---



U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-QSB



(Mark One)



|x | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------



For the quarterly period ended June 30, 2004



| ̈ | Transition report under Section 13 or 15(d) of the Exchange Act
|- | ---------------------------------------------------------------



For the transition period from
 to



Commission file number 333-65101



FLORIDA BUSINESS BANCGROUP, INC.

(Exact Name of Small Business Issuer as Specified in Its Charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Florida                                                        |  | 59-3517595                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|2202 North Westshore Boulevard, Suite 150 Tampa, Florida       |  | 33607                               
|(Address of Principal Executive Offices)                       |  | (Zip Code)                          



(813) 281-0009

(Registrants Telephone Number, Including Area Code)



N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)



Check whether the issuer: (1) filed all reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act during the past 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 ̈



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



|                                       |  |                             
|-------------------------------------- |  | ----------------------------
|Common stock, par value $.01 per share |  | 2,442,000 shares            
|(class)                                |  | Outstanding at July 27, 2004



Transitional Small Business Format
(Check One): YES ̈NO x



---



---

FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



INDEX



|                                                                                              |  |                                                                                                                |  |     
|--------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                              |  |                                                                                                                |  | Page
|                                                                                              | 
|PART I. FINANCIAL INFORMATION                                                                 |  |                                                                                                               
|                                                                                              | 
|Item 1. Financial Statements                                                                  |  |                                                                                                               
|                                                                                              |  |                                                                                                               
|                                                                                              |  | Condensed Consolidated Balance Sheets -At June 30, 2004 (Unaudited) and December 31, 2003                      |  | 2   
|                                                                                              |  |                                                                                                               
|                                                                                              |  | Condensed Consolidated Statements of Earnings (Unaudited) -Three and Six Months ended June 30, 2004 and 2003   |  | 3   
|                                                                                              |  |                                                                                                               
|                                                                                              |  | Condensed Consolidated Statements of Stockholders Equity (Unaudited) -Six Months ended June 30, 2004 and 2003 |  | 4   
|                                                                                              |  |                                                                                                               
|                                                                                              |  | Condensed Consolidated Statements of Cash Flows (Unaudited) -Six Months ended June 30, 2004 and 2003           |  | 5   
|                                                                                              |  |                                                                                                               
|                                                                                              |  | Notes to Condensed Consolidated Financial Statements (Unaudited)                                               |  | 6-10
|                                                                                              |  |                                                                                                               
|                                                                                              |  | Review By Independent Registered Public Accounting Firm                                                        |  | 11  
|                                                                                              |  |                                                                                                               
|                                                                                              |  | Report of Independent Registered Public Accounting Firm                                                        |  | 12  
|                                                                                              | 
|Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 13-18                                                                                                         
|                                                                                              | 
|Item 3.
Controls and Procedures                                                               |  | 19                                                                                                            
|                                                                                              | 
|PART II. OTHER INFORMATION                                                                    |  |                                                                                                               
|                                                                                              | 
|Item 1.
Legal Proceedings                                                                     |  | 19                                                                                                            
|                                                                                              | 
|Item 2.
Submission of Matters to a Vote of Security Holders                                   |  | 19                                                                                                            
|                                                                                              | 
|Item 6.
Exhibits and Reports on Form 8-K                                                      |  | 20                                                                                                            
|                                                                                              | 
|SIGNATURES                                                                                    |  | 21                                                                                                            



1



---

FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------



Condensed Consolidated Balance Sheets

($ in thousands, except per share
information)



|                                                                                                                           |  |              |         |   |                  |         |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---------------- | ------- | -
|                                                                                                                           |  | June 30,2004 |         |   | December 31,2003 |        
|                                                                                                                           |  | (Unaudited)  |         |   |                  |        
|Assets                                                                                                                     |  |              |         |   |                  |         |  
|Cash and due from banks                                                                                                    |  | $            | 5,427   |   |                  | 3,856   |  
|Federal funds sold                                                                                                         |  |              | 6,181   |   |                  | 3,910   |  
|                                                                                                                           |  |              |         |   |                  |         |  
|Total cash and cash equivalents                                                                                            |  |              | 11,608  |   |                  | 7,766   |  
|Securities available for sale                                                                                              |  |              | 51,014  |   |                  | 39,453  |  
|Securities held to maturity                                                                                                |  |              | 1,041   |   |                  | 524     |  
|Loans, net of allowance for loan losses of $1,653 and $1,340                                                               |  |              | 108,464 |   |                  | 101,330 |  
|Federal Home Loan Bank stock                                                                                               |  |              | 400     |   |                  | 400     |  
|Premises and equipment, net                                                                                                |  |              | 1,900   |   |                  | 1,647   |  
|Deferred tax asset                                                                                                         |  |              | 902     |   |                  | 307     |  
|Accrued interest receivable                                                                                                |  |              | 636     |   |                  | 567     |  
|Bank owned life insurance                                                                                                  |  |              | 801     |   |                  | 785     |  
|Other assets                                                                                                               |  |              | 889     |   |                  | 422     |  
|                                                                                                                           |  |              |         |   |                  |         |  
|Total assets                                                                                                               |  | $            | 177,655 |   |                  | 153,201 |  
|                                                                                                                           |  |              |         |   |                  |         |  
|Liabilities and Stockholders Equity                                                                                       |  |              |         |   |                  |         |  
|Liabilities:                                                                                                               |  |              |         |   |                  |         |  
|Noninterest-bearing demand deposits                                                                                        |  |              | 17,807  |   |                  | 11,479  |  
|Savings and NOW deposits                                                                                                   |  |              | 5,488   |   |                  | 4,421   |  
|Money-market deposits                                                                                                      |  |              | 23,055  |   |                  | 20,064  |  
|Time deposits                                                                                                              |  |              | 94,857  |   |                  | 88,091  |  
|                                                                                                                           |  |              |         |   |                  |         |  
|Total deposits                                                                                                             |  |              | 141,207 |   |                  | 124,055 |  
|Federal Home Loan Bank advances                                                                                            |  |              | 8,000   |   |                  | 8,000   |  
|Other borrowing                                                                                                            |  |              | 2,859   |   |                  | 5,873   |  
|Official checks                                                                                                            |  |              | 466     |   |                  | 466     |  
|Other liabilities                                                                                                          |  |              | 499     |   |                  | 482     |  
|                                                                                                                           |  |              |         |   |                  |         |  
|Total liabilities                                                                                                          |  |              | 153,031 |   |                  | 138,876 |  
|                                                                                                                           |  |              |         |   |                  |         |  
|Stockholders equity:                                                                                                      |  |              |         |   |                  |         |  
|Preferred stock:                                                                                                           |  |              |         |   |                  |         |  
|Designated Series A, $.01 par value, redeemable at $100 per share, 10,000 shares so designated, none issued or outstanding |  |              |        |   |                  |        |  
|Nondesignated, no par value, 1,999,100 shares authorized, none issued or outstanding                                       |  |              |        |   |                  |        |  
|Common stock, $.01 par value 10,000,000 shares authorized; 2,442,000 and 1,364,880 shares issued and outstanding           |  |              | 25      |   |                  | 14      |  
|Additional paid-in capital                                                                                                 |  |              | 24,308  |   |                  | 13,550  |  
|Retained earnings                                                                                                          |  |              | 1,307   |   |                  | 790     |  
|Accumulated other comprehensive income (loss)                                                                              |  |              | (1,016  | ) |                  | (29     | )
|                                                                                                                           |  |              |         |   |                  |         |  
|Total stockholders equity                                                                                                 |  |              | 24,624  |   |                  | 14,325  |  
|                                                                                                                           |  |              |         |   |                  |         |  
|Total liabilities and stockholders equity                                                                                 |  | $            | 177,655 |   |                  | 153,201 |  
|                                                                                                                           |  |              |         |   |                  |         |  



See Accompanying Notes
to Condensed Consolidated Financial Statements.



2



---

FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Earnings

($ in thousands, except per share information)

(Unaudited)



|                                                    |  |                            |       |                          |       |      |       |      |      
|--------------------------------------------------- |  | -------------------------- | ----- | ------------------------ | ----- | ---- | ----- | ---- | -----
|                                                    |  | Three Months EndedJune 30, |       | Six Months EndedJune 30,
|                                                    |  | 2004                       |       | 2003                     |       | 2004 |       | 2003
|Interest income:                                    |  |                            |       |                          |       |      |       |      |      
|Loans                                               |  | $                          | 1,794 |                          | 1,517 |      | 3,573 |      | 2,904
|Securities                                          |  |                            | 460   |                          | 250   |      | 833   |      | 509  
|Other                                               |  |                            | 5     |                          | 15    |      | 22    |      | 34   
|                                                    |  |                            |       |                          |       |      |       |      |      
|Total interest income                               |  |                            | 2,259 |                          | 1,782 |      | 4,428 |      | 3,447
|                                                    |  |                            |       |                          |       |      |       |      |      
|Interest expense:                                   |  |                            |       |                          |       |      |       |      |      
|Deposits                                            |  |                            | 789   |                          | 687   |      | 1,533 |      | 1,356
|Borrowings                                          |  |                            | 60    |                          | 55    |      | 123   |      | 95   
|                                                    |  |                            |       |                          |       |      |       |      |      
|Total interest expense                              |  |                            | 849   |                          | 742   |      | 1,656 |      | 1,451
|                                                    |  |                            |       |                          |       |      |       |      |      
|Net interest income                                 |  |                            | 1,410 |                          | 1,040 |      | 2,772 |      | 1,996
|Provision for loan losses                           |  |                            | 93    |                          | 144   |      | 313   |      | 154  
|                                                    |  |                            |       |                          |       |      |       |      |      
|Net interest income after provision for loan losses |  |                            | 1,317 |                          | 896   |      | 2,459 |      | 1,842
|                                                    |  |                            |       |                          |       |      |       |      |      
|Noninterest income:                                 |  |                            |       |                          |       |      |       |      |      
|Service charges and fees on deposit accounts        |  |                            | 95    |                          | 55    |      | 169   |      | 120  
|Other                                               |  |                            | 10    |                          | 13    |      | 28    |      | 24   
|                                                    |  |                            |       |                          |       |      |       |      |      
|Total noninterest income                            |  |                            | 105   |                          | 68    |      | 197   |      | 144  
|                                                    |  |                            |       |                          |       |      |       |      |      
|Noninterest expenses:                               |  |                            |       |                          |       |      |       |      |      
|Compensation and benefits                           |  |                            | 440   |                          | 334   |      | 858   |      | 618  
|Occupancy                                           |  |                            | 154   |                          | 122   |      | 312   |      | 216  
|Data processing                                     |  |                            | 57    |                          | 58    |      | 114   |      | 106  
|Professional fees                                   |  |                            | 30    |                          | 27    |      | 60    |      | 55   
|Courier expense                                     |  |                            | 31    |                          | 28    |      | 62    |      | 55   
|Advertising                                         |  |                            | 53    |                          | 32    |      | 92    |      | 47   
|Other expenses                                      |  |                            | 181   |                          | 109   |      | 323   |      | 196  
|                                                    |  |                            |       |                          |       |      |       |      |      
|Total noninterest expenses                          |  |                            | 946   |                          | 710   |      | 1,821 |      | 1,293
|                                                    |  |                            |       |                          |       |      |       |      |      
|Earnings before income taxes                        |  |                            | 476   |                          | 254   |      | 835   |      | 693  
|Income taxes                                        |  |                            | 182   |                          | 95    |      | 318   |      | 260  
|                                                    |  |                            |       |                          |       |      |       |      |      
|Net earnings                                        |  | $                          | 294   |                          | 159   |      | 517   |      | 433  
|                                                    |  |                            |       |                          |       |      |       |      |      
|Basic and diluted earnings per share                |  | $                          | .12   |                          | .12   |      | .24   |      | .33  
|                                                    |  |                            |       |                          |       |      |       |      |      
|Dividends per share                                 |  |                            |      |                          |      |      |      |      |     
|                                                    |  |                            |       |                          |       |      |       |      |      



See Accompanying Notes
to Condensed Consolidated Financial Statements.



3



---

FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Stockholders Equity

($ in thousands)



Six Months Ended June 30, 2004 and 2003



|                                                                                               |  |              |  |                          |    |                                       |        |  |                                            |   |  |                          |   |  |        |  
|---------------------------------------------------------------------------------------------- |  | ------------ |  | ------------------------ | -- | ------------------------------------- | ------ |  | ------------------------------------------ | - |  | ------------------------ | - |  | ------ | -
|                                                                                               |  | Common Stock |  | AdditionalPaid-InCapital |    | RetainedEarnings(AccumulatedDeficit ) |        |  | AccumulatedOtherComprehensiveIncome (Loss) |   |  | TotalStockholdersEquity |  
|                                                                                               |  | Shares       |  | Amount                   |    |                                       |        | 
|Balance at December 31, 2002                                                                   |  | 1,320,700    |  | $                        | 13 |                                       | 13,131 |  | (210                                       | ) |  | 362                      |   |  | 13,296 |  
|                                                                                               |  |              |  |                          |    |                                       |        |  |                                            |   |  |                          |   |  |        |  
|Comprehensive income:                                                                          |  |              |  |                          |    |                                       |        |  |                                            |   |  |                          |   |  |        |  
|Net earnings for the six months ended June 30, 2003 (unaudited)                                |  |             |  |                          |   |                                       |       |  | 433                                        |   |  |                         |   |  | 433    |  
|Net change in unrealized gain on securities available for sale, net of tax of $59 (unaudited)  |  |             |  |                          |   |                                       |       |  |                                           |   |  | (99                      | ) |  | (99    | )
|                                                                                               |  |              |  |                          |    |                                       |        |  |                                            |   |  |                          |   |  |        |  
|Comprehensive income (unaudited)                                                               |  |             |  |                          |   |                                       |       |  |                                           |   |  |                         |   |  | 334    |  
|                                                                                               |  |              |  |                          |    |                                       |        |  |                                            |   |  |                          |   |  |        |  
|Balance at June 30, 2003 (unaudited)                                                           |  | 1,320,700    |  | $                        | 13 |                                       | 13,131 |  | 223                                        |   |  | 263                      |   |  | 13,630 |  
|                                                                                               |  |              |  |                          |    |                                       |        |  |                                            |   |  |                          |   |  |        |  
|Balance at December 31, 2003                                                                   |  | 1,364,880    |  | $                        | 14 |                                       | 13,550 |  | 790                                        |   |  | (29                      | ) |  | 14,325 |  
|                                                                                               |  |              |  |                          |    |                                       |        |  |                                            |   |  |                          |   |  |        |  
|Comprehensive income:                                                                          |  |              |  |                          |    |                                       |        |  |                                            |   |  |                          |   |  |        |  
|Net earnings for the six months ended June 30, 2004 (unaudited)                                |  |             |  |                          |   |                                       |       |  | 517                                        |   |  |                         |   |  | 517    |  
|Net change in unrealized loss on securities available for sale, net of tax of $595 (unaudited) |  |             |  |                          |   |                                       |       |  |                                           |   |  | (987                     | ) |  | (987   | )
|                                                                                               |  |              |  |                          |    |                                       |        |  |                                            |   |  |                          |   |  |        |  
|Comprehensive income (unaudited)                                                               |  |             |  |                          |   |                                       |       |  |                                           |   |  |                         |   |  | (470   | )
|                                                                                               |  |              |  |                          |    |                                       |        |  |                                            |   |  |                          |   |  |        |  
|Proceeds from warrants exercised (net of offering costs of $3) (unaudited)                     |  | 1,075,620    |  |                          | 11 |                                       | 10,743 |  |                                           |   |  |                         |   |  | 10,754 |  
|Proceeds from stock options exercised (unaudited)                                              |  | 1,500        |  |                          |   |                                       | 15     |  |                                           |   |  |                         |   |  | 15     |  
|                                                                                               |  |              |  |                          |    |                                       |        |  |                                            |   |  |                          |   |  |        |  
|Balance at June 30, 2004 (unaudited)                                                           |  | 2,442,000    |  | $                        | 25 |                                       | 24,308 |  | 1,307                                      |   |  | (1,016                   | ) |  | 24,624 |  
|                                                                                               |  |              |  |                          |    |                                       |        |  |                                            |   |  |                          |   |  |        |  



See Accompanying Notes
to Condensed Consolidated Financial Statements.



4



---

FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



|                                                                                                                                    |  |                           |         |   |      |         |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ---- | ------- | -
|                                                                                                                                    |  | Six Months Ended June 30, |        
|                                                                                                                                    |  | 2004                      |         |   | 2003 |        
|Cash flows from operating activities:                                                                                               |  |                           |         |   |      |         |  
|Net earnings                                                                                                                        |  | $                         | 517     |   |      | 433     |  
|Adjustments to reconcile net earnings to net cash provided by operating activities:                                                 |  |                           |         |   |      |         |  
|Depreciation                                                                                                                        |  |                           | 106     |   |      | 64      |  
|Provision for loan losses                                                                                                           |  |                           | 313     |   |      | 154     |  
|Credit for deferred income taxes                                                                                                    |  |                           |        |   |      | (1      | )
|Amortization of deferred loan fees                                                                                                  |  |                           | (36     | ) |      | (8      | )
|Increase in bank owned life insurance                                                                                               |  |                           | (16     | ) |      |        |  
|Increase in accrued interest receivable and other assets                                                                            |  |                           | (536    | ) |      | (190    | )
|Increase in official checks                                                                                                         |  |                           |        |   |      | 45      |  
|Increase in other liabilities                                                                                                       |  |                           | 17      |   |      | 158     |  
|                                                                                                                                    |  |                           |         |   |      |         |  
|Net cash provided by operating activities                                                                                           |  |                           | 365     |   |      | 655     |  
|                                                                                                                                    |  |                           |         |   |      |         |  
|Cash flows from investing activities:                                                                                               |  |                           |         |   |      |         |  
|Net increase in loans                                                                                                               |  |                           | (7,411  | ) |      | (11,158 | )
|Purchase of securities                                                                                                              |  |                           | (24,295 | ) |      | (21,093 | )
|Proceeds from calls of securities                                                                                                   |  |                           | 6,480   |   |      | 7,365   |  
|Principal pay-downs on securities                                                                                                   |  |                           | 4,155   |   |      | 3,000   |  
|Purchase of Federal Home Loan Bank stock                                                                                            |  |                           |        |   |      | (100    | )
|Purchase of premises and equipment                                                                                                  |  |                           | (359    | ) |      | (567    | )
|                                                                                                                                    |  |                           |         |   |      |         |  
|Net cash used in investing activities                                                                                               |  |                           | (21,430 | ) |      | (22,553 | )
|                                                                                                                                    |  |                           |         |   |      |         |  
|Cash flows from financing activities:                                                                                               |  |                           |         |   |      |         |  
|Net increase in deposits                                                                                                            |  |                           | 17,152  |   |      | 13,253  |  
|Net (decrease) increase in other borrowings                                                                                         |  |                           | (3,014  | ) |      | 5,560   |  
|Net decrease in Federal Home Loan Bank advances                                                                                     |  |                           |        |   |      | 2,000   |  
|Proceeds from warrants and stock options exercised                                                                                  |  |                           | 10,769  |   |      |        |  
|                                                                                                                                    |  |                           |         |   |      |         |  
|Net cash provided by financing activities                                                                                           |  |                           | 24,907  |   |      | 20,813  |  
|                                                                                                                                    |  |                           |         |   |      |         |  
|Net increase (decrease) in cash and cash equivalents                                                                                |  |                           | 3,842   |   |      | (1,085  | )
|Cash and cash equivalents at beginning of period                                                                                    |  |                           | 7,766   |   |      | 6,056   |  
|                                                                                                                                    |  |                           |         |   |      |         |  
|Cash and cash equivalents at end of period                                                                                          |  | $                         | 11,608  |   |      | 4,971   |  
|                                                                                                                                    |  |                           |         |   |      |         |  
|Supplemental disclosure of cash flow information:                                                                                   |  |                           |         |   |      |         |  
|Cash paid during the period for:                                                                                                    |  |                           |         |   |      |         |  
|Interest                                                                                                                            |  | $                         | 1,655   |   |      | 1,451   |  
|                                                                                                                                    |  |                           |         |   |      |         |  
|Income taxes                                                                                                                        |  | $                         | 318     |   |      | 356     |  
|                                                                                                                                    |  |                           |         |   |      |         |  
|Noncash item-                                                                                                                       |  |                           |         |   |      |         |  
|Change in accumulated other comprehensive income, net change in unrealized gain (loss) on securities available for sale, net of
tax |  | $                         | (987    | ) |      | (99     | )
|                                                                                                                                    |  |                           |         |   |      |         |  



See Accompanying Notes
to Condensed Consolidated Financial Statements.



5



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FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited)



|(1) | Description of Business and Summary of Significant Accounting Policies
|--- | ----------------------------------------------------------------------



General. Florida Business BancGroup, Inc., a Florida Corporation, (the Holding Company) owns 100% of the
outstanding shares of Bay Cities Bank, a Florida-chartered commercial bank (the Bank). The Holding Companys only business is the ownership and operations of the Bank (collectively, the Company). The Banks deposits
are insured by the Federal Deposit Insurance Corporation. The Bank provides a variety of community banking services to business and individuals primarily in Hillsborough County, Florida.



The Companys fiscal year end is December 31. In the opinion of the management, the accompanying condensed consolidated
financial statements contain all adjustments (consisting principally of normal recurring accruals) necessary to present fairly the financial position at June 30, 2004, the results of operations for the three- and six-month periods ended June 30,
2004 and 2003 and cash flows for the six months ended June 30, 2004 and 2003. The results of operations for the three and six months ended June 30, 2004, are not necessarily indicative of the results to be expected for the year ending December 31,
2004.



|(2) | Loan Impairment and Losses
|--- | --------------------------



The activity in the allowance for loan losses is as follows (in thousands):



|                               |  |                            |       |                          |       |      |       |      |      
|------------------------------ |  | -------------------------- | ----- | ------------------------ | ----- | ---- | ----- | ---- | -----
|                               |  | Three Months EndedJune 30, |       | Six Months EndedJune 30,
|                               |  | 2004                       |       | 2003                     |       | 2004 |       | 2003
|Balance at beginning of period |  | $                          | 1,560 |                          | 1,008 |      | 1,340 |      | 998  
|Provision for loan losses      |  |                            | 93    |                          | 144   |      | 313   |      | 154  
|                               |  |                            |       |                          |       |      |       |      |      
|Balance at end of period       |  | $                          | 1,653 |                          | 1,152 |      | 1,653 |      | 1,152
|                               |  |                            |       |                          |       |      |       |      |      



There were no loans
identified as impaired during the six months ended June 30, 2003. Loans identified as impaired at June 30, 2004 and for the three- and six-month periods ended June 30, 2004 are as follows (in thousands):



|                                                       |  |                  |      |  
|------------------------------------------------------ |  | ---------------- | ---- | -
|                                                       |  | At June 30, 2004 |     
|Gross loans with related allowance for losses recorded |  | $                | 804  |  
|Less: Allowance on these loans                         |  |                  | (301 | )
|                                                       |  |                  |      |  
|Net investment in impaired loans                       |  | $                | 503  |  
|                                                       |  |                  |      |  



(continued)



6



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FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



|(2) | Loan Impairment and Losses, Continued
|--- | -------------------------------------



|                                             |  |                                 |     |                               |    
|-------------------------------------------- |  | ------------------------------- | --- | ----------------------------- | ---
|                                             |  | Three Months EndedJune 30, 2004 |     | Six Months EndedJune 30, 2004
|Average net investment in impaired loans     |  | $                               | 502 |                               | 309
|                                             |  |                                 |     |                               |    
|Interest income recognized on impaired loans |  | $                               | 11  |                               | 13 
|                                             |  |                                 |     |                               |    
|Interest income received on impaired loans   |  | $                               | 8   |                               | 11 
|                                             |  |                                 |     |                               |    



On July 7, 2004,
impaired loans in the amount of $288,000 were paid off.



Nonaccrual and past due loans were as follows (in thousands):



|                                                 |  |                 |    
|------------------------------------------------ |  | --------------- | ---
|                                                 |  | At June 30,2004
|Nonaccrual loans                                 |  | $               | 401
|Past due ninety days or more, but still accruing |  |                 |   
|                                                 |  |                 |    
|                                                 |  | $               | 401
|                                                 |  |                 |    



|(3) | Earnings Per Share
|--- | ------------------



Earnings per share (EPS) of common stock has been computed on the basis of the weighted-average number of shares of common stock outstanding.
Outstanding stock options and warrants are considered dilutive securities for purposes of calculating diluted EPS which is computed using the treasury stock method. The following table presents the calculations of the weighted-average number of
shares for diluted EPS.



|                                                      |  |                         |  |          
|----------------------------------------------------- |  | ----------------------- |  | ---------
|                                                      |  | Weighted-Average Shares
|Three Months Ended June 30:                           |  | 2004                    |  | 2003     
|For Basic EPS                                         |  | 2,427,138               |  | 1,320,700
|Effect of dilutive securities-                        |  |                         |  |          
|Incremental shares from assumed conversion of options |  | 2,434                   |  | 2,944    
|                                                      |  |                         |  |          
|For Diluted EPS                                       |  | 2,429,572               |  | 1,323,644
|                                                      |  |                         |  |          



(continued)



7



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FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



|(3) | Earnings Per Share, Continued
|--- | -----------------------------



|                                                                                     |  |                         |  |          
|------------------------------------------------------------------------------------ |  | ----------------------- |  | ---------
|                                                                                     |  | Weighted-Average Shares
|Six Months Ended June 30:                                                            |  | 2004                    |  | 2003     
|For Basic EPS                                                                        |  | 2,136,854               |  | 1,320,700
|Effect of dilutive securities- Incremental shares from assumed conversion of options |  | 3,925                   |  | 2,944    
|                                                                                     |  |                         |  |          
|For Diluted EPS                                                                      |  | 2,140,779               |  | 1,323,644
|                                                                                     |  |                         |  |          



Shares not included in
the computations of diluted earnings per share during the three and six months ending June 30, 2004 because the options exercise price was not less than the market value are as follows:



|                 |  |   |             
|---------------- |  | - | ------------
|Number of shares |  |   | 29,500      
|Exercise price   |  | $ | 10.50 -11.00
|Year issued      |  |   | 2004        
|Year expiring    |  |   | 2014        



|(4) | Stock Option Plans
|--- | ------------------



Certain key employees, directors and ex-employees of the Company have options to purchase shares of the Companys common stock under its stock option
plans. Under the plans, the total number of shares which may be issued shall not exceed 248,200 (amended). At June 30, 2004, 38,850 shares remain available for grant. Some options are fully vested when granted while others generally vest over five
years. A summary of stock option transactions follows ($ in thousands, except per share amounts):



|                                 |  |                 |   |  |                                 |             |                               |       |                      |       |  
|-------------------------------- |  | --------------- | - |  | ------------------------------- | ----------- | ----------------------------- | ----- | -------------------- | ----- | -
|                                 |  | Number ofShares |   |  | Range of Per Share Option Price |             | WeightedAveragePer SharePrice |       | AggregateOptionPrice |      
|Outstanding at December 31, 2002 |  | 177,600         |   |  | $                               | 10.00       |                               | 10.00 |                      | 1,776 |  
|Options granted                  |  | 3,000           |   |  |                                 | 10.00       |                               | 10.00 |                      | 30    |  
|                                 |  |                 |   |  |                                 |             |                               |       |                      |       |  
|Outstanding at June 30, 2003     |  | 180,600         |   |  | $                               | 10.00       |                               | 10.00 |                      | 1,806 |  
|                                 |  |                 |   |  |                                 |             |                               |       |                      |       |  
|Outstanding at December 31, 2003 |  | 180,850         |   |  |                                 | 10.00       |                               | 10.00 |                      | 1,809 |  
|Options granted                  |  | 30,000          |   |  |                                 | 10.50-11.00 |                               | 10.65 |                      | 320   |  
|Options forfeited                |  | (1,500          | ) |  |                                 | 10.00       |                               | 10.00 |                      | (15   | )
|                                 |  |                 |   |  |                                 |             |                               |       |                      |       |  
|Outstanding at June 30, 2004     |  | 209,350         |   |  | $                               | 10.00-11.00 |                               | 10.10 |                      | 2,114 |  
|                                 |  |                 |   |  |                                 |             |                               |       |                      |       |  



(continued)



8



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FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



|(4) | Stock Option Plans, Continued
|--- | -----------------------------



The Company accounts their stock option plans under the recognition and measurement principles of Accounting Principles Board Opinion No. 25 and related
Interpretations. No stock-based employee compensation cost is reflected in net earnings, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following
table illustrates the effect on net earnings and earnings per share if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, as
amended by SFAS No. 148, Accounting for Stock-Based Compensation Transition and Disclosure (collectively SFAS No. 123) to stock-based employee compensation (in thousands, except per share amounts):



|                                                                                                                                   |  |                             |     |   |                           |     |   |      |     |   |      |     |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | --- | - | ------------------------- | --- | - | ---- | --- | - | ---- | --- | -
|                                                                                                                                   |  | Three Months Ended June 30, |     |   | Six Months Ended June 30, |    
|                                                                                                                                   |  | 2004                        |     |   | 2003                      |     |   | 2004 |     |   | 2003 |    
|Net earnings, as reported                                                                                                          |  | $                           | 294 |   |                           | 159 |   |      | 517 |   |      | 433 |  
|Deduct: Total stock-based employee compensation determined under fair value based method for all awards, net of related tax
effect |  |                             | (13 | ) |                           | (9  | ) |      | (25 | ) |      | (18 | )
|                                                                                                                                   |  |                             |     |   |                           |     |   |      |     |   |      |     |  
|Proforma net earnings                                                                                                              |  | $                           | 281 |   |                           | 150 |   |      | 492 |   |      | 415 |  
|                                                                                                                                   |  |                             |     |   |                           |     |   |      |     |   |      |     |  
|Basic earnings per share:                                                                                                          |  |                             |     |   |                           |     |   |      |     |   |      |     |  
|As reported                                                                                                                        |  | $                           | .12 |   |                           | .12 |   |      | .24 |   |      | .33 |  
|                                                                                                                                   |  |                             |     |   |                           |     |   |      |     |   |      |     |  
|Proforma                                                                                                                           |  | $                           | .12 |   |                           | .11 |   |      | .23 |   |      | .31 |  
|                                                                                                                                   |  |                             |     |   |                           |     |   |      |     |   |      |     |  
|Diluted earnings per share:                                                                                                        |  |                             |     |   |                           |     |   |      |     |   |      |     |  
|As reported                                                                                                                        |  | $                           | .12 |   |                           | .12 |   |      | .24 |   |      | .33 |  
|                                                                                                                                   |  |                             |     |   |                           |     |   |      |     |   |      |     |  
|Proforma                                                                                                                           |  | $                           | .12 |   |                           | .11 |   |      | .23 |   |      | .31 |  
|                                                                                                                                   |  |                             |     |   |                           |     |   |      |     |   |      |     |  



The fair value of
each option grant is estimated on the date of grant using the Black-Scholes model with the following assumptions:



|                                              |  |                            |      |   |                          |   |   |      |            |   |      |      |  
|--------------------------------------------- |  | -------------------------- | ---- | - | ------------------------ | - | - | ---- | ---------- | - | ---- | ---- | -
|                                              |  | Three MonthsEnded June 30, |      |   | Six MonthsEnded June 30, |  
|                                              |  | 2004                       |      |   | 2003                     |   |   | 2004 |            |   | 2003 |     
|Risk-free interest rate                       |  |                            | 5.08 | % |                          |  | % |      | 4.53%-5.08 | % |      | 4.69 | %
|Dividend yield                                |  |                            |     | % |                          |  | % |      |           | % |      |     | %
|Expected volatility                           |  |                            | 8.01 | % |                          |  | % |      | 9.6%-8.01  | % |      |     | %
|Expected life in years                        |  |                            | 10   |   |                          |  |   |      | 10         |   |      | 10   |  
|Per share fair value of options at grant date |  | $                          | 3.38 |   |                          |  |   |      | 3.37- 3.38 |   |      | 3.84 |  
|                                              |  |                            |      |   |                          |   |   |      |            |   |      |      |  



(continued)



9



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FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



|(5) | Regulatory Matters
|--- | ------------------



The Company and the Bank are required to maintain certain minimum regulatory capital requirements. The following is a summary at June 30, 2004 of the
regulatory capital requirements and the Companys and the Banks actual capital on a percentage basis:



|                                                 |  |        |   |  |                       |  
|------------------------------------------------ |  | ------ | - |  | --------------------- | -
|                                                 |  | Actual |   |  | RegulatoryRequirement |  
|Total capital to risk-weighted assets:           |  |        |   |  |                       |  
|Company                                          |  | 20.30  | % |  | 8.00                  | %
|Bank                                             |  | 12.06  | % |  | 8.00                  | %
|Tier I capital to risk-weighted assets:          |  |        |   |  |                       |  
|Company                                          |  | 19.05  | % |  | 4.00                  | %
|Bank                                             |  | 10.81  | % |  | 4.00                  | %
|Tier I capital to total assets - leverage ratio: |  |        |   |  |                       |  
|Company                                          |  | 14.15  | % |  | 4.00                  | %
|Bank                                             |  | 8.06   | % |  | 4.00                  | %



|(6) | Warrants
|--- | --------



The Company issued warrants in conjunction with the sale of the its common stock. One warrant and one share of common stock were sold as a unit in the
Companys public offering. At June 30, 2004 no warrants were outstanding. Each warrant entitled the holder to purchase one share of common stock for $10 until February 2004. During the six months ended June 30, 2004, 1,075,620 warrants were
exercised. Proceeds from the exercised warrants were approximately $10,754,000, net offering costs of approximately $3,000.



|(7) | Commitments
|--- | -----------



During the six months ended June 30, 2004, the Bank entered into agreements to purchase two sites for future branch locations for approximately
$1,850,000. The Bank expects to open one branch in the fourth quarter of 2004 and the other branch in the first quarter of 2005.





10



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FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



Review by Independent Registered Public Accounting Firm



Hacker, Johnson & Smith PA, the Companys independent registered public accounting firm, have made a limited review of the financial data as of June 30, 2004, and for the three- and six-month periods ended June 30, 2004 and 2003
presented in this document, in accordance with standards established by the Public Company Accounting Oversight Board.



Their report furnished pursuant to Article 10 of Regulation S-X is included herein.



11



---

Report of Independent Registered Public Accounting Firm



Florida Business BancGroup, Inc.

Tampa, Florida:



We have reviewed the accompanying interim condensed consolidated balance sheet of Florida Business BancGroup, Inc. (the Company) as of June
30, 2004, the related interim condensed consolidated statements of earnings for the three- and six- month periods ended June 30, 2004 and 2003 and the related interim condensed consolidated statements of cash flows and stockholders equity for
the six-month periods ended June 30, 2004 and 2003. These interim financial statements are the responsibility of the Companys management.



We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the
Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.



Based on our reviews, we are not aware of any material modifications that
should be made to the interim condensed consolidated financial statements for them to be in conformity with U.S. generally accepted accounting principles.



We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board, the consolidated balance sheet of the
Company as of December 31, 2003, and the related consolidated statements of earnings, stockholders equity and cash flows for the year then ended (not presented herein); and in our report dated January 9, 2004 we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2003, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.



/s/ Hacker, Johnson & Smith PA



HACKER,
JOHNSON & SMITH PA

Tampa, Florida

July 9, 2004



12



---

FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



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



Comparison of June 30, 2004 and December 31, 2003



General



Florida Business BancGroup, Inc., a Florida corporation, (the Holding Company) owns 100% of the outstanding shares of Bay Cities Bank, a Florida-chartered
commercial bank (the Bank). The Holding Companys only business is the ownership and operations of the Bank (collectively, the Company). The Banks deposits are insured, up to the limit of the law, by the Federal
Deposit Insurance Corporation. The Bank provides a variety of community banking services to business and individuals primarily in Hillsborough County, Florida.



Liquidity and Capital Resources



During the six months ended June 30, 2004, the Companys primary sources of funds consisted of proceeds from warrants exercised of $10.8 million, deposit inflows of
$17.2 million, proceeds from principal pay-downs and calls of securities available for sale of $10.6 million and cash provided by operations of $365,000. The Company used its capital resources principally to fund existing and continuing loan
commitments, net of principal repayments of $7.4 million, to purchase securities of $24.3 million and to repay other borrowings of $3.0 million.



As a Florida-chartered commercial bank, the Bank is required to maintain a liquidity reserve of at least 15% of its total transaction accounts and 8% of its total
nontransaction accounts less those deposits of certain public funds. The liquidity reserve may consist of cash on hand, cash on demand with other correspondent banks and other investments and short-term marketable securities as defined, such as
federal funds sold and United States securities or securities guaranteed by the United States. As of June 30, 2004, the Bank had liquidity of approximately $54 million, or approximately 36% of total deposits.



Management believes the Company and the Bank were in compliance with all minimum capital
requirements which they were subject to at June 30, 2004. See note 5 to the condensed consolidated financial statements.



Off-Balance Sheet Arrangements and Aggregate Contractual Obligations



The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial
instruments include commitments to extend credit, unused lines of credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amounts recognized in the condensed
consolidated balance sheet. The contract amounts of those instruments reflect the extent of the Companys involvement in particular classes of financial instruments.



The Companys exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to
extend credit, unused lines of credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments.



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



13



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FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations, Continued
|------- | ------------------------------------------------------------------------------------------------



Standby letters of credit are conditional commitments issued by the Company to guarantee the
performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.



A summary of the contract amounts of the Companys financial instruments, which approximates fair value, with off-balance sheet risk at
June 30, 2004, follows (in thousands):



|                             |  |                |       
|---------------------------- |  | -------------- | ------
|                             |  | ContractAmount
|Commitments to extend credit |  | $              | 12,486
|                             |  |                |       
|Unused lines of credit       |  | $              | 25,168
|                             |  |                |       
|Standby letters of credit    |  | $              | 276   
|                             |  |                |       



Management believes that the Company
has adequate resources to fund all of its commitments and that substantially all of its exiting commitments will be funded in the next twelve months. Management also believes that, if so desired, it can adjust the rates on time deposits to retain or
attract deposits in a changing interest-rate environment.



Selected
Financial Information



The following ratios and rates are presented for
the dates and periods indicated:



|                                                                                                |  |                              |   |  |                            |   |  |                             |  
|----------------------------------------------------------------------------------------------- |  | ---------------------------- | - |  | -------------------------- | - |  | --------------------------- | -
|                                                                                                |  | Six MonthsEnded June 30,2004 |   |  | Year EndedDecember 31,2003 |   |  | Six MonthsEndedJune 30,2003 |  
|Average equity as a percentage of average assets                                                |  | 13.02                        | % |  | 9.66                       | % |  | 11.30                       | %
|Equity to total assets at end of period                                                         |  | 13.86                        | % |  | 9.35                       | % |  | 10.19                       | %
|Return on average assets(1)                                                                     |  | .61                          | % |  | .71                        | % |  | .73                         | %
|Return on average equity(1)                                                                     |  | 4.69                         | % |  | 7.38                       | % |  | 6.43                        | %
|Noninterest expenses to average assets(1)                                                       |  | 2.15                         | % |  | 1.97                       | % |  | 2.17                        | %
|Nonperforming loans and foreclosed real estate as a percentage of total assets at end of period |  | .23                          | % |  |                           | % |  |                            | %



|(1) | Annualized for the six months ended June 30.
|--- | --------------------------------------------



14



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FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



Results of Operations



The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest and dividend income
of the Company from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii) net interest income; (iv) interest-rate spread; and
(v) net interest margin.



|                                                                                 |  |                  |         |                             |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|-------------------------------------------------------------------------------- |  | ---------------- | ------- | --------------------------- | - | ----------------- |  | ---- | -------------- |  | -------------------- | ------- | ----------------- | - | ----- |  | ---- | -
|                                                                                 |  |                  |         | Three Months Ended June 30, |  
|                                                                                 |  |                  |         | 2004                        |   | 2003              | 
|                                                                                 |  | AverageBalance   |         | InterestandDividends        |   | AverageYield/Rate |  |      | AverageBalance |  | InterestandDividends |         | AverageYield/Rate |  
|                                                                                 |  | ($ in thousands) |        
|Interest-earning assets:                                                         |  |                  |         |                             |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Loans                                                                            |  | $                | 108,835 |                             |   | 1,794             |  | 6.59 | %              |  | $                    | 83,707  |                   |   | 1,517 |  | 7.25 | %
|Securities                                                                       |  |                  | 54,247  |                             |   | 460               |  | 3.39 |                |  |                      | 27,154  |                   |   | 250   |  | 3.68 |  
|Other interest-earning assets(1)                                                 |  |                  | 2,616   |                             |   | 5                 |  | .76  |                |  |                      | 4,140   |                   |   | 15    |  | 1.45 |  
|                                                                                 |  |                  |         |                             |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-earning assets                                                    |  |                  | 165,698 |                             |   | 2,259             |  | 5.45 |                |  |                      | 115,001 |                   |   | 1,782 |  | 6.20 |  
|                                                                                 |  |                  |         |                             |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Noninterest-earning assets                                                       |  |                  | 13,755  |                             |   |                   |  |      |                |  |                      | 7,911   |                   |   |       |  |      |  
|                                                                                 |  |                  |         |                             |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total assets                                                                     |  | $                | 179,453 |                             |   |                   |  |      |                |  | $                    | 122,912 |                   |   |       |  |      |  
|                                                                                 |  |                  |         |                             |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Interest-bearing liabilities:                                                    |  |                  |         |                             |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Savings, NOW, money-market deposit accounts                                      |  |                  | 27,719  |                             |   | 72                |  | 1.04 |                |  |                      | 22,611  |                   |   | 79    |  | 1.40 |  
|Time deposits                                                                    |  |                  | 96,187  |                             |   | 717               |  | 2.98 |                |  |                      | 65,145  |                   |   | 608   |  | 3.73 |  
|                                                                                 |  |                  |         |                             |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-bearing deposits                                                  |  |                  | 123,906 |                             |   | 789               |  | 2.55 |                |  |                      | 87,756  |                   |   | 687   |  | 3.13 |  
|Borrowings(2)                                                                    |  |                  | 11,760  |                             |   | 60                |  | 2.04 |                |  |                      | 11,128  |                   |   | 55    |  | 1.98 |  
|                                                                                 |  |                  |         |                             |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-bearing liabilities                                               |  |                  | 135,666 |                             |   | 849               |  | 2.50 |                |  |                      | 98,884  |                   |   | 742   |  | 3.00 |  
|                                                                                 |  |                  |         |                             |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Noninterest-bearing liabilities                                                  |  |                  | 19,089  |                             |   |                   |  |      |                |  |                      | 10,489  |                   |   |       |  |      |  
|Stockholders equity                                                             |  |                  | 24,698  |                             |   |                   |  |      |                |  |                      | 13,539  |                   |   |       |  |      |  
|                                                                                 |  |                  |         |                             |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total liabilities and stockholders equity                                       |  | $                | 179,453 |                             |   |                   |  |      |                |  | $                    | 122,912 |                   |   |       |  |      |  
|                                                                                 |  |                  |         |                             |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Net interest income                                                              |  |                  |         |                             | $ | 1,410             |  |      |                |  |                      |         |                   | $ | 1,040 |  |      |  
|                                                                                 |  |                  |         |                             |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Interest-rate spread(3)                                                          |  |                  |         |                             |   |                   |  | 2.95 | %              |  |                      |         |                   |   |       |  | 3.20 | %
|                                                                                 |  |                  |         |                             |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Net interest margin(4)                                                           |  |                  |         |                             |   |                   |  | 3.40 | %              |  |                      |         |                   |   |       |  | 3.62 | %
|                                                                                 |  |                  |         |                             |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                  | 1.22    |                             |   |                   |  |      |                |  |                      | 1.16    |                   |   |       |  |      |  
|                                                                                 |  |                  |         |                             |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  



|(1) | Includes Federal Home Loan Bank stock, federal funds sold, securities purchased under
agreements to resell and interest-bearing deposits.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------



|(2) | Includes Federal Home Loan Bank advances and repurchase agreements.
|--- | -------------------------------------------------------------------



|(3) | Interest-rate spread represents the difference between the average yield on interest-earning
assets and the average rate of interest-bearing liabilities.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Net interest margin is net interest income divided by average interest-earning assets.
|--- | --------------------------------------------------------------------------------------



15



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FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



The following table sets forth, for the periods indicated, information regarding (i) the
total dollar amount of interest and dividend income of the Company from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii)
net interest income; (iv) interest-rate spread; and (v) net interest margin.



|                                                                                 |  |                  |         |                           |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|-------------------------------------------------------------------------------- |  | ---------------- | ------- | ------------------------- | - | ----------------- |  | ---- | -------------- |  | -------------------- | ------- | ----------------- | - | ----- |  | ---- | -
|                                                                                 |  |                  |         | Six Months Ended June 30, |  
|                                                                                 |  |                  |         | 2004                      |   | 2003              | 
|                                                                                 |  | AverageBalance   |         | InterestandDividends      |   | AverageYield/Rate |  |      | AverageBalance |  | InterestandDividends |         | AverageYield/Rate |  
|                                                                                 |  | ($ in thousands) |        
|Interest-earning assets:                                                         |  |                  |         |                           |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Loans                                                                            |  | $                | 107,373 |                           |   | 3,573             |  | 6.66 | %              |  | $                    | 80,793  |                   |   | 2,904 |  | 7.19 | %
|Securities                                                                       |  |                  | 47,278  |                           |   | 833               |  | 3.52 |                |  |                      | 26,231  |                   |   | 509   |  | 3.88 |  
|Other interest-earning assets(1)                                                 |  |                  | 3,486   |                           |   | 22                |  | 1.26 |                |  |                      | 5,028   |                   |   | 34    |  | 1.35 |  
|                                                                                 |  |                  |         |                           |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-earning assets                                                    |  |                  | 158,137 |                           |   | 4,428             |  | 5.60 |                |  |                      | 112,052 |                   |   | 3,447 |  | 6.15 |  
|                                                                                 |  |                  |         |                           |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Noninterest-earning assets                                                       |  |                  | 11,120  |                           |   |                   |  |      |                |  |                      | 7,195   |                   |   |       |  |      |  
|                                                                                 |  |                  |         |                           |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total assets                                                                     |  | $                | 169,257 |                           |   |                   |  |      |                |  | $                    | 119,247 |                   |   |       |  |      |  
|                                                                                 |  |                  |         |                           |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Interest-bearing liabilities:                                                    |  |                  |         |                           |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Savings, NOW, money-market deposit accounts                                      |  |                  | 26,479  |                           |   | 150               |  | 1.13 |                |  |                      | 22,037  |                   |   | 164   |  | 1.49 |  
|Time deposits                                                                    |  |                  | 91,537  |                           |   | 1,383             |  | 3.02 |                |  |                      | 63,077  |                   |   | 1,192 |  | 3.78 |  
|                                                                                 |  |                  |         |                           |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-bearing deposits                                                  |  |                  | 118,016 |                           |   | 1,533             |  | 2.60 |                |  |                      | 85,114  |                   |   | 1,356 |  | 3.19 |  
|Borrowings(2)                                                                    |  |                  | 12,672  |                           |   | 123               |  | 1.94 |                |  |                      | 10,044  |                   |   | 95    |  | 1.89 |  
|                                                                                 |  |                  |         |                           |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-bearing liabilities                                               |  |                  | 130,688 |                           |   | 1,656             |  | 2.53 |                |  |                      | 95,158  |                   |   | 1,451 |  | 3.05 |  
|                                                                                 |  |                  |         |                           |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Noninterest-bearing liabilities                                                  |  |                  | 16,536  |                           |   |                   |  |      |                |  |                      | 10,618  |                   |   |       |  |      |  
|Stockholders equity                                                             |  |                  | 22,033  |                           |   |                   |  |      |                |  |                      | 13,471  |                   |   |       |  |      |  
|                                                                                 |  |                  |         |                           |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total liabilities and stockholders equity                                       |  | $                | 169,257 |                           |   |                   |  |      |                |  | $                    | 119,247 |                   |   |       |  |      |  
|                                                                                 |  |                  |         |                           |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Net interest income                                                              |  |                  |         |                           | $ | 2,772             |  |      |                |  |                      |         |                   | $ | 1,996 |  |      |  
|                                                                                 |  |                  |         |                           |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Interest-rate spread(3)                                                          |  |                  |         |                           |   |                   |  | 3.07 | %              |  |                      |         |                   |   |       |  | 3.10 | %
|                                                                                 |  |                  |         |                           |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Net interest margin(4)                                                           |  |                  |         |                           |   |                   |  | 3.51 | %              |  |                      |         |                   |   |       |  | 3.56 | %
|                                                                                 |  |                  |         |                           |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                  | 1.21    |                           |   |                   |  |      |                |  |                      | 1.18    |                   |   |       |  |      |  
|                                                                                 |  |                  |         |                           |   |                   |  |      |                |  |                      |         |                   |   |       |  |      |  



|(1) | Includes Federal Home Loan Bank stock, federal funds sold, securities purchased under
agreements to resell and interest-bearing deposits.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------



|(2) | Includes Federal Home Loan Bank advances and repurchase agreements.
|--- | -------------------------------------------------------------------



|(3) | Interest-rate spread represents the difference between the average yield on interest-earning
assets and the average rate of interest-bearing liabilities.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Net interest margin is net interest income divided by average interest-earning assets.
|--- | --------------------------------------------------------------------------------------



16



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FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



Comparison of the Three-Month Periods Ended June 30, 2004 and 2003



General. Net earnings for the three months ended June 30,
2004 were $294,000 or $.12 per basic and diluted share compared to net earnings of $159,000 or $.12 per basic and diluted share for the same period in 2003. The increase in earnings was primarily due to an increase in net interest income resulting
from growth in the Companys interest earning assets which was partially offset by an increase in noninterest expenses.



Interest Income and Expense. Interest income increased to $2.3 million for the three-month period ended June 30, 2004 from $1.8 million for the three months
ended June 30, 2003. Interest on loans increased to $1.8 million due to an increase in the average loan portfolio balance in 2004 to $108.8 million from $83.7 million in 2003 which was partially offset by a decrease in the weighted-average yield
earned in 2004 to 6.59% from 7.25% in 2003. Interest on securities increased to $460,000 for the three-months ended June 30, 2004 compared to $250,000 in 2003 due to an increase in the average securities portfolio balance in 2004 to $54.2 million
from $27.2 million in 2003 which was partially offset by a decrease in the weighted average yield earned in 2004 to 3.39% from 3.68% in 2003. Interest on other interest-earning assets decreased from $15,000 for the three-months ended June 30, 2003
to $5,000 for the three months ended June 30, 2004.



Interest expense on
deposits increased to $789,000 for the three-months ended June 30, 2004 from $687,000 in 2003. The increase is due to an increase in the average interest bearing deposits in 2004 to $123.9 million from $87.8 million in 2003 which was only partially
offset by a decrease in the weighted-average rate paid on deposits in 2004 to 2.55% from 3.13% in 2003.



Provision for Loan Losses. The provision for loan losses is charged against earnings to bring the total allowance to a level deemed appropriate by management and is based upon historical experience, the
volume and type of lending conducted by the Company, industry standards, the amount of nonperforming loans, general economic conditions, particularly as they relate to the Companys market areas, and other factors related to the collectibility
of the Companys loan portfolio. The provision for loan losses was $93,000 for the three-month period ended June 30, 2004 compared to $144,000 for the same period in 2003. The decrease is due to a smaller increase in the portfolio during the
2004 period compared to the 2003 period. The allowance for loan losses is $1,653,000 at June 30, 2004. While management believes that its allowance for loan losses is adequate as of June 30, 2004, future adjustments to the Companys allowance
for loan losses may be necessary if economic conditions differ substantially from the assumptions used in making the initial determination.



Noninterest Income. Noninterest income increased to $105,000 in 2004 from $68,000 for the three- months ended June 30, 2003. The increase was due to a
increase in service charges and fees primarily due to the growth in deposit accounts.



Noninterest Expense. Total noninterest expense increased to $946,000 for the three-months ended June 30, 2004 from $710,000 for the comparable period ended June 30, 2003. The increase was due to an increase in salaries and
employee benefits and occupancy expense due to the opening of a second banking office in the second quarter of 2003.



Income Taxes. Income taxes for the three-months ended June 30, 2004 were $182,000 (an effective rate of 38.2%) compared to income taxes of $95,000 in 2003
(an effective rate of 37.4%).



17



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FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



Comparison of the Six-Month Periods Ended June 30, 2004 and 2003



General. Net earnings for the six months ended June 30, 2004
were $517,000 or $.24 per basic and diluted share compared to net earnings of $433,000 or $.33 per basic and diluted share for the same period in 2003. The increase in earnings was primarily due to an increase in net interest income resulting from
growth in the Companys interest earning assets which was partially offset by an increase in noninterest expense.



Interest Income and Expense. Interest income increased to $4.4 million for the six-month period ended June 30, 2004 from $3.4 million for the six months
ended June 30, 2003. Interest on loans increased to $3.6 million due to an increase in the average loan portfolio balance in 2004 to $107.4 million from $80.8 million in 2003 which was only partially offset by a decrease in the weighted-average
yield earned in 2004 to 6.66% from 7.19% in 2003. Interest on securities increased to $833,000 for the six-months ended June 30, 2004 compared to $509,000 in 2003 due to an increase in the average securities portfolio balance in 2004 to $47.3
million from $26.2 million in 2003, partially offset by a decrease in the weighted average yield earned in 2004 to 3.52% from 3.88% in 2003. Interest on other interest-earning assets decreased from $34,000 for the six-months ended June 30, 2003 to
$22,000 for the six months ended June 30, 2004.



Interest expense on deposits
increased to $1.5 million for the six-months ended June 30, 2004 from $1.4 million in 2003. The increase is due to an increase in the average deposits in 2004 to $118.0 million from $85.1 million in 2003 which was only partially offset by a decrease
in the weighted-average rate paid on deposits in 2004 to 2.60% from 3.19% in 2003.



Provision for Loan Losses. The provision for loan losses is charged against earnings to bring the total allowance to a level deemed appropriate by management and is based upon historical experience, the volume and type of
lending conducted by the Company, industry standards, the amount of nonperforming loans, general economic conditions, particularly as they relate to the Companys market areas, and other factors related to the collectibility of the
Companys loan portfolio. The provision for loan losses was $313,000 for the six-month period ended June 30, 2004 compared to $154,000 for the same period in 2003. The increase is due to an increase in the portfolio and the downgrade of one
commercial loan by management during the 2004 period. The allowance for loan losses is $1,653,000 at June 30, 2004. While management believes that its allowance for loan losses is adequate as of June 30, 2004, future adjustments to the
Companys allowance for loan losses may be necessary if economic conditions differ substantially from the assumptions used in making the initial determination.



Noninterest Income. Noninterest income increased to $197,000 in 2004 from $144,000 for the six- months ended June 30, 2003.
The increase was due to a increase in service charges and fees primarily due to the growth in deposit accounts.



Noninterest Expense. Total noninterest expense increased to $1.8 million for the six-months ended June 30, 2004 from $1.3 million for the comparable period
ended June 30, 2003. The increase in noninterest expense was primarily due to an increase in salaries and employee benefits and occupancy expense due to the opening of a second banking office during the second quarter of 2003.



Income Taxes. The income taxes for the six- months ended June 30, 2004 were
$318,000 (an effective rate of 38.1%) compared to an income taxes of $260,000 in 2003 (an effective rate of 37.5%).



18



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FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



|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
reports 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 90 days of the filing date of this report, the Chief Executive and Chief Financial Officers of the Company concluded that the Companys disclosure controls and procedures were
adequate.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Changes 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 and Chief Financial officers.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------



Registrant has no pending legal proceedings as of June 30, 2004.



|Item 2. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------



The Annual Meeting of Shareholders (the Annual Meeting) of Florida Business Bancgroup, Inc., was held on April 27, 2004, to consider the election of four
directors. Shareholders elected four directors with terms expiring at the Annual Meeting in 2007. The shareholders also voted upon the amendment of 2000 Key Employee Stock Compensation Program and the ratification of the independent auditors.



At the Annual Meeting, 1,928,050 shares were present in person or by proxy.
Listed below are the directors that were elected at the Annual Meeting, there terms and a summary of the votes cast for each nominee:



|                  |  |              |  |           |  |         
|----------------- |  | ------------ |  | --------- |  | --------
|Class             |  | TermExpiring |  | For       |  | Withheld
|Johnny R. Adcock  |  | 2007         |  | 1,926,050 |  | 2,000   
|Jeff Huenink      |  | 2007         |  | 1,926,050 |  | 2,000   
|Eiji Sadato       |  | 2007         |  | 1,928,050 |  |        
|A. Bronson Thayer |  | 2007         |  | 1,928,050 |  |        



The shareholder vote on two other
matters considered at the meeting was as follows:



|                                                              |  |           |  |         |  |         |  |          
|------------------------------------------------------------- |  | --------- |  | ------- |  | ------- |  | ---------
|                                                              |  | For       |  | Against |  | Abstain |  | Not Voted
|Amendment of the 2000 Key Employee Stock Compensation Program |  | 1,798,625 |  | 81,925  |  | 11,000  |  | 36,500   
|                                                              |  |           |  |        
|                                                              |  | For       |  | Against |  | Abstain |  |          
|Ratification of the independent auditors                      |  | 1,927,050 |  | -0-     |  | 1,000   |  |          



19



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FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



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



(a) Exhibits. The following exhibits are filed with or incorporated by reference into this report. The exhibits which are marked by a single
asterisk (*) were previously filed as a part of the Companys Registration Statement on Form SB-2, filed with the Securities and Exchange Commission on September 30, 1998, Registration No. 333-65101; exhibits marked with four asterisks (****)
were previously filed in Amendment No. 3 to Registration Statement on Form SB-2. The exhibits marked with five asterisks (*****) were previously filed as part of the Companys Definitive Form 14-A, filed with the Securities and Exchange
Commission on March 13, 2000; exhibits marked with six asterisks (******) were previously filed as part of the Companys Proxy Statement on Form 14-A, filed with the Securities and Exchange Commission on March 16, 2001; exhibits marked with
seven asterisks (*******) were previously filed as part of the companies March 31, 2002 10-QSB, filed with the Securities and Exchange Commission on May 9, 2002; exhibits marked with eight asterisks (********) were previously filed as part of the
companies June 30, 2002 10-QSB, filed with the Securities and Exchange Commission on August 8, 2002; and exhibits marked with nine asterisks (*********) were previously filed as part of the companies March 31, 2003 10-QSB, filed with the Securities
and Exchange Commission on May 6, 2003.



|            |  |                        |  |                                                                                                                                              
|----------- |  | ---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit
|*           |  | 3.1                    |  | Articles of Incorporation of the Company                                                                                                     
|            |  |                       
|*           |  | 3.2                    |  | By-laws of the Company                                                                                                                       
|            |  |                       
|*           |  | 4.1                    |  | Specimen Common Stock Certificate                                                                                                            
|            |  |                       
|******      |  | 4.5                    |  | Amended and Restated Warrant Plan and Specimen Warrant Certificate                                                                           
|            |  |                       
|*           |  | 10.3                   |  | Servicing Agreement with M&I Data Services                                                                                                   
|            |  |                       
|****        |  | 10.4                   |  | Lease Agreement for Permanent Office                                                                                                         
|            |  |                       
|*****       |  | 10.5                   |  | 2000 Key Employee Stock Compensation Program                                                                                                 
|            |  |                       
|*****       |  | 10.6                   |  | 2000 Directors Stock Option Plan                                                                                                            
|            |  |                       
|*******     |  | 10.7                   |  | Supplemental Executive Retirement Plan                                                                                                       
|            |  |                       
|********    |  | 10.8                   |  | Supplemental Executive Retirement Plan Participation Agreement with Gregory W. Bryant                                                        
|            |  |                       
|********    |  | 10.93                  |  | Supplemental Executive Retirement Plan Participation Agreement with Marti J. Warren                                                          
|            |  |                       
|*******     |  | 10.10                  |  | Endorsement Split Dollar Insurance Agreement with Gregory W. Bryant                                                                          
|            |  |                       
|*******     |  | 10.11                  |  | Endorsement Split Dollar Plan Beneficiary Designation and Limited Assignment of Rights Gregory W. Bryant                                     
|            |  |                       
|*******     |  | 10.12                  |  | Endorsement Split Dollar Insurance Agreement with Marti J. Warren                                                                            
|            |  |                       
|*******     |  | 10.13                  |  | Endorsement Split Dollar Plan Beneficiary Designation and Limited Assignment of Rights Marti J. Warren                                       
|            |  |                       
|*******     |  | 10.14                  |  | Directors Written Consent to Action                                                                                                         
|            |  |                       
|*********   |  | 10.15                  |  | Employment Agreement with Gregory W. Bryant                                                                                                  
|            |  |                       
|*********   |  | 10.16                  |  | Confidentiality Non-Compete and Non-Solicitation Agreement with Gregory W. Bryant                                                            
|            |  |                       
|            |  | 10.17                  |  | Amendment I to 2000 Key Employee Stock Compensation Program Charter of the Audit Committee                                                   
|            |  |                       
|******      |  | 99                     |  | Charter of the Audit Committee                                                                                                               
|            |  |                       
|            |  | 31.1                   |  | Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act                                         
|            |  |                       
|            |  | 31.2                   |  | Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act                                         
|            |  |                       
|            |  | 32.1                   |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002
|            |  |                       
|            |  | 32.2                   |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002



(b) Reports on
Form 8-K.Registrant filed no Form 8-K during the three months ended June 30, 2004.



20



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FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



PART II. OTHER INFORMATION



SIGNATURES



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



|                      |  |  |  |                                  |  |                          |  |                                
|--------------------- |  |  |  | -------------------------------- |  | ------------------------ |  | -------------------------------
|                      |  |  |  | FLORIDA BUSINESS BANCGROUP, INC.
|                      |  |  |  | (Registrant)                    
|                      |  |  | 
|Date: August 10, 2004 |  |  |  | By:                              |  | /s/    A. BRONSON THAYER
|                      |  |  |  |                                  |  |                          |  | A. Bronson Thayer, Chairman and
|                      |  |  |  |                                  |  |                          |  | Chief Executive Officer        



|                      |  |  |  |     |  |                        |  |                                             
|--------------------- |  |  |  | --- |  | ---------------------- |  | --------------------------------------------
|                      |  |  | 
|Date: August 10, 2004 |  |  |  | By: |  | /s/    MARTI J. WARREN
|                      |  |  |  |     |  |                        |  | Marti J. Warren, Principal Financial Officer



21