1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): July 30, 1996
Key Florida Bancorp, Inc.
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Exact name of registrant as specified in its charter
Florida
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State or other jurisdiction of incorporation
333-2962 65-0105205
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Commission File Number I.R.S. Employer
Identification No.
6016 26th Street West, Bradenton, Florida 34207
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Address of Principal Executive Offices
Registrant's telephone number, including area code: (941) 751-4460
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2
KEY FLORIDA BANCORP, INC.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 30, 1996, effective the close of business, Key Florida Bancorp, Inc.
("Bancorp") and Liberty National Bank ("LNB") closed the merger of Key Florida
Bank, F.S.B. with and into LNB. The Key Florida Bank, F.S.B./LNB merger
transaction has been accounted for under the purchase method of accounting. As
a result of the merger the outstanding shares of LNB were converted into an
aggregate of 2,739,847 shares of Bancorp common stock. Immediately prior to the
merger there were 940,986 shares of Bancorp common stock issued and outstanding
which remained outstanding and unchanged after the merger as shares of Bancorp
Common Stock. Immediately prior to the merger there were 1,199,282 shares of
LNB common stock which were converted into the right to receive 1.50 shares of
Bancorp common stock, or 2,739,847 shares in the aggregate. Cash was paid in
lieu of fractional shares based upon the book value of Bancorp Common Stock.
The description of the merger transaction contained herein is qualified in its
entirety by reference to Prospectus-Proxy statement dated June 18, 1996
included in the S-4 Registration Statement relating to the merger
(2)
3
Item 2. Acquisition or Disposition of Assets
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
LNB conducts a commercial banking business which consists of attracting
deposits from the general public and applying those funds to the origination of
commercial, consumer and real estate loans (including commercial loans
collateralized by real estate). LNB's profitability depends primarily on net
interest income, which is the difference between interest income generated from
interest-earning assets (i.e., loans and investments) less the interest expense
incurred on interest-bearing liabilities (i.e., customer deposits and borrowed
funds). Net interest income is affected by the relative amounts of
interest-earning assets and interest-bearing liabilities, and the interest-rate
earned and paid on these balances. Net interest-earning assets approximate or
exceed interest-bearing liabilities, any positive interest rate spread will
generate net interest income. The interest rate spread is impacted by interest
rates, deposit flows, and loan demand. Additionally, and to a lesser extent,
LNB's profitability is affected by such factors as the level of noninterest
income and expenses, the provision for credit losses, and the effective tax
rate. Noninterest income consists primarily of service fees on deposit
accounts. Noninterest expense consists of compensation and employee benefits,
occupancy related expenses, deposit insurance premiums paid to the FDIC, and
other operating expenses.
LNB management is not aware of any trends or uncertainties which will
materially impact future operating results, liquidity, or capital resources.
LNB management also is not aware of any material credits for which there is
serious doubt as to the ability of the borrower to comply with the loan
repayment terms. Further, LNB's management is not aware of any current
recommendations from regulatory authorities which would have any affect on
liquidity, capital resources or results of operations.
Management's discussion and analysis of earnings and related financial data are
presented herein to assist investors in an understanding of the financial
condition of LNB at, and results of operations of LNB for the six months ended
June 30, 1996 and 1995. The following discussion should be read in conjunction
with the financial statements and related footnotes presented elsewhere herein
and in conjunction with the Prospectus-Proxy Statement dated June 18, 1996
included in the S-4 Registration Statement relating to the merger.
(3)
4
Item 2. Acquisition or Disposition of Assets
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management
The objective of liquidity management is to ensure the availability of
sufficient resources to meet all financial commitments and to capitalize on
opportunities for business expansion. Liquidity Management addresses the
ability to meet deposit withdrawals either on demand or by contractual
maturity, to repay other borrowings as they mature and to make new loans and
investments as opportunities arise.
LNB's principal source of funds are net increases in deposits, principal and
interest payments on loans and proceeds from sales and maturities of investment
and mortgage-backed securities.
LNB has numerous sources of liquidity including loan and security principal
repayments and maturities, lines of credit at other financial institutions, ,
the sale of securities from its available-for-sale portfolio, whole loan sales
and growth in its core deposit base.
The liquidity reserve may consist of cash on hand, cash on demand deposit with
other correspondent banks, and other investments and short-term marketable
securities as determined by the rules of the Office of the Comptroller of the
Currency, such as federal funds sold and United States securities and
securities guaranteed by the United States. At June 30, 1996, the Company had
a liquidity ratio of 14%.
Liquidity, as measured in the form of cash and cash equivalents, totaled
$4,780,439 at June 30, 1996. At June 30, 1995, cash and cash equivalents
totaled $7,719,976, a decrease of 38% from June 30, 1995 to June 30, 1996.
Cash and cash equivalents vary with seasonal deposit movements and are
generally higher in the winter than in the summer, and vary with the level of
principal repayments occurring in LNB's investment securities portfolio and
loan portfolio.
As is typical of financial institutions, cash flows from investing activities
(primarily in loans and securities) and from financing activities (primarily
through deposit generation and short-term borrowings) are in excess of cash
flows from operations. For the six months ended June 30, 1996, the cash flow
from operations of $416,238 was less than the same period of 1995. Cash
flows from investing activities primarily reflect the net increase in loans and
investments and the cost of constructing the University Parkway Branch. The
cash flows from financing activities at June 30, 1996 reflect the increase in
time deposits.
Capital Resources
As mentioned previously, LNB's principal sources of funds are net increases in
deposits, principal and interest payments on loans and proceeds from sales and
maturities of investment and mortgage-backed securities. LNB uses its capital
resources primarily to fund existing and continuing loan commitments and to
purchase investment and mortgage-backed securities. At June 30, 1996 and 1995,
the Bank had commitments to originate loans totaling $4,050,000 and $7,698,000,
respectively, and had issued but unused standby letters of credit of $420,000
and $56,000, respectively. Scheduled maturities of certificates of deposit
during the twelve months following June 30, 1996 and 1995, totaled $28.95
million and $7.8 million, respectively. LNB has also committed to the capital
expenditures necessary to upgrade its computer and data processing systems.
Though slightly more than half of the projected $400,000 cost has been expended,
these expenditures will enable LNB to upgrade and convert its existing data
processing system to a new more innovative technology in order to stay
competitive. The data processing capital expenditure will be amoritized over
the normal useful lives of the different components based on generally accepted
accounting principles.
(4)
5
ITEM 2-ACQUISITION OR DISPOSITION OF ASSETS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(CONTINUED)
Management belives that LNB has commitments that substantially all of its
existing commitments will be funded in the subsequent twelve months and, if so
desired, it can adjust the rates on certificates of deposit accounts to retain
deposits in a changing interest rate environment.
The Federal Reserve Board's (FRB) capital adequacy guidelines mandate that
minimum ratios be maintained by bank holding companies and banks.
Based upon their respective regulatory capital ratios at June 30, 1996 LNB is
well capitalized, based on the definitions in the regulations issued by the
Federal Reserve Board and the other federal bank regulatory agencies setting
forth the general capital requirements mandated by the Federal Deposit
Insurance Corporation Improvement Act of 1991.
The table below indicates the regulatory capital ratios of LNB and the minimum
regulatory guidelines (all three regulatory capital ratios) at both June 30,
1996 and 1995,
Actual Ratios
--------------------- FRB Well Capitalized
June 30, June 30, Regulatory
1996 1995 Guidelines
--------------------- --------------------
Risk Based Ratios
Tier 1 Capital to risk-weighted assets 10.15% 12.34% 6.0%
Total Equity Capital to risk-weighted
assets 10.05% 12.23% 10.0%
Tier 1 Capital to total average assets-
leverage ratio 7.57% 8.12% 5.0%
The following were the essential components of the Bank's risk-based capital
ratios (in thousands):
June 30, June 30,
1996 1995
------------ -------------
Tier 1 Capital
Common Stock $ 4,797 $ 5,408
Additional Paid-in Capital 1,751 1,140
Retained Earnings 1,187 657
Intangible assets (157) 0
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Total Tier 1 Capital 7,578 7,205
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Tier 2 Capital
Allowance for loan losses, as limited 792 544
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Total Tier 2 Capital 792 544
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Total risk-based Capital 8,370 7,749
======= =======
Risk-weighted Assets $74,681 $58,386
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During the six months ended June 30,1996 and 1995 the bank's Tier 1 Capital
ratio declined by 219 points and the Total Capital ratio declined by 218 basis
points. Though common stock, additional paid-in capital and retained earnings
increased as a result of the exercise of stock options and continued
profitability the risk-weighted assets increased from LNB's growth which
resulted in the decrease of the Tier 1 and Total Capital ratios. The increase
in intangible assets is primarily the disallowed portion of deferred tax assets
which caused a decrease in the Tier 1 Capital.
(5)
6
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
Net interest income, which constitutes the principal source of income for LNB,
represents the difference between interest income on interest-earning assets
and interest expense on interest-bearing liabilities. The principal
interest-earning assets are investment and mortgage-backed securities and loans
made to businesses and individuals. Interest-bearing liabilities primarily
consist of time deposits, interest-bearing checking accounts ("NOW accounts"),
retail savings deposits and money market accounts. Funds attracted by these
interest-bearing liabilities are invested in interest-earning assets.
Accordingly, net interest income depends upon the volume of average
interest-earning assets and average interest-bearing liabilities and the
interest rates earned or paid on them.
Net interest income was $1,092,565 for LNB for the six months ended June 30,
1996 compared with $864,442 for the same period in 1995. Net interest income
was $3.2 million for LNB for the year ended December 31, 1995 compared with
$2.5 million for the year ended December 31, 1994. This improvement in net
interest income was a result of a higher volume of net interest-earning assets.
Although the interest rate spread declined during 1995, LNB has been
successful in reversing this trend during the first half of 1996. The primary
reason for this improvement related to the cost of funds that LNB is incurring,
as well as a significant increase in the yield on interest-earning assets.
This increase in yield on interest-earning assets is a result of LNB being
successful in achieving a loan-to-deposit ratio in excess of 78% during the
first half of 1996.
Interest Income and Expense
Interest income increased by $700,000 from $3.3 million for the six months
ended June 30, 1995 to $4.0 million for the six months ended June 30, 1996.
Interest income on loans increased $840,000 due to an increase in the average
loan portfolio balance from $55 million for the six months ended June 30, 1995
to $71 million for the comparable 1996 period, and an increase in the weighted
average yield. There was an increase in the weighted average yield on loans
which was the result of increases in market interest rates, rather than a
material change in the loan composition. Interest on investment and
mortgage-backed securities decreased $123,000 due to a decrease in the average
investment and mortgage-backed securities portfolio from $26 million in 1995 to
$19 million in 1996 and a decrease in the average yield earned. During the
first half of 1996, LNB had a significant number of above market rate CD's that
matured. LNB was successful in repricing these deposits at a lower level which
enabled the net interest margin of the Bank to increase from the prior period.
Interest expense increased to $302,000 for the six months ended June 30, 1996
from $1.7 million for the comparable 1995 period. Interest expense on deposits
increased because of an increase in the average rate paid on deposits from
4.67% for the six months ended June 30, 1995 to 4.87% for the six months ended
June 30,1996 and a $9.6 million increase in the average balance during the 1996
period. The increase in rates paid on deposits was caused generally by rising
interest rates in the local area. There was a change in the deposit mix in 1996
with certifcates of deposit decreasing to 68% of the total deposit from 69% in
1995. This decrease was a result of market demands caused by increased
marketing activities by several large banks in the area. The result was an
increase in volume of deposits and higher rates being paid. The majority of
certificates are concentrated in the 5.00% to 5.99% interest rate range.
Provision for Credit Losses
The provision for credit 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 LNB, the
amounts of nonperforming loans, general economic conditions, particularly as
they relate to LNB's market area, and other factors related to the
collectibility of LNB's loan portfolio.
(6)
7
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(CONTINUED)
There was an increase in the provision from $165,000 for the six months ended
June 30, 1995 to $195,000 for the six months ended June 30, 1996. The increase
in the provision was primarily due to overall growth in the loan portfolio.
Noninterest Income
Total noninterest income decreased by $91,000 for the six months ended June 30,
1996 compared to 1995, principally due to the settlement and recovery of
$110,000 from a legal claim. There was also a slight decrease in service
charges on deposit accounts from June 30, 1995 to June 30, 1996.
Noninterest Expense
Total noninterest expense increased by $140,000 to $1.54 million for the six
months ended June 30, 1996 from $1.4 million for the six months ended June 30,
1995, primarily due to an increase of $135,000 in salaries and employee benefits
and an increase of $35,000 in other expenses. These increases were partially
offset by a decrease of $55,000 in federal insurance premiums.
(7)
8
KEY FLORIDA BANCORP, INC.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
The following unaudited financial statements of Liberty National Bank
are filed with this report:
Page
------
Statements of Income for the Three Months Ended June 30, 1996 and 1995 9
Statements of Income for the Six Months Ended June 30, 1996 and 1995 10
Balance Sheet as of June 30, 1996 11
Statements of Cash Flows for the Six Months Ended June 30, 1996 and 1995 12
Notes to Unaudited Interim Financial Statements 13-16
(b) Pro Forma Financial Information
The following unaudited pro forma condensed financial statements are
filed with this report:
Pro Forma Condensed Consolidated Statement of Income for the
Six Months Ended June 30, 1996 19
Pro Forma Condensed Consolidated Statement of Income for the
Year Ended December 31, 1995 20
Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1996 21
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
and Statement of Income 22-23
The Pro Forma Condensed Consolidated Balance Sheet of Key Florida Bancorp, Inc.
as of June 30, 1996 reflects the financial position of Key Florida Bancorp,
Inc. after giving effect to the merger discussed in item 2 and assumes the
merger took place on June 30, 1996. The Pro Forma Condensed Consolidated
Statement of Income for the six months ended June 30, 1996 assumes that the
merger occurred on January 1, 1996 and is based on the operations of the Key
Florida Bancorp, Inc. and Liberty National Bank for the six months ended June
30, 1996. The Pro Forma Condensed Consolidated Statement of Income for the
year ended December 31, 1995 assumes that the merger occurred on January 1,
1995 and is based on the operations of Key Florida Bancorp, Inc. and Liberty
National Bank for the year ended December 31, 1995.
The unaudited pro forma condensed consolidated financial statements have been
prepared by Key Florida Bancorp based upon assumptions deemed proper by it.
The unaudited pro forma condensed consolidated financial statements presented
herein are shown for illustrative purposes only and are not necessarily
indicative of the future financial position or future results of operations of
Key Florida Bancorp, Inc., or of the financial position or results
of operations of Key Florida Bancorp, Inc. that would have actually occurred
had the transaction been in effect as of the date or for the period presented.
The unaudited pro forma condensed consolidated financial statements should be
read in conjunction with the historical financial statements and related notes
of Key Florida Bancorp, Inc. and Liberty National Bank which are contained in
the Prospectus-Proxy Statement dated June 18, 1996 included in the S-4
registration statement filed with the United States Securities and Exchange
Commission relating to the merger.
(8)
9
Item 7. (a) Financial Statements of Business Acquired
LIBERTY NATIONAL BANK
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
-----------
Increase
1996 1995 (Decrease)
---- ---- --------
Interest Income
Interest and Fees on Loans $1,778,886 $1,376,375 $ 402,511
Interest on Investment Securities
U.S. Treasury and Government Agencies 284,663 383,391 (98,728)
Other 46,324 41,547 4,777
---------- ----------
Total Interest Income 2,109,873 1,801,313 308,560
---------- ---------- ---------
Interest Expense
Interest on Deposits 1,017,308 936,871 80,437
Interest on other borrowings 0 0 0
---------- ---------- ---------
Total Interest Expense 1.017,308 936,871 80,437
---------- ---------- ---------
Net Interest Income 1,092,565 864,442 228,123
Provision for Loan Losses 135,000 120,000 15,000
---------- ---------- ---------
Net Interest Income After Provision
for Loan Losses 957,565 744,442 213,123
---------- ---------- ---------
Noninterest Income
Service Charges on Deposit Accounts 81,972 84,365 (2,393)
Other Income 35,354 137,249 (101,895)
---------- ---------- ---------
Total Noninterest Income 117,326 221,614 (104,288)
---------- ---------- ---------
Noninterest Expense
Salaries and Employee Benefits 392,713 321,575 71,138
Occupancy Expense 119,327 111,299 8,028
Data Processing Expense 43,429 30,643 12,786
FDIC Insurance Premiums and Assessments 18,870 44,287 (25,417)
Other Expenses 307,480 271,379 36,101
---------- ---------- ---------
Total Noninterest Expense (881,819) (779,183) 102,636
---------- ---------- ---------
Income Before Income Taxes 193,072 186,873 6,199
Income Tax (Expense) Benefit (69,750) (39,974) (29,776)
---------- ---------- ---------
Net Income $ 123,322 $ 146,899 $ (23,577)
========== ========== =========
Net income per common share $ 0.10 $ 0.14
========== ==========
Weighted average number of
common shares outstanding 1,199,282 1,063,851
========== ==========
(9)
10
Item 7. (a) Financial Statements of Business Acquired
LIBERTY NATIONAL BANK
STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
-----------
Increase
1996 1995 (Decrease)
---- ---- --------
Interest Income
Interest and Fees on Loans $3,352,506 $2,512,911 $ 839,595
Interest on Investment Securities
U.S. Treasury and Government Agencies 572,189 695,168 (122,979)
Other 70,872 87,823 (16,951)
---------- ---------- ---------
Total Interest Income 3,995,567 3,295,902 699,665
---------- ---------- ---------
Interest Expense
Interest on Deposits 1,990,371 1,689,647 300,724
Interest on other borrowings 2,844 1,845 999
---------- ---------- ---------
Total Interest Expense 1,993,215 1,691,492 301,723
---------- ---------- ---------
Net Interest Income 2,002,352 1,604,410 397,942
Provision for Loan Losses 195,000 165,000 30,000
---------- ---------- ---------
Net Interest Income After Provision
for Loan Losses 1,807,352 1,439,410 367,942
---------- ---------- ---------
Noninterest Income
Service Charges on Deposit Accounts 151,496 159,024 (7,528)
Other Income 92,878 176,057 (83,179)
---------- ---------- ---------
Total Noninterest Income 244,374 335,081 (90,707)
---------- ---------- ---------
Noninterest Expense
Salaries and Employee Benefits 775,427 640,841 134,586
Occupancy Expense 217,335 210,371 6,964
Data Processing Expense 94,151 71,241 22,910
FDIC Insurance Premiums and Assessments 28,965 83,887 (54,922)
Other Expenses 424,322 389,311 35,011
---------- ---------- ---------
Total Noninterest Expense (1,540,200) (1,395,651) 144,549
---------- ---------- ---------
Income Before Income Taxes 511,526 378,840 132,686
Income Tax (Expense) Benefit (189,033) (45,707) (143,326)
---------- ---------- ---------
Net Income $ 322,493 $ 333,133 $ (10,640)
========== ========== =========
Net income per common share $ 0.27 $ 0.33
========== ==========
Weighted average number of 1,199,292 1,006,842
common shares outstanding ========== ==========
(10)
11
Item 7. (a) Financial Statements of Business Acquired
LIBERTY NATIONAL BANK
BALANCE SHEET
JUNE 30, 1996
ASSETS
(unaudited)
Cash and cash equivalents
Cash and due from banks $ 3,530,274
Federal funds sold 1,250,165
------------
Total cash and cash equivalents 4,780,439
------------
Investment and mortgage-backed securities 20,591,961
Loans receivable, net 73,667,465
Bank premises and equipment, net 2,597,250
Accrued interest receivable 781,185
Prepaid expenses and other assets 451,196
------------
Total Assets $102,869,496
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest bearing deposits $ 9,721,138
Money market deposits 7,767,042
Savings and NOW deposits 12,366,465
Time deposits 64,560,401
------------
Total deposits 94,415,046
Accrued interest payable 399,213
Accrued expenses and other liabilities 544,467
------------
Total liabilities 95,358,726
Stockholders' Equity
Common stock - $4 par value; authorized 10,000,000
shares; issued and outstanding, 1,199,282 shares 4,797,128
Additional paid-in capital 1,751,497
Unrealized gain (loss) on securities (224,762)
Retained earnings 1,186,907
------------
Total stockholders' equity 7,510,770
------------
Total Liabilities and Stockholders' Equity $102,869,496
============
(11)
12
Item 7. (a) Financial Statements of Business Acquired
LIBERTY NATIONAL BANK
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
-----------
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 322,492 $ 333,133
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 51,298 36,792
Provision for possible loan losses 195,000 185,000
Net amortization/accretion of premium/discount on
investment securities (5,588) 43,982
Net (gain) loss on sale of investment securities (938) 5,502
Net loss on sale of other real estate owned 13,143 0
Deferred income taxes 34,959 (18,293)
Changes in assets and liabilities:
(Increase) decrease in accrued interest receivable (103,521) (85,457)
(Increase) decrease in prepaid expenses and other assets (234,009) 32,661
Increase (decrease) in accrued interest payable 3,793 121,423
Increase (decrease) in accrued expense and other liabilities 139,609 243,300
----------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 416,238 898,043
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investment securities 500,938 494,029
Loan originations, net (8,118,657) (7,109,569)
Proceeds from sale of other real estate owned 132,194 32,220
Purchase of investment securities (5,041,679) (5,569,009)
Proceeds from maturities and calls of investment securities 5,088,296 750,000
Purchase of bank premises and equipment (906,809) (89,751)
----------- ------------
NET CASH (USED IN) INVESTING ACTIVITIES (8,345,717) (11,492,080)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand deposits (1,667,116) 1,968,160)
Net increase (decrease) in money market deposits 1,362,188 1,205,299
Net increase (decrease) in savings and NOW deposits 960,963 (427,465)
Net increase (decrease) in time deposits 5,804,304 13,140,194
Purchase of fractional shares of common stock 0 (1,035)
Proceeds from issuance of common stock 0 88,000
----------- ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,460,339 12,036,833
----------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,469,140) 1,442,796
CASH AND CASH EQUIVALENTS AT JANUARY 1 6,249,579 6,277,180
----------- ------------
CASH AND CASH EQUIVALENTS AT JUNE 30 $ 4,780,439 $ 7,719,976
=========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Payments for Interest $ 1,986,578 $ 1,568,224
=========== ============
Cash Payments for Income Taxes $ 148, 500 $ 77,584
=========== ============
(12)
13
Item 7. (a) Financial Statements of Business Acquired
LIBERTY NATIONAL BANK
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments necessary for a fair statement of (a) the results of
operations for the three-month and six-month periods ended June 30, 1996, and
June 30, 1995, (b) the financial position of June 30, 1996, (c) the statements
of cash flows for the six-month periods ended June 30, 1996, and June 30, 1995,
have been made.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for financial
statements. For further information, refer to the audited financial statements
and notes thereto for the years ended December 31, 1995 and 1994, included in
the Prospectus-Proxy Statement dated June 18, 1996 included in the S-4
Registration Statement relating to the merger.
NOTE 2 - Merger with Key Florida Bank, F.S.B.
On July 30, 1996, effective the close of business, Bancorp and the LNB closed
the merger of Key Florida Bank, F.S.B. with and into LNB. The Key Florida
Bank, F.S.B./Liberty National Bank merger transaction has been accounted for
under the purchase method of accounting. As a result of the merger the
outstanding shares of LNB were converted into an aggregate of 2,739,847 shares
of Key Florida Bancorp, Inc. common stock. In connection with the merger, LNB
recorded intangible assets, including a core deposit intangible in the amount
of $975,000 is being amortized over ten years in accordance with guidelines
promulgated by the Office of the Comptroller of the Currency ("OCC").
NOTE 3 - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
LNB adopted Statement of Financial Accounting Standards (SFAS) 107, Disclosures
About Fair Value of Financial Instruments, on October 1, 1995. SFAS 107
requires disclosures about the fair value of financial instruments and the
methods and assumptions used to estimate fair value. Included in the
definition of financial instruments are investment and mortgage-backed
securities, loans, deposit liabilities, and unfunded loan commitments. SFAS
107 relates only to disclosure issues and has no impact on the financial
position of LNB.
LNB adopted Financial Accounting Standards Board (SFAS) 114, Accounting by
Creditors for Impairment of a Loan, and SFAS 118, Accounting by Creditors for
Impairment of a Loan-income Recognition and Disclosures, on October 1, 1995.
Under the new standards, a loan is considered impaired, based on current
information and events, when it is probable that LNB will be unable to collect
the scheduled payments of principal or interest when due according to the
contractual value of expected future cash flows discounted at the historical
effective interest rate, except that all collateral-dependent loans are
measured for impairment based on the fair value of the collateral. Prior to
October 1, 1995, the allowance for credit losses related to these loans was
based on undiscounted cash flows or the fair value of the collateral for
collateral dependent
(13)
14
Item 7. (a) Financial Statements of Business Acquired
LIBERTY NATIONAL BANK
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
NOTE 3 - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS - CONTINUED
loans. The effect of the adoption of SFAS 114 was immaterial to LNB and,
accordingly, no additional provision for credit losses was necessary for the
six-month period ended June 30, 1996.
NONACCRUAL LOANS - Generally, a loan (including a loan impaired under SFAS 114)
is classified as Nonaccrual and the accrual of interest on such loan is
discounted when the contractual payment of principal or interest has become 90
days past due or management has serious doubts about further collectibility of
principal or interest, even though the loan currently is performing. A loan may
remain on accrual status if it is in the process of collection and is either
guaranteed or well collateralized. When a loan is placed on nonaccrual status,
unpaid interest, credited to income in the current year is reversed and unpaid
interest accrued in prior years is charged against the allowance for credit
losses. Generally, loans are restored to accrual status when the obligation is
brought current, has performed in accordance with the contractual terms for a
reasonable period of time and the ultimate collectibility of the total
contractual principal and interest is no longer in doubt.
LNB's loan portfolio by type of loan consisted of the following:
(Unaudited)
June 30, 1996
-----------------
Commercial $15,593,450
Commercial real estate 25,841,754
Residential real estate 29,154,132
Consumer loans 6,051,234
-----------
$74,459,038
Allowance for loan losses 791,573
-----------
Loans, net $73,667,465
===========
The adequacy of the allowance for loan losses is periodically evaluated by LNB
in order to maintain the allowance at a level that is sufficient to absorb
probable credit losses. Management's evaluation of the adequacy of the
allowance is based on a review of the Company's historical loss experience,
that may affect the borrower's ability to repay interest and/or principal, the
delinquencies, charge-offs, and the risk ratings of the various loan
categories. Such factors as the level and trend of interest rates and the
evaluation is inherently subjective as it requires material estimates including
the amounts and timing of future cash flows expected to be received on impaired
loans that may be susceptible to significant change.
Management does not consider an insignificant delay or shortfall in the amount
of payments an event that, when considered in isolation, would automatically
cause a loan to be considered impaired for purposes of SFAS 114. Examples of
insignificant delays or shortfalls include, depending on the specific facts
and operations due to equipment failure or a natural disaster, or due to tight
cash flows during the off-peak season of a business. Recurring shortfalls or
delays in payments and/or extended delinquency periods may provide evidence
that a delay or shortfall is significant and are considered by management in
reviewing loans for impairment.
Management divides LNB's loan portfolio into the following categories when
estimating the allowance: (1) individually identified impaired loans; (2)
individually classified loans, other than those considered
(14)
15
Item 7. (a) Financial Statements of Business Acquired
LIBERTY NATIONAL BANK
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
NOTE 3 - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED)
impaired; (3) groups of homogeneous performing loans, i.e., residential
mortgages, consumer, etc.; and (4) groups of homogeneous loan commitments and
other off-balance sheet exposures.
The allowance for loan losses is established through charges to earnings in the
form of a provision for loan losses. Increases and decreases in the allowance
due to changes in the measurement of the impaired loans are included in the
provision for loan losses. Loans continue to be classified as impaired unless
they are brought fully current and the collection of principal and interest is
considered probable.
When a loan or portion of a loan is determined to be uncollectible, the portion
deemed uncollectible is charged against the allowance and subsequent recoveries
if any, are credited to the allowance.
An analysis of the allowance for loan losses for the six months ended June 30,
1996 is as follows:
1996
------
Allowance at January 1 $706,674
Provision charged to operating expense 195,000
Recovered on loans 1,423
Loans charged-off (111,524)
--------
Balance at June 30 $791,573
========
At June 30, 1996, the Bank had no loans which were considered impaired and had
nonaccrual loans totaling approximately $548,927. Interest income which would
have been recorded on these loans was insignificant.
LNB adopted SFAS 119, "Disclosure About Derivative Financial Instruments and
Fair Value of Financial Instruments" on October 1, 1995. SFAS 119 requires
disclosures about derivative financial instruments--futures, forward, swap, and
option contracts, and other financial instruments with similar characteristics.
SFAS 119 also amends existing requirements of SFAS 105, Disclosure of
Information About Financial Instruments with Off-Balance-Sheet Risk and
Financial Instruments with Concentrations of Credit Risk, and SFAS 107. SFAS
119 requires disclosures about amounts, nature, and terms of derivative
financial instruments that are not subject to SFAS 105 because they do not
result in off-balance-sheet risk of accounting loss. It requires that a
distinction be made between financial instruments held or issued for trading
activities measured at fair value with gains and losses recognized in earnings
and financial instruments held or issued for purposes other than trading. SFAS
119 relates only to disclosure issues and does not have a financial impact on
LNB.
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of", issued by the FASB in March 1995, is
effective for LNB for fiscal years beginning on or after December 15, 1995.
SFAS 121 requires that long-lived assets and certain identifiable intangibles
to be held and used by an entity, be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. In performing the review for recoverability, the entity should
estimate the future cash flows expected to result from the use of that asset
and its eventual disposition. If the sum of the expected future cash flows
(undiscounted
(15)
16
LIBERTY NATIONAL BANK
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
NOTE 3 - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED)
without interest charges) is less than the carrying amount of the asset, an
impairment loss is recognized. Measurement of an impairment loss for
long-lived assets and identifiable intangibles that an entity expects to hold
and use should be based on the fair value of the asset. Management has
determined the impact, if any of SFAS 121 on LNB's financial statements as of
June 30, 1996 is not material.
In May 1995, the Financial Accounting Standards Board issued SFAS 122,
"Accounting for Mortgage Servicing Rights," SFAS 122 requires companies that
engage in mortgage banking activities to allocate the total cost of the
mortgage loans it acquires or originates and then sells with servicing rights
retained between the estimated fair value of the loans and the capitalized
mortgage servicing rights, if practical. SFAS 122 also requires that
capitalized mortgage servicing rights be assessed for impairment based on the
fair value of those rights. SFAS applies prospectively to fiscal years
beginning after December 15, 1995. The adoption of the provision of SFAS 122
is not expected to have a material impact on the financial position of LNB.
In October 1995, the FASB issued SFAS 123, "Accounting for Stock Based
Compensation," effective for fiscal years beginning after December 15, 1995.
SFAS 123 requires a fair value-based method of accounting for stock-based
compensation. Since the Company does not utilize any stock-based compensation
plans, SFAS 123 is not expected to have a material impact on the financial
position or results of operations of LNB.
The FASB recently issued SFAS 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." This Statement
provides consistent standards for distinguishing transfers of financial assets
that are sales from transfers that are secured borrowings. The Statement
breaks new ground in resolving long-standing questions about whether
transactions should be accounted for as secured borrowings or as sales. The
approach that is used focuses on control. A company is required to recognize
the financial and servicing assets that it controls and the liabilities that it
has incurred. The opposite result would occur when control of financial assets
has been surrendered and liabilities extinguished. SFAS 125 applies
prospectively to fiscal years beginning after December 15, 1996. No earlier or
retroactive application is allowed. The adoption of the provisions of SFAS 125
is not expected to have material impact on the financial position of LNB.
(16)
17
Item 7. (b) Pro Forma Financial Information
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial presentation
of Bancorp was prepared to provide information on the combined balance sheet
and income statement of Bancorp and LNB.
The Pro Forma Condensed Consolidated Balance Sheet reflects the consolidated
balance sheet of Bancorp as of June 30, 1996, after giving effect to the
proposed Merger. The Merger was accounted for as a purchase and is based on
assumptions explained herein and in the Notes to Pro Forma Condensed
Consolidated Balance Sheet and Statement of Income. The Merger was accounted
for as a reverse acquisition of Bancorp by LNB (and a recapitalization of LNB)
for accounting and financial reporting purposes.
The information presented below should be read in conjunction with the separate
financial statements and notes thereto of Bancorp and LNB, the respective
Management's Discussion and Analysis of Financial Condition and Results of
Operations of Bancorp and LNB and the other unaudited pro forma financial
information, all included in the Prospectus-Proxy Statement dated June 18, 1996
included in the S-4 Registration Statement relating to the Merger.
(17)
18
Item 7. (b) Pro Forma Financial Information
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
The following Pro Forma Condensed Consolidated Statements of Income reflects
the consolidated results of operations of Bancorp for the six months ending
June 30, 1996 and the year ending December 31, 1995, after giving effect to the
proposed Merger in a transaction which will be accounted for as a purchase.
The statements are based on the assumptions set forth herein and in the Notes
to Unaudited Pro Forma Condensed Consolidated Balance Sheet and Statements of
Income. The Merger will be accounted for as a reverse acquisition of Bancorp
by LNB (and a recapitalization) for accounting and financial reporting
purposes. The Pro Forma Condensed Consolidated Statement of Income does not
necessarily reflect the results of operations as they would have been if LNB
and Bancorp had constituted a single entity during the period presented herein.
The information presented below should be read in conjunction with the
separate financial statements and notes thereto of LNB and Bancorp, the
respective Management's Discussion and Analysis of Financial Condition and
Results of Operations of LNB and Bancorp, and the other unaudited pro forma
financial information, all included in the Prospectus-Proxy Statement dated
June 18, 1996 included in the S-4 Registration Statement relating to the
Merger.
(18)
19
Item 7. (b) Pro Forma Financial Information
BANCORP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
For the Six Months Ended June 30, 1996
Historical Adjustments for Merger
---------- ----------------------
Bancorp LNB Debit Credit Pro Forma
------- --- ----- ------ ---------
(Dollars in thousands, except per share amounts)
Interest income on loans $2,806 $3,353 $ 20(3) $6,139
Interest income on investment securities 147 572 719
Other interest income 255 70 325
------ ------ ---- ----- ------
Total interest income 3,208 3,995 20 7,183
------ ------ ---- ----- ------
Interest expense on deposits 2,066 1,990 174(3) 3,882
Interest expense on borrowings 26 3 174 3,911
------ ------ ---- --- ------
Total interest expense 2,092 1,993 0 174 3,272
------ ------ ---- ----- ------
Net interest income 1,116 1,807 20 174 3,077
------ ------ ---- ----- ------
Provision for loan losses 0 195 195
------ ------ ---- ----- ------
Net interest income after
provision for loan losses 1,116 1,807 20 174 3,077
------ ------ ---- ----- ------
Fees, service charges and other income 100 244 344
------ ------ ---- ----- ------
Total other income 100 244 0 344
------ ------ ---- ----- ------
Compensation and employee benefits 550 775 1,325
Other operating expenses 612 765 164(3) 1,541
------ ------ ---- ----- ------
Total other expenses 1,162 1,540 164 0 2,866
------ ------ ---- ----- ------
Income before income taxes 54 511 184 174 555
Income tax (provision) benefit 4 (189) (185)
------ ------ ---- ----- ------
Net income $ 58 $ 322 $184 $ 174 $ 370
------ ------ ---- ----- ------
Net income per share $ 0.06 $ 0.27 0 0 $ 0.13
====== ====== ==== ===== ======
Weighted average shares outstanding 941 1,199 --- --- 2,758
====== ====== ==== ===== ======
(See Notes to Pro Forma Condensed Combined Balance Sheet and Statements of
Income)
(19)
20
Item 7. (b) Pro Forma Financial Information
BANCORP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
For the Year Ended December 31, 1995
Historical Adjustments for Merger
---------- ----------------------
Bancorp LNB Debit Credit Pro Forma
------- --- ----- ------ ---------
(Dollars in thousands, except per share amounts)
Interest income on loans $5,924 $5,282 $ 52(3) $ $11,154
Interest income on investment and
mortgage-backed securities 741 1,429 2,170
Other interest income 33 146 179
------ ------ ---- ---- -------
Total interest income 6,698 6,857 52 13,503
------ ------ ---- ---- -------
Interest expense on deposits 4,212 3,677 300(3) 7,589
Interest expense on borrowings 435 5 440
------ ------ ---- ---- -------
Total interest expense 4,647 3,682 0 300 8,029
------ ------ ---- ---- -------
Net interest income 2,051 3,175 52 300 5,474
------ ------ ---- ---- -------
Provision for loan losses 110 362 472
------ ------ ---- ---- -------
Net interest income after
provision for loan losses 1,941 2,813 52 300 5,002
------ ------ ---- ---- -------
Fees, service charges and other income 91 584 675
------ ------ ---- ---- -------
Total other income 91 584 675
------ ------ ---- ---- -------
Compensation and employee benefits 1,078 1,015 2,093
Other operating expenses 1,127 1,469 308(3) 2,904
------ ------ ---- ---- -------
Total other expense 2,205 2,484 308 0 4,997
------ ------ ---- ---- -------
Income (loss) before income taxes (173) 913 360 300 680
Income tax (provision) benefit 180 (351) --- --- (171)
------ ------ ---- ---- -------
$ 7 $ 562 $360 $300 $ 509
====== ====== ==== ==== =======
Net income $ 0.01 $ 0.52 $--- --- $ 0.20
Net income per share ====== ====== ==== ==== =======
Weighted average shares outstanding 941 1,089 --- --- 2,575
====== ====== ==== ==== =======
(20)
21
Item 7. (b) Pro Forma Financial Information
BANCORP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30, 1996
Historical Adjustments for Merger
---------- ----------------------
ASSETS Bancorp LNB Debit Credit Pro Forma
------- --- ----- ------ ---------
(Dollars in thousands, except per share amounts)
Cash and Cash Equivalents $ 3,951 $ 4,780 $ $ $ 8,731
Investment Securities 10,531 20,592 260 30,863
Loans Receivable, net 68,093 73,668 186(1) 141,947
Accrued Interest Receivable 477 781 1,258
Premises and Equipment, net 964 2,597 300(1) 3,861
Other Real Estate Owned 346 346
Core Deposits Intangible 975(1) 975
Other Assets 1,041 451 1,461 1,492
-------- ---------- ---------- ---------- ----------
Total Assets $ 85,403 $ 102,869 $ 1,461 $ 260 $ 189,473
======== ========== ========== ========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Deposits $ 78,332 $ 94,415 $ $ 300 $ 173,047
Accrued Interest Payable 21 399 420
Other Liabilities 2,383 545 2,928
-------- ---------- ---------- ---------- ----------
Total Liabilities 80,736 95,359 0 300 176,395
-------- ---------- ---------- ---------- ----------
Preferred Stock 430 430
Common Stock 9 4,797 4,797(1) 18 27
Additional Paid-in Capital 5,720 1,751 1,751(1) 5,940 11,660
Retained Earnings (1,460) 1,187 1,460 1,187
Unrealized Gain (loss) on
Investment Securities (31) (225) 31 (225)
Less: Treasury Stock (1) (1)
-------- --------- ---------- ---------- ----------
Total Stockholder's Equity 4,667 7,510 6,548 7,449 13,078
-------- ---------- ---------- ---------- ----------
Total Liabilities and
Stockholder's Equity $ 85,403 $ 102,869 $ 6,548 $ 7,449 $ 189,473
======== ========== ========== ========== ==========
Book value per common share $ 4.96 $ 6.26 $ 4.77(2)
======== ========== ==========
Common shares outstanding 940,986 1,199,282 1,798,861 1,199,282 2,739,847
======== ========== ========== ========== ==========
(See Notes to Pro Forma Condensed Combined Balance Sheet and Statements of
Income)
(21)
22
Item 7. (b) Pro Forma Financial Information
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AND STATEMENTS OF INCOME
The Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1996, assumes
that the proposed Merger occurred on June 30, 1996. The Merger was considered
as a purchase in accordance with GAAP. The Merger was accounted for as a
reverse acquisition of Bancorp by LNB (and a recapitalization of LNB) for
accounting and reporting purposes. LNB is considered the acquiring entity
because the LNB shareholders acquired the majority of Bancorp Common Stock as a
result of the Merger. Bancorp was the surviving legal entity.
The Pro Forma Condensed Consolidated Statements of Income for the year ended
December 31, 1995 and for the six months ended June 30, 1996 assume that the
proposed Merger occurred on the first day of each of the respective periods.
The Pro Forma financial information included in the Pro Forma Condensed
Consolidated Balance Sheet and the Pro Forma Condensed Consolidated Statements
of Income assumed the issuance in the Merger of 1.50 shares of Bancorp Common
Stock for each share of LNB Common Stock outstanding.
The following footnotes relate to the Pro Forma Condensed Consolidated Balance
Sheet and the Pro Forma Condensed Consolidated Statements of Income.
(1) Reflects the adjustments on the pro forma balance sheet to record the
issuance of Bancorp Common Stock and the restatement of Bancorp assets
and liabilities to fair value to account for the Merger as a purchase. The
assets and liabilities of Bancorp have been adjusted since, for accounting
purposes, LNB is acquiring Bancorp. Due to the short maturity of
liabilities and amount of adjustable rate loans, adjustment is not expected
to be a significant amount. Adjustments have been made to account for the
combining of Bancorp using the purchase method of accounting as follows:
Net assets of Bancorp $4,667
Add adjustment to fair value 870
------
Subtotal 5,537
Add adjustment required to eliminate
LNB Common Stock and paid-in-capital
and Bancorp retained earnings that are
in excess of the net asset value of Bancorp 421
------
Purchase price $5,958
======
The purchase price has been established using the adjusted net assets of
Bancorp adjusted for the net increase in fair value adjustments and for
the elimination of certain equity accounts of LNB. The purchase price has
been allocated between common stock ($18) and paid-in-capital ($5,940).
The adjustments of assets and liabilities to estimated fair value includes
the following:
Investments held to maturity - decreased by $260 based on published
values.
Loans-increase by $186 based on analysis by an outside consultant and
considered reasonable.
Premises and equipment-increase by $300 based on management's knowledge of
the local real estate market.
An intangible asset for core deposits has been established at an estimated
fair value amount of $975 based upon an analysis at June 30, 1996 by an
outside consultant and considered reasonable.
Time deposits-increase by $300 based on analysis by an outside consultant
and considered reasonable.
Unrealized gains on investments available-for-sale - decrease $31 based on
published values.
(22)
23
Item 7. (b) Pro Forma Financial Information
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AND STATEMENT OF INCOME (CONCLUDED)
The adjustment to net asset value acquired includes:
Elimination of LNB Common Stock $ 4,797
Elimination of LNB paid-in-capital 1,751
Elimination of Bancorp retained earnings (1,460)
-------
Subtotal 5,088
Net assets of Bancorp 4,667
-------
Adjustment $ 421
=======
The retained earnings of Bancorp are eliminated since LNB is considered
the acquiring company for accounting purposes.
(2) Computed using the weighted average number of shares of Bancorp Common
Stock outstanding during the period plus 1.50 shares of Bancorp Common
Stock for each of the weighted average number of shares of LNB Common Stock
outstanding during the period (less cash paid in lieu of fractional
shares).
(3) Amortization and depreciation of the market value adjustments made at time
of acquisition. Amortization of loans is based on the present value of
cash flows over a repricing period that does not exceed six years, with
over 50% of the intangible amortizing in the first two years. Depreciation
of premises and equipment is spread over 40 years on the straight line
method. Amortization of core deposits is based on an amortization period
of 10 years. The amortization of the certificates of deposit intangible is
based on the present value of cash flows with an estimated average maturity
of .92 years with all of the amortization occurring in the first year. The
Core Deposit intangible is amortized over 10 years.
The amortization of loans results in interest income being decreased by $20
and $52 on the six months and annual statements. The amortization of the
certificates of deposits results in interest expense being increased by
$174 and $300 on the six month and annual statements. The adjustment of
other operating expenses on the six month statement includes adjustments
for depreciation of premises and equipment of $4 and amortization of core
deposit intangible of $161. The adjustment to other operating expenses on
the annual statement includes adjustments for depreciation of premises and
equipment of $8 and amortization of core deposit intangible of $300.
(4) The cost to complete the Merger has been expensed by Bancorp and LNB as
incurred. Future Merger costs are not expected to be material and
accordingly have not been considered in the pro forma statements.
(23)
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Key
Florida Bancorp, Inc. Has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized, in Bradenton, Florida on December
19, 1996.
Key Florida Bancorp, Inc.
By:
/s/ Steven R. Jonsson
------------------------------------
Steven R. Jonsson,
President
/s/ Michael L. Hogan
------------------------------------
Michael L. Hogan,
Vice President and Treasurer
(24)