UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the fiscal year ended December 31, 2004

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

Commission File Number 0-24433

POINTE FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)

Florida	65-0451402
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

21845 Powerline Road, Boca Raton, Florida 33433
(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code: (561) 368-6300

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
Yes o No x

The aggregate market value of the Common Stock held by non-affiliates of the Registrant, based upon the average bid and asked prices as quoted on the NASDAQ Stock Market on June 30, 2004, the last business day of the most recently completed second fiscal quarter, was $47,516,229*.

The Registrant had 2,293,973 shares of Common Stock outstanding on March 16, 2005.

DOCUMENTS INCORPORATED BY REFERENCE

The Registrant’s Definitive Proxy Statement for its 2005 Annual Meeting of Stockholders or an amendment to this Form 10-K will be filed with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K pursuant to Rule G(2) and Rule G(3) of the General Instructions for Form 10-K. Information from such Definitive Proxy Statement or amendment will be incorporated by reference into Part II, Item 5 and Part III, Items 10, 11, 12 and 13 hereof.

* Based on reported beneficial ownership of all directors and executive officers of the Registrant; this determination does not, however, constitute an admission of affiliated status for any of these individual stockholders.

INDEX

PART I

Item 1.	Description of Business
	Introduction	1
	Proposed Merger with The South Financial Group, Inc	2
	Business	2
	Investment Banking Joint Venture	3
	Market Area and Competition	3
	Employees	3
	Forward-Looking Statements	3

Item 2.	Properties	4

Item 3.	Legal Proceedings	5

Item 4.	Submission of Matters to a Vote of Security Holders	5

PART II

Item 5.	Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	6

Item 6.	Selected Financial Data	7

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	26

Item 8.	Financial Statements and Supplementary Data (See index page 25)	26

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	27

Item 9A.	Controls and Procedures	27

Item 9B.	Other Information	27

PART III

Item 10.	Directors and Executive Officers of the Registrant	28

Item 11.	Executive Compensation	29

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	29

Item 13.	Certain Relationships and Related Transactions	30

Item 14.	Principal Accounting Fees and Services	30

PART IV

Item 15.	Exhibits, Financial Statement Schedules	30


SIGNATURES		33

PART I

Item 1. Description of Business

Introduction

Pointe Financial Corporation, a Florida corporation, (“Pointe” or the “Company”) is a bank holding company headquartered in Boca Raton. Pointe’s principal business consists of operating its commercial bank subsidiary, Pointe Bank, a Florida state chartered commercial bank (the “Bank”). At December 31, 2004, the Company had total assets of $413.2 million and stockholders equity of $37.4 million.

As a bank holding company registered under the Bank Holding Company Act (the “BHCA”), the Company is subject to the regulation and supervision of the Board of Governors of the Federal Reserve System (the “FRB”). The Company is required to file with the FRB annual reports and other information regarding its business operations and those of its subsidiaries.

As a state-chartered commercial bank, the Bank is subject to extensive regulation by the Florida Department of Financial Services, Office of Financial Regulation (“Florida OFR”), the FRB and the Federal Deposit Insurance Corporation (“FDIC”). The Bank files reports with Florida OFR and FDIC concerning its activities and financial condition, in addition to obtaining regulatory approvals prior to entering into certain transactions such as mergers with or acquisitions of other financial institutions. Periodic examinations and inspections are performed by the Florida OFR and the FRB to monitor the Bank’s compliance with the various regulatory requirements.

There are a number of obligations and restrictions imposed on bank holding companies and their depository institution subsidiaries by law and regulatory policy that are designed to minimize potential loss to the depositors of such depository institutions and the FDIC insurance funds in the event the depository institution becomes in danger of default. Under a policy of the FRB with respect to bank holding company operations, a bank holding company is required to serve as a source of financial strength to its subsidiary depository institutions and to commit resources to support such institutions in circumstances where it might not do so absent such policy. The FRB also has the authority under the BHCA to require a bank holding company to terminate any activity or to relinquish control of a non-bank subsidiary upon the FRB’s determination that such activity or control constitutes a serious risk to the financial soundness and stability of any depository institution subsidiary of the bank holding company.

The BHCA has been substantially amended by the Gramm-Leach-Bliley Financial Modernization Act of 1999 (the “Modernization Act”). The portion of the Modernization Act affecting the powers of the Company became effective March 13, 2000. The Modernization Act, among other things:

(i)

allows bank holding companies meeting management, capital and Community Reinvestment Act standards to elect the status of financial holding company and thereafter engage in a substantially broader range of non-banking activities, including insurance underwriting and making merchant banking investments in commercial and financial companies;

(ii)

allows insurers and other financial services companies to acquire banks or bank holding companies; and

(iii)

establishes the overall regulatory structure applicable to bank holding companies that also engage in insurance and securities operations.

The Company filed a declaration with the Federal Reserve Bank to become a financial holding company under the Modernization Act. The FRB advised the Company that its election to become a financial holding company was effective on March 13, 2000. The Company elected to relinquish the financial holding company status early in 2002. The Company believes that the relinquishment of this status has not had any effect on its business plan.

Proposed Merger with The South Financial Group, Inc.

On October 27, 2004, the Company signed a definitive agreement with The South Financial Group, Inc. (“South Financial”) under which the Company agreed to merge with and into South Financial, with South Financial surviving the merger. Under the terms of the Merger Agreement, which has been unanimously approved by the Boards of Directors of both South Financial and Pointe, South Financial will issue a fixed consideration of 2,554,022 shares of South Financial common stock and $24,493,075 in cash. Holders of Pointe common stock shall have the right to elect to receive cash, South Financial common stock, or a mixture of cash and South Financial common stock. On February 11, 2005 the Company announced that its shareholders approved the Agreement and Plan of Merger, between Pointe and South Financial at its special meeting of the shareholders. The merger will close upon the satisfaction of customary closing conditions, including the receipt of regulatory approvals.

Business

The Company was incorporated under the laws of the State of Florida on September 29, 1993 for the dual purpose of serving as a holding company for Pointe Federal Savings Bank, a federally chartered thrift (the “Thrift”), and to facilitate the acquisition of the Bank, then known as Flamingo Bank, in mid-1994. Both the Bank and the Thrift were established in the mid-1980‘s. The Thrift, headquartered in Boca Raton, had been a mortgage banking thrift highly focused on residential mortgage lending. The Bank had focused on small business commercial lending, with emphasis on originating Small Business Administration (“SBA”) guaranteed loans. After the acquisition of the Bank in mid-1994, the Company had been both a bank holding company (subject to regulation by the FRB) and a thrift holding company (subject to regulation by the Office of Thrift Supervision (the “OTS”)). This was a very complex regulatory environment for the Company. The Company streamlined its operations through the merger in April 1997 of the Thrift into the Bank. As a result of the merger of the Thrift into the Bank, the Company is no longer subject to regulation by the OTS. The merger thus allowed the Company to alleviate some of its regulatory burdens without negatively impacting its ability to service its customers.

On June 12, 1998, the Company completed an initial public offering issuing 869,565 shares of its common stock. The proceeds totaled $12.1 million of which $6.0 million was invested in the Bank; the remainder was retained by the Company for general corporate purposes. Following its business plan to build its network of banking center locations into communities that are consistent with the Bank’s focus on small businesses, professionals and individuals, in 1999 the Bank opened two branches in Palm Beach County. In 2001, the Bank opened one de novo branch in Broward County and acquired four branches in Miami-Dade County from Republic Bancshares, Inc. of St. Petersburg, Florida. During the year ending December 31, 2002, the Company entered into a lease agreement for a de novo branch office in Miami-Dade County’s South Beach. The office was opened for business during the last quarter of 2003.

During 2003, the Company closed two unprofitable banking offices located in Doral and West Boca Raton. The Doral office was a lease obligation acquired in the Republic Bancshares acquisition. The customers’ accounts of the Doral office were transferred to the Bank’s Airpark facility during the second quarter of 2003. The customers’ accounts of the West Boca Raton office located on State Road 7 were transferred to the Bank’s main office. The vacated West Boca Raton office was sold during 2004. The Company does not believe that the closure of these offices has had a negative impact on its business.

The Bank opened a new office in Downtown Boca Raton during the third quarter of 2004. The office is located in the center of the Boca Raton business district is expected to expand the business opportunities for the Bank.

The Company’s principal business, conducted through the Bank, is making commercial, consumer and real estate loans. Deposits from the general public, along with utilizing Federal Home Loan Bank (“FHLB”) advances and other borrowings, are the primary sources of funds used to make these loans, and to a lesser extent, purchase security investments. The Bank conducts business through its nine full service facilities located in Palm Beach, Broward and Miami-Dade counties. The Company derives revenues principally from interest income earned on loans and securities, fee income associated with loans serviced and originated, service charges on depository accounts and the sale of assets designated as available for sale.

Investment Banking Joint Venture

In July, 2000, the Company formed Pointe Capital, LLC (“Pointe Capital”) an investment banking joint venture with First Integrated Capital. Pointe Capital offered investment banking services to customers overlooked by larger investment banking firms. In 2001, Pointe Capital became a broker-dealer registered with the Securities and Exchange Commission and a member of the National Association of Securities Dealers. During 2003, Pointe Capital discontinued operating activities and in 2004, the net assets of Pointe Capital were liquidated.

Market Area and Competition

The Company’s market area is primarily Palm Beach, Broward and Miami-Dade counties. The financial services industry in which the Company operates is highly competitive. The Bank competes with national and state banks, savings and loan associations and credit unions for loans and deposits. In addition, the Bank competes with other providers of financial services, from both inside and outside Florida, including finance companies, institutional buyers of commercial paper, money market funds, brokerage firms, investment companies, insurance companies, insurance agencies and governmental agencies. These competitors are actively engaged in marketing various types of loans, commercial paper, short-term obligations, investments, insurance and other products and services. The Company anticipates that the intensity of competition among financial institutions will continue to increase.

The consolidation of the financial services industry has continued to create opportunities and challenges for the Company. Mergers among institutions have disrupted many customer relationships and created opportunities for the Bank to acquire new customers. The Bank’s objective is to compete for deposits and loans by offering the customers a higher level of personal service, together with a wide range of products offered at competitive rates. Management continues to evaluate market needs and products to meet those needs, which would also allow Pointe to control the growth of its assets and liabilities.

Employees

As of December 31, 2004, the Company had 124 employees of which 121 were full-time and 3 part-time. The Company’s employees are not represented by a collective bargaining group, and the Company considers its relations with its employees to be good. The Company provides employees with benefits customary in the banking industry, which include major medical insurance, group term life insurance, dental insurance, long-term disability insurance, a 401(k) plan, and vacation and sick leave.

Forward-Looking Statements

When used in this Form 10-K or future filings by the Company with the Securities and Exchange Commission, in the Company’s press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “will likely result”, “expect”, “will continue”, “anticipate”, “estimate”, “project”, “believe” and similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and to advise readers that various factors, including general economic factors and conditions, changes in levels of market interest rates, credit risks of lending activities, competitive and regulatory factors, and expansion strategies could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from those anticipated or projected. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

Item 2. Properties

The Bank conducts its business through its main office and nine branch offices. The following table sets forth certain information regarding the Bank’s office properties:

Location	Date Acquired/ Leased December 31, 2004	Lease Expiration and Renewal Terms	Book Value of Land and Building at December 31, 2004		Book Value Of Leasehold Improvements and Furniture Fixtures and Equipment at December 31, 2004		Square Footage
			(Dollars in thousands)		(Dollars in thousands)
Main Office (1)
21845 Powerline Road		08/31/2012
Boca Raton, Florida 33433	2002	2 - 5 year period	$	—	$	668	18,929

Pembroke Pines (1)
One S.W. 129th Avenue		02/28/2006
Pembroke Pines, Florida 33027	1994	—		—		53	4,659

Aventura (1)
20495 Biscayne Boulevard		09/30/2008
Aventura, Florida 33180	2001	3-10 year period		—		56	3,200

Ocean Ridge (1)
5112 N. Ocean Boulevard		05/31/2009
Ocean Ridge, Florida 33435	1999	—		—		37	2,500

Coral Springs
4697 North State Road 7
Coral Springs, Florida 33067	1999	—		1,229		95	3,000

Coral Gables (1)
2222 Ponce de Leon Boulevard		05/07/2008
Coral Gables, Florida 33134	2001	2-5 year period		—		95	11,801

South Miami (1)
8211 South Dixie Highway		02/28/2006
Miami, Florida 33143	2001	1-1 year period		—		20	1,946

Airpark (1)
720 N.W. 57th Avenue		10/29/2009
Miami, Florida 33126	2001	1-10 year period		—		106	3,250

South Beach (1)
500 South Pointe Drive		12/31/2012
Miami Beach, Florida 33139	2002	1-5 year period		—		376	2,402

Downtown Boca Raton (1) 165 East Boca Raton Road Boca Raton, Florida 33432	2003	2/28/2009 5 – 1 year periods				291	2,600

_______________

(1) Leased branch office.

The Bank owns and operates personal computers, teller terminals and associated equipment. At December 31, 2004, such equipment had a net book value of $273,000, included above.

Item 3. Legal Proceedings

The Company is not subject to any material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of their property is the subject.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of the stockholders during the fourth quarter of the fiscal year ended December 31, 2004, through the solicitation of proxies or otherwise.

[Balance of page intentionally left blank]

PART II

Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Price and Dividends

(a) The common stock of the Company, par value $.01 per share, has been traded on the Nasdaq National Market System under the symbol "PNTE" since June 12, 1998. The following table sets forth the high and low bids for the common stock for the periods indicated as reported by Nasdaq.

Year Ended

December 31, 2004 December 31, 2003

High Low High Low

Quarter ended March 31 $ 28.94 $ 23.66 $ 15.91 14.25

Quarter ended June 30 28.90 26.90 20.08 15.15

Quarter ended September 30 32.20 27.80 23.50 19.00

Quarter ended December 31 40.79 32.11 25.00 22.68

Currently the Company has ten market makers in its common stock:

Advest, Inc. THE BRUT ECN, LLC

Keefe, Bruyette & Woods, Inc. Ryan Beck & Co., Inc.

Archipelago Exchange (The) Fig Partners, LLC

National Stock Exchange UBS Capital Markets L.P.

Knight Equity Markets, L.P. McDonnell Budd & Downes


Advest, Inc.	THE BRUT ECN, LLC
Keefe, Bruyette & Woods, Inc.	Ryan Beck & Co., Inc.
Archipelago Exchange (The)	Fig Partners, LLC
National Stock Exchange	UBS Capital Markets L.P.
Knight Equity Markets, L.P.	McDonnell Budd & Downes

As of December 31, 2004, there were 2,287,023 common shares issued and outstanding held by approximately 127 shareholders of record and 358 beneficial shareholders, not including persons or entities where stock is held in nominee or “street” name through various brokerage firms or banks.

The following table sets forth cash dividends paid during the years ended 2004 and 2003.

2004			2003
Quarter Ended	Dividend		Quarter Ended	Dividend

March 31	$	.09	March 31	$	.05
June 30	$	.09	June 30	$	.05
September 30	$	.09	September 30	$	.07
December 31	$	.09	December 31	$	.07

Future payments of dividends are subject to determination and declaration by the Board of Directors. In addition, the Merger Agreement restricts the ability of the Company to pay any dividend or make any distribution on its capital stock, other than the Company’s normal quarterly dividend not in excess of $0.09 per share, or an interim dividend if the effective time of the merger would otherwise cause the Company’s Shareholders not to receive a quarterly dividend. See Note 17 to the Audited Consolidated Financial Statements for discussion of restrictions on dividend payments.

Information regarding the Company’s securities authorized for issuance under the Company’s equity compensation plans is set forth below under Item 12.

Item 6. Selected Financial Data

SELECTED FINANCIAL DATA
(Dollars in thousands, except per share amounts)

	At December 31,
	2004		2003		2002		2001		2000

Cash and cash equivalents	$	12,734		12,943		35,648		40,655		7,616
Securities		106,307		71,738		66,009		57,612		56,631
Loans		281,519		250,331		214,840		223,379		173,129
Loans held for sale		2,545		3,084		150		446		719
All other assets		10,107		10,618		10,660		11,303		6,413


Total assets	$	413,212		348,714		327,307		333,395		244,508


Deposits	$	311,038		263,866		233,501		225,825		161,136
Other borrowings		61,556		45,925		57,963		75,094		53,067
All other liabilities		3,177		4,006		3,512		3,929		3,575
Stockholders’ equity		37,441		34,917		32,331		28,547		26,730


Total liabilities and stockholders’ equity	$	413,212		348,714		327,307		333,395		244,508

	Year Ended December 31,
	2004		2003			2002		2001		2000

Total interest income	$	20,637		18,444			20,230		21,707		18,545
Total interest expense		4,824		5,039			7,583		10,453		9,305


Net interest income		15,813		13,405			12,647		11,254		9,240
Provision (credit) for loan losses		215		(100	)		811		1,296		685


Net interest income after provision (credit) for loan losses		15,598		13,505			11,836		9,958		8,555
Noninterest income		3,365		3,243			2,883		2,714		1,092
Noninterest expense		14,493		13,077			12,126		10,190		7,185


Earnings before income taxes and extraordinary item		4,470		3,671			2,593		2,482		2,462
Income taxes		1,421		1,178			829		814		821
Extraordinary item (1)		-		-			-		-		78


Net earnings	$	3,049		2,493			1,764		1,668		1,719


Earnings per common share - basic (2)	$	1.34		1.12			.84		.82		.85


Earnings per common share - diluted (2)	$	1.29		1.08			.82		.81		.85


Cash dividends declared	$	0.36		.24			.20		.20		.20

SELECTED FINANCIAL DATA, Continued
(Dollars in thousands, except per share amounts)

	At or For The Year Ended December 31,

	2004			2003			2002			2001			2000
For the Period:
Return on average assets		.80	%		.75	%		.54	%		.55	%		.73	%
Return on average equity		8.47	%		7.42	%		5.86	%		6.02	%		6.84	%
Average equity to average assets		9.40	%		10.07	%		9.23	%		9.20	%		10.73	%
Interest rate spread during the period (3)		3.92	%		3.78	%		3.53	%		3.18	%		3.15	%
Net interest margin		4.37	%		4.25	%		4.09	%		3.96	%		4.14	%
Noninterest income to average assets		.88	%		.97	%		.88	%		.90	%		.47	%
Noninterest expense to average assets		3.78	%		3.92	%		3.72	%		3.38	%		3.07	%
Efficiency ratio		77.10	%		80.66	%		78.08	%		77.77	%		69.55	%

At the End of the Period:
Ratio of average interest-earning assets to
average interest-bearing liabilities		1.38			1.33			1.25			1.22			1.24
Nonperforming loans and foreclosed real
estate as a percentage of total assets		.03	%		.21	%		.10	%		.31	%		.63	%
Allowance for loan losses as a percentage
of total loans		1.17	%		1.35	%		1.61	%		1.06	%		1.02	%
Allowance for loan losses as a percentage
of nonperforming loans		2863.25	%		472.02	%		1,652.11	%		234.37	%		117.43	%
Total number of offices		10			10			11			10			5
Full-service banking offices		10			9			11			10			5
Total shares outstanding at
end of period		2,287,023			2,252,028			2,174,668			2,048,295			2,022,227
Book value per share	$	16.37			15.50			14.87			13.94			13.22
Tangible Book Value Per Share (4)	$	15.18			14.18			13.39			12.25			—

________________

(1) In 2000, the Company sold $5.0 million of a FHLB advance recording a pre-tax gain of $125,000. The gain is reported as an extraordinary item; gain on extinguishment of debt, net of tax of $47,000.

(2) Basic earnings per share (EPS) of common stock has been computed on the basis of the weighted-average number of shares of common stock outstanding. Outstanding stock options are considered dilutive securities for purposes of calculating diluted EPS which is computed using the treasury stock method.

(3) Difference between weighted-average yield on all interest-earning assets and weighted-average rate on all interest-bearing liabilities.

(4) Intangible asset is a result of acquired branches in April 2001.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Critical Accounting Policies

Management’s discussion and analysis of the Company’s financial condition and results of operations are based on the consolidated financial statements which are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of such financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to the allowance for loan losses. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis in making judgments about the carrying values of assets that are not readily apparent from other sources. Actual results could differ from the amount derived from management’s estimates and assumptions under different assumptions or conditions.

Management believes the allowance for loan losses policy is a critical accounting policy that required the most significant estimates and assumptions used in the preparation of the consolidated financial statements. The allowance for loan losses is based on management’s evaluation of the level of the allowance required in relation to the estimated loss exposure in the loan portfolio. Management believes the allowance for loan losses is a significant estimate and, therefore, regularly evaluates it for adequacy by taking into consideration factors such as prior loan loss experience, the character and size of the loan portfolio, business and economic conditions and management’s estimation of future losses. The use of different estimates or assumptions could produce different provisions for loan losses. The allowance for loan losses is also discussed as part of “Credit Risk” below and in Note 3 to the Consolidated Financial Statements. The significant accounting policies are discussed in Note 1 to the Consolidated Financial Statements.

General

Pointe Financial Corporation owns 100% of the outstanding stock of Pointe Bank. The Bank is a Florida State chartered commercial bank. The Bank provides a variety of community banking services to small and middle-market businesses and individuals through its ten banking offices located in Broward, Miami-Dade and Palm Beach counties, Florida. On February 12, 2002, the Bank formed a subsidiary, Will No-No, Inc., a Florida corporation, for the purpose of owning, maintaining and disposing of the Bank’s foreclosed assets. Will No-No, Inc. had no activity during the year ended December 31, 2003 and during the year ended December 31, 2004. The Company owns an inactive subsidiary, Pointe Financial Services and was a 50% owner of Pointe Capital, an investment banking joint venture that the Company ceased operating in 2004.

On June 12, 1998, the Company consummated an initial public offering (the “Offering”) of 869,565 shares of common stock, par value $.01 per share. The shares were sold at an offering price of $15.375 per share. Keefe, Bruyette & Woods, Inc. and McGinn, Smith & Co. acted as the representatives of the underwriters of the Offering. The net proceeds of the Offering totaled $12.1 million of which $6.0 million was invested in the Bank. The remaining proceeds retained by the Company will continue to fund branch expansion and support growth in the loan and security portfolio.

At December 31, 2004, the Company had total consolidated assets of $413.2 million, an increase of $64.5 million or 18.5% over total assets of $348.7 million at December 31, 2003. Total loans outstanding were $284.1 million at December 31, 2004 compared to $253.4 million at the end of 2003, $30.7 million or a 12.1% increase. The Company realized $144.3 million in loan originations to the loan portfolio during 2004 compared to $137.9 million during 2003. During 2004, the Company received principal reductions in the loan portfolio exceeding $113.6 million compared to the $101.9 million during 2003. The Bank’s deposits increased to $311.0 million as of December 31, 2004 from $263.9 million as of December 31, 2003, a 17.9% increase. At December 31, 2004, the Company’s noninterest bearing demand accounts were $91.6 million, increasing by more than $20.3 million or 28.5%. At December 31, 2004, the Company’s time deposits were $76.5 million, a slight increase from December 31, 2003, $75.5 million. The Company’s borrowings, FHLB Advances and Repurchase Sweep Accounts ended December 31, 2004 at $61.6 million, compared to $45.9 million at the end of 2003, increasing by $15.7 million or 34.2%. The Company’s net earnings for the year ended December 31, 2004 of $3.0 million compared to $2.5 million, an increase of $556,000 or 22.3% over the year ended December 31, 2003. Net interest income was $15.8 million in 2004 compared to $13.4 million during 2003, a $2.4 million increase or 18.0%. The Company’s net interest income to average interest earning assets ending December 31, 2004 increased to 4.37%, compared to 4.25% in 2003. The net interest spread (the difference between the weighted-average yield on interest earning assets less the weighted-average cost paid on interest-bearing liabilities) ending December 31, 2004 increased to 3.92%, compared to 3.78% in 2003. The improvements of net interest income, margin and spread result from the continuing shifting of deposit balances from time deposits to less costly interest bearing transaction accounts and noninterest-bearing demand deposits.

Credit Risk

The Bank’s primary business is making commercial, business, consumer and real estate loans. That activity entails potential loan losses, the magnitude of which depend on a variety of economic factors affecting borrowers which are beyond the control of the Bank. While management has instituted underwriting guidelines and credit review procedures in an effort to minimize avoidable credit losses, some losses will inevitably occur.

The following table sets forth certain information regarding nonaccrual loans and foreclosed real estate, including the ratio of such loans and foreclosed real estate to total assets as of the dates indicated, and certain other related information.

	At December 31,
	2004			2003			2002			2001			2000
	(Dollars in thousands)

Nonaccrual loans:
Residential real estate	$	-			66			71			408			74
Commercial real estate		-			-			-			250			432
Commercial		102			645			120			348			988
Consumer and other		15			18			22			21			32


Total nonaccrual loans	$	117			729			213			1,027			1,526


Total nonperforming assets		117			729			213			1,027			1,526


Total nonperforming assets to total loans		.04	%		.29	%		.10	%		.46	%		.88	%


Foreclosed real estate-
Real estate acquired by foreclosure or deed
in lieu of foreclosure		-			-			117			-			18


Total nonperforming loans and foreclosed
real estate	$	117			729			330			1,027			1,544


Total nonperforming and foreclosed real estate
to total assets		.03	%		.21	%		.10	%		.31	%		.63	%

Interest income that would have been recorded under the original terms of nonaccrual loans and the interest income actually recognized are summarized below:

	Year Ended December 31,
	2004			2003		2002		2001		2000
	(Dollars in thousands)


Interest income that would have been recognized	$	-			37		8		64		158
Interest income recognized		14			22		8		34		109
Interest income foregone	$	(14	)		15		0		30		49

The following table sets forth information with respect to activity in the Bank’s allowance for loan losses during the years indicated:

	Year Ended December 31,

	2004			2003			2002			2001			2000

	(Dollars in thousands)


Average loans outstanding	$	268,984			233,521			226,446			213,630			163,247




Allowance at beginning of year		3,441			3,519			2,407			1,792			1,331



Charge-offs:
Residential real estate		-			-			(16	)		-			-
Commercial		(394	)		(122	)		(316	)		(1,107	)		(184	)
Consumer and other		(66	)		(52	)		(93	)		(43	)		(55	)



Total loans charged-off		(460	)		(174	)		(425	)		(1,150	)		(239	)


Recoveries		154			196			726			4			15



Net (charge-offs) recoveries		(306	)		22			301			(1,146	)		(224	)



Provision (credit) for loan losses		215			(100	)		811			1,296			685


Allowance on loans received in acquisition of
branches		-			-			-			465			-



Allowance at end of year	$	3,350			3,441			3,519			2,407			1,792



Net charge-offs (reserves)		.11	%		(.01	%)		(.13	%)		.54	%		.14	%



Allowance as a percent of total loans		1.17	%		1.35	%		1.61	%		1.06			1.02	%



Allowance as a percentage of
nonperforming loans		2,863.25	%		472.02	%		1,652.11	%		234.37	%		117.43	%



Total loans at end of year		285,300			254,226			218,784			226,267			175,131

The Company’s non-performing loans were $117,000 as of December 31, 2004, compared to $729,000 at the end of 2003. The ratio of nonperforming loans to total loans outstanding at .04% and nonperforming loans to total assets at .03% are considered to be low in the industry. The allowance at December 31, 2004 was $3.4 million, which represents 1.17% of total loans outstanding and 2,863.25% of nonperforming loans. At December 31, 2003, the allowance was also $3.4 million, or 1.35% outstanding and 472.02% of nonperforming loans. The Company recorded a provision for loan losses of $215,000 for the year ended December 31, 2004 compared to a credit to the provision of $100,000 for the year ending December 31, 2003. During the year ending December 31, 2004, the Company realized continued recoveries from commercial and commercial real estate loans charged-off in previous reporting periods. The Company has historically had strong asset quality as evidenced by the fact that the percentage of net charge-offs to average loans outstanding over the last five years was .13%. Management believes that the allowance for loan losses of $3.4 million was adequate at December 31, 2004.

The following table presents information regarding the Bank’s total allowance for loan losses as well as the allocation of such amounts to the various categories of loans:

	At December 31,
	2004					2003					2002					2001					2000
	Amount Of Allowance		% of Loans To Total Loans			Amount Of Allowance		% of Loans To Total Loans			Amount Of Allowance		% of Loans To Total Loans			Amount Of Allowance		% of Loans To Total Loans			Amount Of Allowance		% of Loans To Total Loans
	(Dollars in thousands)

Commercial loans	$	1,491		31.44	%	$	1,916		26.10	%	$	2,283		26.09	%	$	1,184		26.52	%	$	1,122		23.59	%
Commercial real
estate loans		1,512		32.62			1,120		32.57			954		24.90			904		25.95			367		16.96
Residential real
estate loans		71		26.75			78		29.81			96		35.80			102		37.05			142		50.62
Consumer and other
Loans		276		9.19			327		11.52			186		13.21			217		10.48			161		8.83

Total allowance
for loan losses	$	3,350		100.00	%	$	3,441		100.00	%	$	3,519		100.00	%	$	2,407		100.00	%	$	1,792		100.00	%

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. Management regularly reviews its loan portfolio and charge-off experience to maintain the allowance at a level management feels is adequate. The most dominant category of loans at the end of 2004, commercial and commercial real estate loans, comprised 64.06% of the portfolio compared to 58.67% at the end of 2003. At the end of 2004, residential real estate loans consisted of 26.75% of the portfolio compared to 29.81% at the end of 2003. Consumer loans at the end of 2004 were 9.19% of the loan portfolio compared to the 11.52% at the end of 2003.

Results of Operations

The operating results of the Company depend primarily on its net interest income, which is the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities, consisting primarily of deposits. Net interest income is determined by the difference between yields earned on interest-earning assets and rates paid on interest-bearing liabilities (“the interest-rate spread”) and the relative amounts of interest-earning assets and interest-bearing liabilities. The Company’s success is dependent to a significant extent upon general economic conditions in Florida, particularly south Florida. General economic conditions include such factors as the south Florida real estate market, inflation, recession, unemployment and other factors beyond the Company’s control. The south Florida economy is susceptible to adverse effects resulting from adverse conditions in the south Florida real estate markets, a decline in tourism, or adverse economic conditions or recession in the national economy. Economic recession over a prolonged period or other economic dislocation in south Florida could cause increases in nonperforming assets, thereby causing operating losses, impairing liquidity and eroding capital. There can be no assurance that future adverse changes in the Florida economy would not have a material adverse effect on the Company’s financial condition, results of operations or cash flows. In addition, the Company’s net earnings are also affected by the level of nonperforming loans and foreclosed real estate, as well as the level of its noninterest income, and its noninterest expenses, such as salaries and employee benefits, occupancy and equipment costs and income taxes.

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

	Year Ended December 31,

	2004							2003							2002

	Average Balance		Interest And Dividends		Average Yield/ Rate			Average Balance		Interest And Dividends		Average Yield/ Rate			Average Balance		Interest And Dividends		Average Yield/ Rate

	(Dollars in thousands)


Interest-earning assets:
Loans	$	268,984		17,192		6.39	%	$	233,521		15,588		6.68	%	$	226,446		16,735		7.39	%
Securities (1)		81,373		3,189		4.19			69,582		2,648		4.07			65,486		3,107		4.92
Other interest-earning
assets (2)		11,774		256		2.17			12,314		208		1.69			17,002		388		2.28

Total interest- Earning assets		362,131		20,637		5.76			315,417		18,444		5.91			308,934		20,230		6.59

Noninterest-earning
assets (3)		21,073							18,219							16,868

Total assets	$	383,204						$	333,636						$	325,802

Interest-bearing liabilities:
Savings and NOW deposits	$	35,036		147		.42			27,616		156		0.56		$	22,174		158		.71
Money-market deposits		92,333		1,032		1.12			79,711		853		1.07			64,408		1,174		1.82
Time deposits		78,423		1,721		2.19			82,100		2,176		2.65			98,343		3,543		3.60
Borrowings		55,872		1,924		3.44			47,628		1,854		3.89			62,496		2,708		4.33


Total interest- bearing liabilities		261,664		4,824		1.84			237,055		5,039		2.13			247,421		7,583		3.06

Demand deposits		80,924							58,681							44,443
Noninterest-bearing liabilities		4,600							4,292							3,851
Stockholders’ equity		36,015							33,608							30,087

Total liabilities and
stockholders’
equity	$	383,203						$	333,636						$	325,802



Net interest income			$	15,813						$	13,405						$	12,647



Interest-rate spread (4)						3.92	%						3.78	%						3.53	%

Net interest margin (5)						4.37	%						4.25	%						4.09	%
Ratio of average interest-
earning assets to
average interest-
bearing liabilities		1.38							1.33							1.25

_____________

(1)

Yield on securities is stated on a tax equivalent basis.

(2)

Includes interest-bearing deposits and federal funds sold.

(3)

Includes nonaccrual loans.

(4)

Interest-rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities.

(5)

Net interest margin is net interest income divided by average interest-earning assets.

Rate/Volume Analysis

The following table sets forth certain information regarding changes in interest income and interest expense of the Company for the years indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in rate (change in rate multiplied by prior volume), (ii) changes in volume (change in volume multiplied by prior rate) and (iii) changes in rate-volume (change in rate multiplied by change in volume).

	Year Ended December 31, 2004 vs. 2003

	Increase (Decrease) Due To

	Rate			Volume			Rate/ Volume			Total

	(In Thousands)
Interest-earning assets:
Loans	$	(677	)		2,369			(88	)		1,604
Securities		80			480			(19	)		541
Other interest-earning assets		59			(9	)		(2	)		48



Total		(538	)		2,840			(109	)		2,193


Interest-bearing liabilities:
Savings and NOW deposits		(39	)		42			(12	)		(9	)
Money-market deposits		40			135			4			179
Time deposits		(378	)		(97	)		20			(455	)
Borrowings		(214	)		321			(37	)		70



Total		(591	)		401			(25	)		(215	)



Net change in net interest income	$	53			2,439			(84	)		2,408

	Year Ended December 31, 2004 vs. 2003

	Increase (Decrease) Due To

	Rate			Volume			Rate/ Volume			Total

	(In Thousands)
Interest-earning assets:
Loans	$	(1,608	)		523			(62	)		(1,147	)
Securities		(556	)		202			(105	)		(459	)
Other interest-earning assets		(100	)		(107	)		27			(180	)



Total		(2,264	)		618			(140	)		(1,786	)


Interest-bearing liabilities:
Savings and NOW deposits		(33	)		39			(8	)		(2	)
Money-market deposits		(483	)		279			(117	)		(321	)
Time deposits		(934	)		(585	)		152			(1,367	)
Borrowings		(275	)		(644	)		65			(854	)



Total		(1,725	)		(911	)		92			(2,544	)



Net change in net interest income	$	(539	)		1,529			(232	)		758

Liquidity and Capital Resources

A Florida chartered commercial bank is required to maintain a liquidity reserve of at least 15% of its total transaction accounts and 8% of its total nontransaction accounts. The liquidity reserve may consist of cash on hand, cash on demand with other correspondent banks and other investments and short-term marketable securities as determined by the rules of Florida OFR, such as federal funds sold and United States securities or securities guaranteed by the United States or agencies thereof. As of December 31, 2004 and December 31, 2003, the Bank had liquidity of approximately $73.4 million and $52.4 million, or approximately 22.45% and 19.60%, respectively.

During the year ended December 31, 2004, the Company’s primary sources of funds consisted of net increases in deposits, principal payments on loans and securities, maturities and sales of securities and net cash flows from operating activities. The Company used its capital resources principally to fund existing and continuing loan commitments and the purchase of securities. At December 31, 2004, the Company had commitments to originate loans totaling $5.6 million. Scheduled maturities of certificates of deposit during the 12 months following December 31, 2004 totaled $57.0 million. Management believes the Company has adequate resources to fund all of its commitments, that substantially all of its existing commitments will be funded within the next twelve months and, if so desired, that it can adjust the rates on certificates of deposit to attract deposits in a changing interest-rate environment.

The following table sets forth, by maturity distribution, certain information pertaining to the securities portfolio:

	One Year Or Less					After One Year To Five Years					After Five Years					Total
	Carrying Average					Carrying Average					Carrying Average					Carrying Average
	Value		Yield			Value		Yield			Value		Yield			Value		Yield
	(Dollars in thousands)
At December 31, 2004:
U.S. Treasury securities	$	-		-		$	3,707		5.41	%	$	-		-	%	$	3,707		5.41	%
U.S. Government agency securities		-		-			77,888		3.87			-		-			77,888		3.87
Tax-exempt securities		-		-			-		-			18,213		4.49			18,213		4.49
Mortgage-backed securities		-		-			1,224		4.88			-		-			1,224		4.88
Mutual funds		1,961		4.14			-		-			-		-			1,961		4.14
Other		129		-			200		5.50			300		4.88			629		4.08


Total	$	2,090		3.88		$	83,019		3.95	%	$	18,513		4.50	%	$	103,622		4.05	%

At December 31, 2003:
U.S. Treasury securities	$	-		-	%	$	8,189		5.66	%	$	-		-	%	$	8,189		5.66	%
U.S. Government agency securities		-		-			41,920		4.21			-		-			41,920		4.21
Tax-exempt securities		-		-			-		-			15,193		4.56			15,193		4.56
Mortgage-backed securities		-		-			1,653		5.51			-		-			1,653		5.51
Mutual funds		1,964		4.65			-		-			-		-			1,964		4.65
Other		25		7.50			200		5.50			200		4.51			425		5.15

Total	$	1,989		4.69	%	$	51,962		4.48	%	$	15,393		4.56	%	$	69,344		4.51	%

Regulatory Capital Requirements

Federal and state banking regulations place certain restrictions on dividends paid and loans or advances made by the Bank to the Company.

The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgment by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2004 and 2003, that the Company and the Bank met all capital adequacy requirements to which they are subject.

Under Federal Reserve Board regulations, the Bank is required to meet certain minimum regulatory capital requirements. This is not a valuation allowance and has not been created by charges against earnings. It represents a restriction on stockholders’ equity.

As of December 31, 2004, the most recent notification from the regulatory authorities categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage percentages as set forth in the following tables. There are no conditions or events since that notification that management believes have changed the Bank’s category. The Company and the Bank’s actual capital amounts and capital percentages as of December 31, 2004 and 2003 are also presented in the table (dollars in thousands).

	Actual					Minimum Capital Requirement					Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		%			Amount		%			Amount		%
As of December 31, 2004:
Total capital to Risk-
Weighted assets:
Consolidated	$	37,818		12.65	%	$	23,911		8.00	%		N/A		N/A
Bank		35,835		12.02			23,851		8.00		$	29,814		10.00	%

Tier I Capital to Risk-
Weighted Assets:
Consolidated		34,469		11.53			11,956		4.00			N/A		N/A
Bank		32,485		10.90			11,925		4.00			17,888		6.00

Tier I Capital to Average Assets
Consolidated		34,469		8.10			17,023		4.00			N/A		N/A

Bank		32,485		7.64			17,002		4.00			21,252		5.00

As of December 31, 2003:
Total capital to Risk-
Weighted assets:
Consolidated		34,556		13.40			20,624		8.00			N/A		N/A
Bank		31,619		12.31			20,544		8.00			25,681		10.00

Tier I Capital to Risk-
Weighted Assets:
Consolidated		31,331		12.15			10,312		4.00			N/A		N/A
Bank		28,406		11.06			10,272		4.00			15,408		6.00

Tier I Capital to Average Assets
Consolidated		31,331		8.99			13,942		4.00			N/A		N/A
Bank		28,406		8.17			13,905		4.00			17,381		5.00

Management of Interest-Rate Risk and Market Risk

Market risk is the uncertainty of loss from adverse changes in market prices and rates. The Company’s market risk arises primarily from interest-rate risk inherent in its lending and deposit taking activities. To that end, management actively monitors and manages its interest-rate risk exposure. The measurement of market risk associated with financial instruments is meaningful only when all related and offsetting on- and off-balance-sheet transactions are aggregated, and the resulting net positions are identified. Disclosures about the fair value of financial instruments, which reflect changes in market prices and rates, can be found in Note 9 of Notes to Consolidated Financial Statements.

The Company’s primary objective in managing interest-rate risk is to minimize the adverse impact of changes in interest rates on the Bank’s net interest income and capital, while adjusting the Company’s asset-liability structure to obtain the maximum yield-cost spread on that structure. The Company relies primarily on its asset-liability structure to control interest-rate risk. However, a sudden and substantial increase or decrease in interest rates may impact the Company’s earnings, to the extent that the interest rates borne by assets and liabilities do not change at the same speed, to the same extent or on the same basis. The Company does not engage in trading activities.

As part of its asset and liability management, the Company has emphasized establishing and implementing internal asset-liability decision processes, as well as communications and control procedures to aid in managing the Company’s earnings. Management believes that these processes and procedures provide the Company with better capital planning, asset mix and volume controls, loan-pricing guidelines, and deposit interest-rate guidelines which should result in tighter controls and less exposure to interest-rate risk.

The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest-rate sensitive” and by monitoring an institution’s interest-rate sensitivity “gap.” An asset or liability is said to be interest-rate sensitive within a specific time period if it will mature or reprice within that time period. The interest-rate sensitivity gap is defined as the difference between interest-earning assets and interest-bearing liabilities maturing or repricing within a given time period. The gap ratio is computed as dividing rate-sensitive assets by rate-sensitive liabilities. A gap ratio of 1.0% represents perfect matching. A gap is considered positive when the amount of interest-rate sensitive assets exceeds interest-rate sensitive liabilities. A gap is considered negative when the amount of interest-rate sensitive liabilities exceeds interest-rate sensitive assets. During a period of rising interest rates, a negative gap would adversely affect net interest income, while a positive gap would result in an increase in net interest income. During a period of falling interest rates, a negative gap would result in an increase in net interest income, while a positive gap would adversely affect net interest income.

In order to minimize the potential for adverse effects of material and prolonged increases in interest rates on the results of operations, the Company’s management continues to monitor asset and liability management policies to better match the maturities and repricing terms of its interest-earning assets and interest-bearing liabilities. Such policies have consisted primarily of: (i) emphasizing the origination of adjustable-rate loans; (ii) maintaining a stable core deposit base; and (iii) maintaining a significant portion of liquid assets (cash and short-term investments).

The following table sets forth certain information relating to the Company’s interest-earning assets and interest-bearing liabilities at December 31, 2004 that are estimated to mature or are scheduled to reprice within the period shown:

	Three Months
	($ In thousands)
Loans (1), (2)	$	156,106		8,043		20,680		72,729		30,287		287,845

Securities (3)		6,087		6,088		2,093		71,215		20,824		106,307

Interest-bearing deposits		14		-		-		-		-		14

Total rate-sensitive assets		162,207		14,131		22,773		143,944		51,111		394,166

Deposit accounts (4):
Savings and NOW		36,794		-		-		-		-		36,794
Money-market deposits		106,125		-		-		-		-		106,125
Time deposits		17,741		8,926		30,315		19,519		-		76,501

Total deposit accounts		160,660		8,926		30,315		19,519		-		219,420
Borrowings (5)		41,556		-		5,000		5,000		10,000		61,556

Total rate-sensitive liabilities		202,216		8,926		35,315		24,519		10,000		280,976

Gap (repricing differences)	$	(40,009	)	5,205		(12,542	)	119,425		41,111		113,190

Cumulative GAP	$	(40,009	)	(34,804	)	(47,346	)	72,079		113,190

Cumulative GAP/total assets		(9.68	)%	(8.42	)%	(11.46	)%	17.44	%	27.39	%

(1)

In preparing the table above, adjustable-rate loans are included in the period in which the interest rates are next scheduled to adjust rather than in the period in which the loans mature. Fixed-rate loans are scheduled, including repayment, according to their contractual maturities.

(2)

Includes nonaccrual loans and loans held for sale.

(3)

Securities are scheduled according to their respective repricing, predicted call dates and maturity dates, includes FHLB stock and Federal Reserve Bank stock.

(4)

Savings, NOW and money-market accounts are regarded as readily accessible withdrawable accounts. All other time accounts are scheduled according to their respective maturity dates.

(5)

Borrowings include FHLB fixed and floating rate convertible advances which have a call option and investment repurchase agreements.

The following table reflects the contractual principal repayments of the Company’s loan portfolio at December 31, 2004:

	Commercial Loans
	(Dollars in thousands)
Due within one year	$	77,584	46,594	11,170	21,744	157,092
Due after one through five years		10,809	38,036	11,194	3,979	64,018
Due after five years		1,311	8,434	53,961	484	64,190


Total	$	89,704	93,064	76,325	26,207	285,300

Of the $128.2 million in loans due after one year, 12.4% of such loans have fixed interest rates and 87.6% have adjustable rates.

The following table displays loan originations by type of loan and principal reductions during the years indicated:

	Year Ended December 31,
	2004			2003			2002			2001			2000
	(Dollars in thousands)
Originations:
Commercial loans	$	47,516			51,031			28,450			31,510			13,931
Commercial real estate loans		52,488			47,941			27,978			28,066			13,527
Residential real estate		30,866			32,228			41,222			27,554			24,468
Consumer loans		13,418			6,662			5,191			10,298			6,802


Total loans originated	$	144,288			137,862			102,841			97,428			58,728

Principal reductions		(113,535	)		(101,908	)		(110,176	)		(66,035	)		(35,721	)

Increase (Decrease) in loans	$	30,753			35,954			(7,335	)		31,393			23,007

Throughout 2004, the Company did not originate any loan into the held for sale category. The Company did originate $3.1 million of single family mortgages into the held for sale portfolio during 2003. However, there were none originated during the years ended December 31, 2002, 2001 and 2000. The table above also excludes originations of loans to correspondent banks of $8.2 million, $18.8 million, $15.5 million and $13.4 million for years ended December 31, 2004, 2003, 2002 and 2001, respectively. The loans were originated by the Company and sold to correspondent banks generating $143,000, $311,000, $254,000 and $231,000 in fees, during such respective years.

Loan Portfolio Composition

The following table sets forth information concerning the Company’s loan portfolio by type of loan at December 31.

	2004						2003						2002						2001						2000
	Amount			% Of Total			Amount			% Of Total			Amount			% Of Total			Amount			% Of Total			Amount			% Of Total
	(Dollars in thousands)
Commercial	$	89,704			31.44	%	$	66,341			26.10	%	$	57,090			26.09	%	$	60,003			26.52	%	$	41,305			23.59	%
Commercial
real estate		93,064			32.62			82,800			32.57			54,481			24.90			58,711			25.95			29,699			16.96
Residential
real estate		76,325			26.75			75,809			29.81			78,316			35.80			83,834			37.05			88,659			50.62
Consumer		26,207			9.19			29,276			11.52			28,897			13.21			23,719			10.48			15,468			8.83


Total loans.	$	285,300			100.00	%	$	254,226			100.00	%	$	218,784			100.00	%	$	226,267			100.00	%	$	175,131			100.00	%

Less:
Net deferred
loan fees		(431	)					(454	)					(425	)					(481	)					(210	)

Allowance for
loan losses		(3,350	)					(3,441	)					(3,519	)					(2,407	)					(1,792	)


Loans, net	$	281,519					$	250,331					$	214,840					$	223,379					$	173,129

The Bank originates, purchases and participates in loans for its own portfolio and for sale in the secondary market. The Bank provides commercial business loans, commercial and residential real estate loans, and consumer loans. Loans secured by real estate generally include commercial and residential real estate, loans to refinance or purchase existing properties and home equity loans. Over the past five years, the Company has continued to increase its originations of commercial and commercial real estate loans. Management intends to continue to focus on these types of lending.

Commercial business loans totaled $89.7 million or 31.44% of the Bank’s loan portfolio, as of December 31, 2004. Commercial business loan underwriting practices assess the borrower’s creditworthiness and ability to repay, including an evaluation of the value of any collateral securing the proposed loan. While commercial business loans generally are made for shorter terms and at higher yields than one-to-four family residential loans, such loans generally involve a higher level of risk than one-to-four family residential loans.

The Bank’s commercial real estate loans at December 31, 2004 totaled $93.1 million or 32.6% of the Bank’s portfolio. The portfolio generally has terms ranging from five to seven and in some cases ten years and interest rate adjustment periods ranging from monthly to five years. Amortization periods for commercial mortgage loans generally are 15 to 20 years and do not exceed 25 years. Commercial real estate loans originated by the Bank are primarily secured by income-producing properties such as office buildings, warehouse buildings, retail space and to a lesser extent multi-family property. Generally, in underwriting commercial real estate loans, the Bank requires the personal guaranty of borrowers, a maximum loan to value ratio of 75%, and a cash flow to debt service ratio of 1.25 to 1 or higher. The Bank’s residential real estate mortgage loans at December 31, 2004 totaled $76.3 million or 26.75% of the Bank’s total loan portfolio. The Bank’s residential mortgage loans have terms which do not exceed 30 years and are secured by one-to-four family residences. Loans made for an amount in excess of 80% of the appraised value of the financed residences are generally originated with private mortgage insurance, which essentially insures that portion of the loan which is in excess of 80% of the appraised value of the financed residences. The Company will originate loans targeted at those low and moderate income home buyers whose underwriting standard may exceed what is considered typical. As of December 31, 2004, the residential loan portfolio of the Bank consisted of approximately 49.0% in adjustable rate mortgages and 51.0% in fixed-rate loans. During 2004, the Company originated residential real estate mortgage loans to correspondent banks, servicing released totaling $8.2 million. The Company originated $30.9 million of residential real estate mortgages to the portfolio. Residential mortgage loans generally are underwritten by the Bank in accordance with guidelines of the Federal National Mortgage Association (the “FNMA”) and the Federal Home Loan Mortgage Corporation (the “FHLMC”).

Consumer loans are extended for a variety of purposes including the purchase of automobiles, home improvement, lines of credit, credit cards and unsecured personal loans. As of December 31, 2004, consumer loans were approximately $26.2 million or 9.19% of total loans. Consumer loan underwriting standards include an examination of the applicant’s payment history on other debts and an evaluation of the applicant’s ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of the applicant is of primary importance, the underwriting process also includes a comparison of the value of the security, if any, in relation to the proposed loan amount. While consumer loans generally involve a higher element of credit risk than one-to-four family residential loans, consumer loans are typically made at higher interest rates and for shorter terms, or at adjustable rates, and are helpful in maintaining a profitable spread between the Bank’s loan yield and its cost of funds.

Deposit Composition

The Company attracts both short-term and long-term deposits from the Company’s primary market area by offering a wide assortment of accounts and rates. The Company offers checking accounts (both interest bearing and non-interest bearing), money market accounts, savings accounts, fixed interest rate certificates of deposits with varying maturities and individual retirement accounts.

The following table shows the distribution of, and certain other information relating to, deposit accounts by type:

	At December 31,
	2004					2003					2002
	Balance		% of Total			Balance		% of Total			Balance		Total
	(Dollars in thousands)
Noninterest-bearing demand deposits	$	91,618		29.46	%	$	71,326		27.03	%	$	45,198		19.36	%
Savings and NOW deposits		36,794		11.83			32,562		12.34			26,530		11.36
Money-market deposits		106,125		34.12			84,443		32.00			72,179		30.91
Time deposits		76,501		24.60			75,535		28.63			89,594		38.37

Total deposits	$	311,038		100.00	%	$	263,866		100.00	%	$	233,501		100.00	%

Jumbo certificates ($100,000 and over) included above mature as follows:

	At December 31,
	2004
	(Dollars in thousands)
Due three months or less	$	7,219
Due over three months to six months		3,351
Due over six months to one year		10,632
Due over one year		4,286

Total	$	25,488

The scheduled maturities of time deposits are as follows:

	At December 31,
	2004
	(Dollars in thousands)
Due in one year or less	$	56,982
Due in more than one but less than three years		17,925
Due in more than three but less than five years		1,594

Total	$	76,501

The following table sets forth the net deposit flows of the Company during the year indicated:

	Year Ended December 31,
	2004		2003		2002
	(Dollars in thousands)
Net increase before interest credited	$	43,892	$	26,800	$	2,389
Net interest credited		3,280		3,565		5,344

Net deposit increase	$	47,172	$	30,365	$	7,733

The following table indicates the daily average balances and weighted average interest rates paid on interest bearing deposits for each of the three years ended December 31, 2004, 2003 and 2002:

	Years Ended December 31,
	2004								2003								2002
	Average Balance		% Of Total			Average Yield			Average Balance		% Of Total			Average Yield			Average Balance		% Of Total			Average Yield
	(Dollars in thousands)
Savings and NOW
Deposits	$	35,036		12.22	%		.42	%	$	27,616		11.13	%		.56	%	$	22,174		9.67	%		.71	%
Money-market
Deposits		92,333		32.20			1.12			79,711		32.13			1.07			64,408		28.08			1.82
Time deposits		78,423		27.35			2.19			82,100		33.09			2.65			98,343		42.87			3.60

Total interest-bearing
Deposits		205,792		71.77	%		1.41	%		189,427		76.35			1.68	%		184,925		80.62			2.64	%
Noninterest bearing
deposits		80,924		28.23						58,681		23.65						44,443		19.38

Total	$	286,716		100.00	%				$	248,108		100.00	%				$	229,368		100.00	%

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

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

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

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

The following is a summary of the Company’s contractual obligations, including certain on-balance sheet obligations, at December 31, 2004 (in thousands):

			Payments Due by Period
	Total		Less Than 1 Year		1 - 3 Years		3 - 5 Years		More Than 5 Years
Contractual Obligations

Deposits	$	311,038		291,519		17,925		1,594		-
FHLB advances		33,555		3,555		15,000		5,000		10,000
Other borrowings		28,001		28,001		-		-		-
Operating leases		7,498		1,428		2,894		1,792		1,384
Loan Commitments		23,013		23,013		-		-		-
Standby letters of credit		2,820		2,820		-		-		-
Undisbursed construction and line of credit loans		43,436		43,436		-		-		-


Total	$	449,361	$	393,772	$	35,819	$	8,386	$	11,384

Comparison of Years Ended December 31, 2004 and 2003

General

Net earnings for the year ended December 31, 2004, were $3.0 million compared to $2.5 million in 2003. The increase in net earnings is attributed to the $15.6 million of net interest income after the loan loss provision for the year ended December 31, 2004, compared to $13.5 million in 2003, an increase of $2.1 million or 15.5%. Net interest income improved primarily as a result of an increase of $46.7 million of average interest earning assets offset in part by the $24.6 million increase in average interest bearing liabilities. The Company’s earnings per share were $1.34 basic and $1.29 diluted for the year ended December 31, 2004 compared to $1.12 per basic and $1.08 diluted share in 2003.

Interest Income and Expense

Interest income increased by $2.2 million, or 11.9%, from $18.4 million for the year ended December 31, 2003 to $20.6 million for the year ended December 31, 2004. Interest income on loans increased $1.6 million primarily due to increased average volumes of $269.0 million at December 31, 2004 from $233.5 million in 2003 partially offset by a decline in the weighted-average yield from 6.68% in 2003 to 6.39% in 2004. Interest on securities increased $541,000 primarily due to increased weighted average yields earned of 4.19% in 2004 compared to 4.07% in 2003, and an increase in the average securities portfolio balance from $69.6 million in 2003 to $81.4 million in 2004. The marginal increase in interest income on other interest-earning assets of $48,000 was due to an increase in the weighted-average yield earned of 2.17% at December 31, 2004 compared to 1.69% for 2003. The other interest earning assets decreased from $12.3 million in 2003 to $11.8 million in 2004.

Interest expense on deposits decreased to $2.9 million for the year ended December 31, 2004 from $3.2 million for the year ending December 31, 2003. Interest expense on deposits decreased due to a decrease in the average rate paid on deposits from 1.68% in 2003 to 1.41% in 2004, partially offset by an increase in the average balance from $189.4 million in 2003 to $205.8 million in 2004.

Interest expense on borrowings increased slightly by $70,000 to $1.9 million for the year ended December 31, 2004 from $1.9 million in 2003. Interest expense on borrowings increased due to increased average borrowings from $47.6 million in 2003 to $55.9 million in 2004, offset by a decrease in the average rate paid for borrowings from 3.89% in 2003 to 3.44% in 2004.

Provision for Loan Losses

The provision for loan losses is charged to earnings to bring the total allowance to a level deemed appropriate by management and is based upon historical experience, the volume and type of lending conducted by the Bank, industry standards, the amounts of nonperforming loans, general economic conditions, particularly as they relate to the Bank’s market areas, and other factors related to the collectibility of the Bank’s loan portfolio. The Company recorded a provision of $215,000 for the year ended December 31, 2004 compared to a credit to the provision of $100,000 in 2003. Management’s decision to increase the reserve is based on the composition and risk associated in the loan portfolio. Management’s assessment is that the allowance for loan losses of $3.4 million was adequate at December 31, 2004.

Noninterest Income

Total noninterest income for the year ended December 31, 2004 was $3.4 million compared to $3.2 million in 2003. The net increase in noninterest income of $122,000 was primarily due to the $320,000 gain realized on the sale of a branch office previously closed in 2003 and an increase in service charges on deposit accounts of $196,000, offset by a decrease in net realized gain on the sale of securities of $374,000 and a decrease in loan correspondent fees of $168,000.

Noninterest Expenses

Total noninterest expenses increased $1.4 million to $14.5 million for the year ended December 31, 2004 from $13.1 million in 2003. The increase in noninterest expenses in 2004 was primarily a result of an increase in salaries and employee benefits of $809,000 due to the required staff to support the Company’s growth and an increase of $551,000 in professional fees as a result of the Company’s needs to address issues related to shareholder activities and efforts to explore strategic alternatives.

Provision for Income Taxes

The provision for income taxes increased from $1.2 million (an effective rate at 32%) during the year ended December 31, 2003 to $1.4 million (an effective rate at 32%) during the year ended December 31, 2004.

Comparison of Years Ended December 31, 2003 and 2002

General

Net earnings for the year ended December 31, 2003 were $2.5 million compared to $1.8 million in 2002. The increase in net earnings is attributed to the $13.5 million of net interest income after the loan loss (credit) provision for the year ended December 31, 2003, compared to the $11.8 million in 2002, an increase of $1.7 million or 14.10%. Net interest income improved primarily because a shift of deposit accounts from high cost time deposits into lower cost transaction accounts and noninterest-bearing demand deposit accounts. The Company’s earnings per share were $1.12 basic and $1.08 diluted for the year ended December 31, 2003 compared to $.84 per basic and $.82 diluted share in 2002.

Interest Income and Expense

Interest income decreased by $1.8 million, or 8.8%, from $20.2 million for the year ended December 31, 2002 to $18.4 million for the year ended December 31, 2003. Interest income on loans decreased $1.1 million primarily due to a decrease in the average yield earned from 7.39% in 2002 to 6.68% in 2003, partially offset by an increase in the average loan portfolio balance from $226.4 million for the year ended December 31, 2002 to $233.5 million in 2003. Interest on securities decreased $459,000 primarily due to a decrease in the weighted-average yield earned of .85%, partially offset by an increase in the average securities portfolio balance from $65.5 million in 2002 to $69.6 million in 2003. The marginal decrease in interest income on other interest-earning assets of $180,000 was due to a decrease in the weighted-average yield earned of .59% and the decrease of average balances from $17.0 million to $12.3 million in 2003.

Interest expense on deposits decreased to $3.2 million for the year ended December 31, 2003 from $4.9 million for the year ending December 31, 2002. Interest expense on deposits decreased due to a decrease in the average rate paid on deposits from 2.64% in 2002 to 1.68% in 2003, and a shift in the amount of deposits from time to transaction accounts.

Interest expense on borrowings decreased $854,000 to $1.9 million for the year ended December 31, 2003 from $2.7 million in 2002. Interest expense on borrowings decreased due to a decrease in the average rate paid for borrowings from 4.33% in 2002 to 3.89% in 2003 and a decrease in average borrowings from $62.5 million to $47.6 million in 2003.

Provision for Loan Losses

The provision for loan losses is charged to earnings to bring the total allowance to a level deemed appropriate by management and is based upon historical experience, the volume and type of lending conducted by the Bank, industry standards, the amounts of nonperforming loans, general economic conditions, particularly as they relate to the Bank’s market areas, and other factors related to the collectibility of the Bank’s loan portfolio. The Company recorded a credit to the provision of $100,000 for the year ended December 31, 2003 compared to a provision of $811,000 in 2002. The credit to the provision is a direct result in realizing recoveries on previously charged-off loans. Management’s decision to decrease reserves is based on the composition and risk associated in the loan portfolio. Management’s assessment is that the allowance for loan losses of $3.4 million was adequate at December 31, 2003.

Noninterest Income

Total noninterest income for the year ended December 31, 2003 was $3.2 million compared to the $2.9 million in 2002. The net increase in noninterest income of $360,000 was primarily due to the increase in service charges on deposit accounts of $165,000, an increase of $94,000 from realized gain on securities available for sale and an increase of $57,000 being earned from loan correspondent fees associated with the Company’s mortgage originations.

Noninterest Expenses

Total noninterest expenses increased $951,000 to $13.1 million for the year ended December 31, 2003 from $12.1 million in 2002. The increase in noninterest expenses in 2003 was primarily a result of an increase in salaries and employee benefits of $701,000 due to the required staff to support the Company’s growth. Occupancy expenses increased $152,000 primarily as a result of the lease associated with the South Beach office which opened on December 31, 2002. Data processing expenses increased $123,000 as a result of the Company’s investment spending in state of the art technology.

Provision for Income Taxes

The provision for income taxes increased from $829,000 (an effective rate at 32%) during the year ended December 31, 2002 to $1.2 million (an effective rate at 32%) during the year ended December 31, 2003.

Quarterly Data

The following table presents summarized quarterly financial data (in thousands, except per share amounts):

	Year Ended December 31, 2004
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(Dollars in thousands)

Interest income	$	4,763	$	4,980	$	5,255	$	5,639

Interest expense		1,087		1,110		1,207		1,420


Net interest income		3,676		3,870		4,048		4,219

Provision for loan losses		100		115		-		-


Net interest income after provision for loan losses		3,576		3,755		4,048		4,219


Noninterest income		1,005		853		722		785
Noninterest expense		3,330		3,437		3,654		4,072


Net earnings before income taxes		1,251		1,171		1,116		932
Income taxes		388		376		360		297


Net Earnings	$	863		795		756		635


Basic earnings per common share	$	.38	$	.35	$	.33	$	.28


Diluted earnings per common share	$	.37	$	.34	$	.32	$	.26

	Year Ended December 31, 2004
	First Quarter			Second Quarter		Third Quarter			Fourth Quarter
	(Dollars in thousands)


Interest income	$	4,501		$	4,582	$	4,618		$	4,743

Interest expense		1,447			1,261		1,186			1,145

Net interest income		3,054			3,321		3,432			3,598

(Credit) provision for loan losses		(100	)		200		(200	)		0


Net interest income after provision for loan losses		3,154			3,121		3,632			3,598


Noninterest income		733			960		791			759
Noninterest expense		3,230			3,245		3,358			3,244


Net earnings before income taxes		657			836		1,065			1,113
Income taxes		196			260		352			370


Net Earnings		461			576		713			743


Basic earnings per common share	$	.21		$	.26	$	.32		$	.33


Diluted earnings per common share	$	.21		$	.25	$	.31		$	.31

Item 7a. Quantitative and Qualitative Disclosures About Market Risk.

See Part I, Item 7. Credit Risk and Management of Interest Rate-Risk and Market Risk.

Item 8. Financial Statements and Supplementary Data.

INDEX

			Page(s)

Audited Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (Hacker, Johnson & Smith PA)			F-1

Consolidated Balance Sheets as of December 31, 2004 and 2003			F-2

Consolidated Statements of Earnings for the years ended December 31, 2004, 2003 and 2002			F-3

Consolidated Statements of Stockholder’s Equity for the years ended December 31, 2004, 2003 and 2002			F-4

Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002			F-5, F-6

Notes to Consolidated Financial Statements			F-7, F-28

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES
Boca Raton, Florida

Boca Raton, Florida

Audited Consolidated Financial Statements

At December 31, 2004 and 2003 and
for Each of the Years in the Three-
Year Period Ended December 31, 2004
with Supplementary Information

(Together With Report of Independent Registered Public Accounting Firm)

Report of Independent Registered Public Accounting Firm

Pointe Financial Corporation
Boca Raton, Florida:

We have audited the accompanying consolidated balance sheets of Pointe Financial Corporation and Subsidiaries (the “Company”) at December 31, 2004 and 2003, and the related consolidated statements of earnings, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company at December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2004 in conformity with U.S. generally accepted accounting principles.

HACKER, JOHNSON & SMITH PA
Fort Lauderdale, Florida
February 23, 2005

F-1

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

($ in thousands, except share amounts)

	At December 31,
	2004			2003
Assets
Cash and due from banks	$	12,720			12,341
Interest-bearing deposits with banks		14			602


Total cash and cash equivalents		12,734			12,943

Securities available for sale		103,622			69,344
Loans, net of allowance for loan losses of $3,350 and $3,441		281,519			250,331
Loans held for sale		2,545			3,084
Accrued interest receivable		2,322			2,072
Premises and equipment, net		3,026			3,482
Federal Home Loan Bank stock, at cost		2,206			1,915
Federal Reserve Bank stock, at cost		479			479
Branch acquisition intangible asset		2,732			2,974
Deferred income tax asset		858			786
Other assets		1,169			1,304


Total	$	413,212			348,714


Liabilities and Stocjgikders’ Equity

Liabilities:
Noninterest-bearing demand deposits		91,618			71,326
Savings and NOW deposits		36,794			32,562
Money-market deposits		106,125			84,443
Time deposits		76,501			75,535

Total deposits		311,038			263,866

Official checks		1,941			2,143
Federal Home Loan Bank advances		33,555			30,875
Other borrowings		28,001			15,050
Accrued interest payable		397			393
Advance payments by borrowers for taxes and insurance		181			260
Other liabilities		658			1,210


Total liabilities		375,771			313,797


Commitments and contingencies (Notes 4, 8 and 9)
Stockholders’ equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued		-			-
Common stock, $.01 par value, 5,000,000 shares authorized;
2,584,023 and 2,549,028 shares issued		26			25
Additional paid-in capital		27,362			26,617
Retained earnings		13,067			10,835
Accumulated other comprehensive income		202			576
Treasury stock, at cost (297,000 shares)		(3,000	)		(3,000	)
Stock incentive plan		(216	)		(136	)


Total stockholders’ equity		37,441			34,917


Total	$	413,212			348,714

See Accompanying Notes to Consolidated Financial Statements.

F-2

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Earnings

($ in thousands, except per share amounts)

	Year Ended December 31,
	2004		2003			2002
Interest income:
Loans	$	17,192		15,588			16,735
Securities available for sale		3,189		2,648			3,107
Other		256		208			388


Total interest income		20,637		18,444			20,230


Interest expense:
Deposits		2,900		3,185			4,875
Borrowings		1,924		1,854			2,708


Total interest expense		4,824		5,039			7,583


Net interest income		15,813		13,405			12,647

Provision (credit) for loan losses		215		(100	)		811


Net interest income after provision (credit) for loan losses		15,598		13,505			11,836


Noninterest income:
Service charges on deposit accounts		2,077		1,881			1,716
Gain on sale of premises and equipment		320		-			-
Net realized gain on sale of securities		62		436			342
Loan correspondent fees		143		311			254
Other		763		615			571


Total noninterest income		3,365		3,243			2,883

Noninterest expenses:
Salaries and employee benefits		7,676		6,867			6,166
Occupancy and equipment		2,524		2,547			2,395
Advertising and promotion		177		231			375
Professional fees		893		342			300
Data processing		697		816			693
Amortization of intangible asset		242		242			245
Other		2,284		2,032			1,952


Total noninterest expenses		14,493		13,077			12,126


Earnings before income taxes		4,470		3,671			2,593

Income taxes		1,421		1,178			829


Net earnings	$	3,049		2,493			1,764


Earnings per share:
Basic	$	1.34		1.12			.84


Diluted	$	1.29		1.08			.82


Weighted-average shares outstanding for basic		2,269,110		2,230,613			2,111,301


Weighted-average shares outstanding for diluted		2,372,678		2,301,391			2,148,659

See Accompanying Notes to Consolidated Financial Statements

F-3

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

($ In thousands)

Years Ended December 31, 2004, 2003 and 2002

						Additional			Stock									Accumulated Other Compre- hensive			Total
	Common Stock					Paid-In			Incentive			Treasury			Retained			Income			Stockholders’
	Shares			Amount		Capital			Plan			Stock			Earnings			(Loss)			Equity
Balance at December 31, 2001		2,345,295		$	23		24,110			(104	)		(3,000	)		7,535			(17	)		28,547


Comprehensive income:
Net earnings		-			-		-			-			-			1,764			-			1,764

Net change in unrealized loss on
available-for-sale securities, net of taxes		-			-		-			-			-			-			957			957


Comprehensive income																						2,721

Common stock options exercised		129,540			2		1,463			-			-			-			-			1,465

Shares committed to participants in
stock incentive plan		-			-		-			19			-			-			-			19

Shares cancelled in stock incentive plan		(3,167	)		-		(33	)		33			-			-			-			-

Cash dividends paid		-			-		-			-			-			(421	)		-			(421	)


Balance at December 31, 2002		2,471,668			25		25,540			(52	)		(3,000	)		8,878			940			32,331


Comprehensive income:
Net earnings		-			-		-			-			-			2,493			-			2,493

Net change in unrealized gain on
available-for-sale securities, net of taxes		-			-		-			-			-			-			(364	)		(364	)


Comprehensive income																						2,129


Common stock options exercised		70,884			-		965			-			-			-			-			965

Shares issued in stock incentive plan		10,891			-		165			(165	)		-			-			-			-

Shares committed to participants in
stock incentive plan		-			-		-			28			-			-			-			28

Shares cancelled in stock incentive plan		(4,415	)		-		(53	)		53			-			-			-			-

Cash dividends paid		-			-		-			-			-			(536	)		-			(536	)


Balance at December 31, 2003		2,549,028			25		26,617			(136	)		(3,000	)		10,835			576			34,917


Comprehensive income:
Net earnings		-			-		-			-			-			3,049			-			3,049

Net change in unrealized gain on
available-for-sale securities, net of taxes		-			-		-			-			-			-			(374	)		(374	)


Comprehensive income																						2,675


Common stock options exercised		30,569			1		600			-			-			-			601

Shares issued in stock incentive plan		5,900			-		166			(166	)		-			-			-			-

Shares committed to participants in
stock incentive plan		-			-		-			65			-			-			-			65

Shares cancelled in stock incentive plan		(1,474	)		-		(21	)		21			-			-			-

Cash dividends paid		-			-		-			-			-			(817	)		-			(817	)


Balance at December 31, 2004		2,584,023		$	26		27,362			(216	)		(3,000	)		13,067			202			37,441

See Accompanying Notes to Consolidated Financial Statements

F-4

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows
(in thousands)

	Year Ended December 31,
	2004			2003			2002
Cash flows from operating activities:
Net earnings	$	3,049			2,493			1,764
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Provision (credit) for loan losses		215			(100	)		811
Depreciation and amortization		609			724			692
Net amortization of fees, premiums, discounts and other		(139	)		1,256			448
Deferred income taxes (benefit)		(72	)		56			(359	)
Shares committed to participants in incentive stock plan		65			28			19
Gain on sale of securities available for sale		(62	)		(436	)		(342	)
Gain on sale of premises and equipment		(320	)		-			-
Gain on sale of foreclosed real estate		-			(12	)		(67	)
Originations of loans held for sale		-			(3,111	)		-
Repayments of loans held for sale		539			177			296
Decrease (increase) in other assets		593			(36	)		812
Increase in accrued interest receivable		(250	)		(89	)		(204	)
(Decrease) increase in official checks		(202	)		224			(175	)
Increase (decrease) in accrued interest payable		4			(201	)		(255	)
(Decrease) increase in other liabilities		(552	)		441			67
						)

Net cash provided by operating activities		3,477			1,414			3,507
						)

Cash flows from investing activities:
Purchase of securities available for sale		(89,938	)		(89,122	)		(98,160	)
Proceeds from sale of securities available for sale		5,578			12,772			38,020
Maturities and calls of securities available for sale		47,855			68,027			50,980
Principal repayments on securities available for sale		1,417			1,407			2,015
Net (increase) decrease in loans		(30,753	)		(35,954	)		7,335
Proceeds from sale of premises and equipment		856			-			-
Purchase of premises and equipment, net		(689	)		(588	)		(845	)
Proceeds from sale of foreclosed real estate		-			129			367
Net (increase) decrease in other securities		(291	)		585			400
						)

Net cash (used in) provided by investing activities		(65,965	)		(42,744	)		112
						)

Cash flows from financing activities:
Net increase in deposits		47,172			30,365			7,733
Net increase (decrease) in Federal Home Loan Bank advances		2,680			(14,125	)		-
Net increase (decrease) in other borrowings		12,951			2,087			(17,131	)
(Decrease) increase in advance payments for taxes and insurance		(79	)		30			(54	)
Proceeds from exercise of stock options		372			804			1,247
Cash dividends paid on common stock		(817	)		(536	)		(421	)
						)

Net cash provided by (used in) financing activities		62,279			18,625			(8,626	)
						)

Net decrease in cash and cash equivalents		(209	)		(22,705	)		(5,007	)

Cash and cash equivalents at beginning of year		12,943			35,648			40,655
						)

Cash and cash equivalents at end of year	$	12,734			12,943			35,648
						)

(continued)

F-5

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued
(in thousands)

	Year Ended December 31,
	2004			2003			2002
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest	$	4,820			5,240			7,838


Income taxes	$	1,002			1,265			399


Noncash transactions:
Reclassification of loans to foreclosed real estate		-			-			367


Reclassification of other assets to foreclosed real estate		-			-			50


Accumulated other comprehensive income (loss), change in net unrealized
gain (loss) on securities available for sale net of tax	$	(374	)		(364	)		957


Tax benefit related to exercise of common stock options	$	229			161			218


Activity in stock incentive plan, net	$	(79	)		(84	)		52

See Accompanying Notes to Consolidated Financial Statements.

F-6

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

At December 31, 2004 and 2003 and For the Years Ended
December 31, 2004, 2003 and 2002

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

General.Pointe Financial Corporation (the “Holding Company”) owns all the common stock of Pointe Bank (the “Bank”), a state-chartered commercial bank and Pointe Financial Services, Inc. On February 12, 2002, the Bank incorporated a subsidiary, Will No-No, Inc., a Florida corporation, formed for the purpose to own, maintain and dispose of the Bank’s foreclosed assets (collectively the “Company”). The Bank provides a variety of community banking services to small and middle-market businesses and individuals through its ten banking offices located in Broward, Miami-Dade and Palm Beach counties, Florida. Pointe Financial Services, Inc. is an inactive subsidiary and Will No-No, Inc. has had only minimal activity.

In 2000, the Company formed Pointe Capital, an investment banking joint venture with First Integrated Capital Corporation, a subsidiary of McGinn, Smith & Company, Inc., a related party. The Company owned 50% of Pointe Capital. Pointe Capital offered investment banking services to small and medium-size businesses in South Florida. During 2003, Pointe Capital discontinued operating activities and in 2004 net assets of Pointe Capital were liquidated and the partnership was dissolved.

Basis of Presentation. The accompanying consolidated financial statements include the accounts of the Holding Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles and to general practices within the banking industry. The following summarizes the more significant of these policies and practices.

Use of Estimates. In preparing consolidated financial statements in conformity with U.S. generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and deferred tax assets.

Cash and Cash Equivalents. For purposes of the consolidated statements of cash flows, cash and cash equivalents include cash and balances due from banks and interest-bearing deposits with banks.

The Bank is required under Federal Reserve Board regulations to maintain reserves, generally consisting of cash or noninterest-earning accounts, against its transaction accounts. At December 31, 2004 and 2003, balances maintained as reserves were approximately $5.7 million and $3.1 million, respectively.

(continued)

F-7

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(1) Description of Business and Summary of Significant Accounting Policies, Continued

Securities. The Company may classify its securities as either trading, held to maturity or available for sale. Trading securities are held principally for resale and recorded at their fair values. Unrealized gains and losses on trading securities are included immediately in earnings. Held-to-maturity securities are those which the Company has the positive intent and ability to hold to maturity and are reported at amortized cost. Available-for-sale securities consist of securities not classified as trading securities nor as held-to-maturity securities. Unrealized holding gains and losses, net of tax, on available-for-sale securities are excluded from earnings and reported in other comprehensive income. Gains and losses on the sale of available-for-sale securities are recorded on the trade date and are determined using the specific-identification method. Premiums and discounts on securities available for sale are recognized in interest income using the interest method over the period to maturity.

Loans. Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans.

Loan origination fees are deferred and certain direct origination costs are capitalized. Both are recognized as an adjustment of the yield of the related loan.

The accrual of interest on loans is discontinued at the time the loan is ninety days delinquent unless the loan is well-collateralized and in process of collection. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged-off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Loans Held for Sale. Loans held for sale are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses are recognized through a valuation allowance by charges to earnings. At December 31, 2004 and 2003, the book value of loans held for sale approximated fair value in the aggregate.

Loan origination fees are deferred and direct loan origination costs are capitalized until the related loan is sold, at which time the net fees are included in the gain on sale of loans in the consolidated statements of earnings.

Allowance for Loan Losses. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

(continued)

F-8

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(1) Description of Business and Summary of Significant Accounting Policies, Continued

Allowance for Loan Losses, Continued. The allowance consists of specific and general components. The specific component relates to loans that are classified as either loss, doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers nonclassified loans and is based on historical industry loss experience adjusted for qualitative factors.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and commercial real estate loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential real estate loans for impairment disclosures.

Foreclosed Real Estate. Real estate acquired through, or in lieu of, foreclosure is initially recorded at the lower of fair value or the loan balance plus acquisition costs at the date of foreclosure. After foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in earnings.

Premises and Equipment. Land is stated at cost. Building, furniture, fixtures, equipment and leasehold improvements are carried at cost, less accumulated depreciation and amortization computed using the straight-line method over the shorter of the lease term or estimated useful life of each type of asset.

Branch Acquisition Intangible Asset. On April 20, 2001, the Company purchased four branch offices in Miami-Dade County from another financial institution. The branches had a combined deposit base of approximately $55.0 million. The Company also acquired in this transaction consumer loans of approximately $7.5 million and $25.4 million of short-term participation interests in existing commercial real estate loans in the seller’s portfolio. The excess of the fair value of liabilities assumed over the fair value of tangible assets acquired in this transaction was $3.6 million. This $3.6 million constitutes an unidentifiable intangible asset. The transaction in which the unidentifiable intangible asset arose was not a business combination. In accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 147, Acquisition of Certain Financial Institutions, the unidentified intangible asset continues to be amortized over the estimated average remaining life of the existing customer base, fifteen years. The annual amortization will be $247,000 through 2016.

Transfer of Financial Assets. Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

F-9

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(1) Description of Business and Summary of Significant Accounting Policies, Continued

Income Taxes. Deferred income tax assets and liabilities are recorded to reflect the tax consequences on future years of temporary differences between revenues and expenses reported for financial statement and those reported for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. Valuation allowances are provided against assets which are not likely to be realized.

Stock Compensation Plans. SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS 148, Accounting for Stock-Based Compensation Transition and Disclosure (collectively, “SFAS No. 123”) encourages all entities to adopt a fair value based method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, (“Opinion No. 25”) whereby compensation cost is the excess, if any, of the quoted market price of the stock at the grant date (or other measurement date) over the amount an employee must pay to acquire the stock. Stock options issued under the Company’s stock option plan have no intrinsic value at the grant date, and under Opinion No. 25 no compensation cost is recognized for them. The Company has elected to continue with the accounting methodology in Opinion No 25.

The following table illustrates the effect on net earnings and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation (in thousands, except per share amounts).

	Year Ended December 31,
	2004		2003		2002

Net earnings, as reported	$	3,049		2,493		1,764

Deduct: Total stock-based employee compensation
determined under the fair value based method for all
awards, net of taxes		160		238		91


Pro forma net earnings	$	2,889		2,255		1,673


Basic earnings per share:
As reported	$	1.34		1.12		.84



Pro forma	$	1.27		1.01		.79


Diluted earnings per share:
As reported	$	1.29		1.08		.82



Pro forma	$	1.22		.98		.78

(continued)

F-10

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(1) Description of Business and Summary of Significant Accounting Policies, Continued

Stock Compensation Plans, Continued.The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

	Year Ended December 31,
	2004		2003	2002
Risk-free interest rate	4.80	%	4.25-4.50%	5.00	%
Dividend yield	2.00	%	2.00-4.00%	4.00	%
Expected volatility	16.50	%	13.50-17.70%	19.60	%
Expected life in years	10		10	5 or 10

Per share weighted-average grant date fair value of options
issued during the year	$ 7.38		2.64	3.14

Earnings Per Share. Basic earnings per share is computed on the basis of the weighted-average number of common shares outstanding. Diluted earnings per share is computed based on the weighted-average number of shares outstanding plus the effect of outstanding stock options, computed using the treasury stock method.

Off-Balance-Sheet Financial Instruments. In the ordinary course of business, the Company has entered into off-balance-sheet financial instruments consisting of commitments to extend credit, unused lines of credit and stand-by letters of credit. Such financial instruments are recorded in the consolidated financial statements when they are funded.

Fair Values of Financial Instruments. The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Certain financial instruments and all nonfinancial instruments are excluded from these disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. The following methods and assumptions were used by the Company in estimating fair values of financial instruments:

Cash and Cash Equivalents. The carrying amounts of cash and cash equivalents approximate their fair value.

Securities. Fair values for securities available for sale are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. The carrying value of Federal Home Loan Bank stock and Federal Reserve Bank stock approximates fair value.

Loans Held for Sale. Fair values of loans held for sale are based on commitments on hand from investors or prevailing market prices.

(continued)

F-11

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(1) Description of Business and Summary of Significant Accounting Policies, Continued

Fair Values of Financial Instruments, Continued.

Loans. For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values are based on carrying values. Fair values for fixed-rate mortgage (e.g. one-to-four family residential), commercial real estate and commercial loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for nonperforming loans are estimated using discounted cash flow analysis or underlying collateral values, where applicable.

Accrued Interest. Carrying value approximates fair value.

Deposit Liabilities. The fair values disclosed for demand, NOW, money market and savings deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). Fair values for fixed-rate time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered on time deposits to a schedule of aggregated expected monthly maturities of time deposits.

Borrowed Funds. The carrying amounts of other borrowings approximate their fair values. Fair values of advances from Federal Home Loan Bank are estimated using discounted cash flow analysis based on the Company’s current incremental borrowing rates for similar types of borrowings.

Off-Balance-Sheet Financial Instruments. Fair values for off-balance-sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing.

Advertising. The Company expenses all advertising as incurred.

Recent Pronouncements. In December 2003, the American Institute of Certified Public Accountants issued Statement of Position 03-3, “Accounting for Certain Loans and Debt Securities Acquired in a Transfer” (SOP 03-3). SOP 03-3 addresses accounting for differences between contractual cash flows expected to be collected and an investor’s initial investment in loans or debt securities acquired in a transfer if those differences are attributable, at least in part, to credit quality. SOP 03-3 also prohibits “carrying over” or creation of valuation allowances in the initial accounting of all loans acquired in a transfer that are within the scope of SOP 03-3. The prohibition of the valuation allowance carryover applies to the purchase of an individual loan, a pool of loans, a group of loans, and loans acquired in a purchase business combination. SOP 03-3 is effective for loans acquired in fiscal years beginning after December 15, 2004. The Company does not anticipate that the adoption of SOP 03-3 will have a material impact on its consolidated financial condition or results of operations.

In March 2004, the Emerging Issues Task Force reached a consensus on Issue 03-1, “Meaning of Other Than Temporary Impairment” (Issue 03-1). The Task Force reached a consensus on an other-than-temporary impairment model for debt and equity securities accounted for under Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities” and cost method investments, and required certain additional financial statement disclosures. The implementation of the “Other-Than-Temporary Impairment” component of this consensus has been postponed. Management cannot determine the effect of the adoption of this guidance on the Company’s consolidated financial condition or results of operations.

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123 (revised 2004),“Share Based Payment.” This Statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments, which includes stock options and warrants, based on the grant-date fair value of the award.

F-12

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(1) Description of Business and Summary of Significant Accounting Policies, Continued

Recent Pronouncements, Continued. That cost will be recognized over the period during which an employee is required to provide service in exchange for the award. Public entities will adopt this Statement using a modified version of prospective application. Under this application, this Statement will apply to new awards and to awards modified, repurchased, or cancelled after the required effective date and to awards not yet vested that exist as of the effective date. This Statement is effective for the Company as of the beginning of the first interim or annual reporting period that begins after December 15, 2005. Management has not yet determined what effect this Statement will have on the Company’s 2006 consolidated financial statements.

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets-an Amendment to APB opinion No. 29.” This Statement addresses the measurement of exchanges of nonmonetary assets. The Statement is effective for fiscal periods beginning after June 15, 2005. Management believes this Statement will not have a material effect on the Company’s consolidated financial statements.

Comprehensive Income. Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net earnings. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the consolidated balance sheet, such items along with net earnings, are components of comprehensive income. The components of other comprehensive income and related tax effects are as follows (in thousands):

	Before Tax
Year Ended December 31, 2004:

Unrealized holding losses	$	(541	)	206		(335	)
Reclassification adjustment for gains included
in net earnings		(62	)	23		(39	)

	$	(603	)	229		(374	)
Year Ended December 31, 2003:

Unrealized holding losses		(151	)	59		(92	)
Reclassification adjustment for gains included
in net earnings		(436	)	164		(272	)

	$	(587	)	223		(364	)
Year Ended December 31, 2002:

Unrealized holding gains		1,886		(716	)	1,170
Reclassification adjustment for gains included
in net earnings		(342	)	129		(213	)
	$	1,544		(587	)	957

(continued)

F-13

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(2) Securities Available for Sale

Securities have been classified according to management’s intention. The carrying amount of securities and their approximate fair values are summarized as follows (in thousands):

	Amortized Cost
At December 31, 2004:
U.S. Treasury securities	$	3,709	18	(20	)	3,707
U.S. Government agency securities		78,047	21	(180	)	77,888
Tax-exempt securities		17,707	517	(11	)	18,213
Mortgage-backed securities		1,204	20	-		1,224
Mutual funds		2,000	-	(39	)	1,961
Equity securities		129	-	-		129
Other		500	-	-		500

Total	$	103,296	576	(250	)	103,622

At December 31, 2003:
U.S. Treasury securities		7,921	277	(9	)	8,189
U.S. Government agency securities		41,671	251	(2	)	41,920
Tax-exempt securities		14,773	420	-		15,193
Mortgage-backed securities		1,624	29	-		1,653
Mutual funds		2,000	-	(36	)	1,964
Other		425	-	-		425

Total	$	68,414	977	(47	)	69,344

At December 31, 2004 and 2003, approximately $539,000 and $566,000 respectively, of securities were pledged for the Company’s treasury tax and loan account, approximately $36,768,000 and $20,854,000, respectively, were pledged as collateral for investment repurchase agreements and approximately $11,962,000 and $8,430,000, respectively, were pledged for public deposits.

The following summarizes sales of securities (in thousands):

	Year Ended December 31,
	2004			2003			2002

Proceeds from sale of securities	$	5,578			12,772			38,020

Gross gains from sale of securities		134			440			440
Gross losses from sale of securities		(72	)		(4	)		(98	)

Net gains	$	62			436			342

(continued)

F-14

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(2) Securities Available for Sale, Continued

Securities with gross unrealized losses at December 31, 2004, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is as follows (in thousands):

	Less Than Twelve Months					Over Twelve Months
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
Securities available for sale:
U.S. Treasury securities	$	-			-		(20	)		2,095
U.S. Government agency securities		(177	)		54,533		(3	)		997
Tax exempt securities		(11	)		997		-			-
Mortgage-backed securities		-			-		-			-
Mutual fund		-			-		(39	)		1,961
Equity securities		-			-		-			-
Other securities		-			-		-			-
Total securities available for sale	$	(188	)		55,530		(62	)		5,053

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

The unrealized losses on investment securities available for sale were caused by interest rate changes. It is expected that the securities would not be settled at a price less than the par value of the investments. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company has the ability and intent to hold these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

The scheduled maturities of securities available for sale at December 31, 2004 are as follows (in thousands):

	Amortized Cost		Fair Value

Due in less than one year	$	-		-
Due from one to five years		81,956		81,795
Due from five to ten years		300		300
Due in over ten years		17,707		18,213
Mortgage-backed securities		1,204		1,224
Mutual funds		2,000		1,961
Equity securities		129		129

	$	103,296	$	103,622

F-15

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(3) Loans

The components of loans are summarized as follows (in thousands):

	At December 31,
	2004			2003
Residential real estate	$	76,325			75,809
Commercial real estate		93,064			82,800
Commercial		89,704			66,341
Consumer		26,207			29,276


Total loans	$	285,300			254,226

Deduct:
Net deferred loan fees		(431	)		(454	)
Allowance for loan losses		(3,350	)		(3,441	)

	$	281,519			250,331

An analysis of the change in the allowance for loan losses follows (in thousands):

	Year Ended December 31,
	2004			2003			2002
Balance at beginning of year	$	3,441			3,519			2,407


Loans charged-off		(460	)		(174	)		(425	)
Recoveries		154			196			726


Net loans (charged-off) recovered		(306	)		22			301


Provision (credit) for loan losses		215			(100	)		811


Balance at end of year	$	3,350			3,441			3,519

At December 31, 2004 and 2003 and for the years ending December 31, 2004, 2003 and 2002 there were no impaired loans outstanding.

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

	At December 31,
	2004		2003

Nonaccrual loans	$	117		729
Past due ninety days or more, but still accruing		34		120


	$	151		849

(continued)

F-16

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(4) Premises and Equipment

Premises and equipment is summarized as follows (in thousands):

	At December 31,
	2004			2003

Land	$	581			964
Building		732			913
Leasehold improvements		1,701			1,552
Furniture, fixtures and equipment		4,623			4,260


Total, at cost		7,637			7,689

Less accumulated depreciation and amortization		(4,611	)		(4,207	)


Net book value	$	3,026			3,482

The Company leases certain banking offices. The lease terms range up to ten years. Some of the leases contain escalation clauses providing for increased rent expense based primarily on increases in the average consumer index or percentages stipulated in the lease agreements. Rental expense was approximately $1,478,000, $1,451,000 and $1,304,000 for the years ended December 31, 2004, 2003 and 2002, respectively. Approximate future minimum annual rental payments under noncancellable leases are as follows (in thousands):

Year Ending December 31,	Amount

2005	$	1,428
2006		1,621
2007		1,273
2008		1,136
2009		656
Thereafter		1,384


Total	$	7,498

(5) Deposits

The aggregate amount of jumbo time deposits with a minimum denomination of $100,000, was approximately $25.5 million and $28.6 million at December 31, 2004 and 2003, respectively.

At December 31, 2004, the scheduled maturities of all time deposits are as follows (in thousands):

Year Ending December 31,	Amount

2005	$	56,982
2006		14,827
2007		3,098
2008		407
2009 and thereafter		1,187


	$	76,501

(6) Other Borrowings

The Company enters into retail investment repurchase agreements with its customers requiring the Company to pledge securities as collateral for the balance in the accounts. At December 31, 2004 and 2003 the balance totaled approximately $28.0 million and $15.1 million, respectively and the Company pledged securities as collateral for these agreements with a carrying value of approximately $36.8 million and $20.9 million, respectively.

(continued)

F-17

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(7) Federal Home Loan Bank Advances

Maturities and interest rates on the Federal Home Loan Bank (“FHLB”) advances were as follows ($ in thousands):


Maturing in Year Ending	Interest			At December 31,
December 31,	Rate			2004		2003

2005		2.44% - 6.49	%		18,555		15,875
2008		5.09	%		5,000		5,000
2010		5.77% - 6.19	%		10,000		10,000


Total				$	33,555		30,875

At December 31, 2004, the FHLB has the option to call $20.0 million of the above advances at an earlier date than the maturity date. At December 31, 2004 and 2003, pursuant to the collateral agreement with the FHLB, advances are collateralized by the Company’s FHLB stock and a blanket lien on the Company’s qualifying first mortgage, one-to-four family residential loans.

(8) Contingencies

Various legal claims arise from time to time in the normal course of business which, in the opinion of management, will have no material effect on the Company’s consolidated financial statements. However, there are two related lawsuits presently pending in the circuit court of Palm Beach County, Florida. The Company instituted suit for replevin of certain bakery equipment. The claims are based upon allegations that the perfection of the Company’s security interest lapsed prior to the repossession. The Company denies any liability and is vigorously contesting the Plaintiff’s allegations. Although it is believed the Company will ultimately prevail, the litigation may pose significant risk. We are not able at this time to estimate the range of the potential loss, if any, with respect to the claims in one of the lawsuits. The estimated range of potential loss to the Company with respect to the other lawsuit relates to the value of the repossessed equipment and is in the range of $150,000.

(9) Financial Instruments

The estimated fair values of the Company’s financial instruments were as follows (in thousands):

	At December 31, 2004				At December 31, 2003
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents	$	12,734		12,734		12,943		12,943
Securities available for sale		103,622		103,622		69,344		69,344
Loans, net		281,519		284,582		250,331		254,899
Loans held for sale		2,545		2,545		3,084		3,084
Accrued interest receivable		2,322		2,322		2,072		2,072
Other securities		2,685		2,685		2,394		2,394

Financial liabilities:
Deposit liabilities		311,038		310,821		263,866		264,551
Other borrowings		28,001		28,001		15,050		15,050
Federal Home Loan Bank advances		33,555		34,293		30,875		33,190
Accrued Interest		397		397		393		393

(continued)

F-18

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(9) Financial Instruments, Continued

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments are commitments to extend credit, available lines of credit and standby letters of credit and may involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the consolidated balance sheet. The contract amounts of these instruments reflect the extent of involvement the Company has in these financial instruments.

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

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

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. All outstanding letters of credit at December 31, 2004 expire in 2005 and the Company has not recorded a liability for these letters of credit. The Company has collateral securing these agreements or guarantees, which in the event that the Company is required to fund the letters of credit, will result in no loss to the Company.

Unused lines of credit and commitments to extend credit typically result in loans with a market interest rate when funded. A summary of the contractual amounts of the Company’s financial instruments, which approximate fair value, with off- balance sheet risk at December 31, 2004 follows (in thousands):

	Contractual Amount

Unfunded loan commitments at fixed rates	$	720	-	-

Unfunded loan commitments at variable rates	$	4,915	-	-

Available lines of credit	$	51,349	-	-

Standby letters of credit	$	3,299	-	-

(10) Credit Risk

The Company grants a majority of its loans to borrowers primarily in Palm Beach, Broward and Miami-Dade counties, Florida. Although the Company has a diversified loan portfolio, a significant portion of its borrowers’ ability to honor their contracts is dependent upon the economy of these counties in Florida. The contractual amounts of credit-related financial instruments such as commitments to extend credit and standby letters of credit represent the amounts of potential accounting loss should the contract be fully drawn upon, the customer default and the value of any existing collateral become worthless.

(continued)

F-19

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(11) Income Taxes

Allocation of Federal and state income taxes between current and deferred portions is as follows (in thousands):

Year Ended December 31, 2004:	Current
Federal	$	1,230	(61	)	1,169
State	$	263	(11	)	252

Total	$	1,493	(72	)	1,421

*Year Ended December 31, 2003:*
Federal		914	48		962
State		208	8		216

Total	$	1,122	56		1,178


*Year Ended December 31, 2002:*
Federal		1,001	(307	)	694
State		187	(52	)	135

Total	$	1,188	(359	)	829

The reasons for the differences between the statutory Federal income tax rate and the effective tax rate are summarized as follows:

	Year Ended December 31,
	2004			2003			2002
Income taxes at statutory Federal rate		34	%		34	%		34	%
Increase (decrease) in taxes resulting from:
State taxes, net of Federal tax benefit		4			4			3
Tax-exempt income, net of disallowed interest expense		(6	)		(6	)		(5	)


Effective tax rates		32	%		32	%		32	%

(continued)

F-20

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(11) Income Taxes, Continued

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities relate to the following (in thousands):

	At December 31,
	2004			2003
Deferred tax assets:
Allowance for loan losses	$	834			753
Accumulated depreciation		49			102
Stock incentive plan		52			28
Other		27			14

Deferred tax assets		962			897

Deferred tax liabilities:
Intangible asset		(98	)		(106	)
Accrued dividends		(6	)		(5	)

Total gross deferred tax liabilities		(104	)		(111	)

Net deferred tax assets	$	858			786

(12) Related Parties

The Company has entered into transactions with officers, directors and principal stockholders in the ordinary course of business. Loans to such related parties amounted to approximately $1,968,000 and $2,466,000 at December 31, 2004 and 2003, respectively. During the year ended December 31, 2004, total principal additions were approximately $135,000 and total principal payments were approximately $633,000. Deposits from such related parties at December 31, 2004 and 2003 were approximately $5,241,000 and $3,979,000, respectively.

(13) Profit Sharing Plan

The Company sponsors a 401(k) profit sharing plan (the “Plan”). The Plan is available to all employees electing to participate after meeting certain length-of-service requirements. The Company’s contributions to the Plan are discretionary and are determined annually. Expense relating to the Company’s contributions to the Plan was approximately $118,000, $92,000 and $79,000 for 2004, 2003 and 2002, respectively.

(14) Deferred Compensation Plans

The Company had a deferred compensation plan for members of the Board of Directors. The plan permitted the directors to receive the Company’s common stock in lieu of cash as payment of their annual director’s retainer. During the year ending December 31, 2004, the Company elected to terminate the Directors Deferred Compensation Plan.

(continued)

F-21

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(15) Stock Award Plans

Certain key employees and the Company’s directors have options to purchase shares of the Company’s common stock under a nonqualified stock option plan adopted in 1994. In 1998, a new Incentive Compensation and Stock Award Plan (“1998 Plan”) was adopted under which both qualified and nonqualified options can be granted and stock can be awarded to employees as compensation. The Company’s Board of Directors in 2001 determined that all new options would be granted under the 1998 Plan. Directors options vest immediately and officers and employees vest over three or five years. A total of 400,000 options or shares can be granted to directors and employees of the Company under the 1998 plan. As of December 31, 2004, 4,130 options or shares remain available for grant. A summary of stock option transactions follows ($ in thousands, except per share amounts):

	Number of Shares			Range of Per Share Option Price		Weighted- Average Per Share Price		Aggregate Option Price


Outstanding at December 31, 2001		359,052		$	8.62 - 15.38		10.07		3,616

Options granted		113,334			11.95 - 14.75		12.47		1,413
Options exercised		(129,540	)		9.00 - 11.25		9.61		(1,245	)
Options forfeited		(31,319	)		9.00 - 15.38		11.22		(351	)


Outstanding at December 31, 2002		311,527			8.62 - 15.38		11.02		3,433

Options granted		82,605			15.15 - 24.15		16.74		1,383
Options exercised		(70,884	)		8.62 - 16.30		11.34		(804	)
Options forfeited		(13,162	)		9.00 - 15.15		12.71		(167	)


Outstanding at December 31, 2003		310,086			8.62 - 24.15		12.40		3,845

Options granted		14,000			28.00		28.00		392
Options exercised		(30,569	)		9.00-28.00		12.16		(372	)
Options forfeited		(2,282	)		11.95-13.10		12.29		(28	)


Outstanding at December 31, 2004		291,235		$	9.00-28.00	$	12.40		3,837

The weighted-average remaining contractual life of the outstanding stock options at December 31, 2004, 2003 and 2002 was eighty-three months, eighty-six months and seventy-eight months, respectively.

These options are exercisable as follows:

Year Ending	Number of Shares		Weighted-Average Exercise Price

Currently		221,160	$	12.18
2005		48,849		15.21
2006		21,226		18.87

		291,235	$	12.40

(continued)

F-22

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(15) Stock Award Plans, Continued

Also, the Company awarded shares of restricted common stock to employees under the 1998 Plan. Four years following the date of grant these restricted stock awards become entirely vested. The Company is amortizing these restricted stock awards into salaries and employee benefits over the four-year period. From the date awarded, the employees are entitled to dividends paid on common stock and may vote these shares. These restricted shares are as follows:



Shares outstanding at December 31, 2001	15,309
Shares forfeited	(3,167	)

Shares outstanding at December 31, 2002	12,142
Shares granted	10,891
Shares vested	(2,955	)
Shares forfeited	(4,415	)

Shares outstanding at December 31, 2003	15,663
Shares granted	5,900
Shares forfeited	(1,474	)

Shares outstanding at December 31, 2004	20,089

(16) Regulatory Matters

The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the Federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and percentages (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2004 and 2003, that the Company and the Bank met all capital adequacy requirements to which they are subject.

(continued)

F-23

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(16) Regulatory Matters, Continued

As of December 31, 2004, the most recent notification from the regulatory authorities categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage percentages as set forth in the following tables. There are no conditions or events since that notification that management believes have changed the Bank’s category. The Company and the Bank’s actual capital amounts and percentages are also presented in the table ($ in thousands).

	Actual					Minimum Capital Requirement					Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		%			Amount		%			Amount		%
*As of December 31, 2004:*
Total capital to Risk-
Weighted Assets:
Consolidated	$	37,818		12.65	%	$	23,911		8.00	%		N/A		N/A
Bank		35,835		12.02			23,851		8.00		$	29,814		10.00	%
Tier I Capital to Risk-
Weighted Assets:
Consolidated		34,469		11.53			11,956		4.00			N/A		N/A
Bank		32,485		10.90			11,925		4.00			17,888		6.00
Tier I Capital
to Average Assets
Consolidated		34,469		8.10			17,023		4.00			N/A		N/A
Bank		32,485		7.64			17,002		4.00			21,252		5.00

*As of December 31, 2003:*
Total capital to Risk-
Weighted Assets:
Consolidated		34,556		13.40			20,624		8.00			N/A		N/A
Bank		31,619		12.31			20,544		8.00			25,681		10.00
Tier I Capital to Risk-
Weighted Assets:
Consolidated		31,331		12.15			10,312		4.00			N/A		N/A
Bank		28,406		11.06			10,272		4.00			15,408		6.00
Tier I Capital
to Average Assets
Consolidated		31,331		8.99			13,942		4.00			N/A		N/A
Bank		28,406		8.17			13,905		4.00			17,381		5.00

(continued)

F-24

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(17) Stockholders’Equity

In 1999, the Company’s Board of Directors approved a stock repurchase program. The program was initially allocated $3.0 million and in 2000, the Board authorized up to an additional $3.0 million to be used to repurchase Company stock. As of December 31, 2004, the Company has repurchased 297,000 shares in treasury stock at a net cost of approximately $3.0 million.

The Company’s ability to pay cash dividends on its common stock is limited to the amount of dividends it could receive from the Bank plus its own cash and cash equivalents, which amounted to $861,000 at December 31, 2004. The amount of dividends the Bank is permitted to pay to the Company is restricted to 100% of its calendar year-to-date net earnings plus retained earnings for the preceding two years. Twenty percent of the net earnings in the preceding two-year period may not be paid in dividends, but must be retained to increase capital surplus until such surplus equals the amount of the Bank’s common stock then outstanding. In addition, no bank may pay a dividend at any time that net earnings in the current year when combined with retained earnings from the preceding two years produce a loss. Under Florida law, a Florida chartered commercial bank may not pay cash dividends that would cause the Bank’s capital to fall below the minimum amount required by Federal or Florida law.

(18) Earnings Per Share

Basic earnings per share represents earnings available to common stockholders divided by the weighted-average number of common shares outstanding during the year. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that may be issued by the Company relate solely to outstanding stock options, and are determined using the treasury stock method. Earnings per common share have been computed based on the following:

	Year Ended December 31,
	2004		2003		2002

Weighted-average number of common shares outstanding		2,269,110		2,230,613		2,111,301
Effect of dilutive options		103,568		70,778		37,358

Weighted-average number of common shares outstanding used
to calculate diluted earnings per common share		2,372,678		2,301,391		2,148,659

(19) Investment in Joint Venture

The Company was a joint venture partner in Pointe Capital, which was accounted for using the equity method of accounting. During 2003, Pointe Capital discontinued operating activities and in 2004 net assets of Pointe Capital were liquidated and the partnership was dissolved.

(continued)

F-25

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(20) Holding Company Financial Information

The Holding Company’s unconsolidated financial information is as follows (in thousands):

Condensed Balance Sheets

	At December 31,

	2004		2003


Assets

Cash and cash equivalents	$	861		1,666
Investment in subsidiaries		35,465		32,000
Other assets		1,117		1,255



Total assets	$	37,443		34,921



Liabilities and Stockholders’ Equity


Other liabilities		2		4
Stockholders’ equity		37,441		34,917



Total liabilities and stockholders’ equity	$	37,443		34,921

Condensed Statements of Earnings

	Year Ended December 31,

	2004			2003			2002


Revenues	$	(72	)		7			13
Expenses		(718	)		(441	)		(485	)



Loss before earnings of subsidiaries		(790	)		(434	)		(472	)
Earnings of subsidiaries		3,839			2,927			2,236



Net earnings	$	3,049			2,493			1,764

(continued)

F-26

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(20) Holding Company Financial Information, Continued

Condensed Statements of Cash Flows

	Year Ended December 31,

	2004			2003			2002


Cash flows from operating activities:
Net earnings	$	3,049			2,493			1,764
Adjustments to reconcile net earnings to net cash
used in operating activities:
Undistributed earnings of subsidiaries		(3,839	)		(2,927	)		(2,236	)
Shares committed to participants in incentive stock plan		65			28			19
Decrease (increase) in other assets		367			327			(142	)
(Decrease) increase in other liabilities		(2	)		1			(1	)



Net cash used in operating activities		(360	)		(78	)		(596	)



Cash flows from financing activities:
Cash dividends paid on common stock		(817	)		(536	)		(421	)
Proceeds from exercise of stock options		372			804			1,247



Net cash (used in) provided by financing activities		(445	)		268			826



Net (decrease) increase in cash and cash equivalents		(805	)		190			230



Cash and cash equivalents at beginning of the year		1,666			1,476			1,246



Cash and cash equivalents at end of year	$	861			1,666			1,476

(21) Definitive Agreement

On October 27, 2004 Pointe Financial Corporation (NASDAQ: PNTE) and its subsidiaries entered into a definitive agreement to be acquired by The South Financial Group, Inc. (NASDAQ: TSFG), a bank holding company incorporated in South Carolina. Pointe’s operations will be conducted through TSFG’s Florida banking subsidiary, Mercantile Bank. Under the terms of the agreement, which has ben unanimously approved by both boards of directors, TSFG will issue fixed consideration of 2,554,022 shares of TSFG common stock and $24,493,075 in cash for all outstanding PNTE shares, calculated on a fully diluted basis. PNTE shareholders will have the right to elect to receive cash, TSFG common stock, or a mixture of cash and TSFG stock. Without giving effect to any elections, this equates to $9.50 and 0.9906 TSFG shares for each fully diluted PNTE share.

F-27

Report of Independent Registered Public Accounting Firm on Supplementary Information

Pointe Financial Corporation
Boca Raton, Florida

We have audited the accompanying consolidated financial statements of Pointe Financial Corporation and Subsidiaries at and for the year ended December 31, 2004, and have issued our report thereon dated February 23, 2005. Our audit was conducted for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The consolidating information in the accompanying schedules is presented for purposes of additional analysis of the consolidated financial statements rather than to present the financial position and results of operations of the individual companies. The consolidating information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the consolidated financial statements taken as a whole.

HACKER, JOHNSON & SMITH PA
Fort Lauderdale, Florida
February 23, 2005

F-28

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidating Balance Sheet
December 31, 2004
(in thousands)

	Pointe Financial Corporation			Pointe Bank		Pointe Financial Services			Eliminations			Consolidated

Assets


Cash and cash equivalents	$	861			12,734		7			(868	) a		12,734
Securities available for sale		128			103,494		-			-			103,622
Loans, net		-			281,519		-			-			281,519
Loans held for sale		-			2,545		-			-			2,545
Accrued interest receivable		-			2,322		-			-			2,322
Premises and equipment, net		-			3,026		-			-			3,026
Other securities		-			2,685		-			-			2,685
Investment in subsidiaries		35,465			-		-			(35,465	) b		-
Branch acquisition intangible asset		-			2,732		-			-			2,732
Deferred income tax asset		29			829		-			-			858
Other assets		960			209		-			-			1,169



Total	$	37,443			412,095		7			(36,333	)		413,212



Liabilities and Stockholders’ Equity


Liabilities:
Deposits		-			311,906		-			(868	) a		311,038
Official checks		-			1,941		-			-			1,941
Federal Home Loan Bank advances		-			33,555		-			-			33,555
Other borrowings		-			28,001		-			-			28,001
Accrued interest payable		-			397		-			-			397
Advance payments by borrowers for taxes
and insurance		-			181		-			-			181
Other liabilities		2			656		-			-			658



Total liabilities		2			376,637		-			(868	)		375,771



Stockholders’ equity:
Common stock		26			306		1			(307	) b		26
Additional paid-in capital		27,362			15,662		220			(15,882	) b		27,362
Retained earnings (accumulated deficit)		13,067			19,289		(214	)		(19,075	) b		13,067
Accumulated other comprehensive income		202			201		-			(201	) b		202
Treasury stock		(3,000	)		-		-			-			(3,000	)
Stock incentive plan		(216	)		-		-			-			(216	)



Total stockholders’ equity		37,441			35,458		7			(35,465	)		37,441



Total		37,443			412,095		7			(36,333	)		413,212

^(a)	to eliminate intercompany cash
^(b)	to eliminate investment in subsidiaries

(continued)

F-29

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidating Statement of Earnings
Year Ended December 31, 2004
(in thousands)

	Pointe Financial Corporation			Pointe Bank		Pointe Financial Services		Eliminations			Consolidated

Interest income:
Loans	$	-			17,192		-		-			17,192
Securities available for sale		-			3,189		-		-			3,189
Other					256		-		-			256



Total interest income		-			20,637		-		-			20,637



Interest expense:
Deposits		-			2,900		-		-			2,900
Borrowings		-			1,924		-		-			1,924



Total interest expense		-			4,824		-		-			4,824


Net interest income		-			15,813		-		-			15,813


Provision for loan losses		-			215		-		-			215



Net interest income after credit for loan losses		-			15,598		-		-			15,598


Noninterest income:
Service charges on deposit accounts		-			2,077		-		-			2,077
Net realized gain on sale of securities		(72	)		134		-		-			62
Earnings of subsidiaries		3,839			-		-		(3,839	) a		-
Loan correspondent fees		-			143		-		-			143
Other		1			1,082		-		-			1,083



Total noninterest income		3,768			3,436		-		(3,839	)		3,365



Noninterest expenses:
Salaries and employee benefits		458			7,218		-		-			7,676
Occupancy and equipment		-			2,524		-		-			2,524
Advertising and promotion		53			124		-		-			177
Professional fees		559			334		-		-			893
Data processing		8			689		-		-			697
Amortization of intangible asset		-			242		-		-			242
Other		109			2,175		-		-			2,284



Total noninterest expenses		1,187			13,306		-		-			14,493



Earnings before income taxes		2,581			5,728		-		(3,839	)		4,470


Income taxes (benefit)		(468	)		1,889		-		-			1,421



Net earnings	$	3,049			3,839		-		(3,839	)		3,049

^(a) to eliminate subsidiary earnings

F-30

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures

The Company’s chief executive officer and chief financial officer, based on their evaluation of the Company’s disclosure controls and procedures as of the end of the period covered by this report, have concluded that such disclosure controls and procedures were effective to ensure that material information relating to the Company and required to be disclosed by the Company has been made known to them and has been recorded, processed, summarized and reported in a timely manner. There have not been any significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of evaluation.

No change in internal control over financial reporting occurred during the quarter ended December 31, 2004 that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors and Executive Officers of the Company.

The information contained under the caption “Election of Directors” to appear in the Company’s definitive proxy statement relating to the Company’s 2005 Annual Meeting of Stockholders (hereinafter referred to as the “Annual Meeting Proxy Statement”) or an amendment to this Form 10-K, which Annual Meeting Proxy Statement or amendment will be filed with the Securities and Exchange Commission not later than 120 days after the end of the Company’s fiscal year covered by this report on Form 10-K, is incorporated herein by reference. Information concerning the executive officers of the Company is included in Part III of this Report on Form 10-K.

The following table sets forth information concerning the executive officers of the Company and the Bank. The officers of the Company are elected annually by the board of directors.

Name	Position

R. Carl Palmer, Jr.	Chairman of the Board, President and Chief Executive Officer of the Company; President and Chief Executive Officer of the Bank	64

Jean Murphy-Engler	Executive Vice President and Chief Operating Officer of the Company and Bank	42

Bradley R. Meredith	Senior Vice President and Chief Financial Officer of the Company and the Bank	51

John P. Dover	Senior Vice President/Business Banking Palm Beach and Broward Counties	55

John W. Lowery, Jr	Senior Vice President/Senior Credit Officer of the Bank	54

R. Carl Palmer, Jr. Mr. Palmer joined the Company and Bank in 1995 as Chief Executive Officer, President and Director. He was elected to serve as Chairman of the Company in November 2000. He began his banking career at Chemical Bank in New York in 1964. In 1979, he moved to South Florida as an Executive Vice President for Southeast Banking Corporation where he had responsibilities for business development, business banking and community banking. From 1988 to 1991, he was President, Chief Operating Officer and Director of BancFlorida in Naples, Florida. He became a Senior Associate with Martin W. Taplin & Associates, Inc., a real estate investment firm, in 1991. Mr. Palmer received a B.A. from Dartmouth College in 1962, an M.B.A. from Amos Tuck School in 1963 and a J.D. from New York Law School in 1969. Mr. Palmer has served as a director of Integrated Alarm Services Group, Inc. since January 2003. Mr. Palmer resides in Palm Beach County.

Jean Murphy-Engler. Ms. Murphy-Engler joined the Company and the Bank in April 2002. Prior to joining the Company, Ms. Murphy-Engler served as chief executive officer of a Citibank Internet start-up in Eastern Europe. During her 17-year career with Citibank she held various positions in operations, treasury, cash management and trade services, new business development and the launch of small and medium business segments both domestically and overseas. Ms. Murphy-Engler received a B.S. from the State University of New York at Plattsburgh in 1985. Ms. Murphy-Engler resides in Palm Beach County.

Bradley R. Meredith. Mr. Meredith joined the Company and Bank in 1997, after eight years as Executive Vice President and Chief Financial Officer for First Family Financial Corporation in Central Florida. The majority of his twenty-three years of banking experience has been with community banks. Mr. Meredith graduated from DePaul University with a B.S. in Finance in 1982. Mr. Meredith received a diploma from the Graduate School of Banking at the University of Wisconsin in 1989. Mr. Meredith resides in Palm Beach County.

John P. Dover. Mr. Dover joined the Company and Bank in 1995. He currently serves as Senior Vice President of Business Banking in Palm Beach and Broward Counties. Mr. Dover has thirty-two years of banking experience both in community banks and major regional banks. He served as Executive Vice President and Senior Lender for Continental Illinois Bank of Western Springs and held various positions with Northern Trust Corporation both in Chicago and Florida. Mr. Dover graduated from Valparaiso University in 1971 with a B.A. in Economics, and attended Keller Graduate School of Management. Mr. Dover resides in Palm Beach County.

John W. Lowery, Jr. Mr. Lowery joined the Company and Bank in November 2000, after five years as Head of Credit Risk Management for Dresdner Bank Lateinamerika AG-Miami Agency. He has twenty-eight years banking experience that includes various credit and lending positions at First Union National Bank and Bank of America NT & SA. Mr. Lowery graduated from Southwest Texas State University with a B.B.A. in 1973 and from Barry University with a M.B.A. in 1984. Mr. Lowery resides in Miami-Dade County.

Item 11. Executive Compensation.

The information contained under the caption “Executive Compensation” to appear in the Annual Meeting Proxy Statement or an amendment to this Form 10-K is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information contained under the caption “Security Ownership of Certain Beneficial Owners and Management” to appear in the Annual Meeting Proxy Statement or an amendment to this Form 10-K is incorporated herein by reference.

Existing Stock Compensation Plans

Heretofore, the Company has adopted, and the shareholders of the Company have approved, three equity compensation plans: (i) the 1998 Directors Deferred Compensation Plan (the “Directors Plan”); (ii) the 1998 Incentive Compensation and Stock Award Plan (the “Incentive Stock Plan”); and (iii) the 1994 Non-Statutory Stock Option Plan. During the year ending December 31, 2004, the Company elected to terminate the Directors Deferred Compensation Plan. The purpose of the Incentive Stock Plan, amended at the 2001 annual meeting to increase the number of shares of common stock available for grant and issuance under the plan to 400,000 shares, is to attract, motivate, retain and reward high quality executives and other employees, officers, directors and affiliates by enabling such persons to acquire or increase a proprietary interest in the Company in order to strengthen the mutuality of interests between such persons and the Company’s shareholders and providing such persons with annual and long-term performance incentives to expend their maximum efforts in the creation of shareholder value. In conjunction with the amendment of the Incentive Stock Plan, the Company’s Board has determined that no further options will be granted under the 1994 Non-Statutory Stock Option Plan.

The following table sets forth information regarding our existing compensation plans and individual compensation arrangements pursuant to which our equity securities are authorized for issuance to employees or non-employees (such as directors, consultants, advisors, vendors, customers, suppliers or lenders) in exchange for consideration in the form of goods or services:

	(a)	(b)	(c)
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
1998 Incentive Compensation and Stock Award Plan	291,235*	$ 13.17	4,130
Total	291,235	$ 13.17	4,130

*The 291,235 of securities to be issued upon exercise of outstanding options, warrants and rights associated with the “1998 Incentive Compensation and Stock Award Plan” is net of 82,246 options previously exercised and 20,089 of stock grants previously issued.

Item 13. Certain Relationships and Related Transactions.

The information contained under the captions “Compensation Committee Interlocks and Insider Participation” and “Certain Relationships and Related Transactions”to appear in the Annual Meeting Proxy Statement or an amendment to this Form 10-K is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES

Aggregate fees billed to the Company for the fiscal years ended December 31, 2004 and December 31, 2003 by the Company’s independent registered public accounting firm are as follows:

Type of Fees	2004		2003
Audit Fees(1)	$	64,000	$	62,000
Audit-Related Fees(2)		–		–
Tax Fees(3)
		5,500		5,500
All Other Fees(4)
		6,000		–

Total	$	75,500	$	67,500

___________

(1) The services provided in exchange for these fees consisted of our annual audit and review of interim financial statements.

(2) We did not incur any audit-related fees during 2003 or 2004.

(3) The services provided in exchange for these fees consisted of the preparation of federal and state tax returns and tax consultations.

(4) In 2004, we engaged Hacker, Johnson & Smith, P.A. to perform a limited-scope audit of the Company’s 401(k) plan.

Audit Committee Pre-Approval Policies and Procedures

The Audit Committee has established a policy and procedure to require the Audit Committee’s pre-approval before the independent auditor is engaged to render any audit or non-audit service to the Company. All of the fees paid to the Company’s independent auditor during 2004 and 2003 were approved by the Audit Committee.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) The Following Documents are Filed as Part of this Report:

(1)

Financial Statements.

The following consolidated financial statements of the Company and the report of the independent certified public accountants thereon filed with this report:

Report of Independent Registered Public Accounting Firm (Hacker, Johnson & Smith, P.A.)

Consolidated Balance Sheets as of December 31, 2004 and 2003

Consolidated Statements of Earnings for the years ended December 31, 2004, 2003 and 2002.

Consolidated Statements of Stockholder’s Equity for the years ended December 31, 2004, 2003 and 2002. Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002.

Notes to Consolidated Financial Statements.

(2)

Financial Statement Schedules.

Schedules are omitted because the conditions requiring their filing are not applicable or because the required information is provided in the Consolidated Financial Statements, including the Notes thereto.

(3)

Exhibits.*

2.1

Plan of Merger and Merger Agreement dated February 14, 1997 by and between Pointe Federal Savings Bank and Pointe Bank (Exhibit 2.1 to the Registrant’s Form SB-2 Registration Statement, File No. 333-49835, as initially filed with the Securities and Exchange Commission (the “SEC”) on April 9, 1998, the “Registration Statement”).

2.2

Agreement and Plan of Merger dated as of October 27, 2004 between The South Financial Group, Inc. and Pointe Financial Corporation (Exhibit 2.1 to the Form 8-K filed with the SEC on October 29, 2004).

3.1

Articles of Incorporation of the Registrant (Exhibit 3.1 to the Registration Statement).

3.2

By-Laws of the Registrant (Exhibit 3.2 to the Registration Statement).

4.1

Specimen Common Stock Certificate (Exhibit 4.1 to the Registration Statement).

10.1**

1994 Non-Statutory Stock Option Plan (Exhibit 10.1 to the Registration Statement).

10.2**

Deferred Compensation Plan (Exhibit 10.2 to the Registration Statement).

10.3

Office Lease Agreement dated October 8, 1986 by and between Centrum Pembroke, Inc. and Flamingo Bank (Exhibit 10.3 to the Registration Statement).

10.4

Lease dated as of July 15, 1992 between Konrad Ulmer and Pointe Savings Bank (Exhibit 10.4 to the Registration Statement).

10.6

Credit Agreement dated August 18, 1997 between Independent Bankers’ Bank of Florida and Pointe Bank (Exhibit 10.6 to the Registration Statement).

10.7

Credit Agreement dated October 14, 1997 between SunTrust Bank/Miami, N.A. and Pointe Bank (Exhibit 10.7 to the Registration Statement).

10.8

Agreement for Advances and Security Agreement with Blanket Floating Lien dated November 24, 1997 between Pointe Bank and the Federal Home Loan Bank of Atlanta (Exhibit 10.8 to the Registration Statement).

10.9

Equipment Sales and Software License Agreements between Information Technology, Inc. and Pointe Financial Corporation (Exhibit 10.9 to the Registration Statement).

10.10

Master Equipment Lease Agreement dated May 7, 1997 between Leasetec Corporation and Pointe Financial Corporation (Exhibit 10.10 to the Registration Statement).

10.11***

Letter Agreement dated March 9, 1995 between Pointe Financial Corporation and R. Carl Palmer, Jr. (Exhibit 10.11 to the Registration Statement).

10.12**

1998 Incentive Compensation and Stock Award Plan (Exhibit 10.12 to the Registration Statement).

10.13***

Employment agreement between the company and R. Carl Palmer, Jr. dated August 16, 1999 (Exhibit 10.13 to the 1999 Form 10-K filed with the SEC on February 23, 2000).

10.15***

Employment agreement between the company and Bradley R. Meredith dated August 16, 1999 (Exhibit 10.15 to the 1999 Form 10-K filed with the SEC on February 23, 2000).

10.16

Branch Purchase and Deposit Assumption Agreement by and between Pointe Bank and Republic Bank dated January 4, 2001, Amendment included (Exhibit 10.16 to the Form 10-QSB filed with the SEC on May 8, 2001).

10.17***

Employment agreement between the Company and Jean Murphy-Engler dated June 24, 2002 (Exhibit 10.17 to the Form 10-QSB filed with the SEC on August 9, 2002).

10.18***

Employment agreement between the Company and John P. Dover dated June 24, 2002 (Exhibit 10.18 to the Form 10-QSB filed with the SEC on August 9, 2002).

10.19

Amended and restated lease agreement dated May 13, 2002, by and between 21845 Powerline Road, Ltd. and Pointe Bank (Exhibit 10.19 to the Form 10-QSB filed with the SEC on November 13, 2002).

10.20

Standard Retail Lease Agreement dated June 25, 2002 between Marquesa, Inc. and Pointe Bank. (Exhibit 10.20 to the 2002 Form 10-K filed with the SEC on March 18, 2003).

10.21***

Employment Protection Agreement by and among John P. Dover, Pointe Bank and Pointe Financial Corporation, dated as of July 23, 2004 (Exhibit 10.1 to the Form 10-Q filed with the SEC on August 16, 2004).

10.22***

Employment Protection Agreement by and among John W. Lowery, Jr., Pointe Bank and Pointe Financial Corporation, dated as of July 23, 2004 (Exhibit 10.2 to the Form 10-Q filed with the SEC on August 16, 2004).

10.23***

Employment Protection Agreement by and among Bradley R. Meredith, Pointe Bank and Pointe Financial Corporation, dated as of July 23, 2004 (Exhibit 10.3 to the Form 10-Q filed with the SEC on August 16, 2004).

10.24***

Employment Protection Agreement by and among Jean Murphy-Engler, Pointe Bank and Pointe Financial Corporation, dated as of July 23, 2004 (Exhibit 10.4 to the Form 10-Q filed with the SEC on August 16, 2004).

10.25***

Employment Protection Agreement by and among R. Carl Palmer, Jr., Pointe Bank and Pointe Financial Corporation, dated as of July 23, 2004 (Exhibit 10.5 to the Form 10-Q filed with the SEC on August 16, 2004).

10.26***

Employment Protection Agreement by and among Charles D. Umberger, Pointe Bank and Pointe Financial Corporation, dated as of July 23, 2004 (Exhibit 10.6 to the Form 10-Q filed with the SEC on August 16, 2004).

10.27

Lease Agreement between 4035, Inc. and Pointe Bank, dated April 6, 2004 (Exhibit 10.7 to the Form 10-Q filed with the SEC on August 16, 2004).

10.28

Commercial Lease Agreement by and between 3700 Grand Avenue LLC and Pointe Bank, dated as of May 12, 2004 (Exhibit 10.8 to the Form 10-Q filed with the SEC on August 16, 2004).

14.1

Code of Business Conduct and Ethics.

21.1

Subsidiaries of the Registrant.

23.1

Consent of Hacker, Johnson & Smith P.A.

31.1

CEO Certification required under Section 302 of Sarbanes-Oxley Act of 2002.

31.2

CFO Certification required under Section 302 of Sarbanes-Oxley Act of 2002.

32.1

CEO Certifications required under Section 906 of Sarbanes-Oxley Act of 2002.

32.2

CFO Certifications required under Section 906 of Sarbanes-Oxley Act of 2002.

____________

* Exhibits followed by a parenthetical reference are incorporated herein by reference from the documents described therein.

** Exhibits 10.1, 10.2 and 10.12 are compensatory plans or arrangements.

*** Contracts with Management.

(b) Exhibits to this Form 10-K are attached or incorporated herein by reference.

(c) Not applicable.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

		POINTE FINANCIAL CORPORATION
Date:	March 30, 2005	By:	/s/ R. CARL PALMER, JR.
			R. Carl Palmer, Jr., Chairman of the Board,
			President and Chief Executive Officer

Date:	March 30, 2005	By:	/s/ BRADLEY R. MEREDITH
			Bradley R. Meredith, Chief Financial Officer
			and Senior Vice President

Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date

/s/ R. CARL PALMER, JR	Chairman of the Board, President	March 30, 2005
	and Chief Executive Officer
R. Carl Palmer, Jr

/s/ TIMOTHY M. MCGINN	Vice Chairman of the Board	March 30, 2005

Timothy M. McGinn

/s/ BRADLEY R. MEREDITH	Chief Financial Officer,	March 30, 2005
	Senior Vice President
Bradley R. Meredith

/s/ CLARITA KASSIN	Director	March 30, 2005

Clarita Kassin

/s/ MORRIS MASSRY	Director	March 30, 2005

Morris Massry

/s/ D. RICHARD MEAD, JR	Director	March 30, 2005

D. Richard Mead, Jr

/s/ JAMES L. HORAN	Director	March 30, 2005

James L. Horan

EXHIBIT INDEX

14.1		Code of Business Conduct and Ethics
21.1		Subsidiaries of the Registrant
23.1		Consent of Hacker, Johnson & Smith P.A.
31.1		CEO Certification required under Section 302 of Sarbanes-Oxley Act of 2002.
31.2		CFO Certification required under Section 302 of Sarbanes-Oxley Act of 2002.
32.1		CEO Certifications required under Section 906 of Sarbanes-Oxley Act of 2002.
32.2		CFO Certifications required under Section 906 of Sarbanes-Oxley Act of 2002.

	Year Ended

	December 31, 2004				December 31, 2003

	High		Low		High		Low

Quarter ended March 31	$	28.94	$	23.66	$	15.91		14.25
Quarter ended June 30		28.90		26.90		20.08		15.15
Quarter ended September 30		32.20		27.80		23.50		19.00
Quarter ended December 31		40.79		32.11		25.00		22.68

(1)	Yield on securities is stated on a tax equivalent basis.
(2)	Includes interest-bearing deposits and federal funds sold.
(3)	Includes nonaccrual loans.
(4)	Interest-rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities.
(5)	Net interest margin is net interest income divided by average interest-earning assets.

For the fiscal year ended December 31, 2004

Commission File Number 0-24433

DOCUMENTS INCORPORATED BY REFERENCE

PART I

Item 1. Description of Business

Introduction

Proposed Merger with The South Financial Group, Inc.

Business

Investment Banking Joint Venture

Market Area and Competition

Employees

Forward-Looking Statements

Item 2. Properties

Item 6. Selected Financial Data

SELECTED FINANCIAL DATA(Dollars in thousands, except per share amounts)

SELECTED FINANCIAL DATA, Continued(Dollars in thousands, except per share amounts)

Liquidity and Capital Resources

Regulatory Capital Requirements

Management of Interest-Rate Risk and Market Risk

Loan Portfolio Composition

Deposit Composition

Report of Independent Registered Public Accounting Firm

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows(in thousands)

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued (in thousands)

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

At December 31, 2004 and 2003 and For the Years EndedDecember 31, 2004, 2003 and 2002

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

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(1) Description of Business and Summary of Significant Accounting Policies, Continued

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(1) Description of Business and Summary of Significant Accounting Policies, Continued

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(1) Description of Business and Summary of Significant Accounting Policies, Continued

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(3) Loans

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(4) Premises and Equipment

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

POINTE FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

PART III

Item 10. Directors and Executive Officers of the Company.

Existing Stock Compensation Plans

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES

Audit Committee Pre-Approval Policies and Procedures

PART IV

SIGNATURES

EXHIBIT INDEX

SELECTED FINANCIAL DATA
(Dollars in thousands, except per share amounts)

SELECTED FINANCIAL DATA, Continued
(Dollars in thousands, except per share amounts)

Consolidated Statements of Cash Flows
(in thousands)

Consolidated Statements of Cash Flows, Continued
(in thousands)

At December 31, 2004 and 2003 and For the Years Ended
December 31, 2004, 2003 and 2002