looking terminology, such as may, will, expect,
estimate, anticipate, believe, target, plan, project, or continue or the negatives thereof or other variations thereon or similar terminology, and are made on the
basis of managements plans and current analyses of Bancshares of Florida, Inc., its business and the industry as a whole. These forward-looking statements are subject to risks and uncertainties, including, but not limited to, economic
conditions, competition, interest rate sensitivity and exposure to regulatory and legislative changes. The above factors, in some cases, have affected, and in the future could affect Bancshares of Florida, Inc.s financial performance and could
cause actual results for fiscal 2004 and beyond to differ materially from those expressed or implied in such forward-looking statements. Bancshares of Florida, Inc. does not undertake to publicly update or revise its forward-looking statements even
if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.



ITEM 3. CONTROLS AND PROCEDURES



(a) Evaluation of Disclosure Controls and Procedures



The Company maintains controls and procedures designed to ensure that information required to be disclosed in the report that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed within the 90 days preceding the filing of this report, the Chief
Executive Officer and Chief Financial Officer of the Company concluded that the Companys disclosure controls and procedures were adequate for the above described purpose.



(b) Change in Internal Controls



The Company made no significant changes in its internal controls or in other factors that could significantly affect these controls subsequent to the date
of the evaluation of those controls by the Chief Executive Officer and Chief Financial Officer of the Company.



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PART II.  OTHER INFORMATION



ITEM 6. EXHIBITS



(a) EXHIBITS



The following exhibits are filed with the Securities and Exchange Commission and are
incorporated by reference into this form 10-QSB. The exhibits which are denominated by an (a.) were previously filed as a part of a Registration Statement on Form SB-2 for Bancshares of Florida with the SEC on March 24, 1999, File No. 333-74997. The
exhibits which are denominated by a (b.) were previously filed as a part of Amendment No. 1 to Form SB-2, filed with the SEC on May 7, 1999. The exhibits which are denominated by a (c.) were previously filed as a part of Form 10-KSB filed with the
SEC on March 30, 2000. The exhibits which are denominated by a (d.) were previously filed as a part of an exhibit to Form 10-QSB/A-1 filed on December 3, 2001. The exhibits which are denominated by an (e.) were previously filed as a part of a
Registration Statement on Form SB-2 for Bancshares of Florida with the SEC on December 28, 2001, File No. 333-76094. The exhibits which are denominated by an (f.) were previously filed as part of a Form 10-QSB/A filed on September 10, 2002. The
exhibit numbers correspond to the exhibit numbers in the referenced document. (g.) were previously filed as a part of Form 10-KSB filed with the SEC on March 30, 2003. The exhibits which are denominated by an (h.) were previously filed as part of a
Form 10-QSB/A filed on August 12, 2003. The exhibits which are denominated by an (i.) were previously filed as part of a Registration Statement on Form SB-2 filed with the SEC on June 24, 2004, file number 333-116833.



|              |  |                                                                                                                              
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------
|              | 
|ExhibitNumber |  | Description of Exhibit                                                                                                       
|a.3.1         |  | Amended and Restated Articles of Incorporation.                                                                              
|              | 
|a.3.2         |  | Bylaws.                                                                                                                      
|              | 
|3.3           |  | Amendment to Articles of Incorporation changing the corporate name filed as an exhibit to Form 8-K filed on October 29, 2001.
|              | 
|3.4           |  | Amendment to Articles of Incorporation changing the corporate name filed as an exhibit to Form 8-K filed on May 10, 2002.    
|              | 
|3.5           |  | Amendment to Articles of Incorporation designating preferences, rights and limitations of Series A Preferred Stock.          
|              | 
|b.4.1         |  | Specimen Common Stock Certificate.                                                                                           
|              | 
|b.4.3         |  | Form of Stock Purchase Warrant1999 Offering.                                                                                
|              | 
|e.4.4         |  | Form of Stock Purchase Warrant2002 Offering.                                                                                
|              | 
|i.4.5         |  | Form of Stock Purchase Warrant A2004 Offering.                                                                              
|              | 
|i.4.6         |  | Form of Stock Purchase Warrant B2004 Offering.                                                                              
|              | 
|b.10.1        |  | Employment Agreement of Michael L. McMullan, dated as of April 28, 1999.                                                     
|              | 
|c.10.1.1      |  | Amendment to Employment Agreement of Michael L. McMullan dated August 24, 1999.                                              
|              | 
|f.10.1.2      |  | Amendment to Employment Agreement of Michael L. McMullan dated July 30, 2001.                                                
|              | 
|f.10.1.3      |  | Amendment to Employment Agreement of Michael L. McMullan dated August 30, 2002.                                              



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|         |  |                                                                                                                
|-------- |  | ---------------------------------------------------------------------------------------------------------------
|         | 
|c.10.4   |  | 1999 Stock Option Plan.                                                                                        
|         | 
|c.10.5   |  | Form of Incentive Stock Option Agreement.                                                                      
|         | 
|d.10.6   |  | Employment Agreement of Craig D. Sherman, dated as of May 3, 1999.                                             
|         | 
|f.10.6.1 |  | Amendment to Employment Agreement of Craig Sherman, dated as of July 30, 2001.                                 
|         | 
|f.10.8   |  | Employment Agreement of John B. James, dated as of October 1, 2001.                                            
|         | 
|f.10.9   |  | Lease between Citizens Reserve, LLC and Citizens National Bank of Southwest Florida.                           
|         | 
|f.10.10  |  | Lease between Citizens Reserve, LLC and Citizens National Bank of Southwest Florida.                           
|         | 
|g.10.11  |  | Employment Agreement of Martin P. Mahan, dated as of September 16, 2002.                                       
|         | 
|h.10.13  |  | Employee Severance Agreement of John S. Chaperon, dated as of March 1, 2003.                                   
|         | 
|21.1     |  | Subsidiaries of the Registrant.                                                                                
|         | 
|31.1     |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - President and Chief Executive Officer
|         | 
|31.2     |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Financial Officer              
|         | 
|32.1     |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  President and Chief Executive Officer
|         | 
|32.2     |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  Chief Financial Officer              



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SIGNATURES



In accordance with
the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                         |  |                             |  |                                             
|------------------------ |  | --------------------------- |  | --------------------------------------------
|                         |  | BANCSHARES OF FLORIDA, INC.
|                         |  |                            
|Dated: November 12, 2004 |  | By:                         |  | /s/ MICHAEL L. MCMULLAN                     
|                         |  |                             |  | Michael L. McMullan                         
|                         |  |                             |  | Chief Executive Officer                     
|                         |  |                             |  | (Principal Executive Officer)               
|                         |  |                            
|Dated: November 12, 2004 |  | By:                         |  | /s/ DAVID G. WALLACE                        
|                         |  |                             |  | David G. Wallace                            
|                         |  |                             |  | Chief Financial Officer                     
|                         |  |                             |  | (Principal Financial and Accounting Officer)



36