CENTERSTATE BANKS OF FLORIDA INC - 10-Q Quarterly Report

U. S. SECURTIES 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 June 30, 2003

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 Small Business Issuer as Specified in Its Charter)


Florida		59-3606741

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

7722 State Road 544 East
Winter Haven, Florida 33881
(Address of Principal Executive Offices)

(863) 419-0833
(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

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			3,365,380

(class)			Outstanding at June 30, 2003

CENTERSTATE BANKS OF FLORIDA, INC. AND SUBSIDIARIES

INDEX


PART I. FINANCIAL INFORMATION	Page
Item 1. Financial Statements
Condensed consolidated balance sheets (unaudited) — June 30, 2003 and December 31, 2002		2
Condensed consolidated statements of earnings for the three and six months ended June 30, 2003 and 2002 (unaudited)		3
Condensed consolidated statements of cash flows – six months ended June 30, 2003 and 2002 (unaudited)		4
Notes to condensed consolidated financial statements (unaudited)		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		10
Item 3. Quantitative and qualitative disclosures: Market Risk		21
Item 4. Disclosure controls and procedures		21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		23
Item 2. Changes in Securities and Use of Proceeds		23
Item 3. Defaults Upon Senior Securities		23
Item 4. Submission of Matters to a Vote of Shareholders		23
Item 5. Other Information		23
Item 6. Exhibits and Reports on Form 8-K		23
SIGNATURES		24
CERTIFICATIONS		25

Centerstate Banks of Florida, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands of dollars)


		As of			As of
ASSETS		June 30, 2003			December 31, 2002

Cash and due from banks		$	23,692		$	22,740
Federal funds sold and money market			56,803			61,302
Securities available for sale (at market value)			68,017			51,799
Loans			373,616			333,721
Less allowance for loan losses			(4,628	)		(4,055	)

	Net Loans		368,988			329,666
Premises and equipment, net			21,141			20,315
Accrued interest receivable			1,979			1,995
Other real estate owned			229			65
Deferred income taxes, net			1,526			1,528
Goodwill			4,675			4,308
Core deposit intangible			688			739
Other assets			513			343

TOTAL ASSETS		$	548,251		$	494,800

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
	Demand — non-interest bearing	$	96,489		$	80,019
	Demand — interest bearing		64,808			62,978
	Savings and money market accounts		116,483			112,359
	Time deposits		207,140			186,106

Total deposits			484,920			441,462
Securities sold under agreement to repurchase			18,599			10,005
Note payable			2,150			—
Amount payable to shareholders			200			2,400
Accrued expenses and other liabilities			1,221			1,018

	Total liabilities		507,090			454,885
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; 3,365,380 and 3,362,068 shares issued and outstanding at June 30, 2003 and December 31, 2002 respectively			34			34
Additional paid-in capital			26,447			26,036
Retained earnings			14,393			13,523
Accumulated other comprehensive income			287			322

Total stockholders’ equity			41,161			39,915

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	548,251		$	494,800

See notes to the accompanying condensed consolidated financial statements

Centerstate Banks of Florida, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
(in thousands of dollars, except per share data)


	Three months ended					Six months ended

	June 30, 2003		June 30, 2002			June 30, 2003		June 30, 2002

Interest income:
Loans	$	5,803	$	4,541		$	11,363	$	9,137
Investment securities		341		482			712		1,032
Federal funds sold and money market		200		164			393		333

		6,344		5,187			12,468		10,502

Interest expense:
Deposits		1,848		1,659			3,708		3,437
Securities sold under agreement to repurchase		25		11			41		21
Note payable		3		—			3		—

		1,876		1,670			3,752		3,458

Net interest income		4,468		3,517			8,716		7,044
Provision for loan losses		286		169			588		349

Net interest income after loan loss provision		4,182		3,348			8,128		6,695

Other income:
Service charges on deposit accounts		727		553			1,439		1,126
Other service charges and fees		446		302			910		599
Gain on sale of securities		—		10			—		21
Gain (loss) on sale of fixed asset		—		(2	)		—		18

		1,173		863			2,349		1,764

Other expenses:
Salaries, wages and employee benefits		2,223		1,611			4,402		3,292
Occupancy expense		557		442			1,124		863
Depreciation of premises and equipment		375		276			757		524
Stationary, printing and supplies		130		106			234		190
Marketing expenses		67		49			130		103
Data processing expense		191		378			397		616
Legal, auditing and other professional fees		124		111			255		181
Other expenses		595		485			1,249		1,018

Total other expenses		4,262		3,458			8,548		6,787
Income before provision for income taxes		1,093		753			1,929		1,672
Provision for income taxes		414		291			723		633

Net income	$	679	$	462		$	1,206	$	1,039

Earnings per share:
Basic	$	0.20	$	0.16		$	0.36	$	0.37
Diluted	$	0.20	$	0.16		$	0.35	$	0.36
Common shares used in the calculation of earnings per share:
Basic		3,364,369		2,822,423			3,363,612		2,820,625
Diluted		3,430,304		2,878,243			3,427,982		2,871,787

See notes to the accompanying condensed consolidated financial statements.

Centerstate Banks of Florida, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands of dollars)


					Six months ended June 30,

					2003			2002

Cash flows from operating activities:
	Net Income				$	1,206		$	1,039
	Adjustments to reconcile net income to net cash provided by operating activities:
		Provision for loan losses				588			349
		Depreciation of premises and equipment				757			524
		Amortization of purchase accounting adjustments related to the CSB merger				(103	)		—
		Net amortization/accretion of investments securities				297			47
		Net deferred origination fees				18			44
		Gain on sale of fixed asset				—			(18	)
		Deferred income taxes				29			1
		Realized gain on sale of available for sale securities				—			(21	)
		Tax deduction in excess of book deduction on options exercised				—			9
	Cash provided by (used in) changes in:
			Net changes in accrued interest receivable			16			272
			Net change in other assets			(170	)		123
			Net change in accrued interest payable			(10	)		(43	)
			Net change in accrued expenses and other liabilities			213			(78	)

				Net cash provided by operating activities		2,841			2,248

Cash flows from investing activities:
	Proceeds from maturities of investment securities available for sale					10,500			14,500
	Proceeds from callable investment securities available for sale					10,000			1,080
	Proceeds from sales of investment securities available for sale					—			5,049
	Purchases of investment securities available for sale					(27,135	)		(16,227	)
	Purchases of mortgage back securities available for sale					(12,768	)		(2,075	)
	Proceeds from pay-downs of mortgage back securities available for sale					2,826			545
	Proceeds from maturities of investment securities held to maturity					—			1,500
	Increase in loans, net of repayments					(40,092	)		(15,202	)
	Purchases of premises and equipment					(1,583	)		(649	)
	Proceeds from sale of fixed asset					—			69
	Decrease in amounts payable to shareholders					(2,200	)		—
	Increase in goodwill due to cash payments for fractional shares related to CSB merger					(5	)		—

				Net cash used in investing activities		(60,457	)		(11,410	)

Cash flows from financing activities:
	Net increase in demand and savings deposits					43,612			25,983
	Net increase (decrease) in other borrowings					8,594			(477	)
	Net increase notes payable					2,150			---	)
	Stock options exercised					49			38
	Net increase in minority interest of subsidiary					—			10
	Dividends paid					(336	)		(282	)

				Net cash provided by financing activities		54,069			25,272

				Net (decrease) increase in cash and cash equivalents		(3,547	)		16,110
Cash and cash equivalents, beginning of period						84,042			36,348

Cash and cash equivalents, end of period					$	80,495		$	52,458

Centerstate Banks of Florida, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands of dollars)
(continued)


Supplemental schedule of noncash transactions:
	Market value adjustment- securities available-for-sale
		Market value adjustments- securities		($62	)		($297	)
		Deferred income tax asset		27			110

	Unrealized loss on securities available-for-sale			($35	)		($187	)

Transfer of loan to other real estate owned			$	164		$	65

Purchase price adjustment related to CSB acquisition			$	362			—

Cash paid during the period for:
	Interest		$	3,759		$	3,501

	Income taxes		$	680		$	891

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 business combination was accounted for using the pooling-of-interest accounting method. All historical financial information has been restated to reflect the merger.

The Company 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.

FNB/Osceola is a national bank charted in September 1989. It operates from three full service locations within Osceola County and two full service locations in Orange County, a contiguous county. CNB/Pasco is a national bank charted in November 1989. It operates from nine full service locations within Pasco, Lake, Sumter, Hernando and Citrus Counties. FNB/Polk is a national bank charted in February 1992. It operates from four full service locations within eastern Polk County. CSB is a state bank charted in April 2000. It operates from three full service and two specialty locations within western Polk County. C. S. Processing, Inc. (“CSP”) is a wholly owned subsidiary, equally owned by the Company’s four subsidiary banks. CSP was formed in 2001. It performs item processing and check rendering services for the Company’s four subsidiary banks.

The Company, through its subsidiary banks, provides traditional deposit and lending products and services to its retail and commercial customers.

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 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 10K for the year ended December 31, 2002. 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 six month periods ended June 30, 2003 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 June 30,

		2003						2002

				Weighted		Per				Weighted		Per
				Average		Share				Average		Share
		Earnings		Shares		Amount		Earnings		Shares		Amount

Basic EPS
	Net earnings available to common shareholders	$	679		3,364,369	$	0.20	$	462		2,822,423	$	0.16

Effect of dilutive securities:
Incremental shares from assumed exercise of stock options		$	0		65,935			$	0		55,820

Diluted EPS
	Net earnings available to common shareholders and assumed conversions	$	679		3,430,304	$	0.20	$	462		2,878,243	$	0.16


		For the six months ended June 30,

		2003						2002

				Weighted		Per				Weighted		Per
				Average		Share				Average		Share
		Earnings		Shares		Amount		Earnings		Shares		Amount

Basic EPS
	Net earnings available to common shareholders	$	1,206		3,363,612	$	0.36	$	1,039		2,820,625	$	0.37

Effect of dilutive securities:
Incremental shares from assumed exercise of stock options		$	0		64,370			$	0		51,162

Diluted EPS
	Net earnings available to common shareholders and assumed conversions	$	1,206		3,427,982	$	0.35	$	1,039		2,871,787	$	0.36

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				Six months ended

		Jun 30, 2003		Jun 30, 2002		Jun 30, 2003			Jun 30, 2002

Net income		$	679	$	462	$	1,206		$	1,039
Other comprehensive income, net of tax:
	Unrealized holding gain (loss) arising during the period		88		63		(35	)		(200	)
	Add: reclassified adjustments for gains included in net income, net of income taxes of $4 and $8 for the three and six month periods ended June 30, 2002		—		6		—			13

Other comprehensive income (loss), net of tax			88		69		(35	)		(187	)
Comprehensive income		$	767	$	531	$	1,171		$	852

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 month period				Six month period
		ending March 31,				ending March 31,

		2003		2002		2003		2002

Net Income
	As reported	$	679	$	462	$	1,206	$	1,039
	Pro forma		651		441		1,149		1,000
Diluted earnings per share
	As reported	$	0.20	$	0.16	$	0.35	$	0.36
	Pro forma		0.19		0.15		0.34		0.35

NOTE 6: Effect of new pronouncements

In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement applies to all entities that have legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development or normal use of the asset. As used in this Statement, a legal obligation results from existing law, statute, ordinance, written or oral contract, or by legal construction of a contract under the doctrine of promissory estoppel. The Company is required to adopt SFAS No. 143 for the fiscal year beginning January 1, 2003. Adoption of this Statement did not have a significant impact on the financial position or results of operations of the Company.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. Adoption of this Statement did not have a significant impact on the financial position or results of operations of the Company.

In October 2002, the FASB issued SFAS No. 147, “Acquisitions of Certain Financial Institutions an amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9.” Except for transactions between two or more mutual enterprises, this Statement removes acquisitions of financial institutions from the scope of both Statement 72 and Interpretation 9 and requires that those transactions be accounted for in accordance with SFAS No. 141, and SFAS No. 142. In addition, this Statement amends SFAS No. 144 to include in its scope long-term customer-relationship intangible assets of financial institutions such as depositor- and borrower-relationship intangible assets and credit cardholder intangible assets. The provisions of this Statement are effective on or after October 1, 2002. The adoption of SFAS No. 147 did not have an impact on the financial position or results of operations.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145 amends existing guidance on reporting gains and losses on extinguishment of debt to prohibit the classification of the gain or loss as extraordinary, as the use of the such extinguishments have become part of the risk management strategy of many companies. SFAS No. 145 also amends SFAS No. 13 to require sale-leaseback accounting for certain lease modifications that have economic effects similar to sale-leaseback transactions. The provisions of the Statement related to the rescission of Statement No. 4 is applied in fiscal years beginning after May 15, 2002. Earlier application of these provisions is encouraged. The provisions of the Statement related to Statement 13 were effective for transactions occurring after May 15, 2002, with early application encouraged. Adoption of this Statement did not have a significant impact on the financial position or results of operations of the Company.

In November 2002, the FASB issued Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, and interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34. This interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. The Interpretation also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement provisions of the Interpretation are applicable to guarantees issued or modified after December 31, 2002 and are not expected to have a material effect on the Company’s consolidated financial statements. The Company has made the required disclosures in the notes of the consolidated financial statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, an amendment of FASB Statement No. 123. This statement amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement No. 123 to require prominent disclosures in both annual and interim financial statements. Certain disclosure modifications are required for fiscal years ending after December 15, 2002 and are included in the notes to these consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51. This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The Interpretation applies immediately to interests in variable interest entities created after January 31, 2003. For public enterprises, such as the Company, with a variable interest in a variable interest entity created before February 1, 2003, the Interpretation is applied to the enterprise beginning July 1, 2003. The application of this Interpretation requires certain disclosures in financial statements issued after January 31, 2003 if it is reasonably possible that the Company will consolidate or disclose information about variable interest entities when the Interpretation becomes effective. The adoption of this Interpretation did not have an effect on the financial statements of the Company.

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 is not expected to have an effect on the financial statements of the Company.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This Statement improves the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity. The new Statement requires that those instruments be classified as liabilities in statements of financial position. Most of the guidance in Statement 150 is effective for all financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of this Statement is not expected to have an effect on the financial statements of the Company.

NOTE 7: Merger

The Company acquired CSB (a non publicly traded commercial bank) on December 31, 2002 for a combination of stock and cash. Shareholders of CSB received $2.40 cash and .53631 share of the Company’s common stock for each share of common stock of CSB. The Company recorded this transaction using the purchase method of accounting. As allowed under SFAS No. 141, the Company completed its purchase price allocation review during the quarter ended June 30, 2003 and recorded an increase in goodwill and additional paid in capital related to the exchange of employee stock options from CSB to the Company in the amount of $362,000.

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

Some of the statements in this report constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934. These statements related to future events, other future financial performance or business strategies, and may be identified by terminology such as ``may,’’ ``will,’’ ``should,’’ ``expects,’’ ``scheduled,’’ ``plans,’’ ``intends’’, ``anticipates,’’ ``believes,’’ ``estimates,’’ ``potential,’’ or ``continue” or the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, you should specifically consider the factors described throughout this report. We cannot be assured that future results, levels of activity, performance or goals will be achieved.

As discussed in other sections, the Company acquired a commercial bank, CSB, on December 31, 2002. As such, CSB’s financial position and results of operations are included in the Company’s results for the three month and six month periods ending June 30, 2003, but are not included in the results for the three month and six month periods ending June 30, 2002. Therefore, the reader should consider this when comparing balance sheets as well as income and expense items between these periods.

COMPARISON OF BALANCE SHEETS AT JUNE 30, 2003 AND DECEMBER 31, 2002

Overview

Total assets of the Company were $548.3 million as of June 30, 2003, compared to $494.8 million at December 31, 2002, an increase of $53.5 million or 10.8%. This increase 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 $56.8 million at June 30, 2003 (approximately 10.4% of total assets) as compared to $61.3 million at December 31, 2002 (approximately 12.4% of total assets), a decrease of $4.5 million or 7.3%. The Company has decreased federal funds sold and money market in total dollars and as a percent of total assets outstanding, and increased investment securities, as part of its investment and liquidity management goals and objective.

Investment securities

Securities available-for-sale, consisting primarily of U.S. Treasury and government agency securities, were $68.0 million at June 30, 2003 (approximately 12.4% of total assets) compared to $51.8 million at December 31, 2002 (approximately 10.5% of total assets), an increase of $16.2 million or 31.3%. The Company has increased investment securities in total dollars and as a percent of total assets outstanding, and decreased federal funds sold and money market, as part of its investment and liquidity management goals and objectives. These securities have been recorded at market value. The Company classifies its securities as “available-for-sale” to provide for greater flexibility to respond to changes in interest rates.

Loans

Total gross loans were $374.1 million at June 30, 2003, compared to $334.2 million at December 31, 2002, an increase of $39.9 million or 11.9%. For the same period, real estate loans increased by $34.6 million or 13.6%, commercial loans increased by $2.9 million or 6.7%, and all other loans including consumer loans increased by $2.4 million or 6.7%. Total loans net of unearned fees were $373.6 million at June 30, 2003, compared to $333.7 million at December 31, 2002, an increase of $39.9 million or 12.0% (24% annualized). The Company hired a senior lender in the third quarter of last year and three senior lenders in the fourth quarter, which was the primary reason for the increase in loans outstanding at June 30, 2003 compared to December 31, 2002. The Company also opened two new full service branches in October 2002, two “mini” branches in January 2003, and two additional “mini” branches in June 2003. The “mini” branches are small branches that are opened for limited hours located in gated residential “active adult” communities in Florida. These branches are located in small offices inside the communities’ club-houses or other community facility and cater to the residents. During the three-year period ending December 31, 2002, the Company’s loan portfolio has grown at an average annual rate of approximately 16.9% per year. The largest annual growth rate was 18.2% and the smallest was 16.0%.

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


			June 30,			Dec 31,
			2003			2002

Real Estate Loans
	Residential		$	128,754		$	114,183
	Commercial			141,803			117,964
	Construction			18,705			22,544

Total Real Estate				289,262			254,691
Commercial				46,542			43,607
Other				38,313			35,906

		Gross Loans		374,117			334,204
Unearned fees				(501	)		(483	)

		Total loans net of unearned fees		373,616			333,721
Allowance for loan losses				(4,628	)		(4,055	)
Total loans net of unearned fees And allowance for loan losses			$	368,988		$	329,666

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 specific reserve element is the result of a regular analysis of all loans and commitments based on credit rating classifications and other factors. Management also weighs general economic conditions based on knowledge of specific factors that may affect the collectibility of loans. At June 30, 2003, the allowance for loan losses was $4.6 million or 1.24% of total loans outstanding, compared to $4.1 million or 1.22%, at December 31, 2002.

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


		Six month period end June 30,

		2003		2002

Allowance at beginning of period		$	4,055	$	3,076
Charge-offs
	Commercial Loans		15		21
	Real Estate Loans		4		127
	Consumer Loans		15		42

Total charge-offs			34		190
Recoveries
	Commercial Loans		—		1
	Real Estate Loans		11		3
	Consumer Loans		8		18

Total recoveries			19		22
Net charge-offs			15		168
Provision for loan losses			588		349

Allowance at end of period		$	4,628	$	3,257

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).


	June 30			Dec 31
	2003			2002

Non-Accrual Loans	$	1,098		$	402
Accruing Loans Past Due over 90 days		524			996
Other Real Estate Owned		229			65
Repossessed assets other than real estate		38			19

Total Non-Performing Assets	$	1,889		$	1,482

As a Percent of Total Assets		0.34	%		0.30	%

Allowance for Loan Losses	$	4,628		$	4,055

Allowance for loan losses to non performing loans		245	%		274	%

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 June 30, 2003, 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 $21.1 million at June 30, 2003 compared to $20.3 million at December 31, 2002, an increase of $0.8 million or 3.9%. The increase was a result of purchases aggregating $1,583,000, which includes the purchase of land (approximately $1 million) for two future branch sites, less depreciation of $757,000.

Deposits

Total deposits were $484.9 million at June 30, 2003, compared to $441.5 million at December 31, 2002, an increase of $43.4 million or 9.8%. During the six month period ended June 30, 2003, demand deposits increased by $16.5 million (20.6%), NOW deposits increased by $1.8 million (2.9%), savings and money market accounts increased by $4.1 million (3.6%), and time deposits increased by $21.0 million (11.3%). The Company hired a senior lender in the third quarter of last year and three senior lenders in the fourth quarter, which was the primary reason for the increase in deposits outstanding during

the six month period ending June 30, 2003. The senior lenders are customer relationship managers, and as such, they will attract the deposit relationship along with the lending relationship. In addition, two new full service branches opened during October 2002, two “mini” branches opened in January 2003, and two additional “mini” branches opened in June 2003. The “mini” branches are small branches that are opened for two to three days a week in gated residential “active adult” communities in Florida. The branches are located in small offices inside the communities’ club-houses or other community facility and cater to the residents.

Repurchase agreements

The Company enters into agreements to repurchase securities under which the Company pledges investment securities owned and under its control as collateral against borrowed funds. These short-term borrowings totaled $18.6 million at June 30, 2003 compared to $10.0 million at December 31, 2002, an increase of $8.6 million, or 86%. The primary reason for the increase was due to the additional business developed by the additional senior lenders (relationship managers) discussed earlier under “Deposits” and “Loans.”

Note payable

During the most recent quarter, the Company entered into an unsecured borrowing facility with a large regional bank. The facility is a two year $2.4 million line of credit with a floating interest rate of LIBOR +1.75%. At June 30, 2003, the balance outstanding was $2,150,000.

Part of the CSB acquisition transaction was a cash payment to shareholders of $2.4 million ($2.40 per share). As of June 30, 2003, $2.2 million had been paid to former CSB shareholders. The Company used this line of credit primarily to fund these shareholder payments. The Company may issue long-term debt in the form of a Trust Preferred Security during the second half of 2003. The funds raised in this expected transaction will be used to repay the shorter-term $2.4 million note and capitalize future asset growth.

Stockholders’ equity

Shareholders’ equity at June 30, 2003, was $41.161 million, or 7.5% of total assets, compared to $39.915 million, or 8.1% of total assets at December 31, 2002. The increase in stockholders’ equity was due to year-to-date net income ($1.206 million), stock options exercised ($49 thousand), an increase in paid in capital ($362 thousand) related to the conversion of stock options discussed in “Note 7: Merger,” less dividends paid ($336 thousand), and a net decrease in the market value of securities available for sale, net of deferred taxes ($35 thousand). The Company paid a dividend of $0.05 per share on March 31, 2003 to shareholders of record as of the close of business on March 14, 2003, and $0.05 per share on June 30, 2003 to shareholders of record as of the close of business on June 13, 2003.

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 June 30, 2003, 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 June 30, 2003 and December 31, 2002 are presented in the table below.


		Actual					Well capitalized					Excess

		Amount		Ratio			Amount		Ratio			Amount

June 30, 2003
	Total capital (to risk weighted assets)	$	39,518		10.7	%	$	36,970		> 10	%	$	2,548
	Tier 1 capital (to risk weighted assets)		34,897		9.4	%		22,182		> 6	%		12,715
	Tier 1 capital (to average assets)		34,897		6.6	%		26,635		> 5	%		8,262
December 31, 2002
	Total capital (to risk weighted assets)	$	37,646		11.2	%	$	33,743		> 10	%	$	3,903
	Tier 1 capital (to risk weighted assets)		33,591		10.0	%		20,246		> 6	%		13,345
	Tier 1 capital (to average assets)		33,591		8.5	%		19,677		> 5	%		13,914

COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED JUNE 30, 2003 AND 2002

Overview

Net income for the three months ended June 30, 2003 was $679 thousand or $0.20 per share basic and diluted, compared to $462 thousand or $0.16 per share basic and diluted for the same period in 2002. Data processing conversion expenses of approximately $234 thousand (approximately $146 thousand net of tax) was recognized during the quarter ended June 30, 2002. If not for these data processing conversion expenses, net income for the three months ended June 30, 2002 would have been approximately $608 thousand or $0.22 per share basic and $0.21 per share diluted. Data processing conversion expense is discussed below under the topic of non interest expenses.

The return on average equity (“ROE”), calculated on an annualized basis, for the three month period ended June 30, 2003 was 6.67%, as compared to 6.60% for the same period in 2002.

Net interest income/margin

As discussed in other sections, the Company acquired a commercial bank, CSB, on December 31, 2002. As such, CSB’s average interest earning assets and interest bearing liabilities are included in the Company’s results for the three month period ended June 30, 2003, but are not included in the results for the period ended June 30, 2002. Therefore, the reader should consider this when comparing average balances and resulting interest income and expense between the two periods.

Net interest income increased $951 thousand or 27% to $4.468 million during the three month period ended June 30, 2003 compared to $3.517 million for the same period in 2002. The $951 thousand increase was the result of a $1.157 million increase in interest income less a $206 thousand increase in interest expense.

Interest earning assets averaged $491.9 million during the three month period ended June 30, 2003 as compared to $334.4 million for the same period in 2002, an increase of $157.5 million, or 47%. The yield on average interest earning assets decreased 1.05% to 5.16% during the three month period ended June 30, 2003, compared to 6.21% for the same period in 2002. The combined net effects of the $157.5 million increase in average interest earning assets and the 1.05% decrease in yield on average interest earning assets resulted in the $1.157 million increase in interest income between the two periods.

Interest bearing liabilities averaged $404.5 million during the three month period ended June 30, 2003 as compared to $273.7 million for the same period in 2002, an increase of $130.8 million, or 48%. The cost of average interest bearing liabilities decreased 0.59% to 1.85% during the three month period ended June 30, 2003, compared to 2.44% for the same period in 2002. The combined net effects of the $130.8 million increase in average interest bearing liabilities and the 0.59% decrease in cost on average interest bearing liabilities resulted in the $206 thousand 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 June 30, 2003 and 2002 (in thousands of dollars).


	Three months ended June 30,

	2003								2002

	Average			Interest		Average			Average			Interest		Average
	Balance			Inc / Exp		Rate			Balance			Inc/Exp		Rate

Loans (1) (2)	$	363,886		$	5,803		6.38	%	$	255,403		$	4,541		7.11	%
Securities (3)		127,986			541		1.69	%		78,956			646		3.27	%

Total Earning Assets		491,872			6,344		5.16	%		334,359			5,187		6.21	%
Allowance for loan losses		(4,460	)							(3,292	)
All other assets		51,267								32,933

Total Assets	$	538,679							$	364,000

Deposits (4)		387,691			1,848		1.91	%		269,614			1,659		2.46	%
Borrowings (5)		16,841			28		0.67	%		4,044			11		1.09	%

Total Interest Bearing Liabilities		404,532			1,876		1.85	%		273,658			1,670		2.44	%
Demand deposits		91,847								60,935
Other liabilities		1,679								1,280
Minority shareholder interest		—								109
Shareholders’ Equity		40,621								28,018

Total Liabilities and Shareholders’ Equity	$	538,679							$	364,000

Net Interest Spread (6)							3.31	%							3.77	%

Net Interest Income				$	4,468							$	3,517

Net Interest Margin (7)							3.63	%							4.21	%


Note 1:		Loan balances are net of deferred origination fees and costs.
Note 2:		Interest income on average loans includes loan fee recognition of $32 thousand and $48 thousand for the three month periods ended June 30, 2003 and 2002.
Note 3:		Includes securities available-for-sale, federal funds sold and money market.
Note 4: Note 5:		Includes interest bearing deposits only. Non-interest bearing checking accounts are included in the demand deposits listed above. Includes repurchase agreements and a note payable.
Note 6:		Represents the average rate earned on interest earning assets minus the average rate paid on interest bearing liabilities.
Note 7:		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, industry standards, the amount of nonperforming loans, general economic conditions, particularly as they relate to the Company’s market areas, and other factors related to the collectibility of the Company’s loan portfolio. 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 $286 thousand for the three month period ended June 30, 2003 compared to $169 thousand for the same period in 2002. The increase was due to the increase in the loan portfolio, relating to the inclusion of CSB operations, and the loan mix of the Company’s loan portfolio.

Non-interest income

Non-interest income for the three months ended June 30, 2003 increased $310 thousand, or 36%, to $1.173 million, compared to $863 thousand for the same period in 2002, primarily due to the December 31, 2002 acquisition of CSB. The largest portion of the increase ($174 thousand) was related to service charges on deposit accounts. Loan related fees, primarily commissions earned on brokering single family fixed rate loans, late payment charges and other non loan origination related fees, increased $126 thousand. All other service charges, fees and other non-interest income combined produced a net increase of $10 thousand. Non-interest income (annualized) as a percentage of total average assets was 0.87% for the three months ended June 30, 2003, compared to 0.95% for the same period in 2002.

Non-interest expense

Non-interest expense for the three months ended June 30, 2003 increased $804 thousand, or 23%, to $4.262 million, compared to $3.458 million for the same period in 2002, primarily due to the December 31, 2002 acquisition of CSB. In addition, two new full service branches were opened in October 2002. As with CSB, the operating expenses related to these two new additional branches are included in the three month period ending June 30, 2003 and not during the same period in 2002.

The largest portion of the increase ($612 thousand) is due to the increase in salaries, wages and employee benefits. Occupancy expenses, including depreciation, increased $214 thousand. Data processing expense decreased $187 thousand primarily due to the conversion of item processing from an outsourcing expense to in-house processing during the first half of 2002, which was also a contributing factor in the increase of salary related expenses and occupancy expenses during the current quarter. All other operating expenses combined produced a net increase of $165 thousand.

Provision for income taxes

The income tax provision for the three months ended June 30, 2003 was $414 thousand (an effective rate of 37.9%) compared to $291 thousand (an effective rate of 38.6%) for the same period in 2002.

COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2003 AND 2002

Overview

Net income for the six months ended June 30, 2003 was $1.206 million or $0.36 per share basic and $0.35 per share diluted, compared to $1.039 million or $0.37 per share basic and $0.36 per share diluted for the same period in 2002.

Data processing conversion expenses of approximately $296 thousand (approximately $185 thousand net of tax) was recognized during the six month period ending June 30, 2002. If not for these data processing conversion expenses, net income would have been approximately $1.224 million or $0.43 per share basic and $0.43 per share diluted. Data processing conversion expense is discussed below under the topic of non interest expenses.

The return on average equity (“ROE”), calculated on an annualized basis, for the six month period ended June 30, 2003 was 5.97%, as compared to 7.41% for the same period in 2002.

Net interest income/margin

As discussed in other sections, the Company acquired a commercial bank, CSB, on December 31, 2002. As such, CSB’s average interest earning assets and interest bearing liabilities are included in the Company’s results for the six month period ended June 30, 2003, but are not included in the results for the period ended June 30, 2002. Therefore, the reader should consider this when comparing average balances and resulting interest income and expense between the two periods.

Net interest income increased $1.672 million or 24% to $8.716 million during the six month period ended June 30, 2003 compared to $7.044 million for the same period in 2002. The $1.672 million increase was the result of a $1.966 million increase in interest income and a $294 thousand increase in interest expense.

Interest earning assets averaged $476.6 million during the six month period ended June 30, 2003 as compared to $330.7 million for the same period in 2002, an increase of $145.9 million, or 44%. The yield on average interest earning assets decreased 1.12% to 5.23% during the six month period ended June 30, 2003, compared to 6.35% for the same period in 2002. The combined net effects of the $145.9 million increase in average interest earning assets and the 1.12% decrease in yield on average interest earning assets resulted in the $1.966 million increase in interest income between the two periods.

Interest bearing liabilities averaged $392.8 million during the six month period ended June 30, 2003 as compared to $273.3 million for the same period in 2002, an increase of $119.5 million, or 44%. The cost of average interest bearing liabilities decreased 0.62% to 1.91% during the six month period ended June 30, 2003, compared to 2.53% for the same period in 2002. The combined net effects of the $119.5 million increase in average interest bearing liabilities and the 0.62% decrease in cost on average interest bearing liabilities resulted in the $294 thousand increase in interest expense between the two periods.

The table below summarizes, the analysis of changes in interest income and interest expense for the six month periods ended June 30, 2003 and 2002 (in thousands of dollars).


	Six months ended June 30,

	2003								2002

	Average			Interest		Average			Average			Interest		Average
	Balance			Inc / Exp		Rate			Balance			Inc / Exp		Rate

Loans (1) (2)	$	354,040		$	11,363		6.42	%	$	251,594		$	9,137		7.26	%
Securities (3)		122,533			1,105		1.80	%		79,087			1,365		3.45	%

Total Earning Assets		476,573			12,468		5.23	%		330,681			10,502		6.35	%
Allowance for loan losses		(4,318	)							(3,215	)
All other assets		50,717								34,569

Total Assets	$	522,972							$	362,035

Deposits (4)		379,139			3,708		1.96	%		269,121			3,437		2.55	%
Borrowings (5)		13,709			44		0.64	%		4,151			21		1.01	%

Total Interest Bearing Liabilities		392,848			3,752		1.91	%		273,272			3,458		2.53	%
Demand deposits		87,794								59,486
Other liabilities		1,945								1,111
Minority shareholder interest		—								105
Shareholders’ Equity		40,385								28,061

Total Liabilities and Shareholders’ Equity	$	522,972							$	362,035

Net Interest Spread (6)							3.32	%							3.82	%

Net Interest Income				$	8,716							$	7,044

Net Interest Margin (7)							3.66	%							4.26	%


Note 1:		Loan balances are net of deferred origination fees and costs.
Note 2:		Interest income on average loans includes loan fee recognition of $65 thousand and $234 thousand for the six month periods ended June 30, 2003 and 2002.
Note 3:		Includes securities available-for-sale, federal funds sold and money market.
Note 4:		Includes interest bearing deposits only. Non-interest bearing checking accounts are included in the demand deposits listed above.
Note 5:		Includes repurchase agreements and a note payable.
Note 6:		Represents the average rate earned on interest earning assets minus the average rate paid on interest bearing liabilities.
Note 7:		Represents net interest income divided by total interest earning assets.

Provision for loan losses

for loan losses charged to earnings. The provision was $588 thousand for the six month period ended June 30, 2003 compared to $349 thousand for the same period in 2002. The increase was due to the increase in the loan portfolio, relating to the inclusion of CSB operations, and the loan mix of the Company’s loan portfolio.

Non-interest income

Non-interest income for the six months ended June 30, 2003 increased $585 thousand, or 33%, to $2.349 million, compared to $1.764 million for the same period in 2002, primarily due to the December 31, 2002 acquisition of CSB. The largest portion of the increase ($313 thousand) was related to service charges on deposit accounts. Loan related fees, primarily commissions earned on brokering single family fixed rate loans, late payment charges and other non loan origination related fees, increased $276 thousand. All other service charges, fees and other non-interest income combined produced a net decrease of $4 thousand. Non-interest income (annualized) as a percentage of total average assets was 0.90% for the six months ended June 30, 2003, compared to 0.97% for the same period in 2002.

Non-interest expense

Non-interest expense for the six months ended June 30, 2003 increased $1.761 million, or 26%, to $8.548 million, compared to $6.787 million for the same period in 2002, primarily due to the December 31, 2002 acquisition of CSB.

Salaries and employee benefits increased by $1.11 million (34%), occupancy and depreciation expenses increased by $494 thousand (36%), data processing expenses (includes item processing and conversion expenses) decreased by $219 thousand (36%), and all remaining expenses together resulted in an increase of $376 thousand (25%).

Although the primary reason for the increase in non-interest expense was the December 31, 2002 acquisition of CSB, other contributing factors involved included the following.

Two new branches were opened during October 2002. Two “mini” branches were opened in January 2003 and two in June 2003. The expenses related to these branches were included in the six month period ending June 30, 2003 but not in the corresponding period in 2002.

The FNB/Osceola bank and the CNB/Pasco bank converted their data processing to a new service bureau during the first half of 2002, as well as converted their item processing from an outsourcing firm to an in-house process. The conversion expenses (approximately $296 thousand) recognized in the first half of 2002, increased data processing expenses for the six month period ending June 30, 2002. In addition, since these last two banks converted their item processing function from an outsourced function to an in house process in March and April of 2002, data processing expense decreased during the six month period ending June 30, 2003 and because this function is now subsequently performed in-house, salary/employee benefits and occupancy expenses have increased.

All four of the Company’s subsidiary banks have now completed their conversions to the same service bureau for their core data processing, and the same general ledger with the same standard chart of accounts. In addition, all four subsidiary banks have also converted their item processing to the Company’s wholly owned subsidiary, C.S. Processing, Inc. In addition to the expected future efficiencies and cost savings, management believes this strategy of control over the item processing function will enhance the quality of the service provided the customer.

Provision for income taxes

The income tax provision for the six months ended June 30, 2003 was $723 thousand (an effective rate of 37.5%) compared to $633 thousand (an effective rate of 37.9%) for the same period in 2002.

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.

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 2002 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, 2002. There have been no changes in the assumptions used in monitoring interest rate risk as of June 30, 2003. 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. DISCLOSURE CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms

of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed within 90 days of the filing date of this report, the Chief Executive Officer and Chief Financial Officer of the Company concluded that the Company’s disclosure controls and procedures were adequate.

Changes in internal controls

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

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

At the April 29, 2003 annual shareholders’ meeting, the Company’s shareholders reelected all the Company’s Directors.

Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8-K


Exhibit 31.1		The President and Chief Executive Officers 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

Exhibit 99.1		Earnings press release for quarter ending March 31, 2003.

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.

CERTIFICATION

Each of the undersigned do hereby certify that this report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the report fairly presents, in all material respects, the financial condition and results of operation of the Issuer.

CENTERSTATE BANKS OF FLORIDA, INC.
(Registrant)


Date:	August 8, 2003	By:	/s/ ERNEST S. PINNER

			Ernest S. Pinner President and Chief Executive Officer

Date:	August 8, 2003	By:	/s/ JAMES J. ANTAL

			James J. Antal Senior Vice President and Chief Financial Officer