<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-21967
KEY FLORIDA BANCORP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 65-0105205
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER)
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
6016 26TH STREET WEST, BRADENTON FLORIDA 34207
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (941) 751-0611
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO .
----- -----
As of May 14, 1997 there were outstanding 2,758,129 shares of the
Registrant's Common Stock.
<PAGE> 2
KEY FLORIDA BANCORP, INC.
FORM 10-QSB - For the Quarter Ended March 31, 1997
TABLE of CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements---------------------------------------------------------- 3-16
Item 2. Management's Discussion and Analysis of Financial
Condition and Result of Operations------------------------------- 17-39
Part II. Other Information
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - Not Applicable
Item 3. Defaults upon Senior Securities - Not Applicable
Item 4. Submissions of Matters to a Vote of Security Holders - Not Applicable
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
</TABLE>
<PAGE> 3
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AND
ACCOUNTANTS' REVIEW REPORT
KEY FLORIDA BANCORP, INC.
AND SUBSIDIARIES
BRADENTON, FLORIDA
MARCH 31, 1997
CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
ACCOUNTANTS' REVIEW REPORT 3
CONDENSED CONSOLIDATED BALANCE SHEETS 4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR KEY FLORIDA
BANCORP, INC. AND SUBSIDIARIES FOR THE THREE MONTHS
ENDED MARCH 31, 1997 AND 1996 5
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
EQUITY FOR KEY FLORIDA BANCORP, INC. AND SUBSIDIARIES FOR
THE THREE MONTHS ENDED MARCH 31, 1997 6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR KEY FLORIDA
BANCORP, INC. AND SUBSIDIARIES FOR THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996 7-8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 9-16
</TABLE>
<PAGE> 4
[PURVIS GRAY & COMPANY LETTERHEAD]
ACCOUNTANTS' REVIEW REPORT
Board of Directors
Key Florida Bancorp, Inc. and Subsidiaries
Bradenton, Florida
We have reviewed the condensed consolidated balance sheet and condensed
consolidated statement of changes in stockholders' equity of Key Florida
Bancorp, Inc. and subsidiaries as of March 31, 1997, and the related condensed
consolidated statements of income and condensed consolidated statements of cash
flows for the three months ended March 31, 1997 and 1996. These financial
statements are the responsibility of Key Florida Bancorp, Inc. and its
subsidiaries' management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1996, and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows for the year then ended (not presented herein) and, in our report
dated March 7, 1997, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 1996, is
fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
May 2, 1997 /s/ Purvis, Gray and Company
Gainesville, Florida
3
<PAGE> 5
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
KEY FLORIDA BANCORP, INC. AND SUBSIDIARIES - BRADENTON, FLORIDA
ASSETS
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
MARCH 31, DECEMBER 31,
1997 1996
-------------- ---------------
<S> <C> <C>
ASSETS
Cash and Demand Deposits Due From Banks $ 4,641,470 $ 10,542,883
Federal Funds Sold and Federal Home Loan Bank
Overnight Account 3,076,181 971,647
Investment Securities - Available-For-Sale 27,150,110 27,414,233
Loans Receivable, Net 155,923,669 153,708,503
Premises and Equipment, Net 5,193,854 4,542,646
Accrued Interest Receivable 1,400,302 1,352,943
Other Real Estate Owned 120,000 120,000
Other Assets 2,491,502 2,237,292
-------------- ---------------
TOTAL ASSETS 199,997,088 200,890,147
============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-Bearing 17,280,711 17,010,952
Interest-Bearing Demand 168,603,461 170,335,869
-------------- ---------------
Total Deposits 185,884,172 187,346,821
Accrued Interest Payable 583,351 549,342
Other Liabilities 657,054 302,816
-------------- ---------------
TOTAL LIABILITIES 187,124,577 188,198,979
-------------- ---------------
STOCKHOLDERS' EQUITY
Common Stock, $.01 Par Value, 4,000,000 Shares
Authorized, 2,758,129 Shares Issued 27,581 27,581
Additional Paid-In Capital 11,400,484 11,400,484
Unrealized (Loss) on Securities (Net of Deferred
Taxes) (63,266) (18,654)
Retained Earnings 1,508,202 1,282,247
(Treasury Stock, At Cost - 143 Shares) (490) (490)
-------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 12,872,511 12,691,168
-------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 199,997,088 $ 200,890,147
============== ===============
</TABLE>
See accompanying notes.
4
<PAGE> 6
CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR
KEY FLORIDA BANCORP, INC. AND SUBSIDIARIES
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
BRADENTON, FLORIDA
<TABLE>
<CAPTION>
(UNAUDITED)
---------------------------
MARCH 31, MARCH 31,
1997 1996
------------ -------------
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $ 3,557,479 $ 1,573,620
Interest on Investment Securities - Taxable 413,319 284,592
Exempt From Federal Income Taxes 6,288 5,934
Federal Funds Sold and Overnight Accounts 4,418 21,548
------------ -------------
TOTAL INTEREST INCOME 3,981,504 1,885,694
------------ -------------
INTEREST EXPENSE
Interest on Deposits 2,020,030 973,063
Interest on Other Borrowings 35,708 2,844
------------ -------------
TOTAL INTEREST EXPENSE 2,055,738 975,907
------------ -------------
NET INTEREST INCOME 1,925,766 909,787
PROVISION FOR LOAN LOSSES 60,000 60,000
------------ -------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,865,766 849,787
------------ -------------
NONINTEREST INCOME
Service Charges on Deposit Accounts 58,057 62,030
Gain on Loan Sales 44,936 0
Gain on Other Real Estate Sales 35,276 0
Other Income 100,817 50,544
------------ -------------
TOTAL NONINTEREST INCOME 239,086 112,574
------------ -------------
NONINTEREST EXPENSE
Salaries and Employees Benefits 773,738 319,266
Occupancy Expense 277,526 99,072
Data Processing Expense 97,559 40,598
FDIC Insurance Premiums and Assessments 30,288 39,600
Other Expenses 578,086 145,371
------------ -------------
TOTAL NONINTEREST EXPENSE 1,757,197 643,907
------------ -------------
INCOME BEFORE INCOME TAXES 347,655 318,454
INCOME TAX (EXPENSE) (121,700) (119,283)
------------ -------------
NET INCOME $ 225,955 $ 199,171
============ =============
EARNINGS PER SHARE $ .08 $ .08
============ =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 2,770,625 2,744,054
============ =============
</TABLE>
See accompanying notes.
5
<PAGE> 7
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY FOR
KEY FLORIDA BANCORP, INC. AND SUBSIDIARIES FOR THE
THREE MONTHS ENDED MARCH 31, 1997
BRADENTON, FLORIDA
<TABLE>
<CAPTION>
UNREALIZED
COMMON STOCK TREASURY STOCK ADDITIONAL GAIN (LOSS)
------------------- -------------- PAID-IN ON RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL SECURITIES EARNINGS TOTAL
---------- -------- ------ ------ ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 (AUDITED) 2,758,129 $ 27,581 143 $ (490) $ 11,400,484 $ (18,654) $ 1,282,247 $ 12,691,168
Unrealized (Loss) on Securities -
Available-For-Sale 0 0 0 0 0 (44,612) 0 (44,612)
Net Income 0 0 0 0 0 0 225,955 225,955
--------- -------- --- ------ ------------ --------- ----------- ------------
BALANCE, MARCH 31, 1997 (UNAUDITED) 2,758,129 $ 27,581 143 $ (490) $ 11,400,484 $ (63,266) $ 1,508,202 $ 12,872,511
========= ======== === ====== ============ ========= =========== ============
</TABLE>
See accompanying notes.
6
<PAGE> 8
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
KEY FLORIDA BANCORP, INC. AND SUBSIDIARIES
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
BRADENTON, FLORIDA
<TABLE>
<CAPTION>
(UNAUDITED)
---------------------------
MARCH 31, MARCH 31,
1997 1996
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 225,955 $ 199,171
Adjustments to Reconcile Net Income to Net Cash
Provided By Operating Activities:
Depreciation and Amortization 95,964 25,649
Provision For Possible Loan Losses 60,000 60,000
Net Amortization/Accretion of Premium/Discount on
Investment Securities (1,900) (2,794)
Net (Gain) on Sale of Loans (44,936) 0
Net (Gain) on Sale of Investment Securities 0 (938)
Net (Gain) on Sale of Other Real Estate Owned (35,276) 0
Deferred Income Taxes 24,391 43,959
Changes in Assets and Liabilities:
(Increase) in Accrued Interest Receivable (47,359) (79,465)
Decrease (Increase) in Other Assets 533,215 (70,881)
Increase (Decrease) in Accrued Interest Payable 34,009 (20,226)
Increase in Other Liabilities 420,676 646,255
------------ -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,264,739 800,730
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds From Sale of Investment Securities 0 500,938
Loan Originations, Net (6,014,554) (2,721,016)
Proceeds From Sale of Loans 2,701,402 0
Proceeds From Sale of Other Real Estate Owned 330,773 0
Purchase of Investment Securities (480,200) (5,041,679)
Proceeds From Maturities and Calls of Investment Securities 677,220 5,021,440
Purchase of Bank Premises and Equipment (747,172) (373,897)
------------ -------------
NET CASH (USED IN) INVESTING ACTIVITIES (3,532,531) (2,614,214)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase (Decrease) in Noninterest-Bearing Deposits 269,759 (1,054,906)
Net (Decrease) in Money Market Deposits (1,827,285) (750,210)
Net Increase in Savings and NOW Deposits 4,833,442 1,191,811
Net (Decrease) Increase in Time Deposits (4,805,003) 1,518,103
Proceeds From Federal Home Loan Bank Advances 6,000,000 0
Repayment of Federal Home Loan Bank Advances (6,000,000) 0
------------ -------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (1,529,087) 904,798
------------ -------------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (3,796,879) (908,686)
CASH AND CASH EQUIVALENTS, JANUARY 1 11,514,530 6,249,574
------------ -------------
CASH AND CASH EQUIVALENTS, MARCH 31 $ 7,717,651 $ 5,340,888
============ =============
</TABLE>
See accompanying notes.
7
<PAGE> 9
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
KEY FLORIDA BANCORP, INC. AND SUBSIDIARIES
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
BRADENTON, FLORIDA
(CONCLUDED)
<TABLE>
<CAPTION>
(UNAUDITED)
---------------------------
MARCH 31, MARCH 31,
1997 1996
------------ -------------
<S> <C> <C>
SHOWN ON THE BALANCE SHEETS AS
- ------------------------------
Cash and Demand Deposits Due From Banks $ 4,641,470 $ 3,909,012
Federal Home Loan Bank Overnight Accounts and
Federal Funds Sold 3,076,181 1,431,876
------------ -------------
TOTAL CASH AND CASH EQUIVALENTS $ 7,717,651 $ 5,340,888
============ =============
SUPPLEMENTAL CASH DISCLOSURES
- -----------------------------
Interest Paid $ 2,068,057 $ 996,133
============ =============
Income Taxes Paid $ 0 $ 205,824
============ =============
</TABLE>
See accompanying notes.
8
<PAGE> 10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
KEY FLORIDA BANCORP, INC. AND SUBSIDIARIES
BRADENTON, FLORIDA
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
BUSINESS ACTIVITY
Key Florida Bancorp, Inc. (the Company) is a commercial bank
holding company, incorporated under the laws of Florida. It is
the parent company of its wholly-owned subsidiary, Liberty
National Bank (the Bank), a national bank. The Bank is engaged in
bank and bank-related activities. The Bank 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). The Bank'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 income is dependent upon the Bank's
interest rate spread, which is the difference between the average
yield earned on its interest-earning assets and the average rate
paid on its interest-bearing liabilities. When 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, the Bank'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.
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions to Form 10-QSB
and do not include all of the information and footnotes required
by generally accepted accounting principles for complete
consolidated financial statements. In the opinion of the Company,
the unaudited consolidated financial statements reflect all
adjustments which are of a normal recurring nature and which are
necessary to present fairly the consolidated financial position of
the Company as of March 31, 1997, the results of its operations
for the three months ended March 31, 1997 and 1996, and its cash
flows for the three months ended March 31, 1997 and 1996. The
results of operations for the three months ended March 31, 1997,
are not necessarily indicative of the results which may be
expected for the entire fiscal year.
WEIGHTED AVERAGE SHARES OUTSTANDING
Net income per share of the Company's common stock was computed by
dividing net income for the respective period by the weighted
average number of shares of common stock outstanding, including
common stock equivalents using the treasury stock method. Stock
options issued to officers are considered common stock
equivalents. Because there is no established public trading of
the Company's common stock, the treasury stock method assumes that
the Company purchased common stock at the Company's average book
value during the respective periods.
9
<PAGE> 11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
KEY FLORIDA BANCORP, INC. AND SUBSIDIARIES
BRADENTON, FLORIDA
(CONTINUED)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION (CONCLUDED)
WEIGHTED AVERAGE SHARES OUTSTANDING (CONCLUDED)
Because the assumed exercise of stock options does not pass the 3%
dilution test in accordance with Accounting Principles Board
Opinion No. 15 (APB No. 15), the Company is deemed to have a
simple capital structure and need only report primary earnings per
share. For the three months ended March 31, 1997 and 1996,
weighted average number of shares of common stock and common stock
equivalents outstanding was computed as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
---------------------------
MARCH 31, MARCH 31,
1997 1996
------------ -------------
<S> <C> <C>
Weighted Average Shares of Common Stock Outstanding 2,758,129 2,739,847
Common Shares Assumed Outstanding to Reflect the
Dilutive Effect of Treasury Common Stock (143) 0
Common Shares Assumed Outstanding to Reflect the
Dilutive Effect of Stock Options to Purchase
Common Stock 12,639 4,207
------------ -------------
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON
STOCK AND COMMON STOCK EQUIVALENTS OUTSTANDING 2,770,625 2,744,054
============ =============
</TABLE>
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the report
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH EQUIVALENTS
Cash equivalents include cash, demand deposits due from banks,
federal funds sold, and Federal Home Loan Bank overnight deposits.
Generally, federal funds sold mature within ninety days.
NOTE 2 - BUSINESS COMBINATION AND COMPARABILITY OF FINANCIAL STATEMENTS
MERGER WITH KEY FLORIDA BANK, F.S.B.
On July 30, 1996, effective the close of business, the Company and
the Bank closed the merger of Key Florida Bank, F.S.B. with and
into the Bank. The Key Florida Bank, F.S.B./Liberty National Bank
merger transaction was accounted for under the purchase method of
accounting. As a result of the merger, the outstanding shares of
the Bank were converted into an aggregate of 1,798,861 shares of
Key Florida Bancorp, Inc. common stock resulting in 2,739,847
shares of Key Florida Bancorp, Inc. common stock outstanding after
the merger. In connection with the merger, the Bank recorded
intangible assets, including a core deposit intangible in the
amount of $975,000, which is being amortized over ten years in
accordance with guidelines promulgated by the Office of the
Comptroller of the Currency (OCC).
10
<PAGE> 12
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
KEY FLORIDA BANCORP, INC. AND SUBSIDIARIES
BRADENTON, FLORIDA
(CONTINUED)
NOTE 2 - BUSINESS COMBINATION AND COMPARABILITY OF FINANCIAL STATEMENTS
(CONCLUDED)
COMPARABILITY OF FINANCIAL STATEMENTS
Due to the aforementioned merger transaction and to the number of
shares of the Company's stock issued to Bank shareholders in the
merger, a change of control of the Company was deemed to have
occurred. Because control changed to Bank shareholders at merger,
the comparative financial statements presented for the preceding
fiscal period ended March 31, 1996, are those of Liberty National
Bank.
RECAPITALIZATION RESULTING FROM MERGER
As a result of the merger transaction, the January 1, 1996,
balance of the Bank's common stock outstanding and the related
balance in par value have been retroactively restated to reflect
the number of shares outstanding of the Company and the Company's
one-cent par value. Additionally, additional paid-in capital at
that date has been restated to reflect the corresponding
adjustment of the balance in par value. These adjustments were
made to give retroactive application to the aforementioned
recapitalization resulting from the merger on July 30, 1996.
NOTE 3 - INCOME TAXES
Federal and state income taxes are provided on income reported for
financial statement purposes and include both current and deferred
income tax expense. Current income tax expense is recorded to
reflect income taxes based upon the tax returns filed with the
appropriate taxing agencies. Deferred income taxes are recorded
to reflect the tax consequences on future years of differences
between the taxes bases of assets and liabilities and their
financial reporting amounts at year end. The change in deferred
taxes attributable to the carrying value of investments
categorized as "available-for-sale" is recognized as a change in
stockholders' equity. The change in deferred income taxes
attributable to all other timing differences is recognized as
deferred income tax expense or benefit. The tax benefits related
to operating loss and tax credit carryforwards, if any, recognized
if management believes, based on available evidence, that it is
more likely than not that they will be realized. Investment tax
credits, if any, are accounted for using the flow-through method.
11
<PAGE> 13
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
KEY FLORIDA BANCORP, INC. AND SUBSIDIARIES
BRADENTON, FLORIDA
(CONTINUED)
NOTE 3 - INCOME TAXES (CONCLUDED)
The Company files consolidated federal and state income tax
returns with its subsidiary, the Bank. Federal and state income
taxes are allocated between the Company and its subsidiary in
proportion to the respective contributions in consolidated taxable
income.
NOTE 4 - LOANS AND ALLOWANCE FOR LOAN LOSSES
The major categories of loans included in the loan portfolio are:
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 31,
1997
-----------------
<S> <C>
Commercial $ 22,237,201
Real Estate 130,300,677
Installment Loans 4,736,787
-----------------
Loans Receivable (Gross) 157,274,665
Unearned Income (96,538)
-----------------
LOANS RECEIVABLE (NET OF UNEARNED INCOME) 157,178,127
Less: Allowance for Loan Losses (1,254,458)
-----------------
LOANS RECEIVABLE (NET) $ 155,923,669
=================
</TABLE>
Changes in the allowance for loan losses are summaries as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 31,
1997
-----------------
<S> <C>
BALANCE, JANUARY 1, 1997 $ 1,321,331
Provision Charged to Expense 60,000
Recoveries of Loans Previously Charged Off 31
-----------------
Total Additions 1,381,362
(Loans Charged Off) (126,904)
-----------------
BALANCE, MARCH 31, 1997 $ 1,254,458
=================
</TABLE>
NOTE 5 - INVESTMENTS
The carrying amounts of investment securities as shown on the
balance sheet of the Bank and their approximate market value at
March 31, 1997, were as follows:
12
<PAGE> 14
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
KEY FLORIDA BANCORP, INC. AND SUBSIDIARIES
BRADENTON, FLORIDA
(CONTINUED)
NOTE 5 - INVESTMENTS (CONCLUDED)
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE - MARCH 31, 1997
---------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS (LOSSES) VALUE
------------ -------------- ------------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 6,451,380 $ 4,462 $ (10,137) $ 6,445,705
U.S. Government Agencies 15,244,388 9,414 (117,286) 15,136,516
Mortgage-Backed Securities 3,946,190 40,837 (31,169) 3,955,858
Obligations of State and Political
Subdivisions 413,318 6,613 0 419,931
------------ -------------- ------------- ------------
Total Debt Securities 26,055,276 61,326 (158,592) 25,958,010
Equity Securities 1,192,100 0 0 1,192,100
------------ -------------- ------------- ------------
TOTAL SECURITIES $ 27,247,376 $ 61,326 $ (158,592) $ 27,150,110
============ ============== ============= ============
</TABLE>
The book value and approximate market value of investments at
March 31, 1997, by contractual maturity are shown below. Expected
maturities may differ from contractual maturities due to borrowers
having the right to call or repay obligations with or without
prepayment penalties.
<TABLE>
<CAPTION>
SECURITIES
AVAILABLE-FOR-SALE
---------------------------
CARRYING
AMORTIZED (MARKET)
COST VALUE
------------- ------------
<S> <C> <C>
Due in One Year or Less $ 5,002,478 $ 4,963,044
Due in One Year to Five Years 20,634,882 20,574,197
Due From Five to Ten Years 417,916 420,769
Other 1,192,100 1,192,100
------------- ------------
TOTAL $ 27,247,376 $ 27,150,110
============= ============
</TABLE>
Effective December 31, 1993, the Company has adopted the investment
categorizations and carrying value rules as required by Financial
Accounting Standards Board Statement of Financial Accounting
Standards No. 115 (FASB No. 115), Accounting for Certain
Investments in Debt and Equity Securities. Under this statement,
the unrealized gain or loss on investment securities
available-for-sale, net of the applicable deferred income taxes,
is shown as a separate component of stockholders' equity in the
balance sheet. The following is a summary of the effects on the
statement of stockholders' equity as of March 31, 1997:
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 31,
1997
---------------
<S> <C>
Gross Unrealized Loss on Securities Available-For-Sale $ (97,266)
Deferred Income Tax Benefit on Unrealized Loss 34,000
---------------
Net Decrease in Stockholders' Equity $ (63,266)
===============
</TABLE>
13
<PAGE> 15
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
KEY FLORIDA BANCORP, INC. AND SUBSIDIARIES
BRADENTON, FLORIDA
(CONTINUED)
NOTE 6 - PREMISES AND EQUIPMENT
A summary of premises and equipment at March 31, 1997, is as
follows:
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 31,
1997
---------------
<S> <C>
Land $ 1,630,670
Buildings 1,937,846
Furniture, Fixtures and Equipment 3,052,955
---------------
6,621,471
(Accumulated Depreciation) (1,427,617)
---------------
TOTAL PREMISES AND EQUIPMENT $ 5,193,854
===============
</TABLE>
NOTE 7 - DEPOSITS
A summary of interest-bearing deposits at March 31, 1997, is as
follows:
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 31,
1997
-----------------
<S> <C>
Demand $ 24,322,335
Savings 24,452,321
Time 119,828,805
-----------------
TOTAL INTEREST-BEARING DEPOSITS $ 168,603,461
=================
</TABLE>
NOTE 8 - PARENT COMPANY ONLY FINANCIAL STATEMENTS
Condensed financial statements of Key Florida Bancorp, Inc.
(Parent Company only) for the three months ended March 31, 1997,
are presented as follows:
CONDENSED BALANCE SHEET
MARCH 31, 1997
<TABLE>
<S> <C>
ASSETS
Investment in Wholly-Owned Subsidiary at Equity
in Underlying Assets $ 13,035,114
Other Assets 123,523
-----------------
TOTAL ASSETS 13,158,637
=================
</TABLE>
14
<PAGE> 16
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
KEY FLORIDA BANCORP, INC. AND SUBSIDIARIES
BRADENTON, FLORIDA
(CONTINUED)
NOTE 8 - PARENT COMPANY ONLY FINANCIAL STATEMENTS (CONTINUED)
CONDENSED BALANCE SHEET
MARCH 31, 1997
(CONCLUDED)
<TABLE>
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Cash Overdraft 69,456
Notes Payable 137,749
Other Liabilities 78,921
-----------------
TOTAL LIABILITIES 286,126
-----------------
STOCKHOLDERS' EQUITY
Common Stock 27,581
Additional Paid-In Capital 11,400,484
Retained Earnings 1,508,202
(Treasury Stock) (490)
Unrealized (Losses) on Certain Securities (63,266)
-----------------
TOTAL STOCKHOLDERS' EQUITY 12,872,511
-----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,158,637
=================
</TABLE>
CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<S> <C>
INCOME
Interest Income $ 126
-----------------
EXPENSES
Interest 3,180
Other Expense 93,715
-----------------
(TOTAL EXPENSES) (96,895)
-----------------
(LOSS) BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF
SUBSIDIARY (96,769)
INCOME TAX BENEFIT RESULTING FROM FILING CONSOLIDATED
INCOME TAX RETURNS 36,550
EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARY 286,174
-----------------
NET INCOME $ 225,955
=================
</TABLE>
15
<PAGE> 17
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
KEY FLORIDA BANCORP, INC. AND SUBSIDIARIES
BRADENTON, FLORIDA
(CONCLUDED)
NOTE 8 - PARENT COMPANY ONLY FINANCIAL STATEMENTS (CONCLUDED)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 225,955
Adjustments to Reconcile Net Income to Net Cash (Used In)
Operating Activities:
Depreciation 2,435
Income From Subsidiary (286,174)
Other (12,780)
-----------------
NET CASH (USED IN) OPERATING ACTIVITIES (70,564)
-----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Premises and Equipment (427)
-----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments on Notes Payable (5,304)
-----------------
(DECREASE) IN CASH (76,295)
CASH, JANUARY 1 6,839
-----------------
CASH OVERDRAFT, MARCH 31 $ (69,456)
=================
</TABLE>
16
<PAGE> 18
KEY FLORIDA BANCORP, INC.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis relates to the financial condition and
results of operations of the Company for the first quarter of fiscal 1997
ending March 31, 1997. Management's discussion and analysis of earnings and
related financial data are presented herein to assist investors in
understanding the financial condition of the Company at March 31, 1997, and the
results of operations of the Company and for Liberty National Bank for the
three months ended March 31, 1997 and 1996, respectively. This discussion
should be read in conjunction with the unaudited consolidated financial
statements and related unaudited footnotes of the Company presented elsewhere
within.
General
The Company's principal asset is its ownership of a controlling interest in
Liberty National Bank ("the Bank"). Accordingly, the Company's results of
operations are primarily dependent upon the results of operations of the Bank.
The Bank conducts commercial business consisting 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). The Bank'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 income is dependent upon the
Bank's interest-rate spread which is the difference between the average yield
earned on its interest-earning assets and the average rate paid on its
interest-bearing liabilities. When 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 less extent, the
Bank's profitability is affected by such factors as the level of noninterest
income and expenses, the provision for loan losses, and the effective tax rate.
Noninterest income consists primarily of service fees on deposit accounts and
income from the sale of loans and investment securities. Noninterest expense
consists of compensation and employee benefits, occupancy and equipment
expenses, deposit insurance premiums paid to the FDIC, and other operating
expenses.
Management's discussion and analysis of earnings and related financial data are
presented herein to assist in an understanding of the financial condition of
the Company at, and results of operations of the Company for, the three
months ended March 31, 1997.
Recent Developments
During the fourth quarter of 1996, Bancorp purchased an existing structure in
Ellenton, Florida (Manatee County), and renovated it for use as its seventh
branch location. The Ellenton branch opened early January 1997.
(17)
<PAGE> 19
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
Liquidity 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.
The Company's principal source of funds are those generated by the Bank,
including net increases in deposits, principal and interest payments on loans
and proceeds from sales and maturities of investment and mortgage-backed
securities.
The Bank has numerous sources of liquidity including loan and security
principal repayments and maturities, lines of credit at other financial
institutions, a line of credit with the Federal Home Loan Bank, the sale of
securities from its available-for-sale portfolio, whole loan sales and growth
in its core deposit base. As a member of the Federal Home Loan Bank system the
Bank has the ability to borrow on a secured basis utilizing mortgage related
loans and securities as collateral. At March 31, 1997 the Bank had no
advances with the Federal Home Loan Bank. The Bank also had an available line
of credit of $10 million.
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 March 31, 1997, the Company
had a liquidity ratio of 14.26%.
Liquidity, as measured in the form of cash and cash equivalents, totaled
$7,717,651 at March 31, 1997. At March 31, 1996, cash and cash equivalents
totaled $5,340,888, an increase of 44.5% from March 31, 1996 to March 31,
1997. 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 the Bank's investment securities portfolio
and loan portfolio.
As is typical of financial institutions, cash flows from investing (primarily
in loans and securities) and from financing (primarily through deposit
generation and short-term borrowings) are in excess of cash flows from
operations. For the three months ended March 31, 1997, the cash flow from
operations of $1,264,739 was higher than the same period 1996. Cash flows
from investing activities primarily reflect the net increase in loans due to
continued strong loan demand. The cash flows from financing activities at
March 31, 1997 reflect the decrease in deposits resulting from a decrease in
money market deposits partially offset by an increase in noninterest bearing
demand deposits.
(18)
<PAGE> 20
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
Liquidity Management - Continued
Capital Resources
As mentioned previously, the Bank'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. The
Bank uses its capital resources primarily to fund existing and continuing loan
commitments and to purchase investment and mortgage-backed securities. At
March 31, 1997 and 1996, the Bank had commitments to originate loans totaling
$2,594,500 and $3,100,000, respectively, and had issued but unused standby
letters of credit of $546,000 and $58,000, respectively. Scheduled maturities
of certificates of deposit during the twelve months following March 31, 1997
and 1996, totaled $86 million and $34 million, respectively. Management
believes that the Bank has adequate resources to fund all of its 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 and other 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 March 31, 1997 both
the Company and the Bank are 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 the Company and the
Bank and the regulatory categories for a well capitalized bank under the
regulatory framework for prompt corrective action (all three regulatory
capital ratios) at both March 31, 1997 and 1996, respectively:
<TABLE>
<CAPTION>
Actual Ratios To Be Well
------------------------- Capitalized Under
March 31, March 31, Prompt Corrective
1997 1996 Action Provisions
-------- --------- -----------
<S> <C> <C> <C>
Risk Based Ratios
Tier 1 Capital to risk-weighted assets 9.34% 10.81% 6.0%
Total Equity Capital to risk-weighted assets 10.31% 11.92% 10.0%
Tier I Capital to adjusted total assets-
leverage ratio 6.12% 7.82% 5.0%
</TABLE>
(19)
<PAGE> 21
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
Capital Resources - Concluded
The following were the essential components of the Company and the Bank's
risk-based capital ratios (in thousands):
<TABLE>
<CAPTION>
Key Florida Bancorp, Inc. Liberty National Bank
March 31, March 31,
1997 1997
------------------------ ---------------------
<S> <C> <C>
Tier 1 Capital
Common Stock $ 28 $ 4,797
Additional Paid-in Capital 11,400 1,751
Retained Earnings 1,508 1,064
Intangible assets (761) 0
-------- --------
Total Tier 1 Capital 12,175 7,612
-------- --------
Tier 2 Capital
Allowance for loan losses, as limited 1,254 760
-------- --------
Total Tier 2 Capital 1,254 760
-------- --------
Total risk-based Capital $ 13,429 $ 8,372
======== ========
Risk-weighted Assets $130,286 $ 70,416
======== ========
</TABLE>
During the three months ended March 31, 1997 the Company's Tier 1 Capital ratio
increased by 30 basis points and the Total Capital ratio increased by 26 basis
points. Though the total risk-weighted assets increased approximately
$3,157,000 during the three months ended March 31, 1997 the increase was
accompanied by an increase in Tier 1 Capital for the quarter ending
March 31, 1997.
(20)
<PAGE> 22
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
RESULTS OF OPERATIONS
Three months ended March 31, 1997, compared to three months ended March 31,
1996
General
The Company's net income was $225,955 or $.08 per share for the three months
ended March 31, 1997 as compared to the Bank's net income of $199,171, or $.08
per share for the three months ended March 31, 1996, or an increase of $26,784
or 13.45%. The Company's income before taxes on income was $347,655 for the
three months ended March 31, 1997, as compared to $318,454 for the Bank for
the three months ended March 31, 1996, or an increase of $29,201, or 9.17%.
The total interest earning assets increased from $89,227 at March 31, 1996 to
$186,845 at March 31, 1997. The increase in total interest earning assets was
due in large part to the merger with Key Florida Bank, F.S.B. in 1996. The
average yield on interest earning assets increased from 8.45% at March 31, 1996
to 8.52% at March 31, 1997. The average yield on loans decreased during this
period from 9.38% to 8.97%, this was due to the large number of residential
real estate mortgages obtained in the merger with Key Florida Bank, F.S.B.
While residential real estate mortgages carry a weighted average yield which is
typically less than a similar sized commercial loan they generally have a lower
level of risk and bring a measure of increased asset quality. The average
yield on investments increased from 5.67% at March 31, 1996 to 6.01% at March
31, 1997. During the fourth quarter of 1996 the Bank reduced its position in
mortgage-backed securities due to market price sensitivity and reinvested in
U.S. Treasury and government agency securities primarily due to higher yield
opportunities. The average rate paid for interest-bearing liabilities
decreased from 5.05% at March 31, 1996 to 4.80% at March 31, 1997. There was
also a decrease from the end of 1996 of 4.90%, a decrease of 10 basis points,
or 2.0%. The decrease during the quarter ended March 31, 1997 was primarily
due to the repricing of approximately $6.1 million in time deposits, which had
been at rates in excess of 6.30%, to a lesser rate. The decrease in the
average rate paid on interest-bearing liabilities from March 31, 1996 to March
31, 1997 was primarily due to the repricing of approximately $20 million of
time deposits which were at rates in excess of 6.50%.
The interest rate spread has increased from 3.40% at March 31, 1996 to 3.72% at
March 31, 1997, primarily due to time deposits repricing at lower rates of
interest and the Banks' loan to deposit ratio increasing. At year-end the
loan to deposits ratio was at 82.04% and increased during the first
quarter of 1997 to 83.88%.
The following table shows selected ratios for the periods ended:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
----------------------------
1997 1996
----- ----
<S> <C> <C>
Average equity as a percentage of average assets 6.40% 7.87%
Equity to total assets at end of period 6.44% 7.70%
Return on average assets .45% .84%
Return on average equity 7.07% 10.63%
Interest expense to average assets 3.60% 2.77%
Interest income to average earning assets 8.54% 8.45%
Interest expense to average interest-bearing liabilities 5.00% 5.05%
Net interest margin 4.13% 4.07%
</TABLE>
(21)
<PAGE> 23
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
RESULTS OF OPERATIONS (Continued)
General (Continued)
The following tables set forth for the periods indicated, information regarding
(1) the total amount of interest and dividend income of the Bank from
interest-earning assets and the resultant average yield (ii) the total total
dollar amount of interest expense on interest-bearing liabilities and the
resultant average cost (iii) net interest/dividend income; (iv) interest rate
spread; and (v) net interest margin.
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------------------------------------------------------
1997 1996
------------------------------------ -----------------------------------------
(Dollars in Thousands)
Interest Average Interest Average
Average and Yield/ Average and Yield/
Balance Dividends Rate Balance Dividends Rate
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing assets:
Loans (1) $158,580 $3,557 8.97% $67,086 $1,574 9.38%
Investment and mortgage-
backed securities 27,914 420 6.01% 20,468 290 5.67%
Other interest-earning assets(2) 351 5 5.69% 1,673 22 5.26%
-------- ------ ---- ------- ------ ----
Total interest-earning assets 186,845 3,982 8.52% 89,227 1,886 8.45%
Noninterest-earning assets 12,782 5,949
-------- ------
Total assets $199,627 $95,176
======== =======
Interest-bearing liabilities:
Demand, money market and
NOW deposits $ 24,491 164 2.68% $13,910 $ 85 2.44%
Savings 22,710 256 4.51% 4,410 39 3.54%
Certificates of deposit 121,165 1,600 5.28% 58,942 852 5.78%
Other borrowings 2,669 33 4.95% 215 3 5.58%
-------- ------ ---- ------- ------ ----
Total interest-bearing
liabilities 171,035 2,053 4.80% 77,477 979 5.05%
-------- ------ ---- ------- ------ ----
Noninterest-bearing liabilities 15,810 10,212
Stockholders' equity 12,782 7,487
-------- -------
Total Liabilities and
Stockholders' equity $199,627 $95,176
======== =======
Net interest/dividend income $1,929 $ 907
====== ======
Interest-rate spread(3) 3.72% 3.40%
==== ====
Net interest margin(4) 4.13% 4.07%
==== ====
Ratio of average interest-earning
assets to average interest-
bearing liabilities 1.09% 1.15%
======== =======
</TABLE>
(1) Includes nonaccrual loans.
(2) Includes interest-bearing deposits on other banks and federal funds sold.
(3) Interest-rate spread represents the difference between the average-yield
on interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net interest margin is net interest income divided by average
interest-earning assets.
(22)
<PAGE> 24
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
RESULTS OF OPERATIONS (CONTINUED)
Net interest income
Net interest income, which constitutes the principal source of income for the
Bank, represents the excess of interest income on interest-earning assets over
interest expense on interest-bearing liabilities. The principal
interest-earning assets are federal funds sold, investment securities and loans
receivable. Interest-bearing liabilities primarily consist of time deposits,
interest-bearing checking accounts ("NOW accounts"), 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.
The following table sets forth certain information regarding changes in
interest income and interest expense of the Bank for the periods indicated.
The rate/volume variance for each category has been allocated on a consistent
basis between rate and volume variances based on the percentage of the rate or
volume variance to the sum of the two absolute variances.
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 Compared to 1996
-----------------------------------------
(Dollars in thousands)
-----------------------------------------
Rate Volume Total
---- ------ ------
<S> <C> <C> <C>
Interest-earning assets:
Loans $ (111) $ 2,094 $ 1,983
Investment and mortgage back securities 18 112 130
Other interest-earning assets 2 (19) (17)
------- --------- ---------
Total (91) 2,187 2,096
------- --------- ---------
Interest-bearing liabilities
Demand money market and NOW deposits 9 70 79
Savings 13 204 217
Certificate of Deposit (57) 808 751
Other borrowings 0 33 33
------- --------- ---------
Total (35) 1,115 1,080
------- --------- ---------
Net change in net interest income (56) 1,072 1,016
======= ========= =========
</TABLE>
(23)
<PAGE> 25
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
RESULTS OF OPERATIONS (CONTINUED)
Net interest Income (Continued)
The Company's net interest income was $1,925,766 for the three months ended
March 31, 1997 compared with $909,787 for the Bank for the three months ended
March 31, 1996, or an increase of $1,015,979 or 112%. This increase in net
interest income resulted primarily from the increase in the loan portfolio due
to the merger with Key Florida Bank, F.S.B. The 136% volume increase in the
average balance of the loan portfolio for the first three months of 1997 as
compared to the first three months of 1996 resulted in a 126% increase in loan
interest income. As the above rate/volume variance table indicates the increase
in interest income in the first quarter of 1997 was primarily driven by the
increased volume of loans and to a lesser extent by an increased volume of
investment securities.
Provision for Loan Losses
The provision for loan losses is charged to earnings to bring the allowance for
loan losses to a level deemed appropriate by management and is based upon
historical experience, the volume and type of lending conducted by the Company,
the amounts of non-performing loans, general economic conditions, particularly
as they relate to the Company's market area, and other factors related to the
collectibility of the Company's loan portfolio. During the three months ended
March 31, 1997, the provision for loan losses was $60,000, as compared to
$60,000 during the three months ended March 31, 1996. Management believes that
the allowance at March 31, 1997 was adequate. See "--Financial
Condition--Allowance for Loan Losses". As of March 31, 1997, the allowance
for loan losses was 0.79% of total loans outstanding.
Noninterest Income
Noninterest income is composed primarily of service charges and fees but also
includes gains or losses on the sale of loans, gains or losses on the
disposition of bank premises and equipment, gain or losses on the sale of other
real estate owned and the gain or loss on the sale of investment securities.
During the three months ended March 31, 1997, noninterest income was $239,086
as compared to $112,574 during the three months ended March 31, 1996 or an
increase of $126,512 or 112.38%. This increase was primarily attributable to
the gains on sale of loans of $44,936 and gains of $35,276 recorded on the sale
of other real estate owned.
(24)
<PAGE> 26
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
RESULTS OF OPERATIONS (CONTINUED)
Noninterest Expenses
During the three months ended March 31, 1997, noninterest expenses were
$1,757,197 as compared to $643,907 during the three months ended March 31,
1996, or an increase of $113,290 or 173%. The following sets forth additional
information on certain other expenses categories which had significant changes.
Compensation and benefits increased $454,472 or 142% to $773,197 during the
three months ended March 31, 1997 from $319,266 during the three months ended
March 31, 1996. This increase is primarily due to the merger of the bank with
Key Florida Bank, F.S.B. on July 30, 1996. Prior to the merger of the two
financial institutions, the number of full time equivalent employees at the
Bank had averaged 44. Since the merger transaction occurred the average number
of full time equivalent employees is approximately 82.
Occupancy expenses increased $178,454 or 180% to $277,526 during the three
months ended March 31, 1997 from $99,072 during the three months ended March
31, 1996. This increase is also attributable to the merger with Key
Florida F.S.B. The Bank had three branch offices prior to the merger
transaction and acquired the three branch offices of Key Florida Bank, F.S.B.
Data processing expenses increased $56,961 or 140% to $97,559 during the
three months ended March 31, 1997 from $40,598 during the three months
ended March 31, 1996. This increase was the result of the merger transaction
with Key Florida Bank, F.S.B. During the fourth quarter of 1996 the Bank
converted its data processing systems to one service bureau and now has a
management information system which will allow for the continued growth of the
Bank.
FDIC insurance assessments decreased $9,312, or 23.52%, to $30,288 during the
three months ended March 31, 1997 from $39,600 during the three months ended
March 31, 1996. At March 31, 1997 the Bank is a well capitalized financial
institution under regulatory guidelines and is assessed insurance premiums at
the lowest assessable rate.
Other expenses were $578,086 for the three months ended March 31, 1997, as
compared to $145,371 during the three months ended March 31, 1996, or an
increase of $432,715, or 298%. The increase in other expenses was primarily
due to the merger with Key Florida Bank, F.S.B. resulting in the doubling in
size of the Bank. Included in Other Expenses is the amortization of the core
deposit intangible (See Note 2 to the Notes to Unaudited Financial Statements -
"Merger with Key Florida Bank, F.S.B."), which is a direct result of the
purchase of Key Florida bank, F.S.B. The amount of the amortization during the
first quarter of 1997 was $80,233. During the quarter ended March 31, 1997
the Company paid costs of $36,119 associated with its registration statement
and application fees to NASDAQ to have its stock publicly traded on the NASDAQ
market.
(25)
<PAGE> 27
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
RESULTS OF OPERATIONS (CONCLUDED)
Taxes on Income
During the three months ended March 31, 1997 and 1996, the Company and the
Bank recorded taxes on income of $121,700 and $119,283 respectively,
reflecting effective income tax rates of 35.00% in 1997 and 37.46 % in 1996.
ASSET/LIABILITY MANAGEMENT
A principal objective of the Bank's asset/liability management strategy is to
minimize it's exposure to changes in interest rates by matching the maturity
and repricing horizons of interest-earning assets and interest-bearing
liabilities. This strategy is monitored by an Asset and Liability Committee
(the "ALCO Committee") which establishes policies and monitors results to
control interest rate sensitivity.
Management evaluates interest-rate-risk and then formulates guidelines
regarding asset generation and repricing funding sources and pricing, and
off-balance sheet commitments in order to maintain interest rate risk within
target levels for the appropriate level of risk which are determined by the
ALCO Committee. The ALCO Committee uses computer models prepared by a third
party to measure the Bank's interest rate sensitivity. From these reports,
the ALCO Committee can estimate the net income effect of various interest rate
scenarios.
As a part of the Bank's interest rate risk management policy, the ALCO
Committee examines the extent to which its assets and liabilities are "interest
rate sensitive" and monitors the Bank's interest rate sensitivity "gap." An
asset or liability is considered to be interest rate sensitive if it will
reprice or mature within the time period analyzed, usually one year or less.
The interest rate sensitivity gap is the difference between interest-earning
assets and interest-bearing liabilities scheduled to mature or reprice within
such time period. A gap is considered positive when the amount of interest
rate sensitive assets exceeds the amount of interest 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 tend to adversely affect net interest
income, while a positive gap would tend to result in an increase in net
interest income. During a period of falling interest rates, a negative gap
would tend to result in an increase in net interest income, while a positive
gap would tend to adversely affect net interest income. If the repricing of
the Bank's assets and liabilities were equally flexible and moved concurrently,
the impact of any increase or decrease in interest rates on net interest income
would be minimal.
The ALCO Committee's policy is to maintain a cumulative one-year gap which
falls in the range of (5%) to 10% of total assets. Management attempts to
conform to this policy by managing the maturity distribution of its investment
portfolio and emphasizing origination's and purchases of adjustable rate loans,
and by managing the product mix and maturity of its deposit accounts.
A simple interest rate "gap" analysis by itself may not be an accurate
indicator of how net interest income will be affected by changes in interest
rates. Accordingly, the ALCO Committee also evaluates how the repayment of
particular assets and liabilities is impacted by changes in interest rates.
Income associated
(26)
<PAGE> 28
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
ASSETS/LIABILITY MANAGEMENT (CONTINUED)
with interest-earning assets and costs associated with interest-bearing
liabilities may not be affected uniformly by changes in interest rates. In
addition, the magnitude and duration of changes in interest rates may have a
significant impact on net interest income. For example, although certain
assets and liabilities may have similar maturities or periods of repricing,
they may react in different degrees to changes in market interest rates.
Interest rates on certain types of assets and liabilities fluctuate in advance
of changes in general market interest rates, while interest rates on other
types may lag behind changes in general market rates. In addition, certain
assets, such as adjustable rate mortgage loans, have features (generally
referred to as "interest rate caps") which limit changes in interest rates on a
short-term basis and over the life of the asset. In the event of a change in
interest rates, prepayment (on loans) and early withdrawal (of deposit accounts)
levels also could deviate significantly from those assumed in calculating the
interest rate gap. The ability of many borrowers to service their debts also
may decrease in the event of an interest rate increase.
Management's strategy is to maintain a balanced interest rate risk position to
protect its net interest margin from market fluctuations. To this end, the
ALCO Committee reviews, on a quarterly basis, the maturity and repricing of
assets and liabilities.
The Bank's cumulative nine month gap at March 31, 1997 was a positive 10.08%
which was within the target range established by the ALCO Committee.
Management believes that the foregoing interest rate sensitivity analysis does
not take into account the potential impact of prepayments on fixed rate loans
(which would tend to mitigate the effect of a negative gap). Also, management
believes the analysis assumes all NOW and statement savings accounts will
reprice immediately, although management considers at least a portion of such
accounts to be "core deposits" which management believes would not reprice in
direct response to changes in market interest rates, and therefore would tend
to mitigate the effect of a negative gap.
Principal among the Bank's asset/liability management strategies has been the
emphasis on managing its interest rate sensitive liabilities in a manner
designed to attempt to reduce the Bank's exposure during periods of
fluctuating interest rates. Management believes that the type and amount of
the Bank's interest rate sensitive liabilities may reduce the potential impact
that a rise in interest rates might have on the Bank's net interest income.
The Bank seeks to maintain a core deposit base by providing quality services to
its customers without significantly increasing its cost of funds or operating
expenses. The Bank's demand, money market, and NOW deposit accounts,
approximated 13.05% of total deposits at March 31, 1997. These accounts bore
a weighted average rate of 2.68% and 2.44% during the three months ended March
31, 1997, and during the three months ended March 31, 1996, respectively.
Management anticipates that these accounts will continue to comprise a
significant portion of the Bank's total deposit base. At March 31, 1997,
3.86% of total assets consisted of cash and cash equivalents and short-term
investment securities. The Bank also maintains a "floor", or minimum rate, on
certain of its floating or prime based loans. These floors allow the Bank to
continue to earn a higher rate when the floating rate falls below the
established floor rate.
(27)
<PAGE> 29
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
ASSET/LIABILITY MANAGEMENT (CONCLUDED)
The following table sets forth certain information relating to Bank's
interest-earning assets and interest-bearing liabilities at March 31, 1997
that were estimated to mature or were scheduled to reprice within the period
shown:
<TABLE>
<CAPTION>
(Dollars in thousands)
0-3 4-12 More than
Months Months One Year Total
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Loans receivable:(1)
Adjustable-rate $ 33,898 $ 53,170 $16,669 $103,737
Fixed-rate 5,479 5,575 42,484 53,538
-------- -------- ------- --------
Total loans 39,377 58,745 59,153 157,275
Federal funds sold and Federal Home
Loan Bank Overnight Account 3,076 0 0 3,076
Investment and mortgage-backed
Securities(2) 1,100 4,855 21,195 27,150
-------- -------- ------- --------
Total rate-sensitive assets $ 43,553 $ 63,600 $80,348 $187,501
-------- -------- ------- --------
Deposit accounts(2)
Money market deposits $ 9,071 $ 0 $ 0 $ 9,071
NOW and savings deposits 39,703 0 0 39,703
Certificates of deposit 31,119 58,949 29,761 119,829
-------- -------- ------- --------
Total rate-sensitive liabilities 79,893 58,949 29,761 168,603
-------- -------- ------- --------
GAP (repricing differences) $(36,340) $ 4,651 $50,587 $ 18,898
======== ======== ======= ========
Cumulative GAP $(36,340) $(31,911) $18,898
======== ======== =======
Cumulative GAP/total assets (19.38%) (17.02%) 10.08%
</TABLE>
- -------------------------
(1) In preparing the table above, adjustable-rate loans were 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
were scheduled according to their contractual maturities.
(2) Excluded noninterest bearing deposit accounts, money market, NOW, and
savings deposits were regarded as maturing immediately. All other time
deposits were scheduled through the maturity dates. Investment and
mortgage-backed securities were scheduled through their contractual
maturity dates.
(28)
<PAGE> 30
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
FINANCIAL CONDITION
Lending Activities
A significant source of income for the Company is the interest earned on loans.
At March 31 1997, the Company's total assets were $199.99 million and its net
loans were $155.92 million or 77.96% of total assets. At March 31, 1996, the
Bank's total assets were $97.77 million and its net loans were $68.4 million
or 69.96% of total assets.
Lending activities were conducted pursuant to a written policy which has been
adopted by the Bank. Each loan officer has defined lending authority beyond
which loans, depending upon their type and size, must be reviewed and approved
by loan committee comprised of certain directors of the Bank.
The following table sets forth information concerning the Company loan
portfolio by type of loan at the dates indicated:
<TABLE>
<CAPTION>
(Unaudited)
March 31, March 31,
------------------------------- ---------------------------
1997 1996
------------------------------- ---------------------------
(Dollars In Thousands)
% of % of
Amount Total Amount Total
------ --------- ------ --------
<S> <C> <C> <C> <C>
Commercial, Financial
and Agricultural Loans $ 22,237 14 $ 13,599 20
Real Estate Loans 130,301 83 50,309 73
Consumer Loans 4,737 3 5,308 7
-------- ---- --------- ----
TOTAL LOANS $157,275 100% 69,216 100%
==== ====
Less:
Deferred Loan Fees (96) (51)
Allowance for Credit Losses (1,254) (760)
-------- ---------
LOANS, NET $155,925 $ 68,405
======== =========
</TABLE>
The net loan originations were at an annualized rate of $24.1 million for the
three months ended March 31, 1997. The continued strong loan origination's
from December 31, 1996 to March 31, 1997 can be attributed to (i) continued
loan demand in the Bank's primary market areas of Manatee and Sarasota
Counties, Florida and (ii) the doubling of the Bank's branch network due to the
merger with Key Florida Bank, F.S.B. in July 1996. Also, the bank opened its
seventh branch location in January 1997 in Ellenton, Florida which has
increased its loan demand.
(29)
<PAGE> 31
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
FINANCIAL CONDITION (CONTINUED)
Asset Quality
Management seeks to maintain a high quality of assets through conservative
underwriting and sound lending practices. As of March 31, 1997 and December
31, 1996, approximately 83% and 78%, respectively, of the total loan portfolio
was collateralized by commercial and residential real estate mortgages. The
level of delinquent loans and real estate owned also is relevant to the credit
quality of a loan portfolio. As of March 31, 1997 total nonperforming assets
were $2,761,000 or 1.38% of total assets. As of December 31, 1996, total
nonperforming assets were $2,131,000 or 1.06% of total assets. For the three
months ended March 31, 1997, the total nonperforming assets to total assets
ratio increased to 1.11% from 0.80% at December 31, 1996, due in large part to
$504,000 in commercial loans being placed on nonaccrual at the end of the
quarter. Subsequent to quarter-end management restructured these loans into a
single credit and added mortgages on the borrowers residence and income
producing property to further secure the Bank's collateral position. In an
effort to maintain the quality of the loan portfolio management seeks to
minimize higher risk types of lending. In view of the relative significance of
real estate related loans, a downturn in the value of the real estate could
have an adverse impact on the Bank's profitability. However, as part of its
loan portfolio management strategy, the Bank generally limits its loans to a
maximum of 80% of the value of the underlying real estate as determined by
appraisal. In addition, knowledgeable members of management generally make
physical inspections of properties being considered for mortgage loans.
Commercial loans also entail risks since repayment is usually dependent upon
the successful operation of the commercial enterprise. They also are subject
to adverse conditions in the economy. Commercial loans are generally riskier
than mortgage loans because they are typically underwritten on the basis of the
ability to repay from the cash flow of a business rather than on the ability of
the borrower or guarantor to repay. Further, the collateral underlying a
commercial loan may depreciate over time, cannot be appraised with as much
precision as real estate, and may fluctuate in value based on the success of
the business.
Loan concentrations are defined as amounts loaned to a number of borrowers
engaged in similar activities which would cause them to be similarly impacted
by economic or other conditions. The Bank on a routine basis, monitors these
concentrations in order to consider adjustments in its lending practices to
reflect economic conditions, loan to deposit ratios, and industry trends.
Concentrations of loans in the following categories constituted the total loan
portfolio as March 31, 1997.
Commercial loans 14%
Real estate mortgage loans 83%
Installment and other loans 3%
The Loan Committee of the Board of Directors of the Bank concentrates its
efforts and resources, and that of its senior management and lending officers,
on loan review and underwriting procedures. Internal controls include ongoing
reviews of loans made to monitor documentation and the existence and valuations
of collateral. In addition, management of the Bank has established a review
process with the objective of identifying, evaluating, and initiating necessary
corrective action for marginal loans. The goal of the loan review process is
to address classified and nonperforming loans as early as possible.
(30)
<PAGE> 32
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
FINANCIAL CONDITION (CONTINUED)
Classification of Assets
Generally, interest on loans accrues and is credited to income based upon the
principal balance outstanding. It is management's policy to discontinue the
accrual of interest income and classify a loan as non-accrual when principal or
interest is past due 90 days or more and the loan is not adequately
collateralized, or when in the opinion of management, principal or interest is
not likely to be paid in accordance with the terms of the obligation. Consumer
installment loans are generally charged-off after 90 days of delinquency unless
adequately collateralized and in the process of collection. Loans are not
returned to accrual status until principal and interest payments are brought
current and future payments appear reasonably certain. Interest accrued and
unpaid at the time a loan is placed on nonaccrual status is charged against
interest income. Subsequent payments received are applied to the outstanding
principal balance.
Real estate acquired by the Bank as a result of foreclosure or by deed in lieu
of foreclosure is classified as other real estate owned ("OREO"). The Bank
considers the collateral for a loan in-substance foreclosed when the debtor has
little or no equity in the collateral, expects repayment for the loan to come
only from the operation and sale of the collateral, and the borrower has
either effectively abandoned control of the collateral or has retained control
of the collateral but will be unable to rebuild equity in collateral or repay
the loan.
OREO properties are recorded at the lower of cost or fair value estimated
selling costs, and the estimated loss, if any, is charged to the allowance for
credit losses at the time it is transferred to OREO. Further allowances for
losses in OREO, including in-substance foreclosed loans, are recorded by a
charge to operations at the time management believes additional deterioration
in value has occurred.
The following table sets forth certain information on nonaccrual loans and
other real estate owned, the ratio of such loans and other real estate owned to
total loans and total assets as of the dates indicated, and certain other
related information
(31)
<PAGE> 33
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
FINANCIAL CONDITION (CONTINUED)
Classification of Assets (Continued)
<TABLE>
<CAPTION>
At March 31, At December 31,
--------------------------- ---------------
1997 1996 1996
--------- --------- ---------------
(Dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans:
Commercial real estate $ 46 $ 0 $ 360
Residential mortgage loans 1,285 66 1,003
Commercial loans 695 500 208
Consumer and other loans 191 23 35
-------- ------- --------
Total nonaccrual loans 2,217 589 1,606
Accruing loans 90 days or more past due 96 0 0
Troubled debt restructuring 0 0 0
-------- ------- --------
Total nonperforming loans $ 2,313 $ 589 $ 1,606
======== ======= ========
Repossessed Assets:
Real estate acquired by foreclosure
or deed in lieu of foreclosure $ 120 $ 145 $ 145
Other repossessions 404 0 380
-------- ------- --------
Total Repossessed Assets $ 524 $ 145 $ 525
======== ======= ========
Total nonperforming assets $ 2,837 $ 734 $ 2,131
======== ======= ========
Total nonperforming assets to
total assets 1.42% 0.76% 1.06%
======== ======= ========
Total nonperforming loans as a
percentage of total loans 1.47% 0.85% 1.04%
======== ======= ========
Total nonperforming loans as a
percentage of total assets 1.16% 0.61% 0,80%
======== ======= ========
Period-end total loans $157,275 $69,216 $155,107
======== ======= ========
Average loans outstanding, net(1) $157,318 $67,086 $103,731
======== ======= ========
</TABLE>
(1) Average loans outstanding less the average allowance for loan losses
(32)
<PAGE> 34
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
FINANCIAL CONDITION (CONTINUED)
Classification of Assets (Concluded)
Nonperforming assets (other real estate owned, other repossessed assets and
nonaccrual loans) at March 31, 1997 were $2,837,000, an increase of $706,000 or
33.13% from December 31, 1996. As previously mentioned, $504,000 of the
increase was due to commercial loans to a single borrower that were placed on
nonaccrual status during the quarter and was restructured subsequent to
quarter-end.
As of March 31, 1997, loans 30 to 89 days delinquent totaled $3,767,000 and
consisted primarily of real estate loans totaling $3,348,000 or 88.88% of
total loans 30 to 89 days delinquent. The remaining $419,000 of loans 30 to
89 days delinquent consisted $185,000 of consumer installment loans and
$234,000 of commercial loans. Within two weeks after the quarter-end
approximately $2.35 million of delinquent loans had been brought current and
the delinquency ratio on commercial and commercial real estate loans had
improved from 3.86% to 1.12% and the delinquency ratio on residential real
estate had improved to 3.44% from 4.46%.
Due to the merger and the approximate doubling of the Bank's loan portfolio,
management continues its special review of the Bank's loan portfolio and has
instituted a number of procedures intended to improve the identification,
evaluation, and resolution of the Bank's problem assets. As a result of these
actions, the senior management and loan staff of the Bank meet periodically to
review all past due and nonperforming loans and to discuss collection efforts.
The Board of Directors of the Bank also reviews problem assets on a monthly
basis. Additionally, an independent firm has been retained to oversee periodic
loan reviews and make recommendations for improvement. The Bank's underwriting
practices also have been enhanced by the establishment of a Bank credit policy
department separate from the loan origination function and a change in loan
origination authorities.
(33)
<PAGE> 35
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
FINANCIAL CONDITION (CONTINUED)
Allowance for Loan Losses
In originating loans, the Bank recognizes that credit losses will be
experienced and that the risk of loss will vary with, among other things, the
type of loan being made, the creditworthiness of the borrower over the term of
the loan and, in the case of a collateralized loan, the quality of the loan as
well as general economic conditions. It is management's policy to attempt to
maintain an adequate allowance for loan losses based on, among other things,
the Bank's historical loan loss experience, evaluation of economic conditions
and regular reviews of any delinquencies and loan portfolio quality. Specific
allowances are provided for individual loans, in accordance with FASB No. 114,
when ultimate collection is considered questionable by management after
reviewing the current status of loans which are contractually past due and
considering the fair value of the collateral for the loan. Management
recognizes the greater inherent risks in connection with commercial and
consumer lending
Management continues to monitor the Bank's asset quality and to charge-off
loans against the allowance for credit losses when appropriate or to provide
specific loss allowances when necessary. Although management believes it uses
the best information available to make determinations with respect to the
allowance for credit losses, future adjustments may be necessary if economic
conditions differ from the economic conditions in the assumptions used in
making the initial determinations. The Bank's allowance was $1,254,458 or
0.79% of total loans at March 31, 1997. The allowance was $1,321,331 or .85%
of total loans at December 31, 1996. The lower percentage of the allowance to
total loans at March 31, 1997 was due to the increase in the residential real
estate loan portfolio which are typically lower risk loans with readily salable
collateral which bring a measure of increased asset quality.
(34)
<PAGE> 36
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
FINANCIAL CONDITION (CONTINUED)
Allowance for Loan Losses (Continued)
The following table sets forth information with respect to activity in the
Bank's allowance for loan losses during the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
Allowance at beginning of period $ 1,321 $ 704
Allowance brought forward from merger 0 528
Charge-offs:
Commercial loans (116) (111)
Real Estate 0 (30)
Consumer loans (11) (33)
-------- --------
Total loans charged-off (127) (174)
-------- --------
Recoveries 0 0
-------- --------
Net charge-offs (127) (168)
-------- --------
Provision for credit losses charged to
operating expenses 60 257
-------- --------
Allowance at end of period $ 1,254 $ 1,321
======== ========
Net charge-offs as a percentage of
average loans outstanding 0.80% 0.16%
======== ========
Allowance for credit losses as a
percentage of period-end total loans 0.79% 0.85%
======== ========
Allowance for credit losses as a
percentage of nonperforming loans 54.22% 82.25%
======== ========
Period-end total loans $157,275 $155,107
======== ========
Average loans outstanding, gross $158,580 $104,728
======== ========
</TABLE>
(35)
<PAGE> 37
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
FINANCIAL CONDITION (CONTINUED)
Allowance for Loan Losses (Concluded)
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:
<TABLE>
<CAPTION>
(Dollars in thousands)
Three Months Ended March 31, 1997 Year Ended December 31, 1996
----------------------------------- ----------------------------
% of % of
Loans to Loans to
Total Total
Amount Loans Amount Loans
------ ----- ------ -----
<S> <C> <C> <C> <C>
Commercial loans $ 482 38.4% $ 596 45.1%
Real Estate 609 48.6% 585 44.3%
Consumer loans and other 163 13.0% 140 10.6%
------ ---- ------ ----
Total allowance for
loan losses $1,254 100.0% 1,321 100.0%
====== ===== ====== =====
</TABLE>
The allowance for loan losses represented 0.79% of the total loans outstanding
as of March 31, 1997 compared with .85% of the total loans outstanding as of
December 31, 1996. The amount of the provision for loan losses charged to
expense in each of the periods presented above represents management's best
estimate during those periods of the addition necessary to establish
appropriate allowances for estimated credit losses. Such estimates were based
on management's assessment of the current and future general economic
conditions in the Bank's market area, the risk levels associated with the
particular composition of the loan portfolio during such periods, and the
Bank's past collection experience.
On a quarterly basis management performs a calculation of its required loan
loss reserve using historical loan loss rates and giving weight to risk-related
loans by loan pool groups. The Bank analyzes the reserve requirements and
based on this analysis, which again gives relative risk weight to loan pools,
the Bank has determined that its reserve balance was adequate at March 31,
1997.
Deposit Activities
Deposits are the major source of the Bank's funds for lending and other
investment purposes. Deposits are attracted principally from within the Bank's
primary market area through the offering of a broad variety of deposit
instruments including checking accounts, money market accounts, regular savings
accounts, term certificate accounts (including "jumbo" certificates in
denominations of $100,000 or more) and retirement savings plans.
Maturity terms, service fees and withdrawal penalties are established by the
Bank on a periodic basis. The determination of rates and terms is predicated
on funds acquisition and liquidity requirements, rates paid by competitors,
growth goals and federal regulations.
(36)
<PAGE> 38
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
FINANCIAL CONDITION (CONTINUED)
Deposit Activities (Continued)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------------------------------- -----------------------------
(Dollars in thousands)
% of % of
Amount Deposit Amount Deposit
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Demand deposit $ 17,281 9.30% $ 17,011 9.08%
NOW deposits 15,185 8.17% 14,902 7.95%
Money market 9,071 4.88% 11,210 5.98%
Saving accounts 24,452 13.15% 19,590 10.46%
Time deposits under $100,000 99,471 53.51% 103,050 55.00%
Time deposits $100,000 and over 20,424 10.99% 21,584 11.53%
-------- ------- -------- -------
Total deposits $185,884 100.00% $187,347 100.00%
======== ======= ======== =======
</TABLE>
Time deposits included individual retirement accounts ("IRA") totaling 10.55
million and 11.02 million as of March 31, 1997 and December 31, 1996,
respectively, all of which are in the form of certificates of deposit.
The Company's deposits decreased $1.46 million or 0.78% to $185.88 million as
of March 31, 1997, from $187.35 million as of December 31, 1996. This decrease
was primarily attributable to a decrease in time deposits under $100,000.
Management believes that the Bank does not have a concentration of deposits
from any one source, the loss of which would have a material adverse effect on
the business of the Bank. Management believes that substantially all of the
Bank's depositors are residents in its primary market area. The Bank currently
does not accept brokered deposits. As shown in the table below, a significant
amount of the Bank's certificates of deposit will mature during the year ending
December 31, 1997. The high volume of maturities during this period is
primarily due to customer demand for certificates of deposit having original
maturities of 12 months or less. Based upon current and anticipated levels of
interest rates and past practice management anticipates that substantially all
of the Bank's certificates of deposit maturing during this time period will be
renewed or replaced by certificates of deposit issued to other customers at
competitive market rates, which may be higher or lower than the rates currently
being paid. Consequently, bank management does not believe that the maturity
of the Bank's certificates of deposit during the year ended December 31, 1997
will have a material adverse effect on the Bank's liquidity. However, if the
Bank is required to pay substantially higher rates to obtain the renewal of
these or other certificates of deposit or alternative sources of funds, the
higher net interest expense could have a material adverse effect on the Bank's
net income.
As of March 31, 1997 and December 31, 1996 all time certificates of deposit
mature as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------------- --------------
<S> <C> <C>
Due in three months or less $ 31,119 $ 39,300
Due from three months to one year 58,949 50,970
Due over one year 29,761 34,364
-------------- --------------
$ 119,829 $ 124,634
============== ===============
</TABLE>
(37)
<PAGE> 39
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
FINANCIAL CONDITION (CONCLUDED)
Investment Securities
The Bank's investment securities at March 31, 1997 primarily consisted of
United States Treasury and Government Agency securities. Although investment
securities generally have a lower yield than loans, investment securities
increase the quality of the Bank's assets by virtue of the guarantees that back
them, are more liquid than loans, and may be used to collateralize borrowing or
other obligations of the Bank. Due to repayment and prepayments of the
underlying loans mortgage-backed securities are substantially less than the
scheduled maturities. Changes in interest rates may also affect the average
life, yield to maturity, and related market value of the Bank's securities
portfolio.
The following table sets forth the carrying value of investment securities held
by the Bank at the dates indicated:
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
---------------------------------- -----------------------------
Amortized Market Amortized Market
Cost Value Cost Value
--------- --------- ----------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Investment securities:
U.S. Treasury securities $ 6,451 $ 6,445 $ 6,444 $ 6,470
U.S. Government Agency securities 15,244 $15,137 $15,798 $15,723
Mortgage-backed securities 3,946 3,955 4,062 4,075
State revenue obligations 413 420 427 435
Other equity securities $ 1,193 1,193 711 711
------- ------- ------- -------
Total investment securities $27,247 $27,150 $27,442 $27,414
======== ======= ======= =======
</TABLE>
(38)
<PAGE> 40
KEY FLORIDA BANCORP, INC.
ITEM 2 - CONTINUED
FINANCIAL CONDITION (CONCLUDED)
Investment Securities (Continued)
As of March 31, 1997 and December 31, 1996, time deposits of $100,000 and over
mature as follows:
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
---------------------------------- -----------------------------
(In thousands)
<S> <C> <C>
Due in three months or less $ 5,663 $ 7,321
Due from three months to one year 10,258 8,666
Due over one year 4,437 4,147
------- -------
Total time deposits $100,000 and over $20,358 $20,134
======= =======
</TABLE>
The following table shows the average amount of and the average rate paid on
each of the following deposit account categories during the period indicated:
<TABLE>
<CAPTION>
(Dollars in thousands)
Three Months Ended Year Ended
March 31, 1997 December 31, 1996
---------------------------------- -----------------------------
Average Average Average Average
Balance Rate Balance Rate
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Demand Money Market and NOW $ 24,491 2.68% $ 19,380 2.95%
Savings deposits 22,710 4.51% 10,151 3.87%
Certificate of deposit 121,165 5.28% 87,558 5.50%
-------- ----- -------- -----
Total Interest-bearing deposits $168,366 4.80% $117,089 4.93%
======== ===== ======== =====
</TABLE>
(39)
<PAGE> 41
KEY FLORIDA BANCORP, INC.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
27 Financial Data Schedule (for SEC use only)
Reports
No reports on Form 8-K were filed during the quarter ended
March 31, 1997.
Signatures
Pursuant to the requirement 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.
KEY FLORIDA BANCORP, INC.
(REGISTRANT)
DATED: May 14, 1997 BY: /S/ Steven R. Jonsson, President
--------------------------------------------
Steven R. Jonsson, President
DATED: May 14, 1997 BY: /S/ Michael L. Hogan, Vice President/Treasurer
----------------------------------------------
Michael L. Hogan, Vice President/Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1997 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10QSB FOR THE QUARTER ENDING MARCH 31, 1997
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,641,470
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,076,181
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 27,150,110
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 157,178,127
<ALLOWANCE> 1,254,458
<TOTAL-ASSETS> 199,997,088
<DEPOSITS> 185,884,172
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,240,405
<LONG-TERM> 0
0
0
<COMMON> 27,581
<OTHER-SE> 12,844,930
<TOTAL-LIABILITIES-AND-EQUITY> 199,997,088
<INTEREST-LOAN> 3,557,479
<INTEREST-INVEST> 419,607
<INTEREST-OTHER> 4,418
<INTEREST-TOTAL> 3,981,504
<INTEREST-DEPOSIT> 2,020,030
<INTEREST-EXPENSE> 35,708
<INTEREST-INCOME-NET> 1,925,766
<LOAN-LOSSES> 60,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,757,197
<INCOME-PRETAX> 347,655
<INCOME-PRE-EXTRAORDINARY> 347,655
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 225,955
<EPS-PRIMARY> .08
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.13
<LOANS-NON> 2,217,000
<LOANS-PAST> 96,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 504,000
<ALLOWANCE-OPEN> 1,321,331
<CHARGE-OFFS> 126,904
<RECOVERIES> 31
<ALLOWANCE-CLOSE> 1,254,458
<ALLOWANCE-DOMESTIC> 1,254,458
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
