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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



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(Mark One)

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



For the quarterly period ended September 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



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FLORIDA BUSINESS BANCGROUP, INC.

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



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|                                |  |                    
|------------------------------- |  | -------------------
|Florida                         |  | 59-3517595         
|(State or Other Jurisdiction of |  | (I.R.S. Employer   
|Incorporation or Organization)  |  | 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)



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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 October 28, 2004



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



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##### Table of Contents

FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



INDEX



|                                                                                                                     |  |      
|-------------------------------------------------------------------------------------------------------------------- |  | -----
|                                                                                                                     |  | Page 
|PART I.
FINANCIAL INFORMATION                                                                                        |  |      
|                                                                                                                     | 
|Item 1.
Financial Statements                                                                                         |  |      
|                                                                                                                     | 
|Condensed Consolidated Balance Sheets -At September 30, 2004 (Unaudited) and December 31, 2003                       |  | 2    
|                                                                                                                     | 
|Condensed Consolidated Statements of Earnings (Unaudited) -Three and Nine Months ended September 30, 2004 and 2003   |  | 3    
|                                                                                                                     | 
|Condensed Consolidated Statements of Stockholders Equity (Unaudited) -Nine Months ended September 30, 2004 and 2003 |  | 4    
|                                                                                                                     | 
|Condensed Consolidated Statements of Cash Flows (Unaudited) -Nine Months ended September 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 6.
Exhibits and Reports on Form 8-K                                                                             |  | 20   
|                                                                                                                     | 
|SIGNATURES                                                                                                           |  | 21   



1



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##### Table of Contents

FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



PART I. FINANCIAL INFORMATION



Item 1. Financial Statements



Condensed Consolidated Balance Sheets

($ in thousands, except share information)



|                                                                                                                           |  |                   |         |   |                  |         |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | ------- | -
|                                                                                                                           |  | September 30,2004 |         |   | December 31,2003 |        
|                                                                                                                           |  | (Unaudited)       |         |   |                  |        
|Assets                                                                                                                     |  |                   |         |   |                  |         |  
|Cash and due from banks                                                                                                    |  | $                 | 4,994   |   |                  | 3,856   |  
|Federal funds sold                                                                                                         |  |                   | 2,350   |   |                  | 3,910   |  
|                                                                                                                           |  |                   |         |   |                  |         |  
|Total cash and cash equivalents                                                                                            |  |                   | 7,344   |   |                  | 7,766   |  
|                                                                                                                           |  |                  
|Securities available for sale                                                                                              |  |                   | 47,478  |   |                  | 39,453  |  
|Securities held to maturity                                                                                                |  |                   | 2,011   |   |                  | 524     |  
|Loans, net of allowance for loan losses of $1,693 and $1,340                                                               |  |                   | 116,667 |   |                  | 101,330 |  
|Federal Home Loan Bank stock                                                                                               |  |                   | 400     |   |                  | 400     |  
|Premises and equipment, net                                                                                                |  |                   | 3,844   |   |                  | 1,647   |  
|Deferred tax asset                                                                                                         |  |                   | 556     |   |                  | 307     |  
|Accrued interest receivable                                                                                                |  |                   | 627     |   |                  | 567     |  
|Bank owned life insurance                                                                                                  |  |                   | 810     |   |                  | 785     |  
|Other assets                                                                                                               |  |                   | 823     |   |                  | 422     |  
|                                                                                                                           |  |                   |         |   |                  |         |  
|Total assets                                                                                                               |  | $                 | 180,560 |   |                  | 153,201 |  
|                                                                                                                           |  |                   |         |   |                  |         |  
|Liabilities and Stockholders Equity                                                                                       |  |                   |         |   |                  |         |  
|                                                                                                                           |  |                  
|Liabilities:                                                                                                               |  |                   |         |   |                  |         |  
|Noninterest-bearing demand deposits                                                                                        |  |                   | 16,171  |   |                  | 11,479  |  
|Savings and NOW deposits                                                                                                   |  |                   | 5,329   |   |                  | 4,421   |  
|Money-market deposits                                                                                                      |  |                   | 25,310  |   |                  | 20,064  |  
|Time deposits                                                                                                              |  |                   | 95,502  |   |                  | 88,091  |  
|                                                                                                                           |  |                   |         |   |                  |         |  
|Total deposits                                                                                                             |  |                   | 142,312 |   |                  | 124,055 |  
|                                                                                                                           |  |                  
|Federal Home Loan Bank advances                                                                                            |  |                   | 8,000   |   |                  | 8,000   |  
|Other borrowing                                                                                                            |  |                   | 2,483   |   |                  | 5,873   |  
|Official checks                                                                                                            |  |                   | 1,562   |   |                  | 466     |  
|Other liabilities                                                                                                          |  |                   | 631     |   |                  | 482     |  
|                                                                                                                           |  |                   |         |   |                  |         |  
|Total liabilities                                                                                                          |  |                   | 154,988 |   |                  | 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                                                                                                          |  |                   | 1,683   |   |                  | 790     |  
|Accumulated other comprehensive income (loss)                                                                              |  |                   | (444    | ) |                  | (29     | )
|                                                                                                                           |  |                   |         |   |                  |         |  
|Total stockholders equity                                                                                                 |  |                   | 25,572  |   |                  | 14,325  |  
|                                                                                                                           |  |                   |         |   |                  |         |  
|Total liabilities and stockholders equity                                                                                 |  | $                 | 180,560 |   |                  | 153,201 |  
|                                                                                                                           |  |                   |         |   |                  |         |  



See
Accompanying Notes to Condensed Consolidated Financial Statements.



2



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##### Table of Contents

FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Earnings

($ in thousands, except per share information)

(Unaudited)



|                                                    |  |                                 |       |                                |       |      |       |      |      
|--------------------------------------------------- |  | ------------------------------- | ----- | ------------------------------ | ----- | ---- | ----- | ---- | -----
|                                                    |  | Three Months EndedSeptember 30, |       | Nine Months EndedSeptember 30,
|                                                    |  | 2004                            |       | 2003                           |       | 2004 |       | 2003
|Interest income:                                    |  |                                 |       |                                |       |      |       |      |      
|Loans                                               |  | $                               | 1,890 |                                | 1,586 |      | 5,463 |      | 4,490
|Securities                                          |  |                                 | 440   |                                | 298   |      | 1,273 |      | 807  
|Other                                               |  |                                 | 10    |                                | 5     |      | 32    |      | 39   
|                                                    |  |                                 |       |                                |       |      |       |      |      
|Total interest income                               |  |                                 | 2,340 |                                | 1,889 |      | 6,768 |      | 5,336
|                                                    |  |                                 |       |                                |       |      |       |      |      
|Interest expense:                                   |  |                                 |       |                                |       |      |       |      |      
|Deposits                                            |  |                                 | 775   |                                | 697   |      | 2,308 |      | 2,053
|Other borrowings                                    |  |                                 | 60    |                                | 70    |      | 183   |      | 165  
|                                                    |  |                                 |       |                                |       |      |       |      |      
|Total interest expense                              |  |                                 | 835   |                                | 767   |      | 2,491 |      | 2,218
|                                                    |  |                                 |       |                                |       |      |       |      |      
|Net interest income                                 |  |                                 | 1,505 |                                | 1,122 |      | 4,277 |      | 3,118
|                                                    |  |                                 |       |                               
|Provision for loan losses                           |  |                                 | 40    |                                | 89    |      | 353   |      | 243  
|                                                    |  |                                 |       |                                |       |      |       |      |      
|Net interest income after provision for loan losses |  |                                 | 1,465 |                                | 1,033 |      | 3,924 |      | 2,875
|                                                    |  |                                 |       |                                |       |      |       |      |      
|Noninterest income:                                 |  |                                 |       |                                |       |      |       |      |      
|Service charges and fees on deposit accounts        |  |                                 | 108   |                                | 81    |      | 277   |      | 201  
|Other                                               |  |                                 | 19    |                                | 23    |      | 47    |      | 47   
|                                                    |  |                                 |       |                                |       |      |       |      |      
|Total noninterest income                            |  |                                 | 127   |                                | 104   |      | 324   |      | 248  
|                                                    |  |                                 |       |                                |       |      |       |      |      
|Noninterest expenses:                               |  |                                 |       |                                |       |      |       |      |      
|Compensation and benefits                           |  |                                 | 516   |                                | 344   |      | 1,374 |      | 962  
|Occupancy                                           |  |                                 | 170   |                                | 134   |      | 482   |      | 350  
|Data processing                                     |  |                                 | 60    |                                | 52    |      | 174   |      | 158  
|Professional fees                                   |  |                                 | 96    |                                | 21    |      | 156   |      | 76   
|Courier expense                                     |  |                                 | 38    |                                | 30    |      | 100   |      | 85   
|Advertising                                         |  |                                 | 30    |                                | 25    |      | 122   |      | 72   
|Other expenses                                      |  |                                 | 86    |                                | 125   |      | 409   |      | 321  
|                                                    |  |                                 |       |                                |       |      |       |      |      
|Total noninterest expenses                          |  |                                 | 996   |                                | 731   |      | 2,817 |      | 2,024
|                                                    |  |                                 |       |                                |       |      |       |      |      
|Earnings before income taxes                        |  |                                 | 596   |                                | 406   |      | 1,431 |      | 1,099
|                                                    |  |                                 |       |                               
|Income taxes                                        |  |                                 | 220   |                                | 153   |      | 538   |      | 413  
|                                                    |  |                                 |       |                                |       |      |       |      |      
|Net earnings                                        |  | $                               | 376   |                                | 253   |      | 893   |      | 686  
|                                                    |  |                                 |       |                                |       |      |       |      |      
|Basic and diluted earnings per share                |  | $                               | .15   |                                | .19   |      | .40   |      | .52  
|                                                    |  |                                 |       |                                |       |      |       |      |      
|Dividends per share                                 |  | $                               |      |                                |      |      |      |      |     
|                                                    |  |                                 |       |                                |       |      |       |      |      



See
Accompanying Notes to Condensed Consolidated Financial Statements.



3



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##### Table of Contents

FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Stockholders Equity

($ in thousands)



Nine Months Ended September 30, 2004 and 2003



|                                                                                               |              |           |        |   |    |                            |   |                                          |  |       |                                                 |  |      |                            |  |        |  
|---------------------------------------------------------------------------------------------- | ------------ | --------- | ------ | - | -- | -------------------------- | - | ---------------------------------------- |  | ----- | ----------------------------------------------- |  | ---- | -------------------------- |  | ------ | -
|                                                                                               |              |           |        |   |    | Additional Paid-In Capital |   | Retained Earnings (Accumulated Deficit ) |  |       | Accumulated Other Compre- hensive Income (Loss) |  |      | Total Stockholders Equity | 
|                                                                                               |              |           |        |   |   
|                                                                                               |              |           |        |   |   
|                                                                                               | Common Stock |           |        |   |   
|                                                                                               | Shares       |           | Amount |   |    |                            |  
|Balance at December 31, 2002                                                                   |              | 1,320,700 |        | $ | 13 |                            |   | 13,131                                   |  | (210  | )                                               |  | 362  |                            |  | 13,296 |  
|                                                                                               |              |           |        |   |    |                            |   |                                          |  |       |                                                 |  |      |                            |  |        |  
|Comprehensive income:                                                                          |              |           |        |   |    |                            |   |                                          |  |       |                                                 |  |      |                            |  |        |  
|Net earnings for the nine months ended September 30, 2003 (unaudited)                          |              |          |        |   |   |                            |   |                                         |  | 686   |                                                 |  |     |                            |  | 686    |  
|Net change in unrealized gain on securities available for sale, net of tax of $240 (unaudited) |              |          |        |   |   |                            |   |                                         |  |      |                                                 |  | (400 | )                          |  | (400   | )
|                                                                                               |              |           |        |   |    |                            |   |                                          |  |       |                                                 |  |      |                            |  |        |  
|Comprehensive income (unaudited)                                                               |              |           |        |   |    |                            |   |                                          |  |       |                                                 |  |      |                            |  | 286    |  
|                                                                                               |              |           |        |   |    |                            |   |                                          |  |       |                                                 |  |      |                            |  |        |  
|Proceeds from warrants exercised (net of offering costs of $22 (unaudited)                     |              | 3,180     |        |   |   |                            |   | 10                                       |  |      |                                                 |  |     |                            |  | 10     |  
|                                                                                               |              |           |        |   |    |                            |   |                                          |  |       |                                                 |  |      |                            |  |        |  
|Balance at September 30, 2003 (unaudited)                                                      |              | 1,323,880 |        | $ | 13 |                            |   | 13,141                                   |  | 476   |                                                 |  | (38  | )                          |  | 13,592 |  
|                                                                                               |              |           |        |   |    |                            |   |                                          |  |       |                                                 |  |      |                            |  |        |  
|Balance at December 31, 2003                                                                   |              | 1,364,880 |        | $ | 14 |                            |   | 13,550                                   |  | 790   |                                                 |  | (29  | )                          |  | 14,325 |  
|                                                                                               |              |           |        |   |    |                            |   |                                          |  |       |                                                 |  |      |                            |  |        |  
|Comprehensive income:                                                                          |              |           |        |   |    |                            |   |                                          |  |       |                                                 |  |      |                            |  |        |  
|Net earnings for the nine months ended September 30, 2004 (unaudited)                          |              |          |        |   |   |                            |   |                                         |  | 893   |                                                 |  |     |                            |  | 893    |  
|Net change in unrealized loss on securities available for sale, net of tax of $249 (unaudited) |              |          |        |   |   |                            |   |                                         |  |      |                                                 |  | (415 | )                          |  | (415   | )
|                                                                                               |              |           |        |   |    |                            |   |                                          |  |       |                                                 |  |      |                            |  |        |  
|Comprehensive income (unaudited)                                                               |              |           |        |   |    |                            |   |                                          |  |       |                                                 |  |      |                            |  | 478    |  
|                                                                                               |              |           |        |   |    |                            |   |                                          |  |       |                                                 |  |      |                            |  |        |  
|Proceeds from warrants exercised (net of offering costs of $3 (unaudited)                      |              | 1,075,620 |        |   | 11 |                            |   | 10,743                                   |  |      |                                                 |  |     |                            |  | 10,754 |  
|Proceeds from stock options exercised                                                          |              | 1,500     |        |   |   |                            |   | 15                                       |  |      |                                                 |  |     |                            |  | 15     |  
|                                                                                               |              |           |        |   |    |                            |   |                                          |  |       |                                                 |  |      |                            |  |        |  
|Balance at September 30, 2004 (unaudited)                                                      |              | 2,442,000 |        |   | 25 |                            | $ | 24,308                                   |  | 1,683 |                                                 |  | (444 | )                          |  | 25,572 |  
|                                                                                               |              |           |        |   |    |                            |   |                                          |  |       |                                                 |  |      |                            |  |        |  



See
Accompanying Notes to Condensed Consolidated Financial Statements.



4



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##### Table of Contents

FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



|                                                                                    |  |                                |         |   |      |         |  
|----------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | ------- | -
|                                                                                    |  | Nine Months EndedSeptember 30, |        
|                                                                                    |  | 2004                           |         |   | 2003 |        
|Cash flows from operating activities:                                               |  |                                |         |   |      |         |  
|Net earnings                                                                        |  | $                              | 893     |   |      | 686     |  
|Adjustments to reconcile net earnings to net cash provided by operating activities: |  |                                |         |   |      |         |  
|Depreciation                                                                        |  |                                | 164     |   |      | 124     |  
|Provision for loan losses                                                           |  |                                | 353     |   |      | 243     |  
|Amortization of loan fees (costs)                                                   |  |                                | (32     | ) |      | 48      |  
|Increase in bank owned life insurance                                               |  |                                | (25     | ) |      |        |  
|Increase in accrued interest receivable and other assets                            |  |                                | (461    | ) |      | (167    | )
|Increase in official checks                                                         |  |                                | 1,096   |   |      | 434     |  
|Increase in other liabilities                                                       |  |                                | 149     |   |      | 220     |  
|                                                                                    |  |                                |         |   |      |         |  
|Net cash provided by operating activities                                           |  |                                | 2,137   |   |      | 1,588   |  
|                                                                                    |  |                                |         |   |      |         |  
|Cash flows from investing activities:                                               |  |                                |         |   |      |         |  
|Net increase in loans                                                               |  |                                | (15,658 | ) |      | (17,294 | )
|Net purchase of securities                                                          |  |                                | (24,785 | ) |      | (24,094 | )
|Proceeds from calls of securities                                                   |  |                                | 7,564   |   |      | 7,365   |  
|Principal paydowns on securities                                                    |  |                                | 7,045   |   |      | 6,590   |  
|Purchase of Federal Home Loan Bank stock                                            |  |                                |        |   |      | (100    | )
|Purchase of premises and equipment                                                  |  |                                | (2,361  | ) |      | (657    | )
|                                                                                    |  |                                |         |   |      |         |  
|Net cash used in investing activities                                               |  |                                | (28,195 | ) |      | (28,190 | )
|                                                                                    |  |                                |         |   |      |         |  
|Cash flows from financing activities:                                               |  |                                |         |   |      |         |  
|Net increase in deposits                                                            |  |                                | 18,257  |   |      | 18,233  |  
|Proceeds from Federal Home Loan Bank advances                                       |  |                                | 2,000   |   |      | 8,000   |  
|Payments of Federal Home Loan Bank advances                                         |  |                                | (2,000  | ) |      | (6,000  | )
|Net (decrease) increase in other borrowings                                         |  |                                | (3,390  | ) |      | 4,823   |  
|Net proceeds from warrants & stock options exercised                                |  |                                | 10,769  |   |      | 10      |  
|                                                                                    |  |                                |         |   |      |         |  
|Net cash provided by financing activities                                           |  |                                | 25,636  |   |      | 25,066  |  
|                                                                                    |  |                                |         |   |      |         |  
|Net decrease in cash and cash equivalents                                           |  |                                | (422    | ) |      | (1,536  | )
|                                                                                    |  |                               
|Cash and cash equivalents at beginning of period                                    |  |                                | 7,766   |   |      | 6,056   |  
|                                                                                    |  |                                |         |   |      |         |  
|Cash and cash equivalents at end of period                                          |  | $                              | 7,344   |   |      | 4,520   |  
|                                                                                    |  |                                |         |   |      |         |  
|Supplemental disclosure of cash flow information:                                   |  |                                |         |   |      |         |  
|Cash paid during the period for:                                                    |  |                                |         |   |      |         |  
|Interest                                                                            |  | $                              | 2,431   |   |      | 2,217   |  
|                                                                                    |  |                                |         |   |      |         |  
|Income taxes                                                                        |  | $                              | 63      |   |      | 457     |  
|                                                                                    |  |                                |         |   |      |         |  
|Noncash item:                                                                       |  |                                |         |   |      |         |  
|Change in unrealized gain (loss) on securities available for sale, net of tax       |  | $                              | (414    | ) |      | (400    | )
|                                                                                    |  |                                |         |   |      |         |  



See
Accompanying Notes to Condensed Consolidated Financial Statements.



5



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##### Table of Contents

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) is a one-bank holding
company and 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 allowed by law, by the Federal Deposit Insurance Corporation. The Bank provides a variety of community banking services to business and individuals through its two banking
offices 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 September 30, 2004, the results of operations for the three- and nine-month periods ended September 30, 2004 and 2003 and cash flows for the nine months ended September 30, 2004 and 2003. The results of operations for the three and nine
months ended September 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 EndedSeptember 30, |       | Nine Months EndedSeptember 30,
|                               |  | 2004                            |       | 2003                           |       | 2004 |       | 2003
|Balance at beginning of period |  | $                               | 1,653 |                                | 1,152 |      | 1,340 |      | 998  
|Provision for loan losses      |  |                                 | 40    |                                | 89    |      | 353   |      | 243  
|                               |  |                                 |       |                                |       |      |       |      |      
|Balance at end of period       |  | $                               | 1,693 |                                | 1,241 |      | 1,693 |      | 1,241
|                               |  |                                 |       |                                |       |      |       |      |      



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



|                                                       |  |                      |    
|------------------------------------------------------ |  | -------------------- | ---
|                                                       |  | At September 30,2004
|Gross loans with related allowance for losses recorded |  | $                    | 962
|                                                       | 
|Less: Allowance for these loans                        |  |                      | 396
|                                                       |  |                      |    
|Net investment in impaired loans                       |  | $                    | 566
|                                                       |  |                      |    



(continued)



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##### Table of Contents

FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



(2) Loan Impairment and Losses, Continued



|                                             |  |                                      |     |                                     |    
|-------------------------------------------- |  | ------------------------------------ | --- | ----------------------------------- | ---
|                                             |  | Three Months EndedSeptember 30, 2004 |     | Nine Months EndedSeptember 30, 2004
|Average net investment in impaired loans     |  | $                                    | 497 |                                     | 435
|                                             |  |                                      |     |                                     |    
|                                             |  |                                     
|Interest income recognized on impaired loans |  | $                                    | 8   |                                     | 17 
|                                             |  |                                      |     |                                     |    
|                                             |  |                                     
|Interest income received on impaired loans   |  | $                                    | 3   |                                     | 3  
|                                             |  |                                      |     |                                     |    



There were no loans on
nonaccrual or past due, ninety days or more at September 30, 2003. Nonaccrual and past due loans at September 30, 2004 were as follows (in thousands):



|                                                 |  |   |    
|------------------------------------------------ |  | - | ---
|Nonaccrual loans                                 |  | $ | 119
|Past due ninety days or more, but still accruing |  |   |   
|                                                 |  |   |    
|                                                 |  | $ | 119
|                                                 |  |   |    



(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
|                                                                   |  | 2004                    |  | 2003     
|Three Months Ended September 30:                                   |  |                         |  |          
|                                                                   |  |                        
|For Basic EPS                                                      |  | 2,442,000               |  | 1,322,549
|                                                                   |  |                        
|Effect of dilutive securities-                                     |  |                         |  |          
|Incremental shares from assumed conversion of options and warrants |  | 4,465                   |  | 2,441    
|                                                                   |  |                         |  |          
|                                                                   |  |                        
|For Diluted EPS                                                    |  | 2,446,465               |  | 1,324,990
|                                                                   |  |                         |  |          
|                                                                   |  |                        
|Nine Months Ended September 30:                                    |  |                         |  |          
|                                                                   |  |                        
|For Basic EPS                                                      |  | 2,239,312               |  | 1,321,316
|                                                                   |  |                        
|Effect of dilutive securities-                                     |  |                         |  |          
|Incremental shares from assumed conversion of options and warrants |  | 3,686                   |  | 2,574    
|                                                                   |  |                         |  |          
|                                                                   |  |                        
|For Diluted EPS                                                    |  | 2,242,998               |  | 1,323,890
|                                                                   |  |                         |  |          



(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



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



|                 |  |   |             
|---------------- |  | - | ------------
|Number of shares |  |   | 28,500      
|Exercise price   |  | $ | 10.50-$11.00
|Year issued      |  |   | 2004        
|Year expiring    |  |   | 2014        



(4) Stock Option Plan



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 324,000 (amended). At September 30, 2004, 115,400 (amended)
shares remain available for grant. Some options are fully vested when granted while others generally vest over four 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                   |  | 3,500           |   |  |                                 | 10.00       |                               | 10.00 |                      | 35    |  
|                                  |  |                 |   |  |                                 |             |                               |       |                      |       |  
|Outstanding at September 30, 2003 |  | 181,100         |   |  | $                               | 10.00       |                               | 10.00 |                      | 1,811 |  
|                                  |  |                 |   |  |                                 |             |                               |       |                      |       |  
|Outstanding at December 31, 2003  |  | 181,100         |   |  |                                 | 10.00       |                               | 10.00 |                      | 1,811 |  
|Options granted                   |  | 30,000          |   |  |                                 | 10.50-11.00 |                               | 10.65 |                      | 320   |  
|Options exercised                 |  | (1,500          | ) |  |                                 | 10.00       |                               | 10.00 |                      | (15   | )
|Options forfeited                 |  | (2,500          | ) |  |                                 | 10.00-11.00 |                               | 10.60 |                      | (27   | )
|                                  |  |                 |   |  |                                 |             |                               |       |                      |       |  
|Outstanding at September 30, 2004 |  | 207,100         |   |  | $                               | 10.00-11.00 |                               | 10.09 |                      | 2,089 |  
|                                  |  |                 |   |  |                                 |             |                               |       |                      |       |  



(continued)



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##### Table of Contents

FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



(4) Stock Option Plan, Continued



The Company accounts for their stock option plans under the recognition and
measurement principles of Accounting Principles Board 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 EndedSeptember 30, |     |   | Nine Months EndedSeptember 30, |    
|                                                                                                                                   |  | 2004                            |     |   | 2003                           |     |   | 2004 |     |   | 2003 |    
|Net earnings, as reported                                                                                                          |  | $                               | 376 |   |                                | 253 |   |      | 893 |   |      | 686 |  
|Deduct: Total stock-based employee compensation determined under fair value based method for all awards, net of related tax
effect |  |                                 | (17 | ) |                                | (9  | ) |      | (42 | ) |      | (27 | )
|                                                                                                                                   |  |                                 |     |   |                                |     |   |      |     |   |      |     |  
|Proforma net earnings                                                                                                              |  | $                               | 359 |   |                                | 244 |   |      | 851 |   |      | 659 |  
|                                                                                                                                   |  |                                 |     |   |                                |     |   |      |     |   |      |     |  
|Basic earnings per share:                                                                                                          |  |                                 |     |   |                                |     |   |      |     |   |      |     |  
|As reported                                                                                                                        |  | $                               | .15 |   |                                | .19 |   |      | .40 |   |      | .52 |  
|                                                                                                                                   |  |                                 |     |   |                                |     |   |      |     |   |      |     |  
|Proforma                                                                                                                           |  | $                               | .15 |   |                                | .18 |   |      | .38 |   |      | .50 |  
|                                                                                                                                   |  |                                 |     |   |                                |     |   |      |     |   |      |     |  
|Diluted earnings per share:                                                                                                        |  |                                 |     |   |                                |     |   |      |     |   |      |     |  
|As reported                                                                                                                        |  | $                               | .15 |   |                                | .19 |   |      | .40 |   |      | .52 |  
|                                                                                                                                   |  |                                 |     |   |                                |     |   |      |     |   |      |     |  
|Proforma                                                                                                                           |  | $                               | .15 |   |                                | .18 |   |      | .38 |   |      | .50 |  
|                                                                                                                                   |  |                                 |     |   |                                |     |   |      |     |   |      |     |  



There were no options
granted during the three months ended September 30, 2004 or 2003. The fair value of each option grant is estimated on the date of grant using the Black-Scholes model with the following assumptions:



|                                              |  |                                |             |      |      
|--------------------------------------------- |  | ------------------------------ | ----------- | ---- | -----
|                                              |  | Nine Months EndedSeptember 30,
|                                              |  | 2004                           |             | 2003
|Risk-free interest rate                       |  |                                | 4.53%-5.08% |      | 4.69%
|Dividend yield                                |  |                                |   %        |      |   % 
|Expected volatility                           |  |                                | 9.6%-8.0%   |      |   % 
|Expected life in years                        |  |                                | 10          |      | 10   
|Per share fair value of options at grant date |  | $                              | 3.37 -3.38  |      | 3.84 



(continued)



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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 September 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                                          |  | 19.49  | % |  | 8.00                  | %
|Bank                                             |  | 11.87  | % |  | 8.00                  | %
|Tier I capital to risk-weighted assets:          |  |        |   |  |                       |  
|Company                                          |  | 18.27  | % |  | 4.00                  | %
|Bank                                             |  | 10.66  | % |  | 4.00                  | %
|Tier I capital to total assets - leverage ratio: |  |        |   |  |                       |  
|Company                                          |  | 14.92  | % |  | 4.00                  | %
|Bank                                             |  | 8.40   | % |  | 4.00                  | %



(6) Warrants



The Company issued warrants in conjunction with the sale of its common
stock. One warrant and one share of common stock were sold as a unit in the Companys public offering. At September 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 nine months ended September 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 nine months ended September 30, 2004, the Bank purchased two sites for future branch locations for approximately
$1,850,000 and entered into a contract to construct one branch building for approximately $795,000. This office is scheduled to open in the first quarter of 2005. The bank has also entered into an agreement to purchase an additional site for a
future branch location for approximately $1,450,000.



10



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##### Table of Contents

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 September 30, 2004, and for the three- and nine-month periods
ended September 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



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##### Table of Contents

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
September 30, 2004, the related interim condensed consolidated statements of earnings for the three- and nine- month periods ended September 30, 2004 and 2003 and the related interim condensed consolidated statements of cash flows and
stockholders equity for the nine-month periods ended September 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                
|October 22, 2004              



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FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



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

and Results of Operations



Comparison of September 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 nine months ended September 30, 2004, the Companys primary sources of funds
consisted of proceeds from warrants exercised of $10.8 million, deposit inflows of $18.3 million, proceeds from principal pay-downs and calls of securities available for sale of $14.6 million and cash provided by operations of $2.1 million. The
Company used its capital resources principally to fund existing and continuing loan commitments, net of principal repayments of $15.7 million, to purchase securities of $24.8 million and to repay other borrowings of $3.4 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 September 30, 2004, the Bank had liquidity of approximately $52.7 million, or
approximately 34.5% of total deposits.



Management believes the Company and the
Bank were in compliance with all minimum capital requirements which they were subject to at September 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 September 30, 2004, follows (in thousands):



|                             |  |                |       
|---------------------------- |  | -------------- | ------
|                             |  | ContractAmount
|Commitments to extend credit |  | $              | 31,763
|                             |  |                |       
|                             | 
|Unused lines of credit       |  | $              | 9,985 
|                             |  |                |       
|                             | 
|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:



|                                                                                                |  |                                   |   |  |                            |   |  |                                   |  
|----------------------------------------------------------------------------------------------- |  | --------------------------------- | - |  | -------------------------- | - |  | --------------------------------- | -
|                                                                                                |  | Nine MonthsEndedSeptember 30,2004 |   |  | Year EndedDecember 31,2003 |   |  | Nine MonthsEndedSeptember 30,2003 |  
|Average equity as a percentage of average assets                                                |  | 13.49                             | % |  | 9.66                       | % |  | 10.84                             | %
|Equity to total assets at end of period                                                         |  | 14.16                             | % |  | 9.35                       | % |  | 9.82                              | %
|Return on average assets (1)                                                                    |  | .70                               | % |  | .71                        | % |  | .74                               | %
|Return on average equity (1)                                                                    |  | 5.17                              | % |  | 7.38                       | % |  | 6.79                              | %
|Noninterest expenses to average assets (1)                                                      |  | 2.20                              | % |  | 1.97                       | % |  | 2.17                              | %
|Nonperforming loans and foreclosed real estate as a percentage of total assets at end of period |  | .07                               | % |  |                           | % |  |                                  | %

---

|(1) | Annualized for the nine months ended September 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 September 30, |        
|                                                                                 |  | 2004                             |         |                       | 2003 |                  
|                                                                                 |  | AverageBalance                   |         | Interest andDividends |      | AverageYield/Rate |  |      | AverageBalance |  | InterestandDividends |         | AverageYield/Rate |  
|                                                                                 |  | ($ in thousands)                 |        
|Interest-earning assets:                                                         |  |                                  |         |                       |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Loans                                                                            |  | $                                | 112,907 |                       |      | 1,890             |  | 6.70 | %              |  | $                    | 92,798  |                   |   | 1,586 |  | 6.84 | %
|Securities                                                                       |  |                                  | 50,993  |                       |      | 440               |  | 3.45 |                |  |                      | 34,043  |                   |   | 298   |  | 3.50 |  
|Other interest-earning assets (1)                                                |  |                                  | 2,388   |                       |      | 10                |  | 1.68 |                |  |                      | 432     |                   |   | 5     |  | 4.63 |  
|                                                                                 |  |                                  |         |                       |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-earning assets                                                    |  |                                  | 166,288 |                       |      | 2,340             |  | 5.63 | %              |  |                      | 127,273 |                   |   | 1,889 |  | 5.94 |  
|                                                                                 |  |                                  |         |                       |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|                                                                                 |  |                                  |         |                       |      |                  
|Noninterest-earning assets                                                       |  |                                  | 10,769  |                       |      |                   |  |      |                |  |                      | 6,992   |                   |   |       |  |      |  
|                                                                                 |  |                                  |         |                       |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total assets                                                                     |  | $                                | 177,057 |                       |      |                   |  |      |                |  | $                    | 134,265 |                   |   |       |  |      |  
|                                                                                 |  |                                  |         |                       |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Interest-bearing liabilities:                                                    |  |                                  |         |                       |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Savings, NOW, money-market deposit accounts                                      |  |                                  | 29,123  |                       |      | 84                |  | 1.15 |                |  |                      | 24,379  |                   |   | 70    |  | 1.15 |  
|Time deposits                                                                    |  |                                  | 93,919  |                       |      | 691               |  | 2.94 |                |  |                      | 68,805  |                   |   | 627   |  | 3.65 |  
|                                                                                 |  |                                  |         |                       |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-bearing deposits                                                  |  |                                  | 123,042 |                       |      | 775               |  | 2.52 |                |  |                      | 93,184  |                   |   | 697   |  | 2.99 |  
|                                                                                 |  |                                  |         |                       |      |                  
|Borrowings (2)                                                                   |  |                                  | 10,868  |                       |      | 60                |  | 2.21 |                |  |                      | 16,334  |                   |   | 70    |  | 1.71 |  
|                                                                                 |  |                                  |         |                       |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-bearing liabilities                                               |  |                                  | 133,910 |                       |      | 835               |  | 2.49 |                |  |                      | 109,518 |                   |   | 767   |  | 2.80 |  
|                                                                                 |  |                                  |         |                       |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Noninterest-bearing liabilities                                                  |  |                                  | 18,167  |                       |      |                   |  |      |                |  |                      | 11,279  |                   |   |       |  |      |  
|Stockholders equity                                                             |  |                                  | 24,980  |                       |      |                   |  |      |                |  |                      | 13,468  |                   |   |       |  |      |  
|                                                                                 |  |                                  |         |                       |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total liabilities and stockholders equity                                       |  | $                                | 177,057 |                       |      |                   |  |      |                |  | $                    | 134,265 |                   |   |       |  |      |  
|                                                                                 |  |                                  |         |                       |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Net interest income                                                              |  |                                  |         |                       | $    | 1,505             |  |      |                |  |                      |         |                   | $ | 1,122 |  |      |  
|                                                                                 |  |                                  |         |                       |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Interest-rate spread (3)                                                         |  |                                  |         |                       |      |                   |  | 3.14 | %              |  |                      |         |                   |   |       |  | 3.14 | %
|                                                                                 |  |                                  |         |                       |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Net interest margin (4)                                                          |  |                                  |         |                       |      |                   |  | 3.62 | %              |  |                      |         |                   |   |       |  | 3.53 | %
|                                                                                 |  |                                  |         |                       |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                                  | 1.24    |                       |      |                   |  |      |                |  |                      | 1.16    |                   |   |       |  |      |  
|                                                                                 |  |                                  |         |                       |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  

---

|(1) | Includes Federal Home Loan Bank stock and federal funds sold.
|--- | -------------------------------------------------------------

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

|(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.
|--- | --------------------------------------------------------------------------------------



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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.



|                                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|-------------------------------------------------------------------------------- |  | ------------------------------- | ------- | -------------------- | ---- | ----------------- |  | ---- | -------------- |  | -------------------- | ------- | ----------------- | - | ----- |  | ---- | -
|                                                                                 |  | Nine Months Ended September 30, |        
|                                                                                 |  | 2004                            |         |                      | 2003 |                  
|                                                                                 |  | AverageBalance                  |         | InterestandDividends |      | AverageYield/Rate |  |      | AverageBalance |  | InterestandDividends |         | AverageYield/Rate |  
|                                                                                 |  | ($ in thousands)                |        
|Interest-earning assets:                                                         |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Loans                                                                            |  | $                               | 109,231 |                      |      | 5,463             |  | 6.67 | %              |  | $                    | 84,839  |                   |   | 4,490 |  | 7.06 | %
|Securities                                                                       |  |                                 | 48,525  |                      |      | 1,273             |  | 3.50 |                |  |                      | 28,971  |                   |   | 807   |  | 3.71 |  
|Other interest-earning assets (1)                                                |  |                                 | 3,102   |                      |      | 32                |  | 1.38 |                |  |                      | 3,372   |                   |   | 39    |  | 1.54 |  
|                                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-earning assets                                                    |  |                                 | 160,858 |                      |      | 6,768             |  | 5.61 |                |  |                      | 117,182 |                   |   | 5,336 |  | 6.07 |  
|                                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Noninterest-earning assets                                                       |  |                                 | 9,814   |                      |      |                   |  |      |                |  |                      | 7,166   |                   |   |       |  |      |  
|                                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total assets                                                                     |  | $                               | 170,672 |                      |      |                   |  |      |                |  | $                    | 124,348 |                   |   |       |  |      |  
|                                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Interest-bearing liabilities:                                                    |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Savings, NOW, money-market deposit accounts                                      |  |                                 | 27,367  |                      |      | 234               |  | 1.14 |                |  |                      | 22,826  |                   |   | 234   |  | 1.37 |  
|Time deposits                                                                    |  |                                 | 92,337  |                      |      | 2,074             |  | 2.99 |                |  |                      | 65,008  |                   |   | 1,819 |  | 3.73 |  
|                                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-bearing deposits                                                  |  |                                 | 119,704 |                      |      | 2,308             |  | 2.57 |                |  |                      | 87,834  |                   |   | 2,053 |  | 3.12 |  
|                                                                                 |  |                                 |         |                      |      |                  
|Borrowings (2)                                                                   |  |                                 | 12,066  |                      |      | 183               |  | 2.02 |                |  |                      | 12,170  |                   |   | 165   |  | 1.81 |  
|                                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-bearing liabilities                                               |  |                                 | 131,770 |                      |      | 2,491             |  | 2.52 |                |  |                      | 100,004 |                   |   | 2,218 |  | 2.96 |  
|                                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Noninterest-bearing liabilities                                                  |  |                                 | 15,880  |                      |      |                   |  |      |                |  |                      | 10,869  |                   |   |       |  |      |  
|Stockholders equity                                                             |  |                                 | 23,022  |                      |      |                   |  |      |                |  |                      | 13,475  |                   |   |       |  |      |  
|                                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total liabilities and stockholders equity                                       |  | $                               | 170,672 |                      |      |                   |  |      |                |  | $                    | 124,348 |                   |   |       |  |      |  
|                                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Net interest income                                                              |  |                                 |         |                      | $    | 4,277             |  |      |                |  |                      |         |                   | $ | 3,118 |  |      |  
|                                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Interest-rate spread (3)                                                         |  |                                 |         |                      |      |                   |  | 3.09 | %              |  |                      |         |                   |   |       |  | 3.11 | %
|                                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Net interest margin (4)                                                          |  |                                 |         |                      |      |                   |  | 3.55 | %              |  |                      |         |                   |   |       |  | 3.55 | %
|                                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                                 | 1.22    |                      |      |                   |  |      |                |  |                      | 1.17    |                   |   |       |  |      |  
|                                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  

|
|

---

|(1) | Includes Federal Home Loan Bank stock and federal funds sold.
|--- | -------------------------------------------------------------

|(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.
|--- | --------------------------------------------------------------------------------------



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FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



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



General. Net earnings for the three months
ended September 30, 2004 were $376,000 or $.15 per basic and diluted share compared to a net earnings of $253,000 or $.19 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 September 30, 2004 from $1.9 million
for the three months ended September 30, 2003. Interest on loans increased to $1.9 million in 2004 from $1.6 million in 2003 due to an increase in the average loan portfolio balance in 2004 to $112.9 million from $92.8 million in 2003 which was only
partially offset by a decrease in the weighted-average yield earned in 2004 to 6.70% from 6.84% in 2003. Interest on securities increased to $440,000 for the three-months ended September 30, 2004 compared to $298,000 in 2003 due to an increase in
the average portfolio balance to $51.0 million from $34.0 million for 2003 which was partially offset by decrease in the average yield earned to 3.45% in 2004 from 3.50% in 2003. Interest on other interest-earning assets increased from $5,000 for
the three-months ended September 30, 2003 to $10,000 for the three months ended September 30, 2004.



Interest expense on deposits increased to $775,000 for the three-months ended September 30, 2004 from $697,000 in 2003. The increase is due to an increase
in the average interest bearing deposits in 2004 to $123.0 million from $93.2 million in 2003 which was only partially offset by a decrease in the weighted-average rate paid on deposits in 2004 to 2.52% from 2.99% 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 $40,000 for the three-month
period ended September 30, 2004 compared to $89,000 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 $1,693,000 at September
30, 2004. While management believes that its allowance for loan losses is adequate as of September 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 $127,000 in 2004 from $104,000 for the three- months ended September 30, 2003. The increase was due to a increase in service charges and fees primarily due to the growth in
deposit accounts.



Noninterest Expenses. Total
noninterest expenses increased to $996,000 for the three-months ended September 30, 2004 from $731,000 for the comparable period ended September 30, 2003. The increase was due to an increase in salaries and employee benefits and occupancy due to the
opening of a second banking office in the second quarter of 2003.



Income Taxes. Income taxes for the three-months ended September 30, 2004 were $220,000 (an effective rate of 36.9%) compared to income taxes of $153,000 in 2003 (an effective rate of 37.7%).



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FLORIDA BUSINESS BANCGROUP, INC. AND SUBSIDIARY



Comparison of the Nine-Month Periods Ended September 30, 2004 and 2003



General. Net earnings for the nine months ended September
30, 2004 were $893,000 or $.40 per basic and diluted share compared to net earnings of $686,000 or $.52 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 $6.8 million for the nine-month period ended September 30, 2004 from $5.3 million for the nine
months ended September 30, 2003. Interest on loans increased to $5.5 million in 2004 from $4.5 million in 2003 due to an increase in the average loan portfolio balance in 2004 to $109.2 million from $84.8 million in 2003 which was only partially
offset by a decrease in the weighted-average yield earned in 2004 to 6.67% from 7.06% in 2003. Interest on securities increased to $1.3 million for the nine-months ended September 30, 2004 compared to $807,000 in 2003 due to an increase in the
average portfolio balance to $48.5 million from $29.0 million for 2003 which was partially offset by a decrease in the average yield earned in 2004 to 3.50% from 3.71% in 2003. Interest on other interest-earning assets decreased from $39,000 for the
nine-months ended September 30, 2003 to $32,000 for the nine months ended September 30, 2004.



Interest expense on deposits increased to $2.3 million for the nine-months ended September 30, 2004 from $2.1 million in 2003. The increase is due to an increase in the average deposits in 2004 to $119.7 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 2.57% from 3.12% 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 $353,000 for the nine-month period ended September 30, 2004 compared to $243,000 for the same period in 2003. The increase
is due to an increase in the portfolio and the downgrade of certain commercial loans by management during the 2004 period. The allowance for loan losses is $1,693,000 at September 30, 2004. While management believes that its allowance for loan
losses is adequate as of September 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 $324,000 in 2004 from
$248,000 for the nine- months ended September 30, 2003. The increase was due to a increase in service charges and fees primarily due to the growth in deposit accounts.



Noninterest Expenses. Total noninterest expenses increased to $2.8 million for the nine-months ended September 30, 2004 from
$2.0 million for the comparable period ended September 30, 2003. The increase in noninterest expense was primarily due to an increase in compensation and benefits, occupancy and other expense due to the opening of a second banking office during the
second quarter of 2003.



Income Taxes. The income taxes for the
nine-months ended September 30, 2004 were $538,000 (an effective rate of 37.6%) compared to income taxes of $413,000 in 2003 (an effective rate of 37.6%).



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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 September 30, 2004.



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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 Companys
March 31, 2002 Form 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 Companys June 30, 2002 Form 10-QSB, filed with the Securities
and Exchange Commission on August 8, 2002; exhibits marked with nine asterisks (*********) were previously filed as part of the Companys March 31, 2003 Form 10-QSB, filed with the Securities and Exchange Commission on May 6, 2003; and exhibits
marked with ten asterisks (**********) were previously filed as part of the Companys June 30, 2004 Form 10-QSB, filed with the Securities and Exchange Commission on August 10, 2004.



|            |  |                        |  |                                                                                                                                              
|----------- |  | ---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|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                                                        
|********    |  | 10.9                   |  | 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                                                                                  
|            |  | 10.18                  |  | Employment Agreement for Patrick J. Murrin                                                                                                   
|            |  | 10.19                  |  | Employment Agreement for Marti J. Warren                                                                                                     
|******      |  | 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 September 30, 2004.



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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: November 8, 2004 |  | By:                              |  | /s/ A. Bronson Thayer                       
|                       |  |                                  |  | A. Bronson Thayer, Chairman and             
|                       |  |                                  |  | Chief Executive Officer                     
|                       |  |                                 
|Date: November 8, 2004 |  | By:                              |  | /s/ Marti J. Warren                         
|                       |  |                                  |  | Marti J. Warren, Principal Financial Officer



21