UNITED STATESSECURITIES AND EXCHANGE COMMISSION
  Washington, D.C. 20549

FORM 10-Q

XQUARTERLY
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  
        For the quarterly period ended March 31, 2004

OR

__    TRANSITION REPORT PURSUANT
  TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
           For the transition period from
  ________ to ________

Commission File No. 0-25988

CNB Florida Bancshares, Inc.

(Exact name of registrant as specified in its charter)

| | FLORIDA                                                                    |  | 59-2958616          | 
| | -------------------------------------------------------------------------- |  | ------------------- | 
| |                                                                            |  |                     | 
| | (State or other jurisdiction                                               |  | (I.R.S. Employer    | 
| | of incorporation or organization)                                          |  | Identification No.) | 
| |                                                                            |  |                     | 
| |                                                                            |  |                     | 
| | 9715 Gate Parkway North                                                    |  |                     | 
| | Jacksonville, Florida                                                      |  | 32246               | 
| |                                                                            |  |                     | 
| | (Address of principal executive offices)                                   |  | (Zip Code)          | 
| |                                                                            |  |                     | 
| | Registrant's telephone number, including
        area code: (904) 997-8484 |  |                     | 

Indicate by check mark whether the registrant (1)
  has filed all reports required to be filed by Section 13 or 15(d) of the Securities
  Exchange Act of 1934 during the preceding 12 months (or for such shorter period
  that the registrant was required to file such reports), and (2) has been subject
  to such filing requirements for the past 90 days. YesXNo___

The number of shares of the registrant's common
  stock outstanding as of April 30, 2004 was 6,286,162shares, $0.01 par value per share.



---

CNB FLORIDA BANCSHARES, INC.

FINANCIAL REPORT ON FORM 10-Q

TABLEOFCONTENTS

|PART I - FINANCIAL INFORMATION |                                                                           |   
|------------------------------ | ------------------------------------------------------------------------- | --
|                               | Item 1. Financial Statements
      (Unaudited)                            |   
|                               |                                                                           |   
|                               | Consolidated Statements of
      Financial Condition                      | 3 
|                               | Consolidated Statements of
      Income                                   | 4 
|                               | Consolidated Statements of
      Cash Flows                               | 5 
|                               | Notes to Consolidated Financial
      Statements                          | 6 
|                               | Selected
      Financial Data                                             | 10
|                               |                                                                           |   
|                               | Item 2. Management's Discussion
      and Analysis of Financial Condition |   
|                               | and Results
      of Operations                                           |   
|                               |                                                                           |   
|                               | Overview                                                                  | 11
|                               | Results
      of Operations                                               | 11
|                               | Liquidity                                                                 | 15
|                               | Obligations
      and Commitments                                         | 17
|                               | Interest Rate Sensitivity                                                 | 17
|                               | Earning
      Assets                                                      | 20
|                               | Funding Sources                                                           | 24
|                               | Capital
      Resources                                                   | 24
|                               | Critical Accounting Policies                                              | 25
|                               |                                                                           |   
|                               | Item 3.
      Quantitative and Qualitative Disclosure About Market Risk   | 25
|                               |                                                                           |   
|                               | Item 4. Controls and Procedures                                           | 26
|                               |                                                                           |   
|PART II - OTHER INFORMATION    |                                                                           |   
|                               | Item 1.
      Legal Proceedings                                           | 27
|                               |                                                                           |   
|                               | Item 2. Changes in Securities
      and Use of Proceeds                   | 27
|                               |                                                                           |   
|                               | Item 3.
      Defaults Upon Senior Securities                             | 27
|                               |                                                                           |   
|                               | Item 4. Submission of Matters
      to a Vote of Security Holders         | 27
|                               |                                                                           |   
|                               | Item 5.
      Other Information                                           | 27
|                               |                                                                           |   
|                               | Item 6. Exhibits and Reports                                              | 27

2



---

PART I FINANCIAL INFORMATION

CNB
  FLORIDA BANCSHARES, INC. AND SUBSIDIARY 
  CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

|                                                                                   | (Unaudited) |             |                    |   |        
|---------------------------------------------------------------------------------- | ----------- | ----------- | ------------------ | - | -------
|ASSETS                                                                             | March 31,   |             | December
      31, |  
|                                                                                   | 2004        |             | 2003               |  
|                                                                                   |             |             |                    |  
|Cash and cash equivalents:                                                         |             | (thousands) |                    |  
|Cash
      and due from banks                                                      | $           | 18,619      |                    | $ | 17,158 
|Federal
      funds sold                                                           |             | 14,000      |                    |   | -      
|Interest-bearing
      deposits in other banks                                     |             | 991         |                    |   | 909    
|                                                                                   |             |             |                    |   |        
|Total
      cash and cash equivalents                                              |             | 33,610      |                    |   | 18,067 
|Investment securities held to maturity
      (market value of $21,858 and $29,416) |             | 21,744      |                    |   | 29,536 
|Investment securities available
      for sale                                     |             | 49,816      |                    |   | 58,831 
|Loans:                                                                             |             |             |                    |   |        
|Commercial                                                                         |             | 119,687     |                    |   | 120,033
|Commercial
      real estate                                                       |             | 379,115     |                    |   | 365,911
|Mortgages
      (including home equity)                                            |             | 161,216     |                    |   | 157,325
|Consumer                                                                           |             | 32,911      |                    |   | 32,510 
|Tax
      free                                                                     |             | 5,491       |                    |   | 5,971  
|                                                                                   |             |             |                    |   |        
|Total
      loans, net of unearned income                                          |             | 698,420     |                    |   | 681,750
|Less:Allowance for loan losses                                                     |             | (7,486      | )                  |   | (7,329 
|                                                                                   |             |             |                    |   |        
|Net
      loans                                                                    |             | 690,934     |                    |   | 674,421
|                                                                                   |             |             |                    |   |        
|Loans held for sale                                                                |             | 216         |                    |   | 1,063  
|Premises and equipment, net                                                        |             | 24,774      |                    |   | 25,150 
|Intangible assets, net                                                             |             | 5,185       |                    |   | 5,345  
|Other assets                                                                       |             | 7,055       |                    |   | 7,522  
|                                                                                   |             |             |                    |   |        
|TOTAL
      ASSETS                                                                 | $           | 833,334     |                    | $ | 819,935
|                                                                                   |             |             |                    |   |        
|LIABILITIES AND SHAREHOLDERS
      EQUITY                                         |             |             |                    |   |        
|LIABILITIES                                                                        |             |             |                    |   |        
|Deposits:                                                                          |             |             |                    |   |        
|Non-interest
      bearing demand                                                  | $           | 108,584     |                    | $ | 94,995 
|Savings,
      NOW and money market                                                |             | 309,708     |                    |   | 294,540
|Time
      under $100,000                                                          |             | 169,776     |                    |   | 173,452
|Time
      $100,000 and over                                                       |             | 154,103     |                    |   | 160,699
|                                                                                   |             |             |                    |   |        
|Total
      deposits                                                               |             | 742,171     |                    |   | 723,686
|Securities sold under repurchase
      agreements and federal funds purchased      |             | 15,329      |                    |   | 22,550 
|Other borrowings                                                                   |             | 11,500      |                    |   | 11,500 
|Other liabilities                                                                  |             | 6,330       |                    |   | 5,812  
|                                                                                   |             |             |                    |   |        
|Total
      liabilities                                                            |             | 775,330     |                    |   | 763,548
|                                                                                   |             |             |                    |   |        
|                                                                                   |             |             |                    |   |        
|SHAREHOLDERS EQUITY                                                               |             |             |                    |   |        
|Preferred stock; $.01 par value;
      500,000 shares authorized,                  |             |             |                    |   |        
|no
      shares issued or outstanding                                              |             | -           |                    |   | -      
|Common stock; $.01 par value; 10,000,000
      shares authorized,                  |             |             |                    |   |        
|6,264,162
      shares issued and outstanding at March 31, 2004 and                |             |             |                    |   |        
|6,256,662
      shares issued and outstanding at December 31, 2003                 |             | 63          |                    |   | 63     
|Additional paid-in capital                                                         |             | 32,361      |                    |   | 32,288 
|Retained earnings                                                                  |             | 25,991      |                    |   | 24,688 
|Accumulated other comprehensive
      loss, net of taxes                           |             | (411        | )                  |   | (652   
|                                                                                   |             |             |                    |   |        
|Total
      shareholders equity                                                   |             | 58,004      |                    |   | 56,387 
|                                                                                   |             |             |                    |   |        
|TOTAL
      LIABILITIES AND SHAREHOLDERS EQUITY                                   | $           | 833,334     |                    | $ | 819,935
|                                                                                   |             |             |                    |   |        

See accompanying notes to unaudited
  consolidated financial statements.

3



---

CNB FLORIDA BANCSHARES, INC. AND
  SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

|                                                           | Three Months Ended |          
|---------------------------------------------------------- | ------------------ | ---------
|                                                           | March 31,          |          
|                                                           | 2004               |          
|                                                           |                    |          
|                                                           | (thousands)        |          
|Interest Income                                            |                    |          
|Interest
      and fees on loans                           | $                  | 10,408   
|Interest
      on investment securities available for sale |                    | 533      
|Interest
      on investment securities held to maturity   |                    | 356      
|Interest
      on federal funds sold                       |                    | 2        
|Interest
      on interest-bearing deposits                |                    | 6        
|                                                           |                    |          
|Total
      interest income                                |                    | 11,305   
|                                                           |                    |          
|Interest Expense                                           |                    |          
|Interest
      on deposits                                 |                    | 3,320    
|Interest
      on repurchases and federal funds purchased  |                    | 43       
|Interest
      on other borrowings                         |                    | 188      
|                                                           |                    |          
|Total
      interest expense                               |                    | 3,551    
|                                                           |                    |          
|Net
      interest income                                  |                    | 7,754    
|                                                           |                    |          
|Provision for Loan Losses                                  |                    | 475      
|                                                           |                    |          
|Net
      interest income after provision for loan losses  |                    | 7,279    
|                                                           |                    |          
|Non-Interest Income                                        |                    |          
|Service
      charges                                      |                    | 890      
|Secondary
      market mortgage sales                      |                    | 97       
|Other
      fees and charges                               |                    | 209      
|Securities
      gains                                     |                    | 106      
|                                                           |                    |          
|Total
      non-interest income                            |                    | 1,302    
|                                                           |                    |          
|Non-Interest Expense                                       |                    |          
|Salaries
      and employee benefits                       |                    | 2,978    
|Occupancy
      and equipment expense                      |                    | 953      
|Other
      operating expense                              |                    | 1,904    
|                                                           |                    |          
|Total
      non-interest expense                           |                    | 5,835    
|                                                           |                    |          
|                                                           |                    |          
|Income before income taxes                                 |                    | 2,746    
|Provision
      for income taxes                           |                    | 1,004    
|                                                           |                    |          
|                                                           |                    |          
|NET INCOME                                                 | $                  | 1,742    
|                                                           |                    |          
|                                                           |                    |          
|Earnings Per Share (Note 4):                               |                    |          
|                                                           |                    |          
|Basic
      earnings per common share                      | $                  | 0.28     
|                                                           |                    |          
|Weighted
      average shares outstanding                  |                    | 6,258,393
|                                                           |                    |          
|                                                           |                    |          
|Diluted
      earnings per common share                    | $                  | 0.27     
|                                                           |                    |          
|Diluted
      weighted average shares outstanding          |                    | 6,497,083
|                                                           |                    |          
|                                                           |                    |          
|Dividends Per Share                                        | $                  | 0.07     
|                                                           |                    |          

See accompanying notes to unaudited consolidated financial statements.

4



---

CNB FLORIDA BANCSHARES, INC.
  AND SUBSIDIARYCONSOLIDATED STATEMENTS OF CASH FLOWS
  (Unaudited)

|                                                                                        | Three Months Ended |        
|--------------------------------------------------------------------------------------- | ------------------ | -------
|                                                                                        | March 31,          |        
|                                                                                        | 2004               |        
|                                                                                        |                    |        
|                                                                                        | (thousands)        |        
|CASH FLOWS FROM OPERATING ACTIVITIES                                                    |                    |        
|Net income                                                                              | $                  | 1,742  
|Adjustments to reconcile net income to net cash
      provided by operating activities: |                    |        
|Securities
      gains                                                                  |                    | (106   
|Depreciation
      and amortization                                                     |                    | 642    
|Provision
      for loan losses                                                         |                    | 475    
|Investment
      securities amortization, net                                           |                    | 93     
|Loss on
      bank real estate                                                          |                    | 142    
|Changes
      in assets and liabilities:                                                |                    |        
|Loans
      held for sale                                                               |                    | 847    
|Other
      assets                                                                      |                    | 305    
|Other
      liabilities                                                                 |                    | 314    
|                                                                                        |                    |        
|Net
      cash provided by operating activities                                         |                    | 4,454  
|                                                                                        |                    |        
|                                                                                        |                    |        
|CASH FLOWS FROM INVESTING ACTIVITIES                                                    |                    |        
|Purchases of investment securities available
      for sale                             |                    | (4,615 
|Proceeds from maturities of securities available
      for sale                         |                    | 4,000  
|Proceeds from sales of securities available
      for sale                              |                    | 8,386  
|Proceeds from called securities available for
      sale                                |                    | -      
|Proceeds from called securities held to maturity                                        |                    | 7,500  
|Proceeds from principal repayments on securities
      available for sale               |                    | 1,668  
|Proceeds from principal repayments on securities
      held to maturity                 |                    | 283    
|Net increase in loans                                                                   |                    | (16,988
|Purchases of premises and equipment                                                     |                    | (107   
|                                                                                        |                    |        
|Net
      cash provided by (used in) investing activities                               |                    | 127    
|                                                                                        |                    |        
|CASH FLOWS FROM FINANCING ACTIVITIES                                                    |                    |        
|Net increase in deposits                                                                |                    | 18,485 
|Net decrease in securities sold under repurchase
      agreements                       |                    |        
|and federal funds purchased                                                             |                    | (7,221 
|Cash dividends                                                                          |                    | (375   
|Proceeds from exercise of stock options                                                 |                    | 73     
|                                                                                        |                    |        
|Net
      cash provided by financing activities                                         |                    | 10,962 
|                                                                                        |                    |        
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                               |                    | 15,543 
|                                                                                        |                    |        
|CASH AND CASH EQUIVALENTS, beginning of period                                          |                    | 18,067 
|                                                                                        |                    |        
|                                                                                        |                    |        
|CASH AND CASH EQUIVALENTS, end of period                                                | $                  | 33,610 
|                                                                                        |                    |        
|                                                                                        |                    |        
|SUPPLEMENTAL DISCLOSURES:                                                               |                    |        
|Interest
      paid                                                                     | $                  | 3,745  
|                                                                                        |                    |        
|                                                                                        |                    |        
|Income
      taxes paid                                                                 | $                  | 365    
|                                                                                        |                    |        

See accompanying notes to unaudited consolidated financial statements.

5



---

CNB FLORIDA BANCSHARES, INC. AND
  SUBSIDIARY
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2004 
  (Unaudited)

Note 1. Basis of Presentation and Accounting Policies

The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q which do not require all information and footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. In the opinion of management, such financial statements reflect all adjustments (consisting only of normal
recurring adjustments) necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented.  Operating results for the three months ended March 31, 2004 are not necessarily indicative of
the results that may be expected for the year ending December 31, 2004. Managements discussion and analysis should be read in conjunction with the consolidated financial statements. Certain amounts and captions relating to 2003 have been
reclassified to conform to current year presentation.

Accounting policies followed in the presentation of interim financial results are presented in Note 2 of CNB Florida Bancshares, Inc.s (the Companys) audited consolidated financial statements
included in Form 10-K for the year ended December 31, 2003, which is available on the Companys web site atwww.cnbnb.com.

Note 2. Pending Merger

On January 21, 2004, the Company announced that it had entered into a definitive agreement to be acquired by The South Financial Group, Inc. in an all-stock transaction. Under terms of the agreement, the Companys
shareholders will receive 0.84 shares of The South Financial Group, Inc. common stock for each CNB Florida Bancshares, Inc. share. In addition, outstanding options to purchase the Companys stock will be converted into options to acquire The
South Financial Group, Inc.s common stock at the 0.84 exchange ratio. The transaction is expected to close in July 2004 and is subject to regulatory and Company shareholder approval.  The Companys subsidiary, CNB National Bank, will
merge into The South Financial Group, Inc.s Florida banking subsidiary, Mercantile Bank.

Note 3. Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, CNB National Bank. All significant intercompany accounts and transactions have been eliminated.

Note 4. Earnings Per Share

Basic earnings per common share is calculated based on the weighted average number of shares of common stock outstanding during the period.  Diluted earnings per common share is calculated based on the weighted average
number of shares of common stock outstanding and common stock equivalents, consisting of outstanding stock options that have a dilutive effect on earnings per share.  Common stock equivalents are determined using the treasury stock method for
diluted shares outstanding. The difference between diluted and basic shares outstanding is common stock equivalents from stock options outstanding during the periods ended March 31, 2004 and 2003.

6



---

The following table sets forth the computation of
  earnings per share for the three month periods ended March 31, 2004 and 2003.

|                                                        | Three Months Ended |        
|------------------------------------------------------- | ------------------ | -------
|                                                        | March 31,          |        
|                                                        | 2004               |        
|                                                        |                    |        
|Numerator:                                              |                    |        
|Net income available to common
      shareholders       | $                  | 1,742  
|                                                        |                    |        
|Denominator:                                            |                    |        
|Denominator for basic earnings
      per common share   |                    |        
|Weighted-average
      shares                           | 6,258,393          |        
|Effect of dilutive securities:                          |                    |        
|Common stock
      options                              |                    | 238,690
|                                                        |                    |        
|Dilutive potential common
      shares                  |                    | 238,690
|                                                        |                    |        
|Denominator for diluted earnings
      per common share |                    |        
|Adjusted
      weighted average shares                  | 6,497,083          |        
|                                                        |                    |        
|                                                        |                    |        
|Basic earnings per common share                         | $                  | 0.28   
|                                                        |                    |        
|                                                        |                    |        
|Diluted earnings per common share                       | $                  | 0.27   
|                                                        |                    |        

Note 5. Comprehensive Income

Comprehensive income is defined as the change in equity during a period arising from non-owner transactions and events. The following table details the Companys comprehensive income for the three months ending March
31, 2004 and 2003.

|                                                                       | Three Months Ended |      
|---------------------------------------------------------------------- | ------------------ | -----
|                                                                       | March 31,          |      
|                                                                       | 2004               |      
|                                                                       |                    |      
|Unrealized gain (loss) recognized in other comprehensive income (net): |                    |      
|Available for sale securities                                          | $                  | 403  
|Interest rate swap designated as cash flow hedge                       |                    | (27  
|                                                                       |                    |      
|Total unrealized gain (loss) before income taxes                       |                    | 376  
|Deferred income taxes                                                  |                    | (135 
|                                                                       |                    |      
|Net of deferred income tax                                             | $                  | 241  
|                                                                       |                    |      
|                                                                       |                    |      
|Amounts reported in net income:                                        |                    |      
|Securities gains                                                       | $                  | 106  
|Interest rate swap designated as cash flow hedge                       |                    | (87  
|Net amortization                                                       |                    | 93   
|                                                                       |                    |      
|Reclassification adjustment                                            |                    | 112  
|Deferred income taxes                                                  |                    | (40  
|                                                                       |                    |      
|Reclassification adjustment, net of deferred income tax                | $                  | 72   
|                                                                       |                    |      
|                                                                       |                    |      
|Amounts reported in other comprehensive income:                        |                    |      
|Net unrealized gain (loss) arising during period, net of tax           | $                  | 313  
|Reclassification adjustment, net of tax                                |                    | (72  
|                                                                       |                    |      
|Unrealized gain (loss) arising during period, net of tax               |                    | 241  
|Net income                                                             |                    | 1,742
|                                                                       |                    |      
|Total comprehensive income                                             | $                  | 1,983
|                                                                       |                    |      

Note 6. Stock-Based Compensation

The Company has long-term incentive plans that provide stock-based awards, including stock options to certain key employees. The Company applies the provisions of Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees, in accounting for its stock option and award plans and has adopted the disclosure-only option under Statement of Financial Accounting Standards,
(SFAS) No. 123,Accounting for Stock-Based Compensation. If the Company had adopted the accounting provisions of SFAS 123 and recognized expense for the fair value
of employee stock options granted over the vesting life of the options, pro forma stock-based

7



---

compensation expense (net of tax) for the three months ended March 31, 2004 and 2003 would have been $117,000 and $21,000, respectively. The following table outlines pro forma net income and earnings per share that would
have been reported if the Company had adopted the fair value provisions of SFAS 123 (dollars in thousands, except per share data):

|                                  | For the Three Months
      Ended |      
|--------------------------------- | -------------------------------- | -----
|                                  |                                  |      
|                                  | As Reported                      |      
|                                  |                                  |      
|                                  | March 31,                        |      
|                                  | 2004                             |      
|                                  |                                  |      
|                                  |                                  |      
|                                  |                                  |      
|Net income                        | $                                | 1,742
|Basic earnings per common share   | $                                | 0.28 
|Diluted earnings per common share | $                                | 0.27 

In determining the pro forma disclosures above, the fair value of options granted was estimated on the grant date using the Black-Scholes option-pricing model. The Black-Scholes model was developed to estimate the fair
value of traded options, which have different characteristics than employee stock options, and changes to the subjective assumptions used in the model can result in materially different fair value estimates. Options to purchase 67,000 shares of
stock with an estimated average fair value of $9.32 per option were granted during the three months ended March 31, 2004. There were no employee stock options granted during the three months ended March 31, 2003. The weighted-average grant date fair
values of options granted during 2004 and all of 2003 were based on the following assumptions:

|                        | 2004    |  | 2003    | 
|----------------------- | ------- |  | ------- | 
|                        |         |  |         | 
|Risk-free interest rate | 3.12%   |  | 5.13%   | 
|Dividend yield          | 1.19%   |  | 1.88%   | 
|Volatility              | 35.00%  |  | 38.00%  | 
|Expected lives          | 6 years |  | 6 years | 

Compensation expense under the fair value-based method is recognized over the vesting period of the related stock options and is based on the estimated number of shares expected to actually vest. Accordingly, the pro forma
results of applying SFAS 123 in 2004 and 2003 may not be indicative of future amounts.

The Company entered into a definitive agreement to be acquired by The South Financial Group, Inc. on January 21, 2004.  The transaction is expected to close in July 2004 and is subject to regulatory and Company shareholder
approval.  Upon approval of the transaction by Company shareholders, all currently unvested stock options will become exercisable. As of March 31, 2004, unrecognized pre-tax pro forma compensation expense on outstanding unvested stock options
totaled $1.1 million.  Assuming Company shareholders approve the transaction; unrecognized pro forma compensation expense would be included in pro forma net income and earnings per common share as noted above in the period shareholder approval for
the transaction is obtained. The shareholder meeting to vote on the transaction is expected to be held in the second quarter of 2004.

Note 7. Recent Accounting Pronouncements

In January 2003, the FASB issued FASB Interpretation No. 46,Consolidation of Variable-Interest Entities  an Interpretation of ARB No. 51(FIN 46). FIN 46 addresses consolidation by business enterprises of variable interest entities, which have one or both of the following characteristics: (1) the equity investment at risk is not sufficient to permit the entity to finance
its activities without additional subordinated financial support from other parties, which is provided through other interests that will absorb some or all of the expected losses of the entity and (2) the equity investors lack one or more of the
following essential characteristics of a controlling financial interest:

- The direct or indirect ability to make decisions
    about the entity's activities through voting rights or similar rights

8



---

- The obligation to absorb the expected losses of the entity if they occur, which makes it possible for the entity to finance its activities
- The right to receive the expected residual returns of the entity if they occur, which is the compensation for the risk of absorbing the expected losses.

This Interpretation applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. It applies in the first
fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. The adoption of FIN 46 did not have a significant impact on the
Companys consolidated financial statements.

In October 2003, the FASB issued FASB Staff Position No. FIN 46-6,Effective Date of FASB Interpretation No. 46, Consolidation of Variable Interest Entities. This Staff Position defers the effective date for applying the provisions of FIN 46 for interests held by public entities in variable interest entities or potential variable interest entities created before February 1, 2003 and
non-registered investment companies. The adoption of this Staff Position is not expected to have a material impact on the Companys consolidated financial statements.

In December 2003, the FASB issued FASB Interpretation No. 46,Consolidation of Variable Interest Entities(revised
December 2003)(FIN 46(R)). FIN 46(R) is an update of FIN 46 and contains different implementation dates based on the types of entities subject to the pronouncement and based on whether a company has
adopted FIN 46. The adoption of FIN 46(R) on March 31, 2004 did not have a material impact on the Companys consolidated financial statements. The Company does not have any interests in variable interest entities that are subject to the
provisions of FIN 46 or FIN 46(R).

In April 2004, the FASB issued FASB Staff Position
  No. 129-1,Disclosure Requirements under
  FASB Statement No. 129, Disclosure of Information about Capital Structure,
  Relating to Contingently Convertible Securities.(FSP
  129-1). The purpose of FSP 129-1 is to interpret how the disclosure provisions
  of FASB Statement No. 129 apply to contingently convertible securities and to
  their potentially dilutive effects on earnings per share. The guidance in this
  FSP is effective April 2004 and applies to all existing and newly created securities.
  The adoption of FSB 129-1 did not have a material impact on the Companys
  consolidated financial statements.

9



---

CNB FLORIDA BANCSHARES, INC. AND
  SUBSIDIARY Selected Financial Data

|                                                          | Three Months Ended |        
|--------------------------------------------------------- | ------------------ | -------
|                                                          | March 31,          |        
|                                                          | 2004               |        
|Dollars in thousands except per share information.        |                    |        
|                                                          |                   
|SUMMARY OF OPERATIONS:                                    |                    |        
|Total interest income                                     | $                  | 11,305 
|Total interest expense                                    |                    | (3,551 
|                                                          |                    |        
|Net interest income                                       |                    | 7,754  
|Provision for loan losses                                 |                    | (475   
|                                                          |                    |        
|Net interest income after provision for loan
      losses |                    | 7,279  
|Non-interest income                                       |                    | 1,302  
|Non-interest expense                                      |                    | (5,835 
|                                                          |                    |        
|Income before taxes                                       |                    | 2,746  
|Income taxes                                              |                    | (1,004 
|                                                          |                    |        
|Net income                                                | $                  | 1,742  
|                                                          |                    |        
|                                                          |                   
|                                                          |                   
|PER COMMON SHARE:                                         |                    |        
|Basic earnings                                            | $                  | 0.28   
|Diluted earnings                                          |                    | 0.27   
|Book value                                                |                    | 9.26   
|Dividends declared                                        |                    | 0.07   
|Actual shares outstanding                                 | 6,264,162          |        
|Weighted average shares outstanding                       | 6,258,393          |        
|Diluted weighted average shares outstanding               | 6,497,083          |        
|                                                          |                   
|                                                          |                   
|KEY RATIOS:                                               |                    |        
|Return on average assets                                  |                    | 0.85   
|Return on average shareholders equity                    |                    | 12.15  
|Dividend payout                                           |                    | 25.00  
|Efficiency ratio                                          |                    | 64.43  
|Total risk-based capital ratio                            |                    | 8.90   
|Average shareholders equity to average
      assets      |                    | 6.96   
|Tier 1 leverage                                           |                    | 6.47   
|                                                          |                    |        
|                                                          |                   
|FINANCIAL CONDITION AT PERIOD-END:                        |                    |        
|Assets                                                    | $                  | 833,334
|Loans                                                     |                    | 698,420
|Deposits                                                  |                    | 742,171
|Shareholders equity                                      |                    | 58,004 

10



---

MANAGEMENTS DISCUSSION AND
  ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

OVERVIEW

The following analysis reviews important factors affecting the financial condition and results of operations of CNB Florida Bancshares, Inc. for the three months ended March 31, 2004 and 2003.
This financial information should be read in conjunction with the unaudited consolidated financial statements of CNB Florida Bancshares, Inc. (the Company) and its wholly owned subsidiary, CNB National Bank (the Bank),
included in "Item 1. Financial Statements" above and the audited consolidated financial statements included in the Companys Form 10-K for the year ended December 31, 2003. The Company makes its Securities and Exchange Commission filings
available on its website atwww.cnbnb.com.  The analysis contains forward-looking statements with respect to financial and business matters, which are subject to risks and
uncertainties that may change over a period of time. These risks and uncertainties include but are not limited to changes in the interest rate environment that may reduce margins, general economic or business conditions in the Companys markets
that lead to a deterioration in credit quality or reduced loan demand, legislative or regulatory changes and competitors of the Company that may have greater financial resources and develop products or services that enable such competitors to
compete more successfully than the Company. Other factors that may cause actual results to differ from the forward-looking statements include customer acceptance of new products and services, changes in customer spending and saving habits and the
Companys success in managing costs associated with expansion. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Actual results could be significantly different from
the forward-looking statements contained herein.  The Company has no foreign operations; accordingly, there are no assets or liabilities attributable to foreign operations.

PENDINGACQUISITION

On January 21, 2004,
  the Company announced that it had entered into a definitive agreement to be
  acquired by The South Financial Group, Inc. in an all-stock transaction. Under
  terms of the agreement, the Companys shareholders will receive 0.84 shares
  of The South Financial Group, Inc. common stock for each CNB Florida Bancshares,
  Inc. share. In addition, outstanding options to purchase the Companys
  stock will be converted into options to acquire The South Financial Group, Inc.s
  common stock at the 0.84 exchange ratio. The transaction is expected to close
  in July 2004 and is subject to regulatory and Company shareholder approval.
  The Companys subsidiary, CNB National Bank, will merge into The South
  Financial Group, Inc.s Florida banking subsidiary, Mercantile Bank.

RESULTSOFOPERATIONS

The Companys
  earnings for the three month period ended March 31, 2004 were $1.7 million,
  or $0.27 per diluted share, compared to $1.3 million, or $0.21 per diluted share,
  in the first quarter of 2003. These results reflect an increase in net interest
  income and a decline in provision for loan losses. The increase in net interest
  income resulted from earning asset growth and favorable changes in the Companys
  funding mix. The lower provision for loan losses reflects an improvement in
  the level of net charge-offs and a decline in nonperforming assets. Results
  for the quarter also include a reduction in noninterest income and a higher
  level of noninterest expense. Noninterest income and noninterest expense for
  the 2004 first quarter include securities gains of $106,000 and a loss on bank
  real estate of $142,000, respectively. Securities gains were $13,000 in the
  first quarter of 2003. Total assets increased to $833.3 million at March 31,
  2004 compared to $819.9 million at December 31, 2003, and $774.2 million at
  March 31, 2003. Total outstanding loans and deposits rose 15% and 7% to $698.4
  million and $742.2 million, respectively, at March 31, 2004 from $606.0 million
  and $694.8 million, respectively, at March 31, 2003.

Net Interest Income

Net interest income is the single largest source of revenue for the Bank and consists of interest and net loan fee income generated by earning assets, less interest expense paid on interest
bearing liabilities. The Companys primary objective is to manage its assets and liabilities to provide the largest possible amount of income while balancing interest rate, credit quality, liquidity and capital risks. Net interest income for
the first quarter of 2004 was $7.8 million, compared to $6.6 million for the three month period ended March 31,2003 an increase of 18%. Loan and investment securities growth, coupled with a favorable change in funding mix, were the primary
contributors to the increase.  Interest income increased 6% while interest expense decreased 14% for the 2004 first quarter over

11



---

comparable 2003 amounts.  The decreased interest expense reflects a decline in funding costs on the Companys interest bearing deposit portfolio. Net interest yield was 4.00% in the first quarter 2004 compared to 3.91%
in the fourth quarter 2003 and 3.79% in the first quarter 2003.

Total average earning
  assets increased $76.2 million, or 11% to $778.9 million in the first quarter
  2004, compared to $702.7 million in the first quarter 2003. The increase was
  primarily due to growth in the average balance of loans and investment securities
  to $689.7 million and $86.1 million for the three months ended March 31,2004
  from $604.0 million and $47.8 million for the same period in 2003, respectively.
  The increase was partially offset by decreases in federal funds sold and interest
  bearing deposits. Increases in NOW and money market deposits, were the main
  contributors to the $48.2 million, or 8% growth in average interest bearing
  liabilities. The increase was partially offset by a decrease in time deposits
  of $17.0 million, or 5%.

The Company believes that its efforts to reduce the impact of margin compression from the current low interest rate environment have been successful. While the Company continues to maintain an
asset sensitive position with respect to asset and liability management, it is anticipated that market interest rates will remain at current low levels well into 2004.  Maintaining this profile will allow the Company to take advantage of a rising
rate environment.  Table 1 provides the Company's average volume of interest earning assets and interest bearing liabilities for the three months ended March 31, 2004 and 2003, respectively.

12



---

Table 1: Year to Date Average Balances - Yields and Rates

|                                | Three Months Ended |         | Three Months Ended |  
|------------------------------- | ------------------ | ------- | ------------------ | -
|                                | March 31, 2004     |         | March 31, 2003     |  
|                                |                    |         |                    |  
|                                |                    |         | Interest           |  
|                                | Average            |         | Income or          |  
|                                | Balance            |         | Expense            |  
|                                |                    |         |                    |  
|                                |                    |         |                    |  
|ASSETS:                         |                    |         |                    |  
|Federal
      funds sold        | $                  | 915     |                    | $
|Investment
      securities     |                    |         |                    |  
|available
      for sale        |                    | 57,352  |                    |  
|Investment
      securities     |                    |         |                    |  
|held
      to maturity          |                    | 28,791  |                    |  
|Loans (1)                       |                    | 689,701 |                    |  
|Interest
      bearing deposits |                    | 2,118   |                    |  
|                                |                    |         |                    |  
|                                |                    |         |                    |  
|TOTAL EARNING ASSETS            |                    | 778,877 |                    |  
|All other
      assets          |                    | 49,246  |                    |  
|                                |                    |         |                    |  
|                                |                    |         |                    |  
|TOTAL ASSETS                    | $                  | 828,123 |                    |  
|                                |                    |         |                    |  
|                                |                    |         |                    |  
|LIABILITIES AND                 |                    |         |                    |  
|SHAREHOLDERS'
      EQUITY:     |                    |         |                    |  
|NOW and
      money markets     | $                  | 273,438 |                    |  
|Savings                         |                    | 25,524  |                    |  
|Time deposits                   |                    | 329,868 |                    |  
|Repurchases
      and federal   |                    |         |                    |  
|funds
      purchased           |                    | 18,590  |                    |  
|Short term borrowings           |                    | 6,379   |                    |  
|Other borrowings (2)            |                    | 10,000  |                    |  
|                                |                    |         |                    |  
|TOTAL INTEREST BEARING          |                    |         |                    |  
|LIABILITIES                     |                    | 663,799 |                    |  
|Demand deposits                 |                    | 101,708 |                    |  
|Other liabilities               |                    | 4,963   |                    |  
|Shareholders'
      equity      |                    | 57,653  |                    |  
|                                |                    |         |                    |  
|                                |                    |         |                    |  
|TOTAL LIABILITIES AND           |                    |         |                    |  
|SHAREHOLDERS'
      EQUITY      | $                  | 828,123 |                    |  
|                                |                    |         |                    |  
|                                |                    |         |                    |  
|INTEREST SPREAD (3)             |                    |         |                    |  
|                                |                    |         |                    |  
|                                |                    |         |                    |  
|NET INTEREST INCOME             |                    |         |                    | $
|                                |                    |         |                    |  
|                                |                    |         |                    |  
|NET INTEREST MARGIN (4)         |                    |         |                    |  
|                                |                    |         |                    |  

|   
|---
|(1)
|(2)
|(3)
|(4)

13



---

Table 1a: Analysis of Year to Date Changes in Interest Income and Expense

|                                         | NET CHANGE MARCH 31,             |       | NET CHANGE MARCH 31,             |  
|---------------------------------------- | -------------------------------- | ----- | -------------------------------- | -
|                                         | 2003-2004 ATTRIBUTABLE
      TO: |       | 2002-2003 ATTRIBUTABLE
      TO: |  
|                                         |                                  |       |                                  |  
|                                         |                                  |       |                                  |  
|                                         | Volume (1)                       |       | Rate (2)                         |  
|                                         |                                  |       |                                  |  
|                                         |                                  |       |                                  |  
|INTEREST INCOME:                         |                                  |       |                                  |  
|Federal funds sold                       | $                                | (36   | )                                | $
|Investment securities available for sale |                                  | 93    |                                  |  
|Investment securities held to maturity   |                                  | 356   |                                  |  
|Loans                                    |                                  | 1,441 |                                  |  
|Interest bearing deposits                |                                  | (117  | )                                |  
|                                         |                                  |       |                                  |  
|Total                                    |                                  | 1,737 |                                  |  
|                                         |                                  |       |                                  |  
|                                         |                                  |       |                                  |  
|INTEREST EXPENSE:                        |                                  |       |                                  |  
|NOW and money markets                    |                                  | 216   |                                  |  
|Savings                                  |                                  | 3     |                                  |  
|Time deposits                            |                                  | (147  | )                                |  
|Repurchases and federal funds            |                                  |       |                                  |  
|purchased                                |                                  | 16    |                                  |  
|Short term borrowings                    |                                  | 21    |                                  |  
|Other borrowings                         |                                  | -     |                                  |  
|                                         |                                  |       |                                  |  
|Total                                    |                                  | 109   |                                  |  
|                                         |                                  |       |                                  |  
|Net interest income                      | $                                | 1,628 |                                  | $
|                                         |                                  |       |                                  |  

|   
|---
|(1)
|(2)

Non-Interest Income

Non-interest income decreased 20% to $1.3 million for the 2004 first quarter from $1.6 million for the comparable 2003 quarter. The decrease was primarily attributed to a $410,000 decline in
secondary market mortgage income due to reductions in loan production staff resulting from organizational changes within the mortgage function and a general increase in mortgage rates which resulted in reduced loan production. The decrease was
partially offset by a $93,000 increase in securities gains and an increase in deposit service charges of $35,000. Other fee income, which includes credit card fees, credit life insurance income, safe deposit box fees, discount brokerage fees and
other miscellaneous fees, decreased $38,000 for the three month period ended March 31, 2004 compared to the corresponding 2003 period.

Non-interest income, annualized, as a percentage of average assets was 0.63% for the three months ended March 31, 2004, compared to 0.87% for the comparable period in 2003.

Non-Interest Expense

Non-interest expense increased 7% to $5.8 million in the 2004 first quarter compared to $5.5 million for the 2003 first quarter. The increase is attributable to an increase in personnel,
occupancy and equipment, and other expense. As a percentage of average assets, annualized non-interest expense decreased to 2.8% from 2.9% in the first quarter 2004 and 2003, respectively. Salaries and employee benefits increased $124,000 or 4% to
$3.0 million for the first three months of 2004, compared to $2.9 million for the same period in 2003. As a percentage of average

14



---

assets annualized, salaries and employee benefits decreased to 1.45% from 1.52%, for the first quarter of 2004 and 2003, respectively. Average full-time equivalent employees increased by one to 260 during the first quarter
of 2004 as compared to the same period in 2003.

Occupancy expense (including premises, furniture, fixtures and equipment) increased $50,000, or 6% during the three months ended March 31, 2004 compared to the same period in 2003. The increase
is primarily attributable to operating expenses associated with the Companys Magnolia Parke and Glen St. Mary Offices, both of which opened in the second half of 2003.

Other operating expenses increased $192,000, or 11%, in the first quarter of 2004 compared to the same period in 2003. Other expense in the first quarter 2004 includes a $142,000 loss on the Companys closed branch
office in Alachua, Florida, which is under contract to be sold in the second quarter of 2004. The following table details the areas of significance in other operating expenses.

Table 2: Other Operating Expenses

|                                  | Three Months Ended |            
|--------------------------------- | ------------------ | -----------
|                                  | March 31,          |            
|                                  | 2004               |            
|                                  |                    |            
|                                  |                    | (thousands)
|Data processing                   | $                  | 416        
|Communications                    |                    | 169        
|Legal and professional            |                    | 214        
|Postage and delivery              |                    | 182        
|Amortization of intangible assets |                    | 160        
|Advertising and promotion         |                    | 94         
|Supplies                          |                    | 95         
|Regulatory fees                   |                    | 73         
|Loan expenses                     |                    | 58         
|Administrative                    |                    | 25         
|Other general operating           |                    | 28         
|Education expense                 |                    | 34         
|Insurance and bonding             |                    | 19         
|Directors fees                    |                    | 71         
|Dues and subscriptions            |                    | 22         
|Other                             |                    | 244        
|                                  |                    |            
|Total other operating expenses    | $                  | 1,904      
|                                  |                    |            

Income Taxes

The Company's income tax expense in interim reporting periods is determined by estimating the combined federal and state effective tax rate for the year and applying such rate to interim
pre-tax income. The Company's estimated annual effective tax rate for 2004 is approximately 36.6%.

LIQUIDITY

Liquidity is defined as the ability of the Company to meet anticipated demands for funds under credit commitments and deposit withdrawals at a reasonable cost on a timely basis. Management
measures the Companys liquidity position by giving consideration to both on- and off-balance sheet sources of and demands for funds on a daily and weekly basis. These funds can be obtained by converting assets to cash or by attracting new
deposits. Average liquid assets (cash and amounts due from banks, interest bearing deposits in other banks, federal funds sold and investment securities available for sale)totaled $79.1 million and represented 11% of average total deposits

15



---

during the first three months of 2004, compared to $118.6 million and 17% for 2003. Average loans were 94% and 89% of average deposits for the three-month periods ended March 31, 2004 and 2003, respectively.

In addition to core deposit growth, sources of funds available to meet liquidity demands include cash received through ordinary business activities such as the collection of interest and fees,
federal funds sold, loan and investment maturities and lines for the purchase of federal funds by the Bank from its principal correspondent banks. The Bank is also a member of the Federal Home Loan Bank and has access to short-term and long-term
funds. In addition, the Company entered into a line of credit with one of its correspondent banks in April 2001. The agreement was amended in October 2001 to reflect the following structures: (1) a $3 million revolving line of credit maturing on
June 30, 2004 with interest floating quarterly at 3-month Libor plus 145 basis points; and (2) a $10 million term loan maturing October 3, 2006 with interest floating quarterly at 3-month Libor plus 170 basis points. Semi-annual principal payments
of approximately $714,000 begin in April 2004. The Company also entered into a $10 million pay-fixed interest rate swap with the same bank.  The fixed rate under the interest rate swap is 6.45% and the variable rate is based on 3-month Libor plus
170 basis points. The swap matures October 3, 2006 and has been designated as a cash flow hedge of the variable interest payments on the $10 million term loan noted in (2) above. The fair value of the interest rate swap at March 31, 2004 was
approximately ($535,000). There was $1.5 million outstanding on the $3 million line of credit on March 31, 2004 (an additional $750,000 was drawn on the line during April 2004). The term loan, line of credit and interest rate swap are all
collateralized by 100% of the common stock of the Bank.

In connection with the term loan and line of credit agreement, the Company is required to maintain compliance with certain covenants and restrictions. The following financial covenants are to be maintained on a quarterly
basis and are calculated at the Bank-level:

- Interest coverage ratio of greater than or equal
    to 2.00x through September 30, 2003.
- Debt service coverage ratio of greater than or equal
    to 0.85x through September 30, 2002; 1.00x from October 1, 2002 through September
    30, 2003; 1.25x from October 1, 2003 through September 30, 2004; and 1.50x
    from October 1, 2004 through maturity.
- Ratio of non-performing assets to total loans plus
    other real estate owned and repossessed assets of less than or equal to 1.25%.
- Maintenance of tier 1 and total risk based capital
    ratios that meet the benchmarks for consideration as a well-capitalized
    institution (currently 6% and 10%, respectively). Also, maintenance of a leverage
    capital ratio of at least 6%.

In addition, the Company is subject to the following restrictions:

- No additional debt is permitted without consent
    of the lender.
- No increases in dividends paid by the Company to
    its common shareholders are permitted without consent of the lender.

Failure to maintain any of these covenants would place the Company in default of the line of credit agreement. In such a case, absent any waivers obtained from the lender, all amounts payable could be accelerated and
become due immediately. As of March 31, 2004, the Company was in compliance with all covenants.

The level of commitments to fund additional borrowings and standby letters of credit also impacts the Companys liquidity position. These commitments, when drawn, are generally funded through deposit inflows, loan
and investment maturities, interest receipts and, to the extent necessary, short term purchases of federal funds. The Companys borrowing capacity with the FHLB is also available to fulfill commitments to lend. Since many commitments are
expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if any, is based on management's credit evaluation in the same manner as though an
immediate credit extension were to be granted. Commitments to extend credit and standby letters of credit amount to approximately $203,910,000 and $8,383,000, respectively, at March 31, 2004 and expire as outlined in the table below (in thousands):

16



---

|                 | Unfunded    |         | Standby           |  
|---------------- | ----------- | ------- | ----------------- | -
|                 | Commitments |         | Letters of Credit |  
|                 |             |         |                   |  
|One year or less | $           | 38,138  |                   | $
|Two years        |             | 54,309  |                   |  
|Three years      |             | 34,200  |                   |  
|Four years       |             | 13,061  |                   |  
|Five years       |             | 19,870  |                   |  
|Over five years  |             | 44,332  |                   |  
|                 |             |         |                   |  
|                 | $           | 203,910 |                   | $
|                 |             |         |                   |  

OBLIGATIONS AND COMMITMENTS

The following table presents the Companys contractual obligations at March 31, 2004:

|                            | Payments due by period |      
|--------------------------- | ---------------------- | -----
|                            | (in thousands)         |      
|                            |                        |      
|                            | Less than              |      
|                            | 1 year                 |      
|                            |                        |      
|Long-Term Debt Obligation   | $                      | 1,428
|Line of Credit Obligation   |                        | 1,500
|Operating Lease Obligations |                        | 367  
|Purchase Obligations        |                        | 1,137
|                            |                        |      
|Total:                      | $                      | 4,432
|                            |                        |      

Long-term debt and line of credit obligations relate to the Companys borrowing arrangement with another financial institution as more fully described in Liquidity above. Operating lease
obligations represent contractual commitments to make payments under leases for certain branch, equipment and related properties. The Company does not have any capital leases obligations. Purchase obligations are defined as contractual obligations
to purchase products or services from unaffiliated parties with a specific minimum quantity defined at a fixed, minimum or variable price over time. The Companys primary purchase obligation relates to certain core processing services provided
by an unaffiliated vendor. The services provided to the Company relate to critical front and back office data processing applications. The term of the contract runs through June 30, 2006 and has pricing provisions that provide for certain minimum
levels of account and transaction volumes.  To date, the level of services obtained under this contract has exceeded such minimums. For the first three months of 2004, the average monthly fee paid for these services was approximately $94,000. For
purposes of presenting contractual commitments in the table above, the average monthly amount was projected to be paid over the remaining term of the contract, subject to minimum pricing increases as outlined in the agreement.

INTEREST RATE SENSITIVITY

Interest rate sensitivity refers to the responsiveness of interest-earning assets and interest-bearing liabilities to changes in market interest rates. The rate sensitive position, or gap, is
the difference in the volume of rate-sensitive assets and liabilities, at a given time interval, including both floating rate instruments and instruments that are approaching maturity. Management generally attempts to maintain a balance between
rate-sensitive assets and liabilities as the exposure period is lengthened to minimize the overall interest rate risk to the Company.

The Companys gap and liquidity positions are reviewed on a regular basis by management to determine whether or not changes in policies and procedures are necessary to achieve financial
goals. This analysis includes assumptions about balance sheet growth and related mix as well as pricing and maturity profile. Included in the review is an internal analysis of the possible impact on net interest income due to market changes in
interest rates. Based on this internal analysis, at March 31, 2004, a gradual increase in interest rates of 200 basis points would have increased net interest income over the ensuing twelve-month period by 5.25% as compared to a projection under

17



---

stable rates. A gradual decrease in interest rates of 200 basis points over this same period would have decreased net interest income by 5.34% as compared to a stable rate environment. At March 31, 2004, the Banks net
economic value ratio was 7.15% and 10.26%, assuming a gradual increase or decrease, respectively, in interest rates of 200 basis points over a 12-month period. The net economic value ratio is the market value of equity divided by the market value of
assets and measures the Banks capitalization, talking into account balance sheet gains and losses. The net economic value ratio, however, does not place a value on the Companys core deposit relationships. The computations of interest
rate risk do not necessarily include certain actions that management may undertake to manage this risk in response to anticipated changes in interest rates.

Table 3,"Rate Sensitivity Analysis", presents rate sensitive assets and liabilities, separating the assets and liabilities into fixed and variable
interest rate categories. The estimated fair value of each instrument category is also shown in the table.  While these fair values are based on management's judgment of the most appropriate factors, there is no assurance that, were the Company to
have disposed of such instruments at March 31, 2004, the estimated fair values would necessarily have been achieved at that date, since market values may differ depending on various circumstances.

18



---

Table 3: Rate Sensitivity Analysis
  March 31, 2004 (dollars in thousands)

|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        | Fair  |  
|---------------------------------- | ------ | ------- | ------- | - | ------- | - | ------- | ------ | ------- | - | ------ | - | ----- | ------ | ----- | -
|                                   | 1 Year |         | 2 Years |   | 3 Years |   | 4 Years |        | 5 Years |   | Beyond |   | TOTAL |        | Value |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|INTEREST-EARNING ASSETS:           |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|Gross Loans                        |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|Fixed rate loans                   | $      | 130,810 |         | $ | 57,948  |   | $       | 49,081 |         | $ | 52,053 |   | $     | 52,070 |       | $
|Average
      interest rate        |        | 5.97    | %       |   | 6.38    | % |         | 6.68   | %       |   | 6.37   | % |       | 6.25   | %     |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|Variable rate
      loans          |        | 49,601  |         |   | 30,316  |   |         | 30,838 |         |   | 9,535  |   |       | 12,219 |       |  
|Average
      interest rate        |        | 4.58    | %       |   | 4.57    | % |         | 4.58   | %       |   | 5.82   | % |       | 5.89   | %     |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|Investment securities (1)          |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|Fixed rate investments             |        | 4,014   |         |   | -       |   |         | 4,377  |         |   | 1,125  |   |       | 1,019  |       |  
|Average
      interest rate        |        | 1.12    | %       |   |         |   |         | 2.09   | %       |   | 2.39   | % |       | 4.38   | %     |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|Variable rate
      investments    |        | -       |         |   | -       |   |         | -      |         |   | -      |   |       | -      |       |  
|Average
      interest rate        |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|Federal funds sold                 |        | 14,000  |         |   | -       |   |         | -      |         |   | -      |   |       | -      |       |  
|Average
      interest rate        |        | 0.91    | %       |   |         |   |         |        |         |   |        |   |       |        |       |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|Other earning assets (2)           |        | 4,709   |         |   | -       |   |         | -      |         |   | -      |   |       | -      |       |  
|Average
      interest rate        |        | 3.64    | %       |   |         |   |         |        |         |   |        |   |       |        |       |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|Total interest-earning assets      | $      | 203,134 |         | $ | 88,264  |   | $       | 84,296 |         | $ | 62,713 |   | $     | 65,308 |       | $
|Average
      interest rate        |        | 5.13    | %       |   | 5.76    | % |         | 5.67   | %       |   | 6.21   | % |       | 6.15   | %     |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|INTEREST-BEARING LIABILITIES:      |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|NOW                                | $      | 69,128  |         | $ | -       |   | $       | -      |         | $ | -      |   | $     | -      |       | $
|Average
      interest rate        |        | 1.51    | %       |   |         |   |         |        |         |   |        |   |       |        |       |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|Money market                       |        | 144,330 |         |   | -       |   |         | -      |         |   | -      |   |       | -      |       |  
|Average
      interest rate        |        | 2.01    | %       |   |         |   |         |        |         |   |        |   |       |        |       |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|Savings                            |        | -       |         |   | -       |   |         | -      |         |   | -      |   |       | -      |       |  
|Average
      interest rate        |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|CD's under $100,000                |        | 119,981 |         |   | 31,266  |   |         | 12,804 |         |   | 5,539  |   |       | 186    |       |  
|Average
      interest rate        |        | 2.32    | %       |   | 3.60    | % |         | 3.88   | %       |   | 3.47   | % |       | 3.56   | %     |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|CD's $100,000 and over             |        | 115,750 |         |   | 20,745  |   |         | 8,985  |         |   | 7,587  |   |       | 1,036  |       |  
|Average
      interest rate        |        | 2.66    | %       |   | 3.71    | % |         | 3.74   | %       |   | 4.10   | % |       | 4.59   | %     |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|Securities sold under              |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|repurchase agreements
      and    |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|federal funds
      purchased      |        | 15,329  |         |   | -       |   |         | -      |         |   | -      |   |       | -      |       |  
|Average
      interest rate        |        | 1.02    | %       |   |         |   |         |        |         |   |        |   |       |        |       |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|Short-term borrowings              |        | 1,500   |         |   | -       |   |         | -      |         |   | -      |   |       | -      |       |  
|Average
      interest rate        |        | 2.63    | %       |   |         |   |         |        |         |   |        |   |       |        |       |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|Other borrowings (3)               |        | 1,428   |         |   | 1,428   |   |         | 7,144  |         |   | -      |   |       | -      |       |  
|Average
      interest rate        |        | 3.60    | %       |   | 3.60    | % |         | 3.60   | %       |   |        |   |       |        |       |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  
|Total interest-bearing liabilities | $      | 467,446 |         | $ | 53,439  |   | $       | 28,933 |         | $ | 13,126 |   | $     | 1,222  |       | $
|Average
      interest rate        |        | 2.15    | %       |   | 3.64    | % |         | 3.77   | %       |   | 3.83   | % |       | 4.43   | %     |  
|                                   |        |         |         |   |         |   |         |        |         |   |        |   |       |        |       |  

|   
|---
|(1)
|(2)
|(3)

19



---

Core deposits, which represent all deposits other than time deposits in excess of $100,000, were 79% of total deposits at March 31, 2004, up slightly from 78% at December 31, 2003. The Bank
closely monitors its reliance on time deposits in excess of $100,000, which are generally considered less stable and less reliable than core deposits. Table 4, below, sets forth the amounts of time deposits with balances of $100,000 or more that
mature within indicated periods.  The Bank does not, nor has it ever, solicited brokered deposits.  Essentially all of the time deposits with balances of $100,000 or more are from customers in the Banks primary markets.

Table 4: Maturity of Time Deposits
  of $100,000 or MoreMarch 31, 2004 (dollars in thousands)

|                               |   | Amount  | 
|------------------------------ | - | ------- | 
|                               |   |         | 
|Three months or less           | $ | 33,751  | 
|Over three through six months  |   | 41,109  | 
|Over six through twelve months |   | 40,890  | 
|Over twelve months             |   | 38,353  | 
|                               |   |         | 
|Total                          | $ | 154,103 | 
|                               |   |         | 

EARNING ASSETS

Loans

Lending activities are the Companys single largest source of revenue.  Although management is continually evaluating alternative sources of revenue, lending is the major segment of the
Companys business and is key to profitability.  For the first three months of 2004, average loans were $689.7 million and were 94% of average deposits, compared to $604.0 million and 89% for the same period in 2003. During the third quarter
2003, the Company sold its credit card portfolio to another financial institution. The Company sold accounts with an outstanding balance of $976,000 for proceeds, net of transaction costs, of $1,031,000. In addition to the sale, the Company also
entered into a credit card marketing arrangement with the same financial institution. Under the marketing agreement, the Company will offer credit card products issued through the other financial institution. The cards will display the CNB National
Bank logo and the Company will receive a fee for each account opened, along with a share of interchange income. The card balances will be retained by the other institution. The following table reflects the composition of the Company's loan portfolio
as of March 31, 2004 compared to December 31, 2003.

Table
  5: Loan Portfolio Composition

|                                          | March 31,   |         | December 31, |  
|----------------------------------------- | ----------- | ------- | ------------ | -
|                                          | 2004        |         | 2003         |  
|                                          |             |         |              |  
|                                          | (thousands) |        
|Commercial                                | $           | 119,687 |              | $
|Commercial real estate                    |             | 379,115 |              |  
|Mortgages (including home
      equity)   |             | 161,216 |              |  
|Consumer                                  |             | 32,911  |              |  
|Tax free                                  |             | 5,491   |              |  
|                                          |             |         |              |  
|Total loans, net of unearned
      income |             | 698,420 |              |  
|Less: allowance for loan losses           |             | (7,486  | )            |  
|                                          |             |         |              |  
|                                          |             |         |              |  
|Net loans                                 | $           | 690,934 |              | $
|                                          |             |         |              |  

Loan concentrations are considered to exist where there are amounts loaned to multiple borrowers engaged in similar activities which collectively would be similarly impacted by economic or
other conditions and when the total of such amounts exceeds 25% of total capital. Due to the lack of diversified industry and the relative proximity of markets served, the Company has concentrations of loans from the North Florida region as well as
the types of loans funded. The Banks four largest concentration categories are: Land Development ($48.9 million), Professional ($31.5 million), Commercial Real Estate ($26.9 million) and Hotels and Motels ($25.7 million).

20



---

Loan Quality

The allowance for loan loss is established through a provision for loan loss charged to expense. Loans are charged against the allowance for loan loss
when management believes that the collectibility of the principal is unlikely. The allowance for loan loss is an amount that management believes will be adequate to absorb inherent losses on existing loans that are probable of becoming uncollectible
based on evaluations of the collectibility of the loans. The evaluations take into consideration such objective factors as changes in the nature and volume of the loan portfolio and historical loss experience.  The evaluation also considers certain
subjective factors such as overall portfolio quality, review of specific problem loans and current economic conditions that may affect the borrowers' ability to pay. The level of the allowance for loan loss is also impacted by increases and
decreases in loans outstanding, because either more or less allowance is required as the amount of the Companys credit exposure changes. To the extent actual loan losses differ materially from managements estimate of these subjective
factors, loan growth/run-off accelerates or the mix of loan types changes, the level of the provision for loan loss, and related allowance, can and will fluctuate.

The allowance for loan losses on March 31, 2004, was 1.07% of total loans, compared to 1.08% at December 31, 2003 and 1.08% at March 31, 2003. Table 6: "Allocation of Allowance for Loan
Losses", set forth below, indicates the specific reserves allocated by loan type.

Table
  6: Allocation of Allowance for Loan Losses

|                                  | March31,               |       | December 31,                                  |      
|--------------------------------- | ---------------------- | ----- | --------------------------------------------- | -----
|                                  | 2004                   |       | 2003                                          |      
|                                  |                        |       |                                               |      
|                                  | Amount                 |       | Percent ofLoans in EachCategory toTotal Loans |      
|                                  |                        |       |                                               |      
|                                  | (dollars in thousands) |      
|Commercial                        | $                      | 2,505 |                                               | 17.1 
|Commercial real estate            |                        | 3,550 |                                               | 54.3 
|Mortgages (including home equity) |                        | 643   |                                               | 23.1 
|Consumer                          |                        | 788   |                                               | 4.7  
|Tax free                          |                        | -     |                                               | 0.8  
|Unallocated                       |                        | -     |                                               | -    
|                                  |                        |       |                                               |      
|Total                             | $                      | 7,486 |                                               | 100.0
|                                  |                        |       |                                               |      

Non-performing assets consist of non-accrual loans, loans past due 90 days or more and still accruing interest, other real estate owned and repossessions. Non-performing assets decreased 48%
from December 31, 2003 to $2.0 million at March 31, 2004. Non-performing assets as a percentage of total assets decreased to 0.24% on March 31, 2004 from 0.46% on December 31, 2003.

Table 7: Non-Performing Assets

|                            | March 31,              |       | December 31, |  
|--------------------------- | ---------------------- | ----- | ------------ | -
|                            | 2004                   |       | 2003         |  
|                            |                        |       |              |  
|                            | (dollars in thousands) |      
|Non-accrual loans           | $                      | 1,826 |              | $
|Past due loans 90 days or   |                        |       |              |  
|more and still accruing     |                        | 39    |              |  
|Other real estate owned     |                        |       |              |  
|and repossessions           |                        | 132   |              |  
|                            |                        |       |              |  
|Total non-performing assets | $                      | 1,997 |              | $
|                            |                        |       |              |  
|                            |                        |       |              |  
|Percent of total assets     |                        | 0.24  | %            |  

21



---

Table 8: Activity in Allowance
  for Loan Losses

|                                                               | March 31,              |        
|-------------------------------------------------------------- | ---------------------- | -------
|                                                               | 2004                   |        
|                                                               |                        |        
|                                                               | (dollars in thousands) |        
|Balance at beginning of year                                   | $                      | 7,329  
|Loans charged-off:                                             |                        |        
|Commercial                                                     |                        | (127   
|Commercial real estate                                         |                        | -      
|Mortgage (including home equity)                               |                        | (98    
|Consumer                                                       |                        | (161   
|Credit card                                                    |                        | -      
|Tax free                                                       |                        | -      
|                                                               |                        |        
|Total loans
      charged-off                                  |                        | (386   
|Recoveries on loans previously charged-off:                    |                        |        
|Commercial                                                     |                        | 9      
|Commercial real estate                                         |                        | 20     
|Mortgage (including home equity)                               |                        | 6      
|Consumer                                                       |                        | 33     
|Tax
      free                                                 |                        | -      
|                                                               |                        |        
|Total loan
      recoveries                                    |                        | 68     
|                                                               |                        |        
|Net
      loans charged-off                                    |                        | (318   
|                                                               |                        |        
|                                                               |                        |        
|Provision for loan losses charged to expense                   |                        | 475    
|                                                               |                        |        
|Ending balance                                                 | $                      | 7,486  
|                                                               |                        |        
|                                                               |                        |        
|Total loans outstanding                                        | $                      | 698,420
|Average loans outstanding                                      | $                      | 689,701
|Allowance for loan losses to loans outstanding                 |                        | 1.07   
|Net charge-offs to average loans outstanding,
      annualized |                        | 0.19   

Investment Portfolio

The Company uses its securities portfolio to assist in maintaining proper interest rate sensitivity in the balance sheet, to provide securities to pledge as collateral for public funds and
repurchase agreements and to provide an alternative investment for available funds. The total recorded value of securities was $71.6 million at March 31, 2004, a decrease of 19% from $88.4 million at the end of 2003. The decrease primarily resulted
from the call and sale of investment securities available for sale of $15.9 million during the three months ended March 31, 2004.

Securities are classified as either held-to-maturity or available-for-sale.  At March 31, 2004 investment securities available-for-sale made up 70% of the total investment portfolio of $71.6
million. Securities in the available-for-sale portfolio are recorded at fair value on the balance sheet and unrealized gains and losses associated with these securities are recorded, net of deferred income tax, as accumulated other comprehensive
income (loss). Also included in other comprehensive income (loss) are accumulated net gains (losses) on cash flow hedges. At March 31, 2004, accumulated other comprehensive income (loss), net of tax, was ($411,000), compared to ($652,000) at
December 31, 2003. Of this amount, ($81,000) of unrealized losses, net of deferred income tax, were related to the securities available for sale portfolio while ($330,000) of unrealized losses, net of deferred income tax, were associated with cash
flow hedges.

At March 31, 2004, there were $256,000 of pre-tax unrealized gains and ($271,000) of pre-tax unrealized losses on the entire securities portfolio. The unrealized gains and losses in the
investment securities portfolio are due to changes in market interest rates subsequent to the date the securities were purchased.  Of the investment securities in an unrealized loss position at March 31, 2004, none were in an unrealized loss
position for a period of more than twelve months.

The Company invests primarily in direct obligations of the United States, obligations guaranteed as to principal and interest by the United States and obligations of agencies of the United
States government. In addition,

22



---

the Company enters into federal funds transactions with its principal correspondent banks. The Federal Reserve Bank and FHLB also require equity investments to be maintained by the Company.

The following tables set forth the maturity distribution and the weighted average yields of the Company's investment portfolio.

Table 9: Maturity Distribution of Investment Securities (1)

March 31, 2004

|(dollars in thousands)             | Held to Maturity |           | Available for Sale |             
|---------------------------------- | ---------------- | --------- | ------------------ | ------------
|                                   |                 
|                                   |                  | Amortized |                    | Estimated   
|                                   |                  | Cost      |                    | Market Value
|                                   |                  |           |                    |             
|U.S. Treasury:                     |                  |           |                    |             
|One year
      or less             | $                | -         |                    | $           
|                                   |                  |           |                    |             
|Total U.S. Treasury                |                  | -         |                    |             
|                                   |                  |           |                    |             
|U.S. Government Agencies           |                  |           |                    |             
|and Corporations (2):              |                  |           |                    |             
|Over one
      through five years  |                  | -         |                    |             
|Over five
      through ten years  |                  | 7,500     |                    |             
|Over ten
      years               |                  | 10,000    |                    |             
|                                   |                  |           |                    |             
|Total U.S. Government Agencies     |                  |           |                    |             
|and Corporations                   |                  | 17,500    |                    |             
|                                   |                  |           |                    |             
|Obligations of State and Political |                  |           |                    |             
|Subdivisions:                      |                  |           |                    |             
|Over five
      through ten years  |                  | -         |                    |             
|Over ten
      years               |                  | -         |                    |             
|                                   |                  |           |                    |             
|Total Obligations of State and     |                  |           |                    |             
|Political Subdivisions             |                  | -         |                    |             
|                                   |                  |           |                    |             
|Mortgage-Backed Securities (3):    |                  |           |                    |             
|Over one
      through five years  |                  | -         |                    |             
|Over five
      through ten years  |                  | 4,244     |                    |             
|Over ten
      years               |                  | -         |                    |             
|                                   |                  |           |                    |             
|Total Mortgage-Backed Securities   |                  | 4,244     |                    |             
|                                   |                  |           |                    |             
|Other Securities:                  |                  |           |                    |             
|Over ten
      years (4)           |                  | -         |                    |             
|                                   |                  |           |                    |             
|Total Other Securities             |                  | -         |                    |             
|                                   |                  |           |                    |             
|Total Securities                   | $                | 21,744    |                    | $           
|                                   |                  |           |                    |             

|   
|---
|(1)
|(2)
|(3)
|(4)

Table 10:Weighted
  Average Yield by Range of Maturities

|                                 | March 31, 2004 |  | December 31, 2003 |  | March 31, 2003 | 
|-------------------------------- | -------------- |  | ----------------- |  | -------------- | 
|                                 |                |  |                   |  |                | 
|One Year or Less                 | 1.12%          |  | 1.22%             |  | 4.21%          | 
|More than One through Five Years | 2.50%          |  | 2.48%             |  | 2.97%          | 
|More than Five through Ten Years | 4.17%          |  | 3.98%             |  | 4.59%          | 
|More than Ten Years (1)          | 4.72%          |  | 4.87%             |  | 4.02%          | 
|                                

(1)
  Includes adjustable rate mortgage-backed securities which are repriceable within
  one year.

23



---

Other Earning Assets

Temporary investment needs are created in the day-to-day liquidity movement of the Bank and are satisfied by selling excess funds overnight (Fed Funds Sold) to larger, well capitalized banking
institutions. If these funds become excessive, management determines what portion, if any, of the liquidity may be rolled into longer term investments as securities.

FUNDING SOURCES

Deposits

The Bank does not rely on purchased or brokered deposits as a source of funds. Instead, competing for deposits within its market area serves as the Bank's fundamental tool in providing a source
of funds to be invested primarily in loans. The following table sets forth certain deposit categories for the periods ended March 31, 2004 and December 31, 2003.

Table 11: Total Deposits

|                        | March 31,   |         | December 31, |  
|----------------------- | ----------- | ------- | ------------ | -
|                        | 2004        |         | 2003         |  
|                        |             |         |              |  
|                        | (thousands) |        
|Non-interest bearing:   |             |         |              |  
|Demand checking         | $           | 108,584 |              | $
|Interest bearing:       |             |         |              |  
|NOW checking            |             | 135,605 |              |  
|Money market checking   |             | 148,005 |              |  
|Savings                 |             | 26,098  |              |  
|Certificates of deposit |             | 323,879 |              |  
|                        |             |         |              |  
|                        |             |         |              |  
|Total deposits          | $           | 742,171 |              | $
|                        |             |         |              |  

CAPITAL RESOURCES

Shareholders equity at March 31, 2004 was $58.0 million, as compared to $56.4 million at December 31, 2003. During the first quarter of 2004, the Board of Directors declared quarterly
dividends of $0.07 per share, an increase of 17% from the fourth quarter 2003 dividend of $0.06 per share.  At March 31, 2004, the Companys common stock had a book value of $9.26 per share compared to $9.01 per share at December 31, 2003.

The Company is subject to various regulatory capital requirements administered by the federal banking agencies. Under capital adequacy guidelines, the Company must meet specific capital
guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative judgments by the
regulators about component, risk weightings and other factors.

Quantitative measures as defined by regulation and established to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of Total and Tier 1 capital to risk-weighted
assets and Tier 1 capital to average assets. If such minimum amounts and ratios are met, the Bank is considered adequately capitalized. If a bank exceeds the requirements of adequately capitalized and meets even more
stringent minimum standards, it is

24



---

considered to be well capitalized. As of March 31, 2004, the Bank met all capital adequacy requirements to which it is subject.

At March 31, 2004
  and 2003, the Companys Tier 1 capital, Total risk-based capital and Tier
  1 leverage ratios were are as follows:

Table 12:Capital Ratios

|                           | March 31, |  | Well-Capitalized |  | Regulatory  
|-------------------------- | --------- |  | ---------------- |  | ------------
|                           | 2004      |  | 2003             |  | Requirements
|                           |           |  |                  |  |             
|Risk Based Capital Ratios: |           |  |                  |  |             
|Tier 1 Capital Ratio       | 7.8%      |  | 7.7%             |  | 6.0%        
|                           |           |  |                  |  |             
|Total Capital to           |           |  |                  |  |             
|Risk-Weighted
      Assets | 8.9%      |  | 8.8%             |  | 10.0%       
|                           |           |  |                  |  |             
|Tier 1 Leverage Ratio      | 6.5%      |  | 6.1%             |  | 5.0%        

CRITICAL ACCOUNTING POLICIES

A critical accounting policy is one that is both very important to the portrayal of the Companys financial condition and requires managements most difficult, subjective or complex
judgments. The circumstances that make these judgments difficult, subjective or complex have to do with the need to make estimates about the effect of matters that are inherently uncertain. The Company considers the establishment and maintenance of
the allowance for loan loss and the accounting for its core deposit intangible asset to be critical accounting policies.

The allowance for loan loss is established through a provision for loan loss charged to expense. Loans are charged against the allowance for loan loss when management believes that the
collectibility of the principal is unlikely. The allowance is an amount that management believes will be adequate to absorb inherent losses on existing loans that may become uncollectible based on evaluations of the collectibility of the loans. The
evaluations take into consideration such objective factors as changes in the nature and volume of the loan portfolio and historical loss experience. The evaluation also considers certain subjective factors such as overall portfolio quality, review
of specific problem loans and current economic conditions that may affect the borrowers ability to pay. The level of the allowance for loan loss is also impacted by increases and decreases in loans outstanding, because either more or less
allowance is required as the amount of the Companys credit exposure changes. To the extent actual loan losses differ materially from managements estimate of these subjective factors, loan growth/run-off accelerates or the mix of loan
types changes, the level of the provision for loan loss, and related allowance, can and will fluctuate.

The accounting for the Companys core deposit intangible asset is also subject to significant estimates about future results. In connection with the acquisition of the Lake City and Live
Oak branches of Republic Bank in 2001, the Company recorded a core deposit intangible of approximately $6,000,000. This intangible asset is being amortized on a straight-line basis over its estimated useful life of 10 years. The life of this asset
was based on the estimated future period of benefit to the Company of the depositor relationships acquired. To the extent that the deposit accounts acquired leave the Company faster than anticipated, the amount of the core deposit intangible that is
amortized each period could increase significantly, thus shortening its useful life. Through March 31, 2004, the performance of the depositor relationships did not differ materially from expectations.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

In 1997 the Securities
  and Exchange Commission adopted amendments to Regulation S-K, Regulation S-X,
  and various forms to clarify and expand existing requirements for disclosures
  about derivatives and market risks inherent in derivatives and other financial
  instruments. As noted below, at March 31, 2004, the Company was a party to a
  single interest rate derivative contract. The Company also holds other financial
  instruments, which include investments, loans and deposit liabilities. The release
  requires quantitative and qualitative disclosures about market risk. See the
  section titled Interest Rate Sensitivity for further discussion
  on the Companys management of interest rate risk.

25



---

The
  Companys sole derivative contract is a $10 million notional interest rate
  swap that was entered into as a hedge of interest rate risk inherent in the
  Companys $10 million term loan. Under the terms of the swap, the Company
  will receive a variable rate of interest equal to 90-day Libor plus 170 basis
  points, reset quarterly. The Company will pay a fixed rate of interest equal
  to 6.45% for the life of the contract. All cash flows are computed based on
  the $10 million notional amount and are settled quarterly on a net basis. The
  contract matures October 3, 2006 and the notional amount will be reduced by
  $714,286 on a semi-annual basis beginning April 2004. The fair value of the
  swap at March 31, 2004, including interest accruals, was approximately ($535,000).
  The swap is being accounted for as a cash flow hedge of the variable interest
  payments under the $10 million term debt.

Non-derivative financial instruments that have market risk are included in Table 3: Rate Sensitivity Analysis. These instruments are shown by maturity, separated by fixed and
variable interest rates. The estimated fair value of each instrument category is also shown in the table. While these estimates of fair value are based on managements judgment of the most appropriate factors, there is no assurance that, were
the Company to have disposed of such instruments at March 31, 2004, the estimated fair values would necessarily have been achieved at that date, since market values may differ depending on various circumstances. The estimated fair values at March
31, 2004 would not necessarily be considered to apply at subsequent dates.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As
  required by Rule 13a-15 under the Securities Exchange Act of 1934 (the "Exchange
  Act"), as of the end of the period covered by this report, the Company carried
  out an evaluation of the effectiveness of the design and operation of the Company's
  disclosure controls and procedures. This evaluation was carried out under the
  supervision and with the participation of the Company's Chief Financial Officer
  and Chief Executive Officer. Based upon that evaluation, the Company's Chief
  Financial Officer and Chief Executive Officer have concluded that the Company's
  disclosure controls and procedures are effective at March 31, 2004 in alerting
  them to material information regarding the Company's financial statement and
  disclosure obligation in order to allow the Company to meet its reporting requirements
  under the Exchange Act in a timely manner.

Changes in Internal Control

There have been no changes in internal controls or in other factors that could significantly affect these controls during the last fiscal quarter, including any corrective actions with regard
to significant deficiencies and material weaknesses.

26



---

PART IIOTHER INFORMATION



|Item 1. | Legal Proceedings - There are
        no material pending legal proceedings to which the Company or any of its
        subsidiaries is a party or of which any of their property is the subject.
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                 
|Item 2. | Changes in Securities and Use
        of Proceeds - Not applicable.                                                                                                                             
|        |                                                                                                                                                                                                 
|Item 3. | Defaults Upon Senior Securities
        - Not applicable.                                                                                                                                       
|        |                                                                                                                                                                                                 
|Item 4. | Submission of Matters to a
        Vote of Security Holders - Not applicable.                                                                                                                   
|        |                                                                                                                                                                                                 
|Item 5. | Other Information - Not applicable.                                                                                                                                                             
|        |                                                                                                                                                                                                 
|Item 6. | Exhibits and Reports -                                                                                                                                                                          
|        |                                                                                                                                                                                                 
|(a)     | Exhibits:                                                                                                                                                                                       
|        |                                                                                                                                                                                                 
|        | 3(i)                                                                                                                                                                                            
|        |                                                                                                                                                                                                 
|        | 3(ii)                                                                                                                                                                                           
|        |                                                                                                                                                                                                 
|        | 31(a)                                                                                                                                                                                           
|        |                                                                                                                                                                                                 
|        | 32(a)                                                                                                                                                                                           
|        |                                                                                                                                                                                                 
|        | 32(b)                                                                                                                                                                                           
|        |                                                                                                                                                                                                 
|(a)     | Reports on Form 8-K:                                                                                                                                                                            
|        |                                                                                                                                                                                                 
|        | On January 22, 2004, the Company
        filed a Form 8-K to announce a definitive agrrement to be acquired by
        The South Financial Group, Inc.                                          
|        |                                                                                                                                                                                                 
|        | On January 30, 2004, the Company
        filed a Form 8-K to report its 2003 fourth quarter and full year results.                                                                              

27



---

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.



| | CNB Florida Bancshares, Inc.
| | ----------------------------
| | (Registrant)                
| |                             
| | By:                         
| |                             
| |                             
| | Date: May 7, 2004           

28