U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2004

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

For the transition period from              to             

Commission file number 333-95087

CENTERSTATE BANKS OF FLORIDA, INC.

(Exact Name of Registrant as Specified in Its Charter)

Florida	59-3606741
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

1101 First Street South, Suite 202

Winter Haven, Florida 33880

(Address of Principal Executive Offices)

(863) 293-2600

(Issuer’s Telephone Number, Including Area Code)

Check whether the issuer: (1) filed all reports required to be filed by Section 12, 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    YES  x    NO  ¨

Check whether the registrant is an accelerated filer (defined in Rule 12b-2 of the Exchange Act):    YES  ¨    NO  x

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

Common stock, par value $.01 per share	4,059,457
(class)	Outstanding at September 30, 2004

CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES

INDEX

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
Condensed consolidated balance sheets - September 30, 2004 and December 31, 2003 (unaudited)		2
Condensed consolidated statements of earnings for the three and nine months ended September 30, 2004 and 2003 (unaudited)		3
Condensed consolidated statements of cash flows – nine months ended September 30, 2004 and 2003 (unaudited)		4
Notes to condensed consolidated financial statements (unaudited)		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
Item 3.	Quantitative and qualitative disclosures: market risk	20
Item 4.	Controls and procedures	20
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	21
Item 2.	Changes in Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Submission of Matters to a Vote of Shareholders	21
Item 5.	Other Information	21
Item 6.	Exhibits and Reports on Form 8-K	21
SIGNATURES		22
CERTIFICATIONS		23

1

Centerstate Banks of Florida, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands of dollars)

	As of September 30, 2004			As of December 31, 2003
ASSETS
Cash and due from banks	$	25,304		$	24,843
Federal funds sold and money market		60,146			46,216
Securities available for sale (at market value)		161,908			95,357
Loans		429,298			413,898
Less allowance for loan losses		(5,532	)		(4,850	)
Net Loans		423,766			409,048
Premises and equipment, net		25,754			22,924
Accrued interest receivable		2,352			2,112
Other real estate owned		257			282
Deferred income taxes, net		1,709			1,992
Goodwill		4,675			4,675
Core deposit intangible		573			637
Other assets		1,317			810
TOTAL ASSETS	$	707,761		$	608,896
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand - non-interest bearing	$	144,235		$	118,219
Demand - interest bearing		87,898			76,404
Savings and money market accounts		167,698			125,570
Time deposits		215,883			218,042
Total deposits		615,714			538,235
Securities sold under agreement to repurchase		22,884			17,465
Corporate debenture		10,000			10,000
Amount payable to shareholders		—			65
Accrued expenses and other liabilities		1,867			1,168
Total liabilities		650,465			566,933
Minority interest		120			—
Stockholders’ equity:
Preferred Stock, $.01 par value; 5,000,000 shares authorized No shares issued or outstanding		—			—
Common stock, $.01 par value: 20,000,000 shares authorized; 4,059,457 and 3,369,380 shares issued and outstanding at September 30, 2004 and December 31, 2003 respectively		41			34
Additional paid-in capital		39,371			26,500
Retained earnings		18,109			15,409
Accumulated other comprehensive (loss) income		(345	)		20
Total stockholders’ equity		57,176			41,963
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	707,761		$	608,896

See notes to the accompanying condensed consolidated financial statements

2

Centerstate Banks of Florida, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)

(in thousands of dollars, except per share data)

	Three months ended				Nine months ended
	Sept 30, 2004		Sept 30, 2003		Sept 30, 2004			Sept 30, 2003
Interest income:
Loans	$	6,530	$	5,973	$	18,683		$	17,336
Investment securities		819		386		1,988			1,098
Federal funds sold and money market		159		139		401			532
		7,508		6,498		21,072			18,966
Interest expense:
Deposits		1,876		1,782		5,149			5,490
Securities sold under agreement to repurchase		56		17		114			58
Corporate debenture		127		8		358			8
Note payable		—		15		—			18
		2,059		1,822		5,621			5,574
Net interest income		5,449		4,676		15,451			13,392
Provision for loan losses		225		240		900			828
Net interest income after loan loss provision		5,224		4,436		14,551			12,564
Other income:
Service charges on deposit accounts		776		724		2,316			2,163
Commissions from mortgage broker activities		110		166		464			522
Loan related fees		75		85		216			209
Commissions on sale of mutual funds and annuities		55		34		165			156
Other service charges and fees		188		144		529			452
Gain on sale of branches		—		—		1,844			—
Loss on sale of other real estate owned		—		—		(5	)		—
		1,204		1,153		5,529			3,502
Other expenses:
Salaries, wages and employee benefits		2,714		2,281		7,830			6,683
Occupancy expense		616		595		1,764			1,719
Depreciation of premises and equipment		392		376		1,125			1,133
Stationary, printing and supplies		107		113		351			347
Marketing expenses		88		73		277			203
Data processing expense		225		201		642			598
Legal, auditing and other professional fees		201		128		441			383
Other expenses		767		757		2,260			2,006
Total other expenses		5,110		4,524		14,690			13,072
Income before provision for income taxes		1,318		1,065		5,390			2,994
Provision for income taxes		489		398		2,000			1,121
Net income	$	829	$	667	$	3,390		$	1,873
Earnings per share:
Basic	$	0.20	$	0.20	$	0.93		$	0.56
Diluted	$	0.20	$	0.19	$	0.91		$	0.55
Common shares used in the calculation of earnings per share:
Basic		4,057,644		3,365,380		3,644,523			3,364,208
Diluted		4,162,279		3,431,094		3,728,968			3,429,420

See notes to the accompanying condensed consolidated financial statements.

3

Centerstate Banks of Florida, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands of dollars)

	Nine months ended September 30,
	2004			2003
Cash flows from operating activities:
Net Income	$	3,390		$	1,873
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		900			828
Depreciation of premises and equipment		1,125			1,133
Amortization of purchase accounting adjustments related to the CSB merger		(56	)		(138	)
Net amortization/accretion of investments securities		391			477
Net deferred origination fees		(23	)		45
Write down of other real estate owned		21			—
Loss on sale of other real estate owned		5			—
Deferred income taxes		500			(346	)
Gain on sale of branches		(1,844	)		—
Cash provided by (used in) changes in:
Net changes in accrued interest receivable		(312	)		107
Net change in other assets		(507	)		(567	)
Net change in accrued interest payable		22			—
Net change in accrued expenses and other liabilities		702			556
Net cash provided by operating activities		4,314			3,968
Cash flows from investing activities:
Proceeds from maturities of investment securities available for sale		24,105			16,000
Proceeds from callable investment securities available for sale		3,000			13,000
Purchases of investment securities available for sale		(83,896	)		(38,155	)
Purchases of mortgage backed securities available for sale		(19,105	)		(25,283	)
Proceeds from pay-downs of mortgage back securities available for sale		8,372			5,493
Increase in loans, net of repayments		(37,223	)		(63,777	)
Purchases of premises and equipment		(5,567	)		(2,522	)
Proceeds from sale of other real estate owned		297			47
Decrease in amounts payable to shareholders		(65	)		(2,335	)
Net cash from sale of branches		829			—
Increase in goodwill due to cash payments for fractional shares related to CSB merger		—			(5	)
Net cash used in investing activities		(109,253	)		(97,537	)
Cash flows from financing activities:
Net increase in demand and savings deposits		101,603			67,048
Net increase in other borrowings		5,419			7,335
Net increase in corporate debenture		—			10,000
Stock options exercised		170			49
Net proceeds of shareholder rights offering		12,708			—
Proceeds from sale of minority interest of subsidiary		120			—
Dividends paid		(690	)		(538	)
Net cash provided by financing activities		119,330			83,894
Net increase (decrease) in cash and cash equivalents		14,391			(9,675	)
Cash and cash equivalents, beginning of period		71,059			84,042
Cash and cash equivalents, end of period	$	85,450		$	74,367

4

Centerstate Banks of Florida, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands of dollars)

(continued)

	Nine months ended September 30,
	2004			2003
Supplemental schedule of noncash transactions:
Fair value adjustment - securities available-for-sale
Fair value adjustments - securities	$	(582	)	$	(552	)
Deferred income tax asset		217			203
Unrealized loss on securities available-for-sale	$	(365	)	$	(349	)
Transfer of loan to other real estate owned	$	297		$	164
Purchase price adjustment related to CSB acquisition	$	—		$	362
Cash paid during the period for:
Interest	$	5,596		$	5,573
Income taxes	$	1,688		$	1,330

See notes to the accompanying condensed consolidated financial statements.

CenterState Banks of Florida, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1: Holding company and subsidiaries background information

CenterState Banks of Florida, Inc (the “Company”) is a multi-bank holding company. The Company was formed on June 30, 2000, as part of the merger of First National Bank of Osceola County (“FNB/Osceola”), Community National Bank of Pasco County (“CNB/Pasco”) and First National Bank of Polk County (“FNB/Polk”), which were three previously independent banks in Central Florida. The Company subsequently acquired CenterState Bank of Florida (“CSB”) on December 31, 2002 in a stock and cash transaction. This transaction was accounted for using the purchase method of accounting. The excess of the purchase price over the fair market value of the tangible assets, core deposit intangible ($739,000) and liabilities was approximately $4.7 million. This amount was recognized and recorded as goodwill.

A 20% interest of C. S. Processing, Inc. (“CSP”) was sold to a Leesburg, Florida bank during the quarter ending June 30, 2004 for $120,000, which approximates the Company’s book value. CSP is now an 80% owned subsidiary, equally owned by the Company’s four subsidiary banks. It performs item processing and check rendering services for the Company’s four subsidiary banks and for the other financial institution which owns the remaining 20%.

The Company, through its subsidiary banks, provides traditional deposit and lending products and services to its retail and commercial customers. It operates through 25 locations in seven counties in Central Florida.

NOTE 2: Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the

5

information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. These statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. In the opinion of management, all adjustments, consisting primarily of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods have been made. The results of operations of the three and nine-months ended September 30, 2004 are not necessarily indicative of the results expected for the full year.

NOTE 3: Common stock outstanding and earnings per share data

Basic earnings per share is based on the weighted average number of common shares outstanding during the periods. Diluted earnings per share includes the weighted average number of common shares outstanding during the periods and the further dilution from stock options using the treasury method. The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the periods presented (dollars are in thousands, except per share data).

	For the three months ended September 30,
	2004					2003
	Earnings		Weighted Average Shares	Per Share Amount		Earnings		Weighted Average Shares	Per Share Amount
Basic EPS
Net earnings available to common shareholders	$	829	4,057,644	$	0.20	$	667	3,365,380	$	0.20
Effect of dilutive securities:
Incremental shares from assumed exercise of stock options	$	0	104,635			$	0	65,714
Diluted EPS
Net earnings available to common shareholders and assumed conversions	$	829	4,162,279	$	0.20	$	667	3,431,094	$	0.19
	For the nine months ended September 30,
	2004					2003
	Earnings		Weighted Average Shares	Per Share Amount		Earnings		Weighted Average Shares	Per Share Amount
Basic EPS
Net earnings available to common shareholders	$	3,390	3,644,523	$	0.93	$	1,873	3,364,208	$	0.56
Effect of dilutive securities:
Incremental shares from assumed exercise of stock options	$	0	84,445			$	0	65,212
Diluted EPS
Net earnings available to common shareholders and assumed conversions	$	3,390	3,728,968	$	0.91	$	1,873	3,429,420	$	0.55

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NOTE 4: Comprehensive income

Under Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income,” certain transactions and other economic events that bypass the income statement must be displayed as other comprehensive income. The Company’s comprehensive income consists of net earnings and unrealized gains and losses on securities available-for-sale, net of deferred income taxes.

The table below sets forth the Company’s comprehensive income for the periods indicated below (in thousands of dollars).

	Three months ended					Nine months ended
	Sept 30, 2004		Sept 30, 2003			Sept 30, 2004			Sept 30, 2003
Net income	$	829	$	667		$	3,390		$	1,873
Other comprehensive income (loss), net of tax:
Unrealized holding gain (loss) arising during the period		398		(314	)		(365	)		(349	)
Total other comprehensive income (loss), net of tax		398		(314	)		(365	)		(349	)
Comprehensive income	$	1,227	$	353		$	3,025		$	1,524

NOTE 5: Compensation programs

Substantially all of the Company’s employees are covered under the Company’s employee benefit plan. The expenses of providing these benefit plans are charged to income in the period the expenses are incurred. In addition, certain directors and key employees are covered under the Company’s stock option plans.

The Company applies Accounting Principle Board Opinion No. 25 and related interpretations in accounting for its stock option plans. Accordingly, no compensation cost has been recognized for its stock option plans. Had compensation cost for the Company’s stock-based compensation plan been determined consistent with Statement of Financial Accounting Standards (“SFAS”) No. 123, the Company’s net income would have been reduced to the pro forma amounts indicated below (amounts are in thousands of dollars except for per share data):

	Three months ending September 30,						Nine months ending September 30,
	2004			2003			2004			2003
Net income, as reported	$	829		$	667		$	3,390		$	1,873
Deduct total stock-based employee compensation expense determined under fair-value-based method for all awards, net of tax	$	(109	)	$	(24	)	$	(167	)	$	(90	)
Pro forma net income	$	720		$	643		$	3,223		$	1,783
Diluted earnings per share, as reported	$	0.20		$	0.19		$	0.91		$	0.55
Deduct stock-based employee compensation per share expense determined under fair-value-based method for all awards, net of tax	$	(0.03	)		—		$	(0.05	)	$	(0.03	)
Pro forma diluted earnings per share	$	0.17		$	0.19		$	0.86		$	0.52

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NOTE 6: Effect of new pronouncements

In December 2003, the FASB issued FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (“VIEs”), which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46, Consolidation of Variable Interest Entities, which was issued in January 2003. The Company adopted FIN 46R as of December 31, 2003.

The Company evaluated the impact of applying FIN 46R to existing VIEs in which it has variable interests and determined that CenterState Bank of Florida Statutory Trust I (“the Trust”) should be deconsolidated from the Company. At December 31, 2003, the Company de-recognized $10 million in trust preferred securities issued during the 3^rd Quarter and recognized $10 million in corporate debentures that the Trust had purchased from the Company.

The Federal Reserve has issued regulations which allow for the inclusion of a portion of these instruments as Tier 1 capital and the balance as Tier 2 capital (in accordance with the Federal Reserve’s guidelines) regardless of the FIN 46 interpretation, although such a determination could potentially be changed at a later date.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. This Statement is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The adoption of this Statement did not have a material effect on the financial statements of the Company.

FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, was issued in May 2003. This Statement establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. The Statement also includes required disclosures for financial instruments within its scope. For the Company, the Statement was effective for instruments entered into or modified after May 31, 2003 and otherwise was effective as of January 1, 2004. The adoption of this Statement did not have a material effect on the financial statements of the Company.

In March 2004, the SEC issued SAB No. 105, Application of Accounting Principles to Loan Commitments. This staff accounting bulletin summarizes the views of the staff regarding the application of generally accepted accounting principles to loan commitments accounted for as derivative instruments. In particular, this bulletin clarifies whether the entity can consider the expected future cash flows related to the associated servicing of the loan and adds additional disclosures to the annual financial statements. The adoption of this bulletin did not have a material effect on the financial statements of the Company.

8

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Rights offering

On April 30, 2004, the Company commenced a rights offering for the sale of up to 675,627 shares of its common stock to shareholders of Record on April 27, 2004, at a price of $18.99 per share. The shareholder rights offer terminated on June 14, 2004. The offer was fully subscribed. Total capital raised, net of expenses, was approximately $12.7 million.

Sale of branches

The Company sold its two Lake County (Florida) branches during February 2004, which included approximately $21 million of loans, $24 million of deposits and all of the related fixed assets (book value of approximately $1.6 million) (the “Branch Sale”). The Company recognized a gain on sale, during the first quarter of 2004, of approximately $1,844,000 ($1,150,000, net of income taxes of $694,000).

COMPARISON OF BALANCE SHEETS AT SEPTEMBER 30, 2004 AND DECEMBER 31, 2003

Overview

Total assets of the Company were $707.8 million as of September 30, 2004, compared to $608.9 million at December 31, 2003, an increase of $98.9 million or 16%. This increase, net of the sale of branches discussed above, was primarily the result of the Company’s internally generated loan growth funded by an increase in deposits.

Federal funds sold and money market

Federal funds sold and money market was $60.1 million at September 30, 2004 (approximately 8.5% of total assets) as compared to $46.2 million at December 31, 2003 (approximately 7.6% of total assets). Management uses its available-for-sale securities portfolio, as well as its federal funds sold and money market accounts for liquidity management and for investment yields. These accounts, as a group, will fluctuate as a function of loans and deposits outstanding. The loan to deposit ratio decreased from 76.9% at December 31, 2003, to 69.7% at September 30, 2004, which is consistent with an increase in federal funds sold and money market, and investment securities outstanding as of September 30, 2004 compared to December 31, 2003.

Investment securities

Securities available-for-sale, consisting primarily of U.S. Treasury and government agency securities, were $161.9 million at September 30, 2004 (approximately 23% of total assets) compared to $95.4 million at December 31, 2003 (approximately 16% of total assets). These securities have been recorded at fair value. The Company classifies its securities as “available-for-sale” to provide for greater flexibility to respond to changes in interest rates. Management uses its available-for-sale securities portfolio, as well as its federal funds sold and money market accounts for liquidity management and for investment yields. These accounts, as a group, will fluctuate as a function of loans and deposits outstanding. The loan to deposit ratio decreased from 76.9% at December 31, 2003, to 69.7% at September 30, 2004, which is consistent with an increase in federal funds sold and money market, and investment securities outstanding as of September 30, 2004 compared to December 31, 2003.

9

Loans

Total gross loans were $429.8 million at September 30, 2004, compared to $414.4 million at December 31, 2003, an increase of $15.4 million or 3.7%. During the same period, real estate loans increased by $4.2 million or 1.3%, commercial loans increased by $2.0 million or 3.4%, and all other loans including consumer loans increased by $9.1 million or 23%. Total loans net of unearned fees and allowance for loan losses were $423.8 million at September 30, 2004, compared to $409.0 million at December 31, 2003, an increase of $14.8 million or 3.6%. As discussed earlier, the Company sold two branches on February 20, 2004, which included loans with a net book value of approximately $21.3 million.

The following table sets forth information concerning the loan portfolio by collateral types as of the dates indicated (dollars are in thousands).

	Sept 30, 2004			Dec 31, 2003
Real estate loans
Residential	$	128,666		$	140,826
Commercial		169,825			157,586
Construction		21,094			16,930
Total real estate		319,585			315,342
Commercial		61,223			59,175
Other		48,995			39,908
Gross loans		429,803			414,425
Unearned fees		(505	)		(527	)
Total loans net of unearned fees		429,298			413,898
Allowance for loan losses		(5,532	)		(4,850	)
Total loans net of unearned fees and allowance for loan losses	$	423,766		$	409,048

Credit quality and allowance for loan losses

The Company’s allowance for loan losses represents management’s estimate of an amount adequate to provide for potential losses within the existing loan portfolio. Loans are charged against the allowance when management believes collection of the principal is unlikely. The allowance consists of amounts established for specific loans and is also based on historical loan loss experience, the volume and type of lending conducted by the Company, the amount of nonperforming loans, general economic conditions, particularly as they relate to the Company’s market areas, and other factors related to the collectibility of the Company’s loan portfolio. The specific reserve element is the result of a regular analysis of all loans and commitments based on credit rating classifications and other factors. At September 30, 2004, the allowance for loan losses was $5.5 million or 1.29% of total loans outstanding, compared to $4.9 million or 1.17%, at December 31, 2003.

10

The following table sets forth information concerning the activity in the allowance for loan losses during the periods indicated (in thousands of dollars).

	Nine months ended September 30,
	2004			2003
Allowance at beginning of period	$	4,850		$	4,055
Charge-offs
Commercial loans		(12	)		(56	)
Real Estate loans		(58	)		(48	)
Consumer loans		(46	)		(36	)
Total charge-offs		(116	)		(140	)
Recoveries
Commercial loans		6			—
Real Estate loans		2			19
Consumer loans		20			24
Total recoveries		28			43
Net charge-offs		(88	)		(97	)
Provision for loan losses		900			828
Adjustment relating to sale of branches		(130	)		—
Allowance at end of period	$	5,532		$	4,786

Nonperforming assets

Nonperforming assets include (1) non-accrual loans; (2) accruing loans that are 90 days or more delinquent that are deemed by management to be adequately secured and in the process of collection; (3) OREO (i.e. real estate acquired through foreclosure or deed in lieu of foreclosure); and (4) other repossessed assets (not real estate). All delinquent loans are reviewed on a regular basis and are placed on non-accrual status when, in the opinion of management, the possibility of collecting additional interest is deemed insufficient to warrant further accrual. As a matter of policy, interest is not accrued on loans past due 90 days or more unless the loan is both well secured and in the process of collection. When a loan is placed on non-accrual status, interest accruals cease and uncollected accrued interest is reversed and charged against current income. Additional interest income on such loans is recognized only when received.

The following table sets forth information regarding the components of nonperforming assets at the dates indicated (in thousands of dollars).

	Sept 30 2004			Dec 31 2003
Non-Accrual Loans	$	779		$	1,078
Accruing Loans Past Due over 90 days		439			246
Other Real Estate Owned		257			282
Repossessed assets other than real estate		—			35
Total Non-Performing Assets	$	1,475		$	1,641
As a Percent of Total Assets		0.21	%		0.27	%
Allowance for Loan Losses	$	5,532		$	4,850
Allowance for loan losses to non performing loans		375	%		296	%

11

Management is continually analyzing its loan portfolio in an effort to recognize and resolve its problem assets as quickly and efficiently as possible. As of September 30, 2004, management believes that its allowance for loan losses was adequate. However, management recognizes that many factors can adversely impact various segments of its market. Accordingly, there is no assurance that losses in excess of such reserves will not be incurred.

Bank premises and equipment

Bank premises and equipment was $25.8 million at September 30, 2004 compared to $22.9 million at December 31, 2003, an increase of $2.9 million or 12.7%. The increase was the net result of purchases aggregating $5.6 million (includes the purchase of land and construction costs of several new branches), less depreciation of $1.1 million and the sale of land, buildings, furniture and equipment relating to the February 20, 2004 Branch sale of approximately $1.6 million.

Deposits

Total deposits were $615.7 million at September 30, 2004, compared to $538.2 million at December 31, 2003, an increase of $77.5 million or 14.4%. During the nine month period ended September 30, 2004, demand deposits increased by $26.0 million (22.0%), NOW deposits increased by $11.5 million (15.1%), savings and money market accounts increased by $42.1 million (33.5%), and time deposits decreased by $2.1 million (1.0%). As discussed before, the Branch Sale included approximately $24.0 million of deposits.

Repurchase agreements

The Company’s subsidiary banks enter into borrowing arrangements with their retail business customer by agreements to repurchase (“repurchase agreements”) under which the banks pledge investment securities owned and under their control as collateral against the one-day borrowing arrangement. These short-term borrowings totaled $22.9 million at September 30, 2004 compared to $17.5 million at December 31, 2003, resulting in an increase of $5.4 million, or 31%.

Corporate debenture

The Company formed CenterState Banks of Florida Statutory Trust I (the “Trust”) for the purpose of issuing trust preferred securities. On September 22, 2003, the Company issued a floating rate corporate debenture in the amount of $10 million. The Trust used the proceeds from the issuance of a trust preferred security to acquire the corporate debenture of the Company. The trust preferred security essentially mirrors the corporate debenture, carrying a cumulative preferred dividend at a variable rate equal to the interest rate on the corporate debenture (three month LIBOR plus 305 basis points). The initial rate in effect at the time of issuance was 4.19% and is subject to change quarterly (currently 4.64%). The corporate debenture and the trust preferred security each have 30-year lives. The trust preferred security and the corporate debenture are callable by the Company or the Trust, at their respective option after five years, and sooner in specific events, subject to prior approval by the Federal Reserve, if then required. Related loan origination costs of $188,000 were capitalized and are being amortized to interest expense over a five year period. The Company has treated the trust preferred security as Tier 1 capital up to the maximum amount allowed under the Federal Reserve guidelines, and the remainder as Tier 2 capital for federal regulatory purposes.

12

Stockholders’ equity

Shareholders’ equity at September 30, 2004, was $57.2 million, or 8.1% of total assets, compared to $42.0 million, or 6.9% of total assets at December 31, 2003. The increase in stockholders’ equity was due to the issuance of 675,627 of the Company’s common shares pursuant to the Company’s shareholder rights offering ($12.7 million), year-to-date net income ($3.4 million), and employee stock options exercised ($0.2 million), less a net decrease in the market value of securities available for sale, net of deferred taxes ($0.4 million), and dividends paid ($0.7 million).

The Company paid dividends of $0.06 per share during 2004 on March 31, June 30, and September 30, to shareholders of record as of the close of business on March 15, June 15, and September 15, respectively.

The federal bank regulatory agencies have established risk-based capital requirements for banks. These guidelines are intended to provide an additional measure of a bank’s capital adequacy by assigning weighted levels of risk to asset categories. Banks are also required to systematically maintain capital against such “off- balance sheet” activities as loans sold with recourse, loan commitments, guarantees and standby letters of credit. These guidelines are intended to strengthen the quality of capital by increasing the emphasis on common equity and restricting the amount of loan loss reserves and other forms of equity such as preferred stock that may be included in capital. As of September 30, 2004, each of the Company’s four subsidiary banks exceeded the minimum capital levels to be considered “Well Capitalized” under the terms of the guidelines.

Selected consolidated capital ratios at September 30, 2004 and December 31, 2003 are presented in the table below.

	Actual				Well capitalized				Excess
	Amount		Ratio		Amount		Ratio		Amount
September 30, 2004
Total capital (to risk weighted assets)	$	67,755	15.0	%	$	45,103	> 10	%	$	22,652
Tier 1 capital (to risk weighted assets)		62,223	13.8	%		27,062	> 6	%		35,161
Tier 1 capital (to average assets)		62,223	9.1	%		34,322	> 5	%		27,901
December 31, 2003
Total capital (to risk weighted assets)	$	51,160	12.5	%	$	40,997	> 10	%	$	10,163
Tier 1 capital (to risk weighted assets)		46,310	11.3	%		24,598	> 6	%		21,712
Tier 1 capital (to average assets)		46,310	7.8	%		29,520	> 5	%		16,790

COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2004 AND 2003

Overview

Net income for the three months ended September 30, 2004 was $829,000 or $0.20 per share basic and diluted, compared to $667,000 or $0.20 per share basic and $0.19 per share diluted for the same period in 2003.

The return on average equity (“ROE”) and the return on average assets (“ROA”), calculated on an annualized basis, for the three month period ended September 30, 2004 was 5.82% and 0.48%, respectively, as compared to 6.47% and 0.48%, respectively, for the same period in 2003.

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Net interest income/margin

Net interest income increased $773,000 or 17% to $5,449,000 during the three month period ended September 30, 2004 compared to $4,676,000 for the same period in 2003. The $773,000 increase was the result of a $1,010,000 increase in interest income less a $237,000 increase in interest expense.

Interest earning assets averaged $637.4 million during the three month period ended September 30, 2004 as compared to $513.4 million for the same period in 2003, an increase of $124 million, or 24%. The yield on average interest earning assets decreased 0.35% to 4.71% during the three month period ended September 30, 2004, compared to 5.06% for the same period in 2003. The combined net effects of the $124 million increase in average interest earning assets and the 0.35% decrease in yield on average interest earning assets resulted in the $1,010,000 increase in interest income between the two periods.

Interest bearing liabilities averaged $489.7 million during the three month period ended September 30, 2004 as compared to $419.2 million for the same period in 2003, an increase of $70.5 million, or 17%. The cost of average interest bearing liabilities decreased 0.06% to 1.68% during the three month period ended September 30, 2004, compared to 1.74% for the same period in 2003. The combined net effects of the $70.5 million increase in average interest bearing liabilities and the 0.06% decrease in cost on average interest bearing liabilities resulted in the $237,000 increase in interest expense between the two periods.

The table below summarizes, the analysis of changes in interest income and interest expense for the three month periods ended September 30, 2004 and 2003 (in thousands of dollars).

	Three months ended September 30,
	2004							2003
	Average Balance			Interest Inc/Exp		Average Rate		Average Balance			Interest Inc /Exp		Average Rate
Loans (1) (2) (3)	$	428,625		$	6,530	6.09	%	$	381,838		$	5,973	6.26	%
Securities (4)		208,821			978	1.87	%		131,558			525	1.60	%
Total Earning Assets		637,446			7,508	4.71	%		513,396			6,498	5.06	%
Allowance for loan losses		(5,450	)						(4,499	)
All other assets		59,742							52,797
Total Assets	$	691,738						$	561,494
Deposits (5)		453,503			1,876	1.65	%		398,304			1,782	1.79	%
Borrowings		26,171			56	0.86	%		20,170			32	0.63	%
Corporate debenture (6)		10,000			127	5.08	%		764			8	4.19	%
Total Interest Bearing
Liabilities		489,674			2,059	1.68	%		419,238			1,822	1.74	%
Demand deposits		143,191							98,174
Other liabilities		1,799							2,826
Minority shareholder interest		120							—
Shareholders’ Equity		56,954							41,256
Total Liabilities and Shareholders’ Equity	$	691,738						$	561,494
Net Interest Spread (7)						3.03	%						3.32	%
Net Interest Income				$	5,449						$	4,676
Net Interest Margin (8)						3.42	%						3.64	%

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Note 1:	Loan balances are net of deferred origination fees and costs.
Note 2:	Interest income on average loans includes loan fee recognition of $76 thousand and $50 thousand for the three month periods ended September 30, 2004 and 2003.
Note 3:	The average rates have not been presented on a tax equivalent basis, as this amount is not deemed material.
Note 4:	Includes securities available-for-sale, federal funds sold and money market.
Note 5:	Includes interest bearing deposits only. Non-interest bearing checking accounts are included in the demand deposits listed above.
Note 6:	Includes amortization of origination costs of $9 thousand for the three month period ended September 30, 2004.
Note 7:	Represents the average rate earned on interest earning assets minus the average rate paid on interest bearing liabilities.
Note 8:	Represents net interest income divided by total interest earning assets.

Provision for loan losses

The provision for loan losses is charged to earnings to bring the total loan loss allowance to a level deemed appropriate by management and is based upon historical experience, the volume and type of lending conducted by the Company, the amount of nonperforming loans, general economic conditions, particularly as they relate to the Company’s market areas, and other factors related to the collectibility of the Company’s loan portfolio. As these factors change, the level of loan loss allowance changes. The allowance for loan loss account is then adjusted by the amount of the provision for loan losses charged to earnings. The provision was $225,000 for the three month period ended September 30, 2004 compared to $240,000 for the same period in 2003.

Non-interest income

Non-interest income for the three months ended September 30, 2004 increased $51,000, or 4%, to $1,204,000, compared to $1,153,000 for the same period in 2003. This increase was the result of the following components. Service charges on deposit accounts increased $52,000 (7.2%), Commissions from mortgage broker activities decreased by $56,000 (33.7%), loan related fees decreased $10,000 (11.8%), commissions on the sale of mutual funds and annuities increased $21,000 (61.8%) and other service charges and fees increased $44,000 (30.6%).

Non-interest income (annualized) as a percentage of total average assets was 0.70% for the three months ended September 30, 2004, compared to 0.82% for the same period in 2003.

Non-interest expense

Non-interest expense for the three months ended September 30, 2004 increased $586,000, or 13%, to $5,110,000, compared to $4,524,000 for the same period in 2003. This increase was the result of the following components. Salary, wages and employee benefits increased $433,000 (19.0%), occupancy expense increased $21,000 (3.5%), depreciation expense increased $16,000 (4.3%), stationary, printing and supplies decreased $6,000 (5.3%), marketing expenses increased $15,000 (20.5%), data processing expenses increased by $24,000 (11.9%), legal, auditing and other professional expenses increased $73,000 (57.0%), and all other expenses increased by $10,000 (1.3%).

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During the three month period ended September 30, 2004, the Company has expensed approximately $105,000 relating to internal control documentation and testing compliance work required by section 404 of the Sarbanes-Oxley Act of 2002. This was included in legal, auditing and other profession expenses discussed above. There were no similar expenses included in the prior year quarter. This increase was partially offset by reduction in other professional expenses. The Company expects to incur similar expenses during the fourth quarter of 2004.

Management believes the increase in non-interest expense results from the cost of growing the Company’s business period to period. Management also notes that non-interest expense (annualized) as a percentage of total average assets was 3.0% for the three months ended September 30, 2004, compared to 3.2% for the same period in 2003, a decrease of 0.2%.

Provision for income taxes

The income tax provision for the three months ended September 30, 2004 was $489,000 (an effective rate of 37.1%) compared to $398,000 (an effective rate of 37.4%) for the same period in 2003.

COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

Overview

Net income for the nine months ended September 30, 2004 was $3,390,000 or $0.93 per share basic and $0.91 per share diluted, compared to $1,873,000 or $0.56 per share basic and $0.55 per share diluted for the same period in 2003.

The February 2004 Branch sale included approximately $21 million of loans, $24 million of deposits and all of the related fixed assets (book value of approximately $1.6 million). The Company recognized a gain on sale of approximately $1,844,000 ($1,150,000 net of income taxes of $694,000).

On a pro forma basis, i.e. excluding the gain on sale of branches, the Company’s net income would have been approximately $2,240,000 or $0.61 per share basic and $0.60 per share diluted, compared to $1,873,000 or $0.56 per share basic and $0.55 per share diluted for the same period in 2003. The Company believes this pro forma basis is useful to the investor when comparing similar period results.

Reconciliation between Net Income and Pro Forma Net Income (i.e. excluding branch sale)
Amounts in thousands of dollars, except per share data				per share basic			per share diluted
Net Income	$	3,390		$	0.93		$	0.91
Gain on sale of branches, net of tax of $694		(1,150	)	$	(0.32	)	$	(0.31	)
Pro Forma Net Income	$	2,240		$	0.61		$	0.60

The return on average equity (“ROE”) and the return on average assets (“ROA”), calculated on an annualized basis, for the nine month period ended September 30, 2004 was 9.17% and 0.69%, respectively (6.06% and 0.46%, respectively, excluding gain from the Branch sale), as compared to 6.14% and 0.47%, respectively, for the same period in 2003.

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Net interest income/margin

Net interest income increased $2,059,000 or 15% to $15,451,000 during the nine month period ended September 30, 2004 compared to $13,392,000 for the same period in 2003. The increase was the result of a $2,106,000 increase in interest income less a $47,000 increase in interest expense.

Interest earning assets averaged $597.3 million during the nine month period ended September 30, 2004 as compared to $488.8 million for the same period in 2003, an increase of $108.5 million, or 22%. The yield on average interest earning assets decreased 0.47% to 4.70% during the nine month period ended September 30, 2004, compared to 5.17% for the same period in 2003. The combined net effects of the $108.5 million increase in average interest earning assets and the 0.47% decrease in yield on average interest earning assets resulted in the $2,106,000 increase in interest income between the two periods.

Interest bearing liabilities averaged $469.1 million during the nine month period ended September 30, 2004 as compared to $401.6 million for the same period in 2003, an increase of $67.5 million, or 17%. The cost of average interest bearing liabilities decreased 0.25% to 1.60% during the nine month period ended September 30, 2004, compared to 1.85% for the same period in 2003. The combined net effects of the $67.5 million increase in average interest bearing liabilities and the 0.25% decrease in cost on average interest bearing liabilities resulted in the $47,000 increase in interest expense between the two periods.

The table below summarizes, the analysis of changes in interest income and interest expense for the nine month periods ended September 30, 2004 and 2003 (in thousands of dollars).

	Nine months ended September 30,
	2004							2003
	Average Balance			Interest Inc / Exp		Average Rate		Average Balance			Interest Inc / Exp		Average Rate
Loans (1) (2) (3)	$	415,359		$	18,683	6.00	%	$	363,306		$	17,336	6.36	%
Securities (4)		181,935			2,389	1.75	%		125,541			1,630	1.73	%
Total Earning Assets		597,294			21,072	4.70	%		488,847			18,966	5.17	%
Allowance for loan losses		(5,231	)						(4,445	)
All other assets		59,385							51,411
Total Assets	$	651,448						$	535,813
Deposits (5)		432,139			5,149	1.59	%		385,528			5,490	1.90	%
Borrowings		26,991			114	0.56	%		15,862			76	0.64	%
Corporate debenture (6)		10,000			358	4.77	%		255			8	4.19	%
Total Interest Bearing Liabilities		469,130			5,621	1.60	%		401,645			5,574	1.85	%
Demand deposits		131,296							91,254
Other liabilities		1,673							2,239
Minority shareholder interest		67							—
Shareholders’ Equity		49,282							40,675
Total Liabilities and Shareholders’ Equity	$	651,448						$	535,813
Net Interest Spread (7)						3.10	%						3.32	%
Net Interest Income				$	15,451						$	13,392
Net Interest Margin (8)						3.45	%						3.65	%

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Note 1:	Loan balances are net of deferred origination fees and costs.
Note 2:	Interest income on average loans includes loan fee recognition of $136 thousand and $115 thousand for the nine month periods ended September 30, 2004 and 2003.
Note 3:	The average rates have not been presented on a tax equivalent basis, as this amount is not deemed material.
Note 4:	Includes securities available-for-sale, federal funds sold and money market.
Note 5:	Includes interest bearing deposits only. Non-interest bearing checking accounts are included in the demand deposits listed above.
Note 6:	Includes amortization of origination costs of $28 thousand for the nine month period ended September 30, 2004.
Note 7:	Represents the average rate earned on interest earning assets minus the average rate paid on interest bearing liabilities.
Note 8:	Represents net interest income divided by total interest earning assets.

Provision for loan losses

The provision for loan losses is charged to earnings to bring the total loan loss allowance to a level deemed appropriate by management and is based upon historical experience, the volume and type of lending conducted by the Company, the amount of nonperforming loans, general economic conditions, particularly as they relate to the Company’s market areas, and other factors related to the collectibility of the Company’s loan portfolio. As these factors change, the level of loan loss allowance changes. The allowance for loan loss account is then adjusted by the amount of the provision for loan losses charged to earnings. The provision was $900,000 for the nine month period ended September 30, 2004 compared to $828,000 for the same period in 2003.

Non-interest income

Non-interest income for the nine months ended September 30, 2004 increased $2,027,000, or 58%, to $5,529,000, compared to $3,502,000 for the same period in 2003. The primary reason for this increase was a gain of $1,844,000 from the Branch Sale during February 2004. Non-interest income for the nine months ended September 30, 2004, exclusive of the gain on sale from the Branch Sale, is $3,685,000 compared to $3,502,000 for the same period in 2003. This represents an increase of $183,000, or 5.2% between the two periods. This increase was the result of the following components. Service charges on deposit accounts increased $153,000 (7.1%), commissions from mortgage broker activities decreased $58,000 (11.1%), loan related fees increased $7,000 (3.3%), commissions on the sale of mutual funds and annuities increased $9,000 (5.8%), and all other charges and fees increased $72,000 (15.9%).

Non-interest income, exclusive of the gain on the Branch Sale, (annualized) as a percentage of total average assets was 0.75% for the nine months ended September 30, 2004, compared to 0.87% for the same period in 2003. There was no significant unusual issue or item included in this category, other than the February 2004 Branch Sale.

Non-interest expense

Non-interest expense for the nine months ended September 30, 2004 increased $1,618,000 or 12%, to $14,690,000, compared to $13,072,000 for the same period in 2003. This increase was a result of the following components: salaries, wages and employee benefits increased by $1,147,000 (17.2%), occupancy expense increased by $45,000 (2.6%), depreciation expense decreased by $8,000 (0.7%), stationary, printing and supplies expense increased by $4,000 (1.2%), marketing expense increased by

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$74,000 (36.5%), data processing expense increased by $44,000 (7.4%), legal, auditing and other professional service expenses increase by $58,000 (15.1%), and all other expenses increased by $254,000 (12.7%).

There were no significant unusual items or issues included in the above except for the following: (1) As discussed previously, the Company sold two branches during February 2004. As such, the related operating expenses were not present for most of the nine month period ending September 30, 2004, but were present during the similar period in 2003. (2) During the nine month period ended September 30, 2004, the Company has expensed approximately $130,000 relating to internal control documentation and testing compliance work required by section 404 of the Sarbanes-Oxley Act of 2002. This was included in legal, auditing and other profession expenses discussed above. There were no similar expenses included during the similar period for 2003. This increase was partially offset by reduction in other professional expenses.

During 2004, a new branch was opened in Osceola County and a new temporary branch was opened in Polk County (a permanent branch is in the process of construction). Management believes the increase in non-interest expense results from the cost of growing the Company’s business period to period. Management also notes that non-interest expense (annualized) as a percentage of total average assets was 3.0% for the nine months ended September 30, 2004, compared to 3.3% for the same period in 2003, a decrease of 0.3%.

Provision for income taxes

The income tax provision for the nine months ended September 30, 2004 was $2,000,000 (an effective rate of 37.1%) compared to $1,121,000 (an effective rate of 37.4%) for the same period in 2003.

Liquidity

Liquidity is defined as the ability to meet anticipated customer demands for funds under credit commitments and deposit withdrawals at a reasonable cost and on a timely basis. Management measures the liquidity position by giving consideration to both on- and off-balance sheet sources of and demands for funds on a daily and weekly basis.

Each of the Company’s subsidiary banks regularly assesses the amount and likelihood of projected funding requirements through a review of factors such as historical deposit volatility and funding patterns, present and forecasted market and economic conditions, individual client funding needs, and existing and planned business activities. Each subsidiary bank’s asset/liability committee (ALCO) provides oversight to the liquidity management process and recommends guidelines, subject to board of director’s approval, and courses of action to address actual and projected liquidity needs.

Short term sources of funding and liquidity include cash and cash equivalents, net of federal requirements to maintain reserves against deposit liabilities; investment securities eligible for pledging to secure borrowings from dealers and customers pursuant to securities sold under repurchase agreements; loan repayments; deposits and certain interest rate-sensitive deposits; and borrowings under overnight federal fund lines available from correspondent banks. In addition to interest rate-sensitive deposits, the primary demand for liquidity is anticipated fundings under credit commitments to customers. The Company does not use off balance sheet financing.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES: MARKET RISK

Market risk

Interest rate risk is the most significant market risk impacting the Company. Each subsidiary bank monitors and manages its interest rate risk using interest rate sensitivity “gap” analysis to measure the impact of market interest rate changes on net interest income. See the Company’s 2003 annual report on Form 10-K for disclosure of the quantitative and qualitative information regarding the interest rate risk inherent in interest rate risk sensitive instruments as of December 31, 2003. There have been no changes in the assumptions used in monitoring interest rate risk as of September 30, 2004. The impact of other types of market risk, such as foreign currency exchange risk and equity price risk, is deemed immaterial. The Company does not maintain a portfolio of trading securities and does not intend to engage in such activities in the immediate future.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in rules 13a-15(e) or 15d-15(e)). Based on that evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities and Exchange Act of 1934 are recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f)) during the quarter covered by this report that have materially effected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 2. Changes in Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Shareholders

None.

Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibit 31.1	The President and Chief Executive Officer’s certification required under section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2	The Chief Financial Officer’s certification required under section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1	The President and Chief Executive Officer’s certification required under section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2	The Chief Financial Officer’s certification required under section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

On July 26, 2004, a Form 8-K was furnished reporting under Item 12, “Results of Operations and Financial Condition,” the Company’s earnings for the quarter ending June 30, 2004.

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CENTERSTATE BANKS OF FLORIDA, INC.

SIGNATURES

In accordance with 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.

CENTERSTATE BANKS OF FLORIDA, INC.

(Registrant)

Date: November 5, 2004	By:	/s/ ERNEST S. PINNER
		Ernest S. Pinner
		President and Chief Executive
		Officer
Date: November 5, 2004	By:	/s/ JAMES J. ANTAL
		James J. Antal
		Senior Vice President
		and Chief Financial Officer

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