10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 2005

Commission File Number 333-74997

BANCSHARES OF FLORIDA, INC.

A Florida Corporation

IRS Employer Identification No. 59-3535315

1185 Immokalee Road

Naples, Florida 34103

(239) 254-2100

Securities Registered Pursuant to Section 12(b)

of the Securities Exchange Act of 1934: NONE

Securities Registered Pursuant to Section 12(g) of the Securities Exchange

Act of 1934: Common Stock, $0.01 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act .    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 159D0 of the Exchange Act.     Yes  ¨    No  x

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.

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  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer    ¨ Accelerated filer    x                     Non-accelerated filer    ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

The aggregate market value of the Registrant’s common stock held by non-affiliates of the Registrant, based upon the closing price of $22.00, as quoted on the NASDAQ National Market, on February 28, 2006 was approximately $110,930,000. For the purposes of this response, directors and officers of the Registrant’s common stock are considered the affiliates of the Registrant at that date.

The number of shares outstanding of the Registrant’s common stock, as of February 28, 2006: 5,943,783 shares of $.01 par value common stock.

Portions of the Proxy Statement of the Registrant for the Annual Meeting of Shareholders to be held in May 2006, are incorporated by reference into Part III of this report.

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

Table of Contents

		Page
	PART I
Item 1.	Description of Business	1
	Background and Prior Operating History	1
	Market Area and Competition	2
	Distribution of Assets, Liabilities and Stockholders’ Equity: Interest Rates and Interest Differential	4
	Return on Equity and Assets	4
	Lending Activities	5
	Summary of Loan Loss Experience	6
	Investment Activities	7
	Sources of Funds	8
	Correspondent Banking	9
	Employees	9
	Recent Accounting Pronouncements	9
	Monetary Policies	10
	Supervision and Regulation	10
Item 1A.	Risk Factors	15
Item 1B.	Unresolved Staff Comments	19
Item 2.	Properties	19
Item 3.	Legal Proceedings	20
Item 4.	Submission of Matters to a Vote of Security Holders	20
	PART II
Item 5.	Market for Common Equity and Related Stockholder Matters	20
Item 6.	Selected Financial Data	21
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	22
Item 7a.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 8.	Financial Statements and Supplementary Data	40
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	40
Item 9a.	Controls and Procedures	41
Item 9b.	Other information	42
	PART III
Item 10.	Directors and Executive Officers of the Registrant	42
Item 11.	Executive Compensation	42
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	42
Item 13.	Certain Relationships and Related Transactions	42
Item 14.	Principal Accountant Fees and Services	42
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	43
	Signatures	77

PART I

ITEM 1. DESCRIPTION OF BUSINESS

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements in this Annual Report on Form 10-K contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which statements generally can be identified by the use of forward-looking terminology, such as “may,” “will,” “expect,” “estimate,” “anticipate,” “believe,” “target,” “plan,” “project,” or “continue” or the negatives thereof or other variations thereon or similar terminology, and are made on the basis of management’s plans and current analyses of Bancshares of Florida, Inc., its business and the industry as a whole. These forward-looking statements are subject to risks and uncertainties, including, but not limited to, economic conditions, competition, interest rate sensitivity and exposure to regulatory and legislative changes. The above factors, in some cases, have affected, and in the future could affect Bancshares of Florida, Inc.’s financial performance. It is possible that our actual results could differ, possibly materially, from those expressed or implied in such forward-looking statements.

We caution our readers that the assumptions which form the basis for forward-looking statements, with respect to or that may impact earnings in future periods, including those factors listed above, are beyond our ability to control or estimate precisely. While Bancshares of Florida, Inc. periodically reassesses material trends and uncertainties affecting our results of operations and financial condition, the Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

BACKGROUND AND PRIOR OPERATING HISTORY

Bancshares of Florida, Inc., (“Bancshares”), was incorporated in Florida in September 1998 to serve as a holding company for Bank of Florida - Southwest, then a national banking association in organization. (Bancshares and its subsidiaries are collectively referred to in this report as the “Company”).

For approximately the first eleven months following its incorporation, the main activities of Bancshares centered on applying for a national bank charter, applying to become a bank holding company, hiring and training bank employees, preparing the banking facilities and premises for opening, and conducting an initial public offering of common stock to raise a minimum of $10 million to fund the startup of Bank of Florida - Southwest. By August 1999, Bancshares had received subscriptions to purchase common stock in an amount in excess of the required minimum, and on August 24, 1999, Bank of Florida - Southwest commenced operations at its office located at 3401 Tamiami Trail North in Naples, Florida. Effective January 1, 2005, Bank of Florida - Southwest became a Florida state chartered bank and officially changed its name from Bank of Florida, N.A.

On April 18, 2000, Bank of Florida Trust Company (the “Trust Company”), was incorporated under the laws of the State of Florida as a wholly owned subsidiary of Bank of Florida - Southwest. Bank of Florida Trust Company applied to the Comptroller of the Currency and was approved to engage in fiduciary services and estate planning consultation on August 23, 2000. In October 2002, the Trust Company applied to the Florida Department of Financial Services, and upon that application’s approval in March 2003, Bancshares acquired the Trust Company from Bank of Florida - Southwest. On July 16, 2004, the Trust Company received approval from the Florida Department of Financial Services to change its name from Florida Trust Company to Bank of Florida Trust Company as a means to improve the name recognition of the subsidiary with Bancshares and its affiliates. As a subsidiary of Bancshares, Bank of Florida Trust Company offers non-proprietary, third-party investment consulting services and access to an extensive, nationwide network of independent money managers.

On July 16, 2002, Bank of Florida, a newly formed state-chartered commercial bank, opened for business in Ft. Lauderdale, Florida with over $7 million in capital and on November 5, 2004, Bank of Florida – Tampa Bay opened for business with over $8 million in capital. (Bank of Florida – Southwest, Bank of Florida and Bank of Florida – Tampa Bay are collectively referred to in this report as the “Banks”).

The Banks offer a complete range of interest bearing and non-interest bearing accounts, including commercial and retail checking accounts, money market accounts, individual retirement accounts, regular interest bearing statement savings accounts, and certificates of deposit. Lending products include commercial loans, real estate loans, home equity loans and consumer/installment loans. In addition, they provide such consumer services as U.S.

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Savings Bonds, traveler’s checks, cashiers checks, safe deposit boxes, bank-by-mail services, direct deposit, on-line banking, and automatic teller services. Specialized services to commercial customers include cash management, expanded on-line banking, lock box, and Door-to-Door banking.

The holding company structure provides flexibility for expansion of our banking business through possible acquisition of other financial institutions and provision of additional banking-related services, which the traditional commercial bank may not provide under present laws. For example, banking regulations require that banks maintain a minimum ratio of capital to assets. In the event that Bank of Florida – Southwest, Bank of Florida or Bank of Florida – Tampa Bay’s growth is such that this minimum ratio is not maintained, we may borrow funds, subject to the capital adequacy guidelines of the Federal Reserve Board, and contribute them to the capital of the Banks, and otherwise raise capital in a manner that is unavailable to the Banks under existing banking regulations. In addition, the Banks may participate loans with each other such that the excess of an individual bank’s loan limit may be shared with another bank, resulting in greater retention within the holding company of the customer relationship, given acceptable credit risk and industry concentration.

The Trust Company offers and provides its customers wealth management services, including fiduciary services, as a trustee, executor, administrator, guardian, custodian of funds, asset manager (with and without discretion) and investment advisor. It provides all of the Banks with these services, generally having a representative situated in the markets that the Company serves with a link to the centralized administrative and support services in the Trust Company’s home office location in Naples, Florida.

MARKET AREA AND COMPETITION

The primary market areas of the Company are Collier and southern Lee Counties on the southwest coast of Florida (served by Bank of Florida - Southwest), Broward, Palm Beach, and parts of Miami-Dade Counties on the southeast coast of Florida (served by Bank of Florida in Ft. Lauderdale) and Hillsborough and Pinellas Counties on the west central coast of Florida (served by Bank of Florida – Tampa Bay).

Bank of Florida - Southwest has two locations in Naples (Collier County) and expects to establish a third location in Bonita Springs (southern Lee County) in early 2006. Bank of Florida is located in downtown Fort Lauderdale (Broward County) with two additional branch locations in Ft. Lauderdale (Broward County) and Boca Raton (Palm Beach County) and expects to establish a fourth location in Aventura (Miami-Dade County) in 2006. The Miami-Dade County location is presently being served out of Bank of Florida, Fort Lauderdale. Bank of Florida – Tampa Bay opened in the Harbor Island area of Tampa (Hillsborough County). Pinellas County is also being served by the Tampa location.

The Trust Company maintains its headquarters in Naples and has offices at all of the affiliate bank locations. In addition to independent investment consulting and wealth management expertise, the Trust Company offers trust and estate planning, full trust powers, custodial services, and private family office fiduciary and advisory services.

Collier and Lee Counties have approximately $19.8 billion in deposits as of June 30, 2005. Collier County is the 10^th largest deposit market in the State of Florida, with 2.87% of all deposits statewide, while Lee County is the 9^th largest with a 3.0% statewide market share. Bank of Florida - Southwest had 2.4% of all deposits in the Naples and Marco Island metropolitan statistical area as of June 30, 2005.

With deposits of $67.9 billion as of June 30, 2005, the Broward/Palm Beach County market is much larger than the Collier/Lee County market. Broward and Palm Beach Counties are the number two and three deposit markets in the State of Florida, respectively, and together account for nearly 20% of Florida’s deposits. Bank of Florida had 0.13% of all deposits in the Miami, Ft. Lauderdale and Miami Beach metropolitan statistical area as of June 30, 2005.

Hillsborough County’s total deposits are $16.9 billion as of June 2005, making it the 7^th largest deposit market in Florida with 4.9% of the state’s deposits. Bank of Florida-Tampa Bay has acquired $45.3 million or 0.1% of Hillsborough County’s deposits after just one year of operations.

The demographics of Broward and Palm Beach Counties, Collier and Lee Counties, and Hillsborough County support our plans to grow assets and deposits with limited, highly selective, full-service locations. The banking locations that we have targeted, Naples, Fort Lauderdale, Palm Beach, and Tampa Bay, by order of priority, have been among the fastest growing deposit markets in the state. As noted above, we are also planning to branch into Bonita Springs, Florida, located in southern Lee County, which is also one of the fastest growing markets in the state.

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We face substantial competition in all phases of operations from a variety of different competitors, including: (i) large national and super-regional financial institutions that have well-established branches and significant market share in the communities we serve; (ii) finance companies, investment banking and brokerage firms, and insurance companies that offer bank-like products; (iii) credit unions, which can offer highly competitive rates on loans and deposits as they receive tax advantages not available to commercial banks; (iv) other community banks, including start-up banks, that can compete with us for customers who desire a high degree of personal service; (v) technology-based financial institutions, including large national and super-regional banks offering on-line deposit, bill payment, and mortgage loan application services; and (vi) both local and out-of-state trust companies and trust service offices.

Many existing community banks with which we compete directly, as well as several new community bank start-ups, have marketing strategies similar to ours. These community banks may open new branches in the communities we serve and compete directly for customers who want the level of service offered by community banks. In addition, these banks compete directly for the same management personnel in Florida.

Various legislative actions in recent years have led to increased competition among financial institutions. With the enactment of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Interstate Banking Act”) and other laws and regulations affecting interstate bank expansion, it is easier for financial institutions located outside of the State of Florida to enter the Florida market, including our targeted markets. In addition, recent legislative and regulatory changes and technological advances have enabled customers to conduct banking activities without regard to geographic barriers, through computer and telephone-based banking and similar services. There can be no assurance that the United States Congress, the Florida Legislature, or the applicable bank regulatory agencies will not enact legislation or promulgate rules that may further increase competitive pressures on us.

3

DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS’ EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL

The following is a presentation of the average consolidated balance sheets of the Company for the five years ended December 31, 2005. This presentation includes all major categories of interest-earning assets and interest-bearing liabilities (In Thousands):

	YEAR ENDED DECEMBER 31,
	2005		2004		2003		2002		2001
ASSETS
Cash and due from banks	$	16,621	$	15,527	$	8,926	$	3,247	$	2,669
Federal funds sold		45,849		17,576		6,682		7,975		6,224
Investment securities & interest earning deposits		18,934		9,079		13,549		2,539		1,295
Loans		400,897		260,385		145,113		84,199		50,866
Total interest-earning assets		465,680		287,040		165,344		94,713		58,385
Other assets		15,201		7,367		4,291		4,931		1,990
Total assets	$	497,502	$	309,934	$	178,561	$	102,891	$	63,044
LIABILITIES AND STOCKHOLDERS’ EQUITY
Savings deposits	$	5,185	$	2,842	$	1,072	$	873	$	641
Time deposits		168,065		132,514		71,170		55,066		32,668
Other interest bearing deposits		183,835		96,776		64,092		20,263		13,282
Other borrowings		6,594		2,250		2,020		611		998
Total interest bearing liabilities		363,679		234,382		138,354		76,813		47,589
Non-interest bearing deposits		74,847		41,305		18,107		12,320		6,515
Other liabilities		7,523		1,350		291		212		135
Total liabilities		446,049		277,037		156,752		89,345		54,239
Stockholders’ equity		51,453		32,897		21,809		13,546		8,805
Total liabilities and stockholders’ equity	$	497,502	$	309,934	$	178,561	$	102,891	$	63,044

Note: An analysis and related discussion of the net interest earnings for the latest two fiscal years is included in the “Results of Operations” section of Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

RETURN ON EQUITY AND ASSETS

Returns on average consolidated assets and average consolidated equity for the three years ended December 31, 2005 were as follows:

	2005		2004		2003
Return on average assets	0.98	%	(0.93	)%	(1.52	)%
Return on average common stockholders’ equity	9.79	%	(9.57	)%	(12.42	)%
Average equity to average assets ratio	10.34	%	10.61	%	12.21	%
Dividend payout ratio	0.00	%	0.00	%	0.00	%

4

LENDING ACTIVITIES

The Company engages, through the Banks, in a large complement of lending activities, including commercial, consumer/installment, and real estate loans.

The majority of the Company’s lending activities is conducted principally with customers located in the Naples, Ft. Lauderdale, Palm Beach and Tampa, Florida areas. Construction loans are comprised of commercial real estate and residential 1 to 4 family loans. Commercial loans are primarily extended to small and mid-sized corporate borrowers in service and manufacturing related industries. Collateral held varies but may include compensating balances, accounts receivable, inventory, property, plant and equipment and income producing commercial properties. Although the Banks’ loan portfolio is diversified, a significant portion of its loans are collateralized by real estate. Therefore, the Banks could be susceptible to economic downturns and natural disasters.

Commercial lending is directed principally towards businesses whose demands for funds fall within the Banks’ legal lending limits and who are potential deposit customers. For presentation purposes, the commercial lending category includes loans made to individual, partnership or corporate borrowers, and obtained for a variety of business purposes. Particular emphasis is placed on loans to small and medium-sized businesses. Real estate loans consist of residential and commercial first mortgage loans, second mortgage financing and construction loans. Lines of credit include home equity, commercial, and consumer lines of credit. Consumer loans consist primarily of installment loans to individuals for personal, family and household purposes.

The Banks have correspondent relationships with several banks, as well as with each other, whereby they can engage in the sale and purchase of loan participations. Participations purchased, if any, are entered into using the same underwriting criteria that would be applied if we had originated the loan. This includes credit and collateral analyses and maintenance of complete credit files on each participation purchased that is consistent with the credit files that we maintain on our customers.

The following table presents various categories of loans contained in the Company’s loan portfolio and the total amount of all loans as of the dates indicated (In Thousands).

	DECEMBER 31,
TYPE OF LOAN	2005			2004			2003			2002			2001
Loans held for sale - 1-4 Family	$	1,323		$	—		$	—		$	—		$	—
Residential 1-4 Family	$	64,805		$	60,124		$	37,294		$	33,454		$	19,713
Commercial real estate		180,039			103,597			66,746			21,022			6,053
Real estate – construction		141,534			65,172			27,779			18,056			9,219
Multifamily		25,255			14,627			3,624			1,699			918
Total real estate loans		411,633			243,520			135,443			74,231			35,903
Commercial loans		36,834			42,721			34,217			12,597			11,468
Lines of credit		26,393			23,871			20,748			13,930			18,067
Consumer loans		11,391			15,869			10,082			5,131			2,968
Total loans held for investment		486,251			325,981			200,490			105,889			68,406
Allowance for loan losses		(4,603	)		(2,817	)		(1,568	)		(907	)		(494	)
Deferred loan (fees) costs, net		(852	)		(202	)		(115	)		(47	)		(64	)
Net loans held for investment	$	480,796		$	322,962		$	198,807		$	104,935		$	67,848

The Company does not presently have, nor intends to implement, a rollover policy with respect to its loan portfolio. At December 31, 2005, approximately 85% of the Company’s loan portfolio is concentrated in real estate loans. All loans are recorded according to original terms, and demand loans, overdrafts and loans having no stated repayment terms or maturity are reported as due in one year or less.

5

The following is an analysis of maturities of loans as of December 31, 2005 (In Thousands):

TYPE OF LOAN	DUE IN 1 YEAR OR LESS		DUE IN 1 TO 5 YEARS		DUE AFTER 5 YEARS		TOTAL
Residential one-to-four family	$	24,722	$	19,312	$	22,094	$	66,128
Commercial real estate		126,281		53,758		—		180,039
Real estate – construction		80,664		60,870		—		141,534
Multifamily		19,292		5,607		356		25,255
Total real estate loans		250,959		139,547		22,450		412,956
Commercial		20,474		10,646		5,714		36,834
Lines of Credit		7,737		6,955		11,701		26,393
Consumer loans		3,647		5,290		2,454		11,391
Total loans held for investment and sale	$	282,817	$	162,438	$	42,319	$	487,574
TYPE OF LOAN	DUE IN 1 YEAR OR LESS		DUE IN 1 TO 5 YEARS		DUE AFTER 5 YEARS		TOTAL
Fixed rate loans	$	16,218	$	39,266	$	32,654	$	88,138
Floating rate loans		266,599		123,172		9,665		399,436
Total loans held for investment and sale	$	282,817	$	162,438	$	42,319	$	487,574

Management has established a policy to discontinue accruing interest (non-accrual status) on a loan after it has become 90 days delinquent as to payment of principal or interest unless the loan is considered to be well collateralized and is actively in the process of collection. In addition, a loan will be placed on non-accrual status before it becomes 90 days delinquent if management believes that the borrower’s financial condition is such that collection of interest or principal is doubtful. Interest previously accrued but uncollected on such loans is reversed and charged against current income when the receivable is determined to be uncollectible. Interest income on non-accrual loans is recognized only as received.

At December 31, 2005, the Company had five loans on non-accrual totaling approximately $321,000. At December 31, 2004, the Company had four loans on non-accrual totaling approximately $544,000, of which $20,000 is SBA guaranteed. At December 31, 2005, there were no loans outstanding that were contractually 90 days or more and still accruing interest. At December 31, 2004, there were loans totaling $42,000 that were contractually past due 90 days or more as to principal or interest payments and still accruing. The Company did not have any loans that would be defined as troubled debt restructuring at December 31, 2005 or 2004.

SUMMARY OF LOAN LOSS EXPERIENCE

The allowance for loan losses is established based upon management’s evaluation of the probable losses in its loan portfolio. In analyzing the adequacy of the allowance, management considers its review as well as the results of independent internal and external credit reviews, changes in the composition and volume of the loan portfolio, levels of non-performing and charged-off loans, value of the underlying collateral, local and national economic conditions, and other factors.

The allowance for loan losses is comprised of: (1) a component for individual loan impairment measured according to SFAS No. 114, “Accounting by Creditors for Impairment of a Loan” , and (2) a measure of collective loan impairment according to SFAS No. 5, “Accounting for Contingencies”. The allowance for loan losses is established and maintained at levels deemed adequate to cover losses inherent in the portfolio as of the balance sheet date. This estimate is based upon management’s evaluation of the risks in the loan portfolio and changes in the nature and volume of loan activity. Estimates for loan losses are derived by analyzing historical loss experience, current trends in delinquencies and charge-offs, historical peer bank experience, changes in the size and composition of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.

6

Although the allowance for loan losses was determined by category of loans, the entire allowance is available to absorb losses from any category. The allowance for loan losses was allocated for each of those years as follows (In Thousands):

	2005				2004				2003				2002				2001
	AMOUNT		% LOANS IN EACH CATEGORY		AMOUNT		% LOANS IN EACH CATEGORY		AMOUNT		% LOANS IN EACH CATEGORY		AMOUNT		% LOANS IN EACH CATEGORY		AMOUNT		% LOANS IN EACH CATEGORY
Residential one-to-four family	$	286	13.6	%	$	218	18.4	%	$	107	18.6	%	$	144	31.6	%	$	55	28.8	%
Commercial real estate		1,516	36.9	%		541	31.8	%		401	33.3	%		121	19.8	%		97	8.9	%
Real estate - construction		1,675	29.0	%		326	20.0	%		139	13.9	%		90	17.1	%		55	13.5	%
Multifamily		248	5.2	%		133	4.5	%		30	1.8	%		16	1.6	%		8	1.3	%
Total real estate		3,725	84.7	%		1,218	74.7	%		677	67.6	%		371	70.1	%		215	52.5	%
Commercial		480	7.6	%		829	13.1	%		468	17.1	%		213	11.9	%		121	16.8	%
Lines of credit		241	5.4	%		463	7.3	%		284	10.3	%		236	13.2	%		136	26.4	%
Consumer		157	2.3	%		307	4.9	%		139	5.0	%		87	4.8	%		22	4.3	%
Total	$	4,603	100.0	%	$	2,817	100.0	%	$	1,568	100.0	%	$	907	100.0	%	$	494	100.0	%

An analysis of the Company’s allowance for loan losses and loan loss experience (charge-offs) is furnished in the following table for the most recent five years ended December 31, as indicated (In Thousands):

Type of Loan	2005			2004			2003			2002			2001
Balance at beginning of year	$	2,817		$	1,568		$	907		$	494		$	281
Charge-offs:
Consumer		(47	)		(26	)		(20	)		(18	)		(2	)
Commercial		(77	)		(14	)		(153	)		(56	)		—
Real estate mortgage		—			—			(3	)		—			—
Recoveries:
Consumer		7			—			—			—			—
Commercial		—			10			4			—			—
Net charge-offs		(117	)		(30	)		(172	)		(74	)		(2	)
Provision for loan losses charged to operations		1,903			1,279			833			487			215
Balance at end of year	$	4,603		$	2,817		$	1,568		$	907		$	494
Asset Quality Ratios
Net charge-offs during the year to average loans outstanding during the year		0.03	%		0.01	%		0.16	%		0.09	%		0.00	%
Allowance for loan losses to total loans		0.94	%		0.86	%		0.78	%		0.86	%		0.72	%
Allowance for loan losses to non-performing assets		1435.40	%		480.70	%		3336.17	%		352.82	%		207.65	%
Nonperforming loans to total loans		0.07	%		0.18	%		0.02	%		0.24	%		0.35	%
Nonperforming assets to total assets		0.06	%		0.14	%		0.02	%		0.18	%		0.31	%

INVESTMENT ACTIVITIES

The Company invests primarily in obligations of the United States or obligations guaranteed as to principal and interest by the United States and other taxable securities. The Banks enter into Federal Funds transactions with their principal correspondent banks, and primarily act as net sellers of such funds. The sale of Federal Funds amounts to short-term loans from the Banks to other banks.

The Company’s investment activities are governed internally by a written, board-approved policy. The investment policy is carried out by the Corporate Asset/Liability Management Committee (“ALCO”), which meets regularly to review the economic environment and establish investment strategies. The ALCO has much broader responsibilities, which are discussed further in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the captions “Capital Resources and Liquidity” and “Interest Sensitivity”.

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The following table represents the amortized cost of the Company’s investments for the periods ending December 31, (In Thousands):

	DECEMBER 31,
INVESTMENT CATEGORY	2005		2004		2003
Obligations of U.S. Treasury and other U.S. government agencies	$	14,030	$	21,993	$	2,499
Mortgage-backed securities		4,827		3,943		5,078
Other bonds		25		—		500
Independent Bankers’ Bank of Florida Stock		51		51		51
Total	$	18,933	$	25,987	$	8,128

For further detailed information as to the amortized cost, fair value, respective maturities and weighted average yields of the Company’s investments, please see “Note 2-Securities” of the “Notes to Consolidated Financial Statements”.

SOURCES OF FUNDS

The Company’s primary funding source for lending, investments and other general business purposes is deposits. The Company offers a wide range of interest bearing and non-interest bearing accounts, including commercial and retail checking accounts, negotiable order of withdrawal (“NOW”) accounts, money market accounts with limited transactions, individual retirement accounts, regular interest-bearing statement savings accounts, certificates of deposit with a range of maturity date options, and accessibility to a customer’s deposit relationship through on-line banking. Commercial customers additionally have cash management, expanded on-line banking, lock box, and Door-to-Door banking depositor services. The sources of deposits are residents, businesses and employees of businesses within the Banks’ market areas, obtained through the personal solicitation of the Banks’ officers and directors, direct mail solicitation and limited advertisements published in the local media. The Banks pay competitive interest rates on time and savings deposits. In addition, the Banks have implemented a service charge fee schedule competitive with other financial institutions in the Company’s market areas, covering such matters as maintenance fees on checking accounts, per item processing fees on checking accounts, returned check charges, and other similar charges.

In addition to deposits, another principal source of funds is loan repayments. If necessary, additional funding is available to the Banks by borrowing from the Federal Home Loan Bank (“FHLB”). Our FHLB lending capacity provides a line of credit up to 20% of total assets for the Bank of Florida – Southwest and 10% of assets for Bank of Florida based in Ft. Lauderdale. Bank of Florida-Southwest and Bank of Florida also issued subordinated debt during 2005 to assist in their capital funding needs. See “Note-6 Deposits”, “Note 7-Subordinated Debt” and “Note 8-Federal Home Loan Bank Advances” of the “Notes to Consolidated Financial Statements” for further information.

The following table presents, for the three years ended December 31, 2005, the average amount of and average rate paid on each of the following funding categories:

FUNDING CATEGORY	AVERAGE AMOUNT (IN THOUSANDS)						AVERAGE RATE PAID
	2005		2004		2003		2005		2004		2003
Non-interest-bearing demand deposits	$	74,847	$	41,305	$	18,107	—		—		—
Savings deposits		5,185		2,842		1,072	1.37	%	1.41	%	0.42	%
Time deposits		168,065		132,514		71,170	3.31	%	2.75	%	3.31	%
Other interest-bearing deposits		183,835		96,776		64,092	1.82	%	1.24	%	1.40	%
Other borrowings		6,594		2,250		2,020	5.79	%	3.02	%	1.11	%
Total Funding	$	438,526	$	275,687	$	156,461	2.57	%	2.10	%	2.74	%

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CORRESPONDENT BANKING

Correspondent banking involves the provision of services by one bank to another bank that cannot provide that service for itself from an economic or practical standpoint. The Banks purchase correspondent services offered by larger banks, including check collections, purchase of Federal Funds, security safekeeping, investment services, coin and currency supplies, liquidity loan participations and sales of loans to or participations with correspondent banks.

The Banks are involved in loan participations to correspondent banks as well as each other with respect to loans that exceed the individual Bank’s respective lending limits. Management of the Banks have established primary correspondent relationships with the Independent Bankers’ Bank of Florida, Busey Bank, FSB Florida, Columbus Bank & Trust (a Synovus member bank), and The Bankers Bank of Georgia. At December 31, 2005, available lines of credit with correspondent banks amounted to $20,300,000.

EMPLOYEES

At December 31, 2005, the Company employed 153 full-time-equivalent employees, none of whom were represented by a union or collective bargaining agreement. The Company will hire additional persons as needed on a full-time and part-time basis, including additional tellers and customer service representatives to support its growth objectives.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2005, the FASB issued FASB Statement No. 154, “Accounting Changes and Error Corrections-a replacement of APB Opinion 20 and FASB Statement 3.” This Statement provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. This statement also provides guidance for determining whether retrospective application of a change is impracticable and for reporting a change when retrospective application is impracticable. This statement shall be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Management believes this Statement will not have a material effect on the Company’s consolidated financial statements.

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

On December 16, 2004, the FASB issued FASB Statement No. 123(R), Share-Based Payment. Statement 123(R) replaces FASB Statement No. 123, Accounting for Stock-Based Compensation, supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees and amends FASB Statement No. 95, Statement of Cash Flows. Statement 123(R) requires that all share-based payments to employees, including grants of employee stock options, be recognized in the financial statements based on their fair values. The provisions of Statement 123(R) are effective prospectively as of the first interim or annual reporting period that begins after June 15, 2005. On March 30, 2005, the SEC Staff issued Staff Accounting Bulletin No. 107, “Application of FASB Statement 123R, Share-Based Payment” which amends the effective date to begin the first annual period beginning after June 15, 2005. In anticipation of the adoption of SFAS No. 123(R), the Company accelerated vesting of nearly all outstanding unvested stock options and warrants (“Instruments”) to purchase shares of common stock on December 14, 2005. The decision to accelerate the vesting of these instruments, which the Company believes to be in the best interest of its stockholders, was made primarily to reduce non-cash compensation expense that would have been recorded in its statements of operations in future periods upon the adoption of SFAS 123(R) beginning in January 2006. As a result, the implementation of this statement is expected to result in an additional $49,000 in expense for fiscal year 2006, based on current options outstanding.

In the second quarter of 2004, the Emerging Issues Task Force (“EITF”) released EITF Issue 03-01, “The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments.” The Issue provided guidance for evaluating whether an investment is other-than-temporarily impaired and requires certain disclosures with respect to these investments. On September 30, 2004, the FASB issued FASB Staff position (“FSP”) EITF 3- 1-1,

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“Effective Date of Paragraph 10-20 of EITF Issue 03-1, “The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments.” This Staff Position delayed certain measurement and recognition provisions of EITF 03-1. Please see “Note 2 – Securities” of the “Notes to Consolidated Financial Statements” for information relating to the required disclosures with respect to these investments.

MONETARY POLICIES

The results of operations of the Company are affected by credit policies of monetary authorities, particularly the Board of Governors of the Federal Reserve System (“Federal Reserve”). The instruments of monetary policy employed by the Federal Reserve include open market operations in U.S. government securities, changes in the discount rate on member bank borrowings, changes in reserve requirements against member bank deposits, and limitations on interest rates which member banks may pay on time and savings deposits. In view of changing conditions in the national economy and in the money markets, as well as the effect of action by monetary and fiscal authorities, including the Federal Reserve Board, no accurate prediction can be made as to possible future changes in interest rates, deposit levels, loan demand or the business and earnings of the Company.

SUPERVISION AND REGULATION

Banks and their holding companies, and their affiliates, are extensively regulated under both federal and state law. The following is a brief summary of certain statutes, rules, and regulations affecting the Company, the Banks and the Trust Company. This summary is qualified in its entirety by reference to the particular statutory and regulatory provisions referred to below and is not intended to be an exhaustive description of the statutes or regulations applicable to the business of the Company, the Banks or the Trust Company. Any change in the applicable law or regulation may have a material effect on the business and prospects of the Company, the Banks and the Trust Company. Supervision, regulation, and examination of banks by regulatory agencies are intended primarily for the protection of depositors, rather than shareholders.

Bank Holding Company Regulation. The Company is a bank holding company and a member of the Federal Reserve System under the Bank Holding Company (“BHC”) Act of 1956. As such, the Company is subject to the supervision, examination and reporting requirements of the BHC Act and the regulations of the Federal Reserve. The Company is required to furnish to the Federal Reserve an annual report of its operations at the end of each fiscal year, and such additional information as the Federal Reserve may require pursuant to the BHC Act. The BHC Act requires that a bank holding company obtain the prior approval of the Federal Reserve before: (i) acquiring direct or indirect ownership or control of more than 5% of the voting shares of any bank; (ii) taking any action that causes a bank to become a subsidiary of the bank holding company; or (iii) merging or consolidating with any other bank holding company.

The BHC Act further provides that the Federal Reserve may not approve any transaction that would result in a monopoly or would be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking in any section of the United States, or the effect of which may be to lessen competition or to tend to create a monopoly in any section of the country, or that in any other manner would be in restraint of trade, unless the anti-competitive effects of the proposed transaction are clearly outweighed by the public interest in meeting the convenience and needs of the community to be served. The Federal Reserve is also required to consider the financial and managerial resources and future prospects of the bank holding companies and banks concerned and the convenience and needs of the community to be served. Consideration of financial resources generally focuses on capital adequacy and consideration of convenience and needs issues, including the party’s performance under the Community Reinvestment Act of 1977 (the “CRA”), which is discussed below.

Community Reinvestment Act. Banks are subject to the provisions of the Community Reinvestment Act (“CRA”). Under the terms of the Community Reinvestment Act, the appropriate federal bank regulatory agency is required, in connection with its examination of a bank, to assess such bank’s record in meeting the credit needs of the community served by that bank, including low- and moderate-income neighborhoods. The regulatory agency’s assessment of the bank’s record is made available to the public. Further, such assessment is required of any bank which has applied to: (i) charter a national bank; (ii) obtain deposit insurance coverage for a newly chartered institution; (iii) establish a new branch office that will accept deposits; (iv) relocate an office; or (v) merge or consolidate with, or acquire the assets or assume the liabilities of, a federally regulated financial institution. In the case of a bank holding company applying for approval to acquire a bank or other bank holding company, the Federal Reserve will assess the record of each subsidiary bank of the applicant BHC, and such records may be the basis for denying the application.

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Gramm-Leach-Bliley Act. This act permits the creation of new financial services holding companies that can offer a full range of financial products under a regulatory structure based on the principle of functional regulation. The legislation eliminates the legal barriers to affiliations among banks and securities firms, insurance companies, and other financial services companies. The law also provides financial organizations with the opportunity to structure these new financial affiliations through a holding company structure as a financial subsidiary of a national bank. The new law reserves the role of the Federal Reserve as the supervisor for bank holding companies. At the same time, the law also provides a system of functional regulation which is designed to utilize the various existing federal and state regulatory bodies. The law also sets up a process for coordination between the Federal Reserve and the Secretary of the Treasury regarding the approval of new financial activities for both bank holding companies and national bank financial subsidiaries.

The law also mandates a minimum federal standard of financial privacy. Financial institutions are required to have written privacy policies that must be disclosed to customers. The disclosure of a financial institution’s privacy policy must take place at the time a customer relationship is established and not less than annually during the continuation of the relationship. The act also provides for the functional regulation of bank securities activities. The law repeals the exemption that banks were afforded from the definition of “broker”, and replaces it with a set of limited exemptions that allows the continuation of some historical activities performed by banks. In addition, the act amends the securities laws to include banks within the general definition of dealer. Regarding new bank products, the law provides a procedure for handling products sold by banks that have securities elements. Under the law, financial holding companies and banks that desire to engage in new financial activities are required to have satisfactory or better CRA ratings when they commence the new activity.

Sarbanes-Oxley Act. The purpose of the Sarbanes-Oxley Act is to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes.

The Sarbanes-Oxley Act amends the Securities Exchange Act of 1934 to prohibit a registered public accounting firm from performing specified nonaudit services contemporaneously with a mandatory audit. The Sarbanes-Oxley Act also vests the audit committee of an issuer with responsibility for the appointment, compensation, and oversight of any registered public accounting firm employed to perform audit services. It requires each committee member to be a member of the board of directors of the issuer, and to be otherwise independent. The Sarbanes-Oxley Act further requires the chief executive officer and chief financial officer of an issuer to make certain certifications as to each annual or quarterly report.

In addition, the Sarbanes-Oxley Act requires officers to forfeit certain bonuses and profits under certain circumstances. Specifically, if an issuer is required to prepare an accounting restatement due to the material noncompliance of the issuer as a result of misconduct with any financial reporting requirement under the securities laws, the chief executive officer and chief financial officer of the issuer shall be required to reimburse the issuer for: (1) any bonus or other incentive-based or equity-based compensation received by that person from the issuer during the 12-month period following the first public issuance or filing with the Securities and Exchange Commission (“SEC”) of the financial document embodying such financial reporting requirement; and (2) any profits realized from the sale of securities of the issuer during that 12-month period.

The Sarbanes-Oxley Act also instructs the SEC to require by rule:

• disclosure of all material off-balance sheet transactions and relationships that may have a material effect upon the financial status of an issuer; and

• the presentation of pro-forma financial information in a manner that is not misleading, and which is reconcilable with the financial condition of the issuer under generally accepted accounting principles.

The Sarbanes-Oxley Act also prohibits insider transactions in the company’s stock held within its pension plans during lock out periods, and any profits on such insider transactions are to be disgorged. In addition, there is a prohibition of company loans to its executives, except in certain circumstances. The SEC also requires the company to issue a code of ethics for senior financial officers of the company. Further, the Sarbanes-Oxley Act adds a criminal penalty of fines and imprisonment of up to 10 years for securities fraud.

Regulation W. Regulation W comprehensively implements Sections 23A and 23B of the Federal Reserve Act. Sections 23A and 23B and Regulation W restrict loans by a depository institution to its affiliates, asset

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purchases by depository institutions from its affiliates, and other transactions between a depository institution and its affiliates. Regulation W unifies in one public document, the Federal Reserve’s interpretations of sections 23A and 23B.

Bank Regulation. Bank of Florida – Southwest, Bank of Florida and Bank of Florida – Tampa Bay are state chartered banks, subject to the supervision and regulation of the Florida Department of Financial Services (the “Department”) and the Federal Deposit Insurance Corporation (“FDIC”). The FDIC serves as the primary federal regulator and the administrator of the fund that insures the deposits of the Banks. The Banks are subject to comprehensive regulation, examination and supervision by the Department and the FDIC and are subject to other laws and regulations applicable to banks. Among the statutes and regulations to which the Banks are subject are limitations on loans to a single borrower and to their directors, officers and employees; restrictions on the opening and closing of branch offices; the maintenance of required capital and liquidity ratios; the granting of credit under equal and fair conditions; and the disclosure of the costs and terms of such credit. The Banks are examined periodically by the FDIC and the Department, to which the Banks submit periodic reports regarding their financial condition and other matters. The FDIC and the Department have a broad range of powers to enforce regulations under their jurisdiction, and to take discretionary actions determined to be for the protection, safety and soundness of banks, including the institution of cease and desist orders and the removal of directors and officers. The FDIC and the Department also have the authority to approve or disapprove mergers, consolidations, and similar corporate actions.

Our subsidiary banks are also subject to “cross-guarantee” provisions under federal law that provide if one FDIC-insured depository institution of a multi-bank holding company fails or requires FDIC assistance, the FDIC may assess a “commonly controlled” depository institution for the estimated losses suffered by the FDIC. Such liability could have a material adverse effect on the financial condition of any assessed bank and the holding company. While the FDIC’s claim is junior to the claims of depositors, holders of secured liabilities, general creditors and subordinated creditors, it is superior to the claims of shareholders and affiliates.

Under federal law, federally insured banks are subject, with certain exceptions, to certain restrictions on any extension of credit to their parent holding companies or other affiliates, on investment in the stock or other securities of affiliates, and on the taking of such stock or securities as collateral from any borrower. In addition, banks are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit or the providing of any property or service.

The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”) contains capital standards for bank holding companies and banks and civil and criminal enforcement provisions. FIRREA also provides that a depository institution insured by the FDIC can be held liable for any loss incurred by, or reasonably expected to be incurred by, the FDIC in connection with (i) the default of a commonly controlled FDIC insured depository institution, or (ii) any assistance provided by the FDIC to a commonly controlled FDIC insured institution in danger of default.

The FDIC Improvement Act of 1991 (“FDICIA”) enacted a number of provisions addressing the safety and soundness of deposit insurance funds, supervision, accounting, prompt regulatory action, and also implemented other regulatory improvements. The cost for conducting an examination of an institution may be assessed to that institution, with special consideration given to affiliates and any penalties imposed for failure to provide information requested. FDICIA also re-codified then current law restricting extensions of credit to insiders under the Federal Reserve Act.

USA Patriot Act. The terrorist attacks in September 2001, have impacted the financial services industry and led to federal legislation that attempts to address certain issues involving financial institutions. On October 26, 2001, President Bush signed into law the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA Patriot Act”).

Part of the USA Patriot Act is the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 (“IMLA”). IMLA authorizes the Secretary of the Treasury, in consultation with the heads of other government agencies, to adopt special measures applicable to banks, bank holding companies, and other financial institutions. These measures may include enhanced recordkeeping and reporting requirements for certain financial transactions that are of primary money laundering concern, due diligence requirements concerning the beneficial ownership of certain types of accounts, and restrictions or prohibitions on certain types of accounts with foreign financial institutions.

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Among its other provisions, IMLA requires each financial institution to: (i) establish an anti-money laundering program; (ii) establish due diligence policies, procedures and controls with respect to its private banking accounts and correspondent banking accounts involving foreign individuals and certain foreign banks; and (iii) avoid establishing, maintaining, administering, or managing correspondent accounts in the United States for, or on behalf of, a foreign bank that does not have a physical presence in any country. In addition, IMLA contains a provision encouraging cooperation among financial institutions, regulatory authorities and law enforcement authorities with respect to individuals, entities and organizations engaged in, or reasonably suspected of engaging in, terrorist acts or money laundering activities. IMLA expands the circumstances under which funds in a bank account may be forfeited and requires covered financial institutions to respond under certain circumstances to requests for information from federal banking agencies within 120 hours. IMLA also amends the BHC Act and the Bank Merger Act to require the federal banking agencies to consider the effectiveness of a financial institution’s anti-money laundering activities when reviewing an application under these acts.

Transactions with Affiliates. In addition to the limitations imposed by Regulation W, there are various legal restrictions on the extent to which the Banks may engage in loan transactions with the Company and its subsidiaries and other affiliates. Subject to certain limited exceptions, the Banks may not extend credit to the Company or any one of the Banks’ affiliates in excess of ten percent of the Bank’s capital stock and surplus, or to all affiliates, in the aggregate, in excess of twenty percent of the Banks’ capital stock and surplus. All extensions of credit by the Banks to an affiliate must be fully collateralized by high quality collateral.

Transactions involving extensions of credit to the Banks’ affiliates are subject to further limitations. These additional limitations are also applicable to: (1) transactions involving the purchase of assets or securities from affiliates; (2) extensions of credit and other transactions by the Banks to or with third persons where there is a benefit to an affiliate; (3) contracts in which the Banks provide services to an affiliate; and (4) transactions in which an affiliate receives a brokerage commission in a transaction involving the Banks. All such transactions must be on terms and under circumstances, including credit standards, that are substantially the same, or at least as favorable to the Banks as those prevailing at the time for comparable transactions with or involving other nonaffiliated companies.

Dividends. The Company’s ability to pay cash dividends will depend almost entirely upon the amount of dividends that the Banks are permitted to pay by statutes or regulations. Additionally, the Florida Business Corporation Act provides that the Company may only pay dividends if the dividend payment would not render it insolvent, or unable to meet its obligations as they come due.

Effective January 1, 2005, all of the Banks and the Trust Company are Florida state-chartered institutions. The Department limits the Banks’ ability to pay dividends. As state-chartered institutions, the Banks and the Trust Company are subject to regulatory restrictions on the payment of dividends, including a prohibition of payment of dividends from their capital under certain circumstances without the prior approval of the Department. Except with the prior approval of the Department, all dividends of any Florida bank or trust company must be paid out of retained net profits from the current period and the previous two years, after deducting expenses, including losses and bad debts. In addition, state-chartered banks and trust companies in Florida are required to transfer at least 20% of their net income to surplus until their surplus equals the amount of paid-in capital.

The Company does not anticipate that the subsidiary banks will pay dividends in the foreseeable future in so that they can maintain their well capitalized status and retain any earnings to support their growth.

Capital Requirements. The federal bank regulatory authorities have adopted risk-based capital guidelines for banks and bank holding companies that are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks and bank holding companies. The resulting capital ratios represent qualifying capital as a percentage of total risk-weighted assets and off-balance sheet items. The guidelines are minimums, and the federal regulators have noted that banks and bank holding companies contemplating significant expansion programs should not allow expansion to diminish their capital ratios and should maintain all ratios well in excess of the minimums. The current guidelines require all bank holding companies and federally-regulated banks to maintain a minimum risk-based total capital ratio equal to 8%, of which at least 4% must be Tier 1 capital. Tier 1 capital includes common stockholders’ equity, qualifying perpetual preferred stock, and minority interests in equity accounts of consolidated subsidiaries, but excludes goodwill and most other intangibles and excludes the allowance for loan and lease losses. Tier 2 capital includes the excess of any preferred stock not included in Tier 1 capital, mandatory convertible securities, hybrid capital instruments, subordinated debt and intermediate term-preferred stock, and general reserves for loan and lease losses up to 1.25% of risk-weighted assets.

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FDICIA contains “prompt corrective action” provisions pursuant to which banks are to be classified into one of five categories based upon capital adequacy, ranging from “well capitalized” to “critically undercapitalized” and which require (subject to certain exceptions) the appropriate federal banking agency to take prompt corrective action with respect to an institution which becomes “significantly undercapitalized” or “critically undercapitalized”.

In general, the regulations define the five capital categories as follows: (i) an institution is “well capitalized” if it has a total risk-based capital ratio of 10% or greater, has a Tier 1 risk-based capital ratio of 6% or greater, has a leverage ratio of 5% or greater and is not subject to any written capital order or directive to meet and maintain a specific capital level for any capital measures; (ii) an institution is “adequately capitalized” if it has a total risk-based capital ratio of 8% or greater, has a Tier 1 risk-based capital ratio of 4% or greater, and has a leverage ratio of 4% or greater; (iii) an institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8%, has a Tier 1 risk-based capital ratio that is less than 4% or has a leverage ratio that is less than 4%; (iv) an institution is “significantly undercapitalized” if it has a total risk-based capital ratio that is less than 6%, a Tier 1 risk-based capital ratio that is less than 3% or a leverage ratio that is less than 3%; and (v) an institution is “critically undercapitalized” if its “tangible equity” is equal to or less than 2% of its total assets. The FDIC also, after an opportunity for a hearing, has authority to downgrade an institution from “well capitalized” to “adequately capitalized” or to subject an “adequately capitalized” or “undercapitalized” institution to the supervisory actions applicable to the next lower category, for supervisory concerns.

The degree of regulatory scrutiny of a financial institution will increase, and the permissible activities of the institution will decrease, as it moves downward through the capital categories. Institutions that fall into one of the three undercapitalized categories may be required to: (i) submit a capital restoration plan; (ii) raise additional capital; (iii) restrict their growth, deposit interest rates, and other activities; (iv) improve their management; (v) eliminate management fees; or (vi) divest themselves of all or part of their operations. Bank holding companies controlling financial institutions can be called upon to boost the institutions’ capital and to partially guarantee the institutions’ performance under their capital restoration plans. These capital guidelines can affect the Company in several ways. The Company’s capital levels are in excess of those required to be maintained by a “well capitalized” financial institution. However, rapid growth, poor loan portfolio performance, or poor earnings performance, or a combination of these factors, could change the Company’s capital position in a relatively short period of time, making an additional capital infusion necessary.

Enforcement Powers. Congress has provided the federal bank regulatory agencies with an array of powers to enforce laws, rules, regulations and orders. Among other things, the agencies may require that institutions cease and desist from certain activities, may preclude persons from participating in the affairs of insured depository institutions, may suspend or remove deposit insurance, and may impose civil money penalties against institution-affiliated parties for certain violations.

Maximum Legal Interest Rates. Like the laws of many states, Florida law contains provisions on interest rates that may be charged by banks and other lenders on certain types of loans. Numerous exceptions exist to the general interest limitations imposed by Florida law. The relative importance of these interest limitation laws to the financial operations of the Banks will vary from time to time, depending on a number of factors, including conditions in the money markets, the costs and availability of funds, and prevailing interest rates.

Bank Branching. Banks in Florida are permitted to branch statewide. A State bank’s expansion is subject to the Department and FDIC approval. Any such approval would take into consideration several factors, including the banks’ level of capital, the prospects and economics of the proposed branch office, and other conditions deemed relevant for purposes of determining whether approval should be granted to open a branch office. For information regarding legislation on interstate branching in Florida, see ”Interstate Banking” below.

Change of Control. Federal law restricts the amount of voting stock of a bank holding company and a bank that a person may acquire without the prior approval of banking regulators. The overall effect of such laws is to make it more difficult to acquire a bank holding company and a bank by tender offer or similar means than it might be to acquire control of another type of corporation. Consequently, shareholders of the Company may be less likely to benefit from the rapid increases in stock prices that may result from tender offers or similar efforts to acquire control of other companies. Under the Change in Bank Control Act and the regulations thereunder, a person or group must give advance notice to the Federal Reserve before acquiring control of any bank holding company. Upon receipt of such notice, the Federal Reserve may approve or disapprove the acquisition. The Change in Bank Control Act creates a rebuttable presumption of control if a member or group acquires a certain percentage or more of a bank holding company’s or bank’s voting stock, or if one or more other control factors set forth in the Change in Bank Control Act are present.

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Interstate Banking. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 provides for nationwide interstate banking and branching. Under this law, interstate acquisitions of banks or bank holding companies in any state by bank holding companies in any other state are permissible subject to certain limitations. Florida also has a law that allows out-of-state bank holding companies (located in states that allow Florida bank holding companies to acquire banks and bank holding companies in that state) to acquire Florida banks and Florida bank holding companies. The law essentially provides for out-of-state entry by acquisition only (and not by interstate branching) and requires the acquired Florida bank to have been in existence for at least three years. Interstate branching and consolidation of existing bank subsidiaries in different states are permissible. A Florida bank may also establish, maintain, and operate one or more branches in a state other than Florida pursuant to an interstate merger transaction in which the Florida bank is the resulting bank.

Effect of Governmental Policies. The earnings and businesses of the Company and the Banks are affected by the policies of various regulatory authorities of the United States, especially the Federal Reserve. The Federal Reserve, among other things, regulates the supply of credit and deals with general economic conditions within the United States. The instruments of monetary policy employed by the Federal Reserve for those purposes influence in various ways the overall level of investments, loans, other extensions of credit, and deposits, and the interest rates paid on liabilities and received on assets.

Bank of Florida Trust Company. The Company’s state-chartered trust company, Bank of Florida Trust Company, is subject to the supervision and regulations of the Department which focuses on, among other things, the soundness of internal controls, appropriate investments, permissible activities, and fiduciary duties.

ITEM 1A. RISK FACTORS

Investing in our common stock involves risk. In addition to the other information set forth elsewhere in this Report, the following factors relating to us and our common stock should be carefully considered in deciding whether to invest in our common stock.

Though we turned profitable in the second quarter of 2005, we have incurred cumulative operating losses since we commenced operations and may continue to incur losses in the future

Since we commenced our operations on August 24, 1999, we have incurred an accumulated deficit of approximately $6.9 million. This deficit is primarily due to the costs of establishing our business strategy, which included opening Bank of Florida – Southwest, Bank of Florida Trust Company, Bank of Florida in Fort Lauderdale and Bank of Florida – Tampa Bay, and the continuing expansion of our banking activities in our markets, as well as the impact of historically low interest rates and other factors. We may charter additional banks in the future. A newly formed bank is typically expected to incur operating losses in its early periods of operations because of an inability to generate sufficient net interest income to cover operating expenses. Those operating losses can be significant and can occur for longer periods than planned, depending on the new bank’s ability to control operating expenses and generate net interest income. There is a risk that losses at our new subsidiaries may exceed profits at our existing subsidiaries.

We may encounter unexpected financial and operating problems due to our rapid growth

We have grown significantly since we opened our first bank subsidiary, Bank of Florida – Southwest, in 1999. Our total assets have grown to approximately $569.8 million as of December 31, 2005. Our rapid growth may result in unexpected financial and operating problems, including problems in our loan portfolio due to its unseasoned nature, and turnover or rapid increases in members of management and staff, which may affect the value of our shares. The addition of our new bank in Tampa and our Boca Raton office may add additional pressures to our internal control systems, and our financial and operating success will depend in large part on our success in integrating these operations. In addition, if our loan and asset growth continues at its current pace, it may be difficult to retain our and our subsidiaries’ “well capitalized” designations with the Federal Deposit Insurance Corporation. If we or our bank subsidiaries fall below being “well capitalized” to “adequately capitalized,” we may sell participations in some of our loans in order to decrease the amount of our assets. This could result in lower earnings due to our retaining a lower level of earning assets.

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Our growth strategy may not be successful

As a strategy, we have sought to increase the size of our franchise through rapid growth and by aggressively pursuing business development opportunities. We can provide no assurance that we will continue to be successful in increasing the volume of loans and deposits at acceptable risk levels and upon acceptable terms and expanding our asset base while managing the costs and implementation risks associated with this growth strategy. There can be no assurance that any further expansion will be profitable or that we will continue to be able to sustain our historical rate of growth, either through internal growth or through other successful expansions of our banking markets, or that we will be able to maintain capital sufficient to support our continued growth.

Losses from loan defaults may exceed the allowance we establish for that purpose, which will have an adverse effect on our business

If a significant number of loans are not repaid, it would have an adverse effect on our earnings and overall financial condition. Like all financial institutions, we maintain an allowance for loan losses to provide for losses inherent in the loan portfolio. The allowance for loan losses reflects our management’s best estimate of probable losses in the loan portfolio at the relevant balance sheet date. This evaluation is primarily based upon a review of our and the banking industry’s historical loan loss experience, known risks contained in the loan portfolio, composition and growth of the loan portfolio, and economic factors. However, the determination of an appropriate level of loan loss allowance is an inherently difficult process and is based on numerous assumptions. As a result, our allowance for loan losses may not be adequate to cover actual losses, and future provisions for loan losses may adversely affect our earnings.

If real estate values in our target markets decline, our loan portfolio would be impaired

A significant portion of our loan portfolio consists of mortgages secured by real estate located in the Collier/Lee County markets. We have also been generating a significant amount of real estate-secured loans in our Broward/Palm Beach County and Hillsborough County markets. Real estate values and real estate markets are generally affected by, among other things, changes in national, regional or local economic conditions; fluctuations in interest rates and the availability of loans to potential purchasers; changes in the tax laws and other governmental statutes, regulations and policies; and acts of nature. If real estate prices decline in any of these markets, the value of the real estate collateral securing our loans could be reduced. Such a reduction in the value of our collateral could increase the number of non-performing loans and adversely affect our financial performance.

If we lose key employees, our business may suffer

Our success is largely dependent on the personal contacts of our officers and employees in our market areas. If we lose key employees, temporarily or permanently, our business could be hurt. We could be particularly hurt if our key employees went to work for our competitors. Our future success depends on the continued contributions of our existing senior management personnel, including our President and Chief Executive Officer Michael L. McMullan, Chief Operating Officer Martin P. Mahan, and our Chief Lending Officer Craig D. Sherman. In each of our markets, we are also dependent on the Presidents and Chief Executive Officers of our subsidiaries. We have entered into employment contracts with many of our key executive officers which contain standard non-competition provisions to help alleviate some of this risk.

Our executive officers and directors have substantial control over our company, which could delay or prevent a change of control favored by our other shareholders

Our executive officers and directors, if acting together, will be able to significantly influence all matters requiring approval by our shareholders, including elections of directors and the approval of mergers or other business combination transactions. Our executive officers and directors own approximately 902,000 shares, representing approximately 15% of the total number of shares outstanding and will have vested options and warrants to acquire approximately 426,000 additional shares.

The interest of these shareholders may differ from the interests of our other shareholders, and these shareholders, acting together, will be able to influence all matters requiring approval by shareholders. As a result, these shareholders could approve or cause us to take actions of which you may disapprove or that may be contrary to your interests and those of other investors.

16

Our subsidiary banks face strong competition in their market areas that may limit their asset growth and profitability

Our primary market areas are the urban areas on the East and West Coasts of South Florida and the Central West Coast of Florida. The banking business in these areas is extremely competitive, and the level of competition facing us following our expansion plans may increase further, which may limit our asset growth and profitability. Each of our subsidiary banks experiences competition in both lending and attracting funds from other banks, savings institutions, and non-bank financial institutions located within its market area, many of which are significantly larger institutions. Non-bank competitors competing for deposits and deposit type accounts include mortgage bankers and brokers, finance companies, credit unions, securities firms, money market funds, life insurance companies and the mutual funds industry. For loans, we encounter competition from other banks, savings associations, finance companies, mortgage bankers and brokers, insurance companies, small loan and credit card companies, credit unions, pension trusts and securities firms.

If adverse economic conditions in our target markets exist for a prolonged period, our financial results could be adversely affected

Our success will depend in large part on economic conditions in Southeast and Southwest Florida, as well as the Tampa Bay area. A prolonged economic downturn or recession in these markets could increase our nonperforming assets, which would result in operating losses, impaired liquidity and the erosion of capital. A variety of factors could cause such an economic dislocation or recession, including adverse developments in the industries in these areas such as tourism, or natural disasters such as hurricanes, floods or tornadoes, or additional terrorist activities such as those our country experienced in September 2001.

Bancshares of Florida and its subsidiaries operate in an environment highly regulated by state and federal government; changes in federal and state banking laws and regulations could have a negative impact on Bancshares of Florida’s business.

As a bank holding company, Bancshares of Florida is regulated primarily by the Federal Reserve Board. Our current subsidiaries are regulated primarily by the Florida Office of Financial Regulation and the Federal Deposit Insurance Corporation. Federal and various state laws and regulations govern numerous aspects of the banks’ operations, including:

• Adequate capital and financial condition;

• Permissible types and amounts of extensions of credit and investments;

• Permissible non-banking activities; and

• Restrictions on dividend payments.

Federal and state regulatory agencies have extensive discretion and power to prevent or remedy unsafe or unsound practices or violations of law by banks and bank holding companies. Bancshares of Florida and its subsidiaries also undergo periodic examinations by one or more regulatory agencies. Following such examinations, Bancshares of Florida may be required, among other things, to change its asset valuations or the amounts of required loan loss allowances or to restrict its operations. Those actions would result from the regulators’ judgments, based on information available to them at the time of their examination.

Regulatory action could severely limit future expansion plans

To carry out some of our expansion plans, Bancshares of Florida is required to obtain permission from the Federal Reserve Board. Application for the formation of new banks and the acquisition of existing banks are submitted to the state and federal bank regulatory agencies for their approval. The future climate for regulatory approval is impossible to predict. Regulatory agencies could prohibit or otherwise significantly restrict the expansion plans of Bancshares of Florida, its current subsidiaries and future new start-up banks, which could limit our ability to increase revenue.

Investors may face dilution resulting from the issuance of common stock in the future

We have the power to issue common stock without shareholder approval, up to the number of authorized shares set forth in our Articles of Incorporation. Our Board of Directors may determine from time to time a need to obtain additional capital through the issuance of additional shares of common stock or other securities, subject to limitations imposed by Nasdaq and the Federal Reserve Board. There can be no assurance that such shares can be issued at prices or on terms better than or equal to the terms obtained by our current shareholders. The issuance of any additional shares of common stock by us in the future may result in a reduction of the book value or market price, if any, of the then-outstanding common stock. Issuance of additional shares of common stock will reduce the proportionate ownership and voting power of our existing shareholders.

17

Shares of our preferred stock may be issued in the future which could materially adversely affect the rights of the holders of our common stock

Pursuant to our Articles of Incorporation, we have the authority to issue additional series of preferred stock and to determine the designations, preferences, rights and qualifications or restrictions of those shares without any further vote or action of the shareholders. The rights of the holders of our common stock will be subject to, and may be materially adversely affected by, the rights of the holders of any preferred stock that may be issued by us in the future.

Our common stock is not an insured bank deposit and is subject to market risk

Our shares of common stock are not deposits, savings accounts or other obligations of us, our subsidiaries or any other depository institution, are not guaranteed by us or any other entity, and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

We may need additional capital in the future and this capital may not be available when needed or at all

We may need to incur additional debt or equity financing in the near future to fund future growth and meet our capital needs. We cannot assure you that such financing will be available to us on acceptable terms or at all. If we are unable to obtain future financing, we may not have the resources available to fund our planned growth.

Future sales of our common stock could depress the price of the common stock

Sales of a substantial number of shares of our common stock in the public market by our shareholders, or the perception that such sales are likely to occur, could cause the market price of our common stock to decline.

We have not paid dividends in the past and we are restricted in our ability to pay dividends to our shareholders

We have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends on our common stock in the foreseeable future. We intend to retain earnings to finance operations and the expansion of our business. Therefore, any gains from your investment in our common stock must come from an increase in its market price.

In addition, we are a holding company with no independent sources of revenue and would likely rely upon cash dividends and other payments from our subsidiaries to fund any cash dividends we decided to pay to our shareholders. Payment of dividends by our subsidiaries may be prohibited by certain regulatory restrictions.

There are substantial regulatory limitations on ownership of our common stock and changes of control

With certain limited exceptions, federal regulations prohibit a person or company or a group of persons deemed to be “acting in concert” from, directly or indirectly, acquiring 10% or more (5% if the acquiror is a bank holding company) of any class of our voting stock or obtaining the ability to control in any manner the election of a majority of our directors or otherwise direct our management or our policies without prior notice or application to and the approval of the Federal Reserve Board.

Although publicly traded, our common stock has substantially less liquidity than the average trading market for a stock quoted on the Nasdaq National Market, and our price may fluctuate in the future

Although our common stock is listed for trading on the Nasdaq National Market, the trading market in our common stock has substantially less liquidity than the average trading market for companies quoted on the Nasdaq National Market. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of our common stock at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which we have no control.

The market price of our common stock may fluctuate in the future, and these fluctuations may be unrelated to our performance. General market price declines or overall market volatility in the future could adversely affect the price of our common stock, and the current market price may not be indicative of future market prices.

18

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Bancshares of Florida, Inc.’s corporate headquarters and Bank of Florida—Southwest’s main offices are located at Bank of Florida Center, 1185 Immokalee Road, Naples, Collier County, Florida 34110. Bank of Florida Center is a three-story office building which opened in August, 2002. Bank of Florida - Southwest leases one-half of the first floor, consisting of 12,324 square feet, from Citizens Reserve, LLC. The first floor houses a banking center with a Board Room, dining room, conference rooms, a drive-through, and ATM/night deposit access. Private banking offices and a conference room are also located on the ground floor. Bancshares of Florida leases 8,246 square feet on the second floor, with offices and work areas for finance, advertising, executive offices, and holding company administrative personnel. The Company has recently leased the third floor of this facility to allow for expansion of corporate offices in 2006. These leases expire in 2012 with options for two five-year renewals at then market rates. The monthly lease payment as of December 2005 is $68,000.

Bancshares of Florida, Inc. also leases approximately 5,273 square feet for its Customer Service Operations (“CSO”) center located at 3364 Woods Edge Circle, Units A through E, Bonita Springs, FL 34134. The lease is for a three year period ending in 2007. The monthly lease payment as of December 31, 2005 is $10,000.

Bank of Florida - Southwest’s former main office at 3401 Tamiami Trail North, Naples, Florida, now serves as a full-service branch office. This branch office, which is owned by Bank of Florida - Southwest, is approximately 4,500 square feet contained in a two-story modern office building located on approximately one acre of land. The bank also has plans to lease a facility in 2006 for branch operations in Bonita Springs, Florida.

Bank of Florida operates in approximately 8,100 square feet of first floor space of the Corporate Center office building located at 110 East Broward Boulevard, in downtown Fort Lauderdale. This space is sub-leased from Wachovia Bank, N.A. The space includes executive offices, a conference room, and full service branch facilities. The site does not have drive-in facilities, but does contain an ATM facility. The lease is for eight years with options for two five-year renewals at then market rates. The monthly lease payment as of December 2005 is $35,000. In addition, Bank of Florida leased 1,148 square feet of office space located at 5200 N. Federal Highway, Suite 1 in Ft. Lauderdale and began branch operations in the second half of 2004. The monthly lease payment for this facility as of December 2005 is $2,900. The Bank has also leased space in Aventura, Florida starting December 2005 to begin branch operations in the first half of 2006 for a monthly lease amount of $8,200.

Bank of Florida has also leased approximately 8,900 square feet of office space in Palm Beach County, located at 595 South Federal Highway, in downtown Boca Raton. The space consists of 6,460 square feet on the first floor, 2,500 square feet on the second floor, the garage, all common areas located on the property and the exclusive use of two (2) remote drive-thru lanes for banking purposes, located on the west side of 555 South Federal Highway. The lease is for fifteen years with options for two five-year renewals at then market rates. The monthly lease payment as of December 2005 is $38,000.

Bank of Florida - Tampa Bay leases 5,454 square feet of office space located in the Harbour Island area of downtown Tampa at 777 South Harbour Island Boulevard. The space consists of 2,718 square feet on the ground floor lobby which is operated as the main branch and banking facility. Additional space is located on the ninth floor and serves as the corporate and lending offices of the bank. The monthly lease payment as of December 31, 2005 is $14,400. Bank of Florida – Tampa Bay has subleased 1,200 square feet located on the ninth floor to Florida Financial Advisors, Inc., of which Edward Kaloust, a director of Bancshares of Florida, Inc. is a managing member. See “Note 11-Related Party Transactions” of the Notes To Consolidated Financial Statements” for further information.

Bank of Florida Trust Company maintains offices and personnel at each of the Banks’ main offices, and also meets with prospective clients at Bank of Florida – Southwest’s Tamiami Trail North branch office.

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ITEM 3. LEGAL PROCEEDINGS

From time-to-time, we are involved in litigation arising in the ordinary course of our business. As of the date of the filing of this Form 10-K, we are of the opinion that the ultimate aggregate liability represented thereby, if any, will not have a material adverse effect on our financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted during the fourth quarter ended December 31, 2005 to a vote of security holders of the Company.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company’s Common Stock was held by approximately 1,934 holders registered or in street name as of December 31, 2005. On July 28, 2004 the Company became listed on the Nasdaq National Market under the symbol “BOFL”. Prior to that, the Company’s stock had been traded on the NASDAQ SmallCap Market under the symbol “BOFL” since December 30, 2002. The table below shows the high, low and closing bid prices on the NASDAQ National and SmallCap Markets for the periods indicated. These over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, markdown, or commission and may not necessarily reflect actual transactions.

Calendar Quarter Ended	High		Low		Closing
December 31, 2003	$	14.75	$	11.31	$	14.74
March 31, 2004	$	17.85	$	14.50	$	14.90
June 30, 2004	$	15.69	$	12.32	$	13.99
September 30, 2004	$	15.92	$	12.64	$	15.89
December 31, 2004	$	16.21	$	13.80	$	16.11
March 31, 2005	$	16.05	$	15.73	$	16.00
June 30, 2005	$	17.09	$	16.50	$	17.00
September 30, 2005	$	22.19	$	21.92	$	22.12
December 31, 2005	$	22.70	$	22.15	$	22.70

To date, Bancshares has not paid any dividends on its common stock. There are no current plans to initiate payment of cash dividends, and future dividend policy will depend on the Banks’ earnings, capital requirements, financial condition, and other factors considered relevant by the Board of Directors of the Company, especially the ability of the Banks to pay dividends.

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

	December 31,
	2005			2004			2003			2002			2001
	(Dollars In Thousands, except per share data.)
Statement of Operations Data:
Total interest income	$	28,491		$	14,767		$	8,856		$	5,884		$	4,450
Total interest expense		9,348			4,962			3,278			2,438			2,251
Net interest income before provision for loan losses		19,143			9,805			5,578			3,446			2,199
Provision for loan losses		1,903			1,279			833			487			215
Net interest income after provision for loan losses		17,240			8,526			4,745			2,959			1,984
Noninterest income		3,259			2,176			1,335			808			488
Noninterest expense		19,344			13,582			8,789			6,407			3,024
Income (loss) before tax benefit		1,155			(2,880	)		(2,709	)		(2,640	)		(552	)
Income tax benefit		(3,728	)		—			—			—			—
Net income (loss)	$	4,883		$	(2,880	)	$	(2,709	)	$	(2,640	)	$	(552	)
Balance Sheet Data:
Total assets	$	569,782		$	420,808		$	222,610		$	144,535		$	77,092
Total cash and cash equivalents		50,117			57,897			8,424			26,373			6,002
Interest-earning assets		538,255			394,851			209,426			134,447			71,730
Investment securities		18,622			25,945			8,072			6,664			76
Loans		487,574			325,981			200,490			105,889			68,406
Allowance for loan losses		4,603			2,817			1,568			907			494
Deposits		495,080			376,064			201,154			129,327			64,288
Other borrowings		14,000			2,000			—			—			—
Stockholders’ equity		59,061			41,954			21,220			15,006			8,521
Share Data:
Basic income (loss) per share	$	0.82		$	(0.81	)	$	(0.92	)	$	(1.48	)	$	(0.47	)
Diluted income (loss) per share		0.79			(0.81	)		(0.92	)		(1.48	)		(0.47	)
Book value per common share (period end)		9.94			7.93			6.89			7.22			7.31
Weighted average shares outstanding - basic		5,595,233			3,811,270			2,948,514			1,784,892			1,165,370
Weighted average shares outstanding - diluted		5,813,230			3,811,270			2,948,514			1,784,892			1,165,370
Total shares outstanding		5,943,783			4,835,632			3,079,199			2,079,199			1,165,370
Performance Ratios:
Return on average assets		0.98	%		(0.93	)%		(1.52	)%		(2.57	)%		(0.87	)%
Return on average common stockholders’ equity		9.79			(9.57	)		(12.42	)		(19.49	)		(7.74	)
Interest-rate spread during the period		3.55			3.02			2.99			2.89			2.76
Net interest margin		4.11			3.42			3.37			3.64			3.77
Efficiency ratio		86.35			113.36			127.12			150.61			112.60
Asset Quality Ratios:
Allowance for loan losses to period end loans		0.94	%		0.86	%		0.78	%		0.86	%		0.72	%
Net charge-offs to average loans		0.03			0.02			0.16			0.09			0.00
Nonperforming assets to period end total assets		0.06			0.14			0.02			0.15			0.31
Capital and Liquidity Ratios:
Average equity to average assets		10.34	%		10.61	%		12.21	%		13.17	%		11.21	%
Leverage (4.00% required minimum)		10.28			11.07			10.32			10.99			13.38
Risk-based capital:
Tier 1		10.48	%		11.85	%		11.66	%		15.40	%		13.36	%
Total		13.37			13.24			12.52			16.33			14.14
Average loans to average deposits		92.81			95.23			93.96			96.03			95.78
Trust Assets Under Advice:
Total assets under advice	$	390,002		$	202,138		$	131,000		$	72,000		$	57,332
Trust fees		1,546			1,063			492			297			149
Trust fees as a % of average assets under advice		0.52	%		0.64	%		0.48	%		0.46	%		0.40	%

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Bancshares of Florida, Inc. is a multi-bank holding company with $569.8 million in assets as of December 31, 2005 and was incorporated in Florida in September 1998. Its primary customer base is businesses, professionals, and entrepreneurs with commercial real estate borrowing needs. The Company also provides a variety of other lending, wealth management, technology-based cash management and other depository services, frequently as an adjunct to the needs of its commercial borrowers, along with providing these same products to individuals who may have no commercial borrowing relationship.

CRITICAL ACCOUNTING POLICIES

The Company’s consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. The financial information contained within these statements is, to a significant extent, based on approximate measures of the financial effects of transactions and events that have already occurred. Critical accounting policies are those that involve the most complex and subjective decisions and assessments, and have the greatest potential impact on the Company’s stated results of operations. The notes to the consolidated financial statements include a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements. Management believes that, of our significant accounting policies, the following involve a higher degree of judgment and complexity. Our management has discussed these critical accounting assumptions and estimates with the Board of Directors’ Audit Committee.

Allowance for Loan Losses:

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

The allowance for loan losses is comprised of: (1) a component for individual loan impairment measured according to SFAS No. 114, “Accounting by Creditors for Impairment of a Loan” , and (2) a measure of collective loan impairment according to SFAS No. 5, “Accounting for Contingencies”. The allowance for loan losses is established and maintained at levels deemed adequate to cover losses inherent in the portfolio as of the balance sheet date. This estimate is based upon management’s evaluation of the risks in the loan portfolio and changes in the nature and volume of loan activity. Estimates for loan losses are derived by analyzing historical loss experience, current trends in delinquencies and charge-offs, historical peer bank experience, changes in the size and composition of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Larger impaired credits that are measured according to SFAS No. 114 have been defined to include loans which are classified as doubtful, substandard or special mention risk grades where the borrower relationship is greater than $250,000. For such loans that are considered impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.

Loans made outside the scope of SFAS No. 114 are measured according to SFAS No. 5 and include commercial and commercial real estate loans that are performing or have not been specifically identified under SFAS No. 114, and large groups of smaller balance homogeneous loans evaluated based on regulatory guidelines and historical peer bank loss experience which are adjusted for qualitative factors.

22

Income Taxes:

Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, as well as net operating loss carryforwards and tax credit carryforwards. Deferred tax assets and liabilities are included in the consolidated financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. In the event of changes in the tax laws, deferred tax assets and liabilities are adjusted in the period of the enactment of those changes, with the cumulative effects included in the current year’s income tax provision. Net deferred tax assets, whose realization is dependent on taxable earnings of future years, are recognized when a more-likely-than-not criterion is met. The Company and its subsidiaries file consolidated tax returns.

The following discussion presents management’s analysis of the financial condition and results of operations of the Company for each of the years ended December 31, 2005 and 2004 and includes the statistical disclosures required by SEC Guide 3 (“Statistical Disclosure by Bank Holding Companies”). The discussion should be read in conjunction with the consolidated financial statements of the Company and the notes related thereto which appear elsewhere in this document.

Year Ended December 31, 2005 Compared to

Year Ended December 31, 2004

FINANCIAL CONDITION

The Company’s growth continued to be very strong in 2005, up $149.0 million in total assets or 35.4% over the last twelve months to $569.8 million. This compares with $198 million or 89% growth in 2004. Bank of Florida – Southwest contributed $57.3 million of this growth, reaching $304.2 million, while Bank of Florida, Ft. Lauderdale contributed $66.7 million for a total of $211.5 million in assets. Bank of Florida-Tampa Bay, which opened in early November 2004, contributed $31.1 million for a total of $68.5 million in total assets.

The following table summarizes the major components of the consolidated balance sheet as of December 31, 2005 and 2004, respectively.

	AT DECEMBER 31,						INCREASE/(DECREASE)
	(IN THOUSANDS, EXCEPT PER SHARE DATA)
	2005			2004			$			%
Total assets	$	569,782		$	420,808			148,974		35.4	%
Cash and cash equivalents		50,117			57,897			(7,780	)	(13.4	)%
Interest-earning assets		538,255			394,851			143,404		36.0	%
Investment securities		18,622			25,945			(7,323	)	(28.2	)%
Gross loans		487,574			325,981			161,593		49.6	%
Allowance for loan losses		4,603			2,817			1,786		63.4	%
Deposit accounts		495,080			376,064			119,016		31.6	%
Borrowings		14,000			—			14,000		100.0	%
Stockholders’ equity		59,061			41,954			17,107		40.8	%
Total shares outstanding		5,943,783			4,835,632			1,108,151		22.9	%
Book value per common share		9.94			7.93			2.01		25.3	%
Allowance for loan losses to total loans		0.94	%		0.86	%		0.08	%	9.3	%
Allowance for loan losses to nonperforming loans		1435.40	%		480.70	%		954.70	%	198.6	%
Nonperforming loans to total loans		0.07	%		0.18	%		(0.11	)%	(61.1	)%
Nonperforming assets to total assets		0.06	%		0.14	%		(0.08	)%	(56.9	)%
Leverage (Tier 1 to average total assets)		10.28	%		11.07	%		(0.79	)%	(7.1	)%
Assets under advice – Bank of Florida Trust Co.	$	390,002		$	202,138		$	187,864		92.9	%

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Loan Portfolio

Total gross loans outstanding (including loans held for sale) were $487.6 million as of year-end 2005, an increase of $161.6 million or 49.6% over the prior year. Bank of Florida - Southwest accounted for $54.8 million (33.9%) of the increase. Bank of Florida, Ft. Lauderdale accounted for $64.0 million (39.6%) and Bank of Florida - Tampa Bay contributed the remaining $42.8 million (26.5%). Loan pipelines at all the bank affiliates remain strong.

Commercial loans, largely secured by real estate, totaled $358.4 million (74% of total loans) at December 31, 2005, up $185.4 million or 107% from a year earlier of which $51.0 million was in construction lending. Making up the rest of the loan portfolio were multi-family and residential loans at $91.4 million (19% of total loans), up $15.3 million from the end of 2004, followed by consumer lines of credit at $26.4 million (5% of total loans) and other consumer loans at $11.4 million (2% of total loans).

Despite the rapid growth in our loan portfolio, asset quality continues to be strong, with nonperforming loans totaling $321,000 or 0.07% of loans outstanding compared to $586,000 or 0.18% of loans outstanding at year-end 2004.

Deposits

Total deposits increased $119.0 million or 31.6% in 2005 to end the year at $495.1 million. Deposit growth in the Bank of Florida - Southwest comprised $45.0 million of this increase, up 20.0% to $270.3 million in deposits at December 31, 2005, while deposits at Bank of Florida, Ft. Lauderdale climbed $54.3 million or 40.6% to $188.0 million. Bank of Florida - Tampa Bay ended the year with $60.0 million in deposits, up $34.5 million or 135.1% .

Deposit growth consisted primarily of increases in demand deposit (DDA) and low-cost NOW accounts (up $39.1 million), money market deposits (up $55.0 million), and certificates of deposit (up $24.9 million). As of year end 2005, these accounts comprised 27.0%, 32.8%, and 39.1%, respectively, of total deposits. Growth in noninterest-bearing DDA accounts totaled $22.7 million or 37.2% during the year, bringing these deposit balances to 16.9% of total deposits, reflective of the Company’s focus to grow this source of funds through expanded services.

The Company’s core deposits, using the industry definition which excludes national market CDs and time deposits of $100,000 or more, ended 2005 at $351.7 million, an increase of $107.7 million or 44.1% from one year earlier. National market CDs were 11.9% of total deposits at December 31, 2005 versus 15.4% a year earlier. Time deposits of $100,000 or more, including national market CDs, were 29.0% of total deposits at the end of 2005, somewhat higher than peer groups primarily due to the Banks depositor base being generally larger commercial or private banking customers with typically higher balances. As such, the Company considers these deposits to be as reliable as core deposits under $100,000.

Subordinated Debt

On October 7, 2005, Bank of Florida, Ft. Lauderdale issued $3.0 million in subordinated debt with a maturity of December 15, 2015. Interest is payable quarterly in arrears, commencing December 15, 2005, at a rate of 1.9% over the quarterly adjustable three-month LIBOR rate. The interest rate at December 31, 2005 was 6.39%. Upon the occurrence and continuation of a Tax Event (a “Special Event”), Bank of Florida may prepay the debt at its option (and with the approval of its regulators, if necessary), in whole or in part, without penalty, at par through December 15, 2010. After that date, Bank of Florida may prepay the debt at its option (and with the approval of its regulators, if necessary), in whole or in part, without penalty, at par, irrespective of the occurrence of a “Special Event”.

On September 30, 2005, Bank of Florida, Ft. Lauderdale issued $3.0 million in subordinated debt with a maturity of December 15, 2011. Interest is payable quarterly in arrears, commencing December 15, 2005, at a rate of two and one-half percent over the quarterly adjustable three-month LIBOR rate. The interest rate at December 31, 2005 was 6.99%. Bank of Florida may prepay the debt at its option (and with the approval of its regulators, if necessary), in whole or in part, without penalty, at par after December 15, 2006.

On August 5, 2005, Bank of Florida – Southwest issued $5.0 million in junior subordinated debt with a maturity of October 7, 2015. Interest is payable quarterly in arrears, commencing October 7, 2005, at a rate of two percent over the quarterly adjustable three-month LIBOR rate. The interest rate at December 31, 2005 was 6.15%.

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Upon the occurrence and continuation of a Tax Event (a “Special Event”), Bank of Florida – Southwest may prepay the debt at its option (and with the approval of its regulators, if necessary) in whole at a redemption price of 105% of par plus accrued interest during the first five years. The Bank will also have the right to repay this debt security at par, anytime on or after October 7, 2010.

The funds received from the debt issued by Bank of Florida – Southwest were used, in part, to repay $2 million in subordinated debt issued by the Bank in June 2004 to a local community bank. Interest was payable at a rate of Prime less one percent during the first sixty days, Prime plus zero percent for the next sixty days, and Prime plus one percent thereafter. This debenture was redeemable by us at our option, without penalty. Bank of Florida – Southwest repaid the subordinated debt plus accrued interest on August 8, 2005.

The subordinated debt issued qualifies as Tier II capital for regulatory risk-based capital guidelines for the issuing affiliated Bank and for the Company.

Aggregate Contractual Obligations

Contractual obligations for payments under long-term debt and lease obligations are shown as follows, stratified by remaining term to contractual maturity (In Thousands):

	Less than 1 Year		1 – 3 Years		3 – 5 Years		More than 5 Years		Total
Real estate operating leases	$	2,365	$	4,288	$	3,406	$	7,263	$	17,322
Equipment operating leases		191		232		89		—		512
Certificates of Deposit		136,524		50,867		6,319		—		193,710
Subordinated Debt		—		—		—		11,000		11,000
Federal Home Loan Bank advances		—		3,000		—		—		3,000
Total	$	139,080	$	58,387	$	9,814	$	18,263	$	225,544

Further discussion of the nature of each obligation is included in “Note 6-Deposits”, “Note 7-Subordinated Debt”, Note 8-Federal Home Loan Bank Advances” and “Note 9-Commitments and Contingencies” of the “Notes to Consolidated Financial Statements”.

RESULTS OF OPERATIONS

The Company’s net income for 2005, including significant items, was $4.9 million or $0.79 per diluted share. The Company reversed the valuation allowance on its deferred tax assets at December 31, 2005, resulting in a $3.7 million income tax benefit. This action was taken following the culmination of three profitable quarters in 2005 and management’s completion of projections for 2006. As a result, the Company determined that it is more likely than not that the deferred tax assets will be realized and, therefore, the valuation allowance was reversed. Before considering the impact of reversing the valuation allowance, pretax net income for 2005 was $1.2 million or $0.15 per diluted share, a $4.0 million or $0.96 per share positive swing from the net loss in 2004.

Top-line revenue climbed $10.4 million, or 87%, on $179 million growth in average earning assets and a 93% or $188 million increase in assets under advice. The Company considers “top-line revenue” to be useful in explaining financial performance, as it combines both the Company’s lending or spread income business (interest income less interest expense) and its fee income business, both of which often pertain to the same customer base and can be matched against the underlying noninterest expense to generate those revenue components. Top-line revenue equals net interest income before provision for loan losses plus noninterest income, exclusive of gain/loss on sale of investment securities. Approximately $9.3 million of the increase in top-line revenue reflects growth in net interest income, of which $1.9 million or 20% was due to a 69 basis point expansion in net interest margin.

25

The following table summarizes the major components of the Statement of Operations and key ratios for the twelve months ending December 31, 2005 and 2004, respectively.

	FOR THE YEAR ENDED DECEMBER 31,						INCREASE/(DECREASE)
	(IN THOUSANDS, EXCEPT PER SHARE DATA)
	2005			2004			$			%
Total interest income	$	28,491		$	14,767		$	13,724		92.9	%
Total interest expense		9,348			4,962			4,386		88.4	%
Net interest income before provision for loan losses		19,143			9,805			9,338		95.2	%
Provision for loan losses		1,903			1,279			624		48.8	%
Net interest income after provision for loan losses		17,240			8,526			8,714		102.2	%
Non-interest income		3,259			2,176			1,083		49.8	%
Non-interest expense		19,344			13,582			5,762		42.4	%
Income tax benefit		(3,728	)		—			(3,728	)	—
Net income (loss)	$	4,883		$	(2,880	)	$	7,763		269.5	%
Basic income (loss) per share	$	0.82			(0.81	)	$	1.63		201.2	%
Diluted income (loss) per share		0.79			(0.81	)		1.60		197.5	%
Weighted average shares - basic		5,595,233			3,811,270			1,783,352		46.8	%
Weighted average shares - diluted		5,813,230			3,811,270			2,001,349		52.5	%
Return on average assets		0.98	%		(0.93	)%		1.91		205.6	%
Return on average common equity		9.79	%		(9.57	)%		19.36		201.9	%
Top-line revenue	$	22,402			11,977		$	10,425		87.0	%
Net interest margin		4.11	%		3.42	%		0.69		20.2	%
Efficiency ratio		86.35	%		113.36	%		(27.01	)	(23.8	)%
Average equity to average assets		10.34	%		10.61	%		(0.33	)	(3.1	)%
Average loans held for investment to average deposits		92.81	%		95.23	%		(2.42	)	(2.5	)%
Net charge-offs to average loans		0.03	%		0.01	%		0.02		200.00	%

Net Interest Income

Net interest income increased $9.3 million or 95% in 2005 to $19.1 million. Net interest spread, the difference between the yield on interest-earning assets and the rate paid on interest-bearing liabilities, was 3.55% on average in 2005, a improvement of 52 basis points over the prior year. In addition, the net interest margin, which is net interest income divided by average interest-earning assets, averaged 4.11% in 2005, a 69 basis points increase over 2004.

Interest income increased $13.7 million or 93% to $28.5 million in 2005, reflective of continued strong loan growth coupled with the impact of a two hundred basis point increase in the prime rate since the end of 2004. Total average interest-earning assets increased $178.3 million during the year that resulted in $10.5 million of the increase in interest income while the average yield on interest-earning assets increased 98 basis points, accounting for the remainder of the improvement. Approximately 49% of loans outstanding immediately adjust to a prime rate change.

Interest expense totaled $9.3 million in 2005, an increase of $4.4 million or 88%. The overall cost on interest-bearing liabilities was 2.57% compared to 2.12% one year ago. Because of the maturity structure of the CDs and the Company’s ability to attract noninterest-bearing deposits during the year, the overall cost of interest–bearing liabilities increased by 45 basis points compared to the 98 basis points increase in average loan yield during the same period as noted above. Noninterest-bearing deposits averaged $74.8 million for 2005, a $33.5 million increase over 2004 levels. Money market rates were 79 basis points higher on average, while the average cost of certificates of deposit increased 56 basis points. The Company’s cost of funds began to rise coincident with the prime rate increases that started in July 2004.

26

The following table represents, for the years indicated, certain information related to our average balance sheet and average yields on assets and average costs of liabilities (In Thousands).

	For the Years Ended December 31,
	2005							2004
	Average Balance		Interest and Dividends			Average Yield/Rate		Average Balance		Interest and Dividends			Average Yield/Rate
Assets:
Earning assets:
Interest earning deposits	$	350	$	12		3.43	%	$	—	$	—		—	%
Securities 1		18,584		689		3.71	%		9,079		322		3.55	%
Federal funds sold		45,849		1,420		3.10	%		17,576		294		1.67	%
Loans 2		400,897		26,370		6.58	%		260,385		14,151		5.43	%
Total interest-earning assets		465,680		28,491		6.12	%		287,040		14,767		5.14	%
Non interest-earning assets		31,822							22,894
Total Assets	$	497,502						$	309,934
Liabilities:
Interest-bearing liabilities:
Interest bearing checking	$	47,551		178		0.37	%	$	23,129		74		0.32	%
Money market accounts		136,284		3,162		2.32	%		73,647		1,129		1.53	%
Savings		5,185		71		1.37	%		2,842		40		1.41	%
Time deposit		168,065		5,555		3.31	%		132,514		3,650		2.75	%
Other borrowings		6,594		382		5.79	%		2,250		69		3.02	%
Total interest-bearing liabilities	$	363,679		9,348		2.57	%	$	234,382		4,962		2.12	%
Non-interest bearing deposits		74,847							41,305
Other liabilities		7,523							1,350
Stockholders’ equity		51,453							32,897
Total Liabilities & Stockholders’ Equity	$	497,502						$	309,934
Net interest income			$	19,143						$	9,805
Interest-rate spread						3.55	%						3.02	%
Net interest margin						4.11	%						3.42	%
Ratio of average interest-bearing liabilities to average earning assets				78.1	%						81.7	%

INCREASE (DECREASE) DUE TO CHANGE IN (IN THOUSANDS)

	VOLUME		RATE			CHANGE
Increase (decrease) in interest income:
Federal funds sold	$	876	$	250		$	1,126
Other investments1		364		15			379
Loans2		9,243		2,976			12,219
Total interest income		10,483		3,241			13,724
Increase (decrease) in interest expense:
NOW and Money Market deposits		1,544		593			2,137
Savings deposits		32		(1	)		31
Time deposits		1,175		730			1,905
Other borrowings		264		49			313
Total interest expense		3,015		1,371			4,386
Total change in net interest income	$	7,468	$	1,870		$	9,338

¹ Tax-exempt income, to the extent included in the amounts above, is not reflected on a tax equivalent basis.

² For purpose of this analysis, non-accruing loans, if any, are included in the average balances.

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Noninterest Income

Noninterest income (excluding securities transactions) climbed $1.1 million or 50% over 2004, primarily due to increases in service charges and fees of $513,000 (up 59%), trust fees of $483,000 (up 45%), and mortgage banking fees of $91,000 (up 38%). Growth in demand deposit accounts contributed to the increase in service charges and fees on deposit accounts, which totaled $1.4 million for the year. The increase in fee income earned by the Trust Company, which totaled $1.5 million in 2005, was primarily the result of 93% growth in assets under advice. The improvement in fees from the origination and sale of mortgages in the secondary market from the prior year were attributable to $81.0 million in residential loan production during 2005.

Noninterest Expenses

Noninterest expenses rose $5.8 million or 42% over 2004, of which approximately $2.5 million reflects the incremental cost of a full year of operation in the new Palm Beach County and Tampa Bay locations. Excluding the absence of the $312,000 acquisition write-off in third quarter 2004, the remaining increase in noninterest expense was the result of additional staffing and expenses related to supporting the $149.0 million year-over-year growth in the balance sheet. More specifically, total personnel expense for the year was up $3.8 million or 57%, representing two thirds of the total increase in noninterest expense. The remaining increases were in occupancy expense (up $684,000 or 31%); equipment, depreciation, and maintenance (up $413,000 or 51%); and general operating (up $854,000 or 22%), all indicative of a fast growth company. Despite the increase in expenses, the Company’s efficiency ratio improved 27 basis points to 86% in 2005 from 113% for the previous year.

Asset Quality and Provision for Loan Losses

Asset quality continued to be strong in 2005, with nonperforming loans (90+ days past due and non-accruals) at $321,000, or 0.07% of loans outstanding. In comparison, nonperforming loans totaled $586,000 or 0.18% of loans outstanding at year-end 2004. The ratio of net charge-offs to average loans for 2005 was 0.03% compared to 0.01% for 2004. The Company’s asset quality can be further measured by strong coverage of the loan loss allowance to nonperforming loans (14.4 times) and minimal past due loans (30 - 89 days were 0.09% of loans outstanding). These measures are consistent with the Company’s historic norm and very favorable to national peer bank levels as of September 30, 2005.

The allowance for loan losses, which is established through a charge to provision expense as losses are estimated, totaled $4.6 million or 0.94% of loans outstanding at December 31, 2005. In comparison, the allowance for loan losses totaled $2.8 million or 0.86% of loans outstanding at December 31, 2004. Actual loan losses are charged against the allowance when management believes the collectibility of a loan balance is unlikely. Subsequent recoveries, if any, are credited to the allowance. The Company recorded net charge-offs during 2005 of $117,000, compared to $30,000 in 2004. The loan loss provision was $1.9 million in 2005, 49% higher than the provision in 2004, largely because of strong loan growth, over 50%, during the year.

Results by Operating Unit

The Company’s results mark a year of tremendous progress over 2004, when we made a significant investment to establish ourselves in two new growth markets, Tampa Bay and Palm Beach County. Our newer markets, in combination with the more established growth franchises in Southwest and Southeast Florida, produced an increase in total loans for the year of $161.6 million or 50%, a surge in net interest income of 95%, and a climb in noninterest income of 50%. Individual highlights at the affiliate level are as follows:

• Bank of Florida - Southwest, based in Naples, produced record pretax earnings for the year of $3.1 million, up 158.0%, with loans climbing $54.8 million or 26.0% over the last twelve months to $264.0 million.

• Earnings at Bank of Florida, Fort Lauderdale, which includes our new Palm Beach County location, climbed from a pretax loss in 2004 of $177,000 to pretax net income in 2005 of $1.8 million. Total loans rose $64.0 million to $167.3 million, up 62.1% during 2005.

• Bank of Florida - Tampa Bay, which opened in November 2004, grew its loans to $54.9 million, recording a pretax loss for the year of $778,000. Notably, the bank reduced its fourth quarter pretax loss to $22,000 from $512,000 in the fourth quarter 2004.

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• Bank of Florida Trust Company grew its assets under advice during 2005 to $390.0 million, up $187.9 million or 92.9%. In its second full year of profitability, pretax earnings were $173,000 versus $53,000 in 2004. Assets under advice in that last 90 days rose $49.2 million or 14.5%.

Please see “Note 19 – Segment Information” of the “Notes to Consolidated Financial Statements” for detailed financial information by affiliate.

Quarterly Operating Results

The following table presents condensed information relating to quarterly periods in the years ended December 31, 2005 and 2004 (In Thousands, except per share data).

	Quarter Ended:
	Dec. 31,			Sept. 30,			June 30,			March 31,
2005
Total interest income	$	8,819		$	7,560		$	6,671		$	5,440
Total interest expense		3,040			2,371			2,117			1,820
Net interest income before provision for loan losses		5,779			5,189			4,554			3,620
Provision for loan losses		594			614			399			296
Net interest income after provision for loan losses		5,185			4,575			4,155			3,324
Non-interest income		879			865			819			698
Non-interest expense		5,448			4,853			4,647			4,397
Income (loss) before tax		616			587			327			(375	)
Income tax benefit		(3,728	)		—			—			—
Net income (loss)	$	4,344		$	587		$	327		$	(375	)
Basic income (loss) per share	$	0.73		$	0.10		$	0.02		$	(0.09	)
Diluted income (loss) per share	$	0.70		$	0.10		$	0.02		$	(0.09	)
Weighted average shares - basic		5,923,862			5,917,630			5,686,208			4,836,300
Weighted average shares - diluted		6,224,724			6,168,208			5,836,987			4,836,300
Return on average assets		3.14	%		0.46	%		0.27	%		(0.35	)%
Return on average common equity		31.50	%		4.27	%		2.63	%		(3.87	)%
Net interest margin		4.42	%		4.31	%		3.99	%		3.61	%
Efficiency ratio		81.83	%		80.16	%		86.49	%		101.83	%
Total assets	$	569,782		$	518,083		$	504,727		$	442,053
Total shares outstanding		5,943,783			5,919,385			5,916,685			4,836,331
Book value per share	$	9.94		$	9.17		$	9.07		$	7.82
2004
Total interest income	$	4,526		$	3,907		$	3,368		$	2,965
Total interest expense		1,528			1,317			1,128			990
Net interest income before provision for loan losses		2,998			2,590			2,240			1,975
Provision for loan losses		451			263			230			333
Net interest income after provision for loan losses		2,547			2,327			2,010			1,642
Non-interest income		616			611			508			441
Non-interest expense		4,156			3,794			3,038			2,595
Income (loss) before tax		(993	)		(856	)		(520	)		(512	)
Income tax benefit		—			—			—			—
Net loss	$	(993	)	$	(856	)	$	(520	)	$	(512	)
Basic loss per share	$	(0.22	)	$	(0.22	)	$	(0.19	)	$	(0.17	)
Diluted loss per share	$	(0.22	)	$	(0.22	)	$	(0.19	)	$	(0.17	)
Weighted average shares - basic		4,835,632			4,220,137			3,094,199			3,079,364
Weighted average shares - diluted		4,835,632			4,220,137			3,094,199			3,079,364
Return on average assets		(1.07	)%		(1.05	)%		(0.72	)%		(0.81	)%
Return on average common equity		(10.39	)%		(10.03	)%		(10.13	)%		(8.87	)%
Net interest margin		3.45	%		3.36	%		3.36	%		3.43	%
Efficiency ratio		115.00	%		118.53	%		110.75	%		107.41	%
Total assets	$	420,808		$	344,644		$	297,343		$	281,322
Total shares outstanding		4,835,632			4,835,632			3,094,199			3,094,199
Book value per share	$	7.93		$	8.13		$	6.50		$	6.76

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Year Ended December 31, 2004 Compared to

Year Ended December 31, 2003

FINANCIAL CONDITION

The Company as a whole, including our 5 ¹/2-year-old Naples bank, our 2 ¹/2-year-old Fort Lauderdale bank, and our new market initiatives noted below, surpassed the $400 million asset threshold, growing $198 million or 89% over the last twelve months to $421 million. This compares with $78 million or 54% growth in 2003. Our Tampa Bay bank opened in early November and has already reached $33 million in assets, including $13 million in loans, while our Palm Beach County location opened as a branch of the Company’s Fort Lauderdale bank in early October and has already proven to be an important new funding source, with $12 million in deposits at year end.

The primary driver of the increase in assets was loan growth. Total loans grew $41million or 15% during the last ninety days, nearly twice the pace of third quarter 2004 and the largest quarterly dollar increase in the Company’s history. Loans ended the year at $326 million, up $125 million or 63% at year end. Asset quality continued to be strong, with nonperforming loans at 0.18% of loans outstanding at year end and net charge-offs at 0.02% of average loans for the year; both measures are consistent with our historic norm and very favorable to national peer bank levels. The overall increase in interest-earning assets was $185 million or 89% during 2004 compared to $185 million or 56% one year ago. Earning asset growth was primarily funded by increased deposits, which rose by $175 million or 87% to $376 million.

Shareholders’ equity rose $20.7 million during the year, representing $3.4 million in net proceeds from a March 2004 preferred stock issuance, $19.8 million in net proceeds from the Company’s third quarter 2004 common stock offering of 1.725 million shares, $0.4 million from the issuance and/or exercise of stock option and warrants, less $2.9 million in losses for the year.

Assets under advice at the Bank of Florida Trust Company subsidiary, which commenced operations in August 2000, ended 2004 at an all-time high of $202 million, up $71 million or 54% from one year earlier. It presently services approximately 74 clients, with an average relationship of $2.2 million (excluding its largest client). The Trust Company completed its first full year of profitability in 2004.

The following table summarizes the major components of the balance sheet as of December 31, 2004 and 2003, respectively.

	AT DECEMBER 31,						INCREASE/(DECREASE)
	(IN THOUSANDS, EXCEPT PER SHARE DATA)
	2004			2003			$		%
Total assets	$	420,808		$	222,610		198,198		89.0	%
Cash and cash equivalents		57,897			8,424		49,473		587.3	%
Interest-earning assets		394,851			209,426		185,425		88.5	%
Investment securities		25,945			8,072		17,873		221.4	%
Loans held for investment		325,981			200,490		125,491		62.6	%
Allowance for loan losses		2,817			1,568		1,249		79.7	%
Deposit accounts		376,064			201,154		174,910		87.0	%
Stockholders’ equity		41,954			21,220		20,734		97.7	%
Total shares outstanding		4,835,632			3,079,199		1,756,433		57.0	%
Book value per common share		7.93			6.89		1.04		15.1	%
Allowance for loan losses to total loans		0.86	%		0.78	%	0.08	%	10.5	%
Allowance for loan losses to nonperforming loans		480.70	%		3,336.84	%	(2856.14	)%	(85.6	)%
Nonperforming loans to total loans		0.18	%		0.02	%	0.16	%	666.8	%
Nonperforming assets to total assets		0.14	%		0.02	%	0.12	%	559.6	%
Leverage (Tier 1 to average total assets)		11.07	%		10.32	%	0.75	%	7.3	%
Assets under advice – Bank of Florida Trust Company	$	202,138		$	131,000		71,138		54.3	%

30

Loan Portfolio

Total gross loans outstanding were $326 million as of year-end 2004, an increase of $125 million or 63% over the prior year. The Naples bank accounted for $63 million in growth (up 43% to $210 million) while loans at the Ft. Lauderdale bank rose $50 million (up 94% to $103 million). Our new de novo bank in the Tampa Bay market, which opened in November 2004, ended the year with $13 million in loans outstanding. Management believes that general economic conditions in the Company’s primary operating areas, including the real estate markets, continue to be healthy due to steady growth in population, personal income, and demand for property and services, which explain the continued strong loan demand for the Company’s lending products.

As indicated in the loan portfolio table in Item 1, commercial loans not secured by real estate ended the year at $43 million, up $9 million or 25% from a year earlier. Commercial loans secured by real estate, including construction loans, approximated $183 million of the total $244 million in real estate loans at December 31, 2004, compared to an approximate $111 million of the $135 million in real estate loans at December 31, 2003. As a result, the combined growth in loans to commercial borrowers was $81 million or 56% over the year. Consequently, commercial loans comprised $226 million or 69% of loans outstanding as of year-end 2004, up from $145 million or 72% of loans outstanding at year-end 2003. When 1-4 family residential real estate used to secured commercial borrowings is considered, total commercial loan borrowings constituted approximately $253 million or 78% of year-end 2004 loans outstanding. While the Company is positioned to serve the seasonal working capital needs of its customers, its primary focus is on commercial real estate term and commercial construction loans. The Company generally does not seek to purchase or participate in loans of other institutions outside its operating area due to the adequacy of demand in its operating area, the desire for a long-term, face-to-face working relationship, including providing depositor services, and a belief that asset quality can be more effectively monitored within its local market area.

Consumer loans, including one-to-four family residential loans, ended 2004 at $100 million versus $56 million one year earlier, representing a growth rate of 79%. These levels are comprised of equity lines of credit and installment loans shown in the loan portfolio table in Item 1 plus consumer loans secured by real estate. In total, consumer loans constituted 31% of loans outstanding at year-end 2004 versus 28% at December 31, 2003.

As a subset of total consumer loans, residential real estate loans totaled approximately $35 million at year end 2004 (11% of total loans outstanding); home equity and other consumer lines of credit reached $30 million at year-end 2004 (9% of total loans outstanding); and consumer installment loans were $8 million (2% of total loans outstanding). Based on the private banking focus of the Company, a good portion of the consumer loans outstanding is related to borrowers who also have a commercial loan or other relationship with the Banks.

Deposits

Total deposits increased $175 million or 87% in 2004 to end the year at $376 million. Deposit growth in the Bank of Florida—Southwest (Naples bank) comprised $76 million of this increase, up 51% to $226 million in deposits at December 31, 2004, while deposits at the Ft. Lauderdale bank climbed $76 million or 133% to $134 million. The Bank of Florida—Tampa Bay ended the year with $23 million in deposits.

The largest shares of deposit growth were in demand deposit (DDA) and low-cost NOW accounts (up $50 million), money market deposits (up $47 million), and certificates of deposit (up $73 million). As of year end 2004, these accounts comprised 24%, 29%, and 43%, respectively, of total deposits. Growth in DDA accounts was $36million or 139% during the year to 16% of total deposits, reflective of the Company’s focus to grow this source of funds through expanded services. The Ft. Lauderdale bank ended the year with a DDA/total deposit ratio of 28% compared to that of the Naples bank at 11%, reflective of the latter’s more CD-oriented market place.

A good share (40%) of Company-wide growth in CDs of $73 million came from national market CDs, which the Naples bank has used as a source to fund the increase in its loans. This funding source, which the Company has found to be reliable and frequently at a lower cost than local market CDs, increased from $28 million at year-end 2003 to $58 million at year-end 2004. As of that date, total CDs constituted $169 million or 45% to total deposits, down slightly from a 47% mix a year earlier.

Non-interest bearing demand deposits reached $61 million at year-end 2004, an increase of $36 million or 135% over the prior year. Most of the growth ($27 million) occurred at the Ft. Lauderdale bank, reflecting

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expansion from an initially low level of operating accounts, as lending relationships, with associated deposit accounts, grew and usage of cash management products expanded. Demand deposits constituted approximately 16.2% of total deposits at year-end 2004 compared to 12.7% at year-end 2003.

The Company’s core deposits, using the industry definition which excludes national market CDs and time deposits of $100,000 or more, ended 2004 at $244 million, an increase of $105 million or 75% from one year earlier. National market CDs constituted 15% of total deposits at December 31, 2004 versus 14% a year earlier. Time deposits of $100,000 or more at year-end 2004 comprised 20% of total deposits, somewhat higher than its peers owing to the nature of its depositor base being generally larger commercial or private banking customers with typically higher balances; as such, the Company considers these deposits to be frequently as reliable as core deposits under $100,000.

Subordinated Debt

During June 2004, Bank of Florida – Southwest issued $2 million in subordinated debt to a local community bank. Interest is payable monthly at a rate of prime less one percent during the first sixty days, prime plus zero percent for the next sixty days, and prime plus one percent, thereafter. The interest rate at December 31, 2004 was 5.25%. This debt matures and is payable in full in June of 2010. Bank of Florida – Southwest may prepay the debt at its option without penalty but with accrued interest. There was no such debt outstanding as of December 31, 2003.

RESULTS OF OPERATIONS

The Company’s net loss for 2004 was $2.880 million, a $171,000 or 6.3% increase from 2003’s net loss of $2.709 million. The loss per share was $0.81, 12% less than in 2003 due to the increase in shares outstanding in third quarter 2004 from the Company’s public offering.

The following table summarizes the major components of the Statement of Operations and key ratios for the twelve months ending December 31, 2004 and 2003, respectively.

	FOR THE YEAR ENDED DECEMBER 31,						INCREASE/(DECREASE)
	(IN THOUSANDS, EXCEPT PER SHARE DATA)
	2004			2003			$			%
Total interest income	$	14,767		$	8,856		$	5,911		66.7	%
Total interest expense		4,962			3,278			1,684		51.4	%
Net interest income before provision for loan losses		9,805			5,578			4,227		75.8	%
Provision for loan losses		1,279			833			446		53.5	%
Net interest income after provision for loan losses		8,526			4,745			3,781		79.7	%
Non-interest income		2,176			1,335			841		63.0	%
Non-interest expense		13,582			8,789			4,793		54.5	%
Provision for income taxes		—			—			—		—
Net loss		(2,880	)		(2,709	)		(171	)	(6.3	)%
Basic loss per share	$	(0.81	)	$	(0.92	)	$	0.11		11.9	%
Diluted loss per share		(0.81	)		(0.92	)		0.11		11.9	%
Weighted average shares used for diluted loss per share		3,811,270			2,948,514			862,756		29.3	%
Top-line revenue	$	11,977		$	6,904		$	5,073		62.3	%
Net interest margin		3.42	%		3.37	%		0.05	%	1.5	%
Efficiency ratio		113.36	%		127.12	%		(13.78	)%	(10.8	)%
Average equity to average assets		10.61	%		12.21	%		(1.60	)%	(13.1	)%
Average loans held for investment to average deposits		95.23	%		93.96	%		1.27	%	1.4	%
Net charge-offs to average loans		0.02	%		0.16	%		(0.14	)%	(8.75	)%

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In addition to establishing its operation in Palm Beach County, which began to be developed in March 2004, and opening the Tampa Bay bank, which began with the purchase of Bank of Florida, Tampa Bay (In Organization) in August, the Company incurred additional 2004 expense in writing off the deferred costs of a bank acquisition in Pembroke Pines, Florida, which was terminated in September 2004. The combined net costs of these activities, including all related expenses before and since the opening of these locations, net of offsetting revenues, is defined in this MD&A as “net expansion costs.”

The Company considers it useful to identify the impact of these expansion activities compared to the activities of its established Naples, Fort Lauderdale, and Trust Company franchises. Improved results of $1.697 million in the Naples, Fort Lauderdale (excluding the Palm Beach County location), and Trust Company franchises enabled the increase in the Company’s 2004 net loss to be held to $171,000 compared to 2003, despite 2004’s net expansion costs of $1.868 million.

The table below details the calculation of net expansion costs and related computations. There were no comparable expenses in 2003.

Explanation of Net Expansion Cost Calculation

	4Q’04			3Q’04			4Q-3Q Change			Total 2004
Net loss reported	$	(993	)	$	(856	)	$	(137	)	$	(2,880	)
Tampa Bay (TB) net start-up costs		(512	)		(181	)		(331	)		(693	)
Palm Beach (PB) net start-up costs		(308	)		(237	)		(71	)		(734	)
TB/PB warrants & options		(119	)					(119	)		119
Tampa Bay intangible amortization		(10	)		—			(10	)		10
Horizon deferred acquisition expense write-off					(312	)		312			312
Net expansion costs		(949	)		(730	)		(219	)		(1,868	)
Net loss adjusted for expansion costs		(44	)		(126	)		82			(1,012	)
Naples loan loss provision		150			176			(26	)		650
Ft. Lauderdale loan loss provision		166			87			79			493
Net income adjusted for expansion costs, before loan loss provision	$	272		$	137		$	135		$	131
	4Q’04			3Q’04			4Q-3Q Change			Total 2004
Total noninterest expense	$	4,156		$	3,794		$	362		$	13,583
Tampa Bay (TB)		424			181			243			605
Palm Beach (PB)		311			237			74			737
TB/PB warrants & options		119			—			119			119
Tampa Bay intangible amortization		10			—			10			10
Horizon deferred acquisition expense write-off		—			312			(312	)		312
Expense of expansion activities		864			730			134			1,783
Noninterest expense adjusted for expansion costs	$	3,292		$	3,064		$	228		$	11,800

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For 2004 as a whole, top-line revenue rose by $5.073 million or 62%, nearly double the $2.650 million or 62% rise in 2003. The Company considers “top-line revenue” to be useful in explaining financial performance, as it combines both the Company’s lending or spread income business (interest income less interest expense) and its fee income business, both of which often pertain to the same customer base and can be matched against the underlying noninterest expense to generate those revenue components. Top-line revenue equals net interest income before provision for loan losses plus noninterest income, exclusive of gain/loss on sale of investment securities.

The increase in top-line revenue of $5.073 million compares to a $4.793 million rise (up 55%) in noninterest expense; $1.868 million of this increase reflects costs related to establishing our Palm Beach County and Tampa Bay operations and a loss taken on terminating a proposed merger with Horizon Financial Corp. The resulting net improvement of $275,000 (including $5,000 fewer net gains on securities and miscellaneous transactions) was more than offset by $446,000 in additional loan loss provision expense due to 63% growth in loans. The noninterest income component of top-line revenue climbed an impressive 64% for all of 2004, two thirds of which reflected higher trust fees and the balance related to banking service charges, commissions, and fees. However, vigorous loan growth drove the net interest income component up an even greater 76%, bringing noninterest income as a percent of top-line revenue down 1.1 percentage points to 18.1%.

Excluding the expansion costs of Tampa Bay, Palm Beach County, and the Horizon acquisition write-off, noninterest expense for the year rose $3.0 million or 34%. The increase in non-interest expense in 2004 compared to the prior year was largely due to the cost of readying and staffing the Company’s new operations center to support the larger organization, including conversion costs to a new core data processing vendor; annual increases in the cost of leased quarters; and timing of certain personnel costs. Including expansion expense, the Company’s efficiency ratio was 113.4% compared to 127.1% in the prior year, which contained no expansion expense; excluding expansion expense and revenues from the Tampa Bay and Palm Beach County markets, the Company’s 2004 efficiency ratio improved even further to 98.9%.

Lastly, the provision for loan losses, which builds the allowance for loan losses (after the impact of net charge-offs), increased by $446,000 or 54% in 2004 to $1,279,000, largely due to general credit risks related to vigorous loan growth of 63% during the year. The loan loss allowance ended 2004 at $2.817 million, up 80% over the last twelve months.

The Company’s 2004 net loss before provision for loan losses was $1.6 million, a $275,000 or 15% improvement over the prior year. The Company considers this measurement an important indication of the size of its earnings stream (top-line revenue less non-interest expense) and its ability to absorb loan loss provisioning caused by rapid loan growth. Because the requirement to provide for an allowance for loan losses coincides with loan growth, it may take several months before the net interest income on loan growth covers the associated provision for loan losses. The larger the Company’s earnings stream becomes, the less the disproportionate impact on profitability of the preceding provisioning.

Net Interest Income

Net interest income increased $4.2 million or 76% in 2004 to $9.8 million. Net interest spread, the difference between the yield on interest-earning assets and the rate paid on interest-bearing liabilities, was 3.02% on average in 2004, a slight increase of 3 basis points over the prior year. In addition, the net interest margin, which is net interest income divided by average interest-earning assets, averaged 3.42% in 2004, a 5 basis points increase over 2003.

As shown by the table in Item 1 (Rate/Volume Analysis of Net Interest Income), the $4.2 million increase in 2004’s net interest income reflects the impact of higher earning asset volumes more than compensating for the increase in outstanding interest-bearing liabilities. Higher volumes (virtually all due to loan growth), enhanced by the impact of a lower mix of interest-bearing liabilities, increased net interest income by $4.3 million, offset by $65,000 less net interest income due to earning assets yields falling faster than rates on interest-bearing liabilities.

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The following table represents, for the years indicated, certain information related to our average balance sheet and average yields on assets and average costs of liabilities. Average balances have been derived from daily averages.

	For the Twelve-Months Ended December 31,
	2004							2003
	Average Balance		Interest and Dividends			Average Yield/Rate		Average Balance		Interest and Dividends			Average Yield/Rate
Assets:
Earning Assets:
Interest Earning Deposits	$	—	$	—		0.00	%	$	3,733	$	79		2.12	%
Securities1		9,079		322		3.55	%		9,816		342		3.48	%
Federal Funds Sold		17,576		294		1.67	%		6,682		72		1.08	%
Loans2		260,385		14,151		5.43	%		145,113		8,363		5.76	%
Total Interest-Earning assets		287,040		14,767		5.14	%		165,344		8,856		5.36	%
Non Interest-earning assets		22,894							13,217
Total Assets	$	309,934						$	178,561
Liabilities:
Interest-bearing liabilities:
NOW & Money Market	$	96,776		1,203		1.24	%	$	64,092	$	897		1.40	%
Savings		2,842		40		1.41	%		1,072		5		0.47	%
Time Deposit		132,514		3,650		2.75	%		71,170		2,354		3.31	%
Other Borrowings		2,250		69		3.02	%		2,020		22		1.09	%
Total interest-bearing liabilities	$	234,382		4,962		2.12	%	$	138,354	$	3,278		2.37	%
Demand deposits		41,305							18,107
Other non-interest bearing liabilities		1,350							291
Total non-interest bearing liabilities		42,655							18,398
Stockholders’ Equity		32,897							21,809
Total Liabilities & Stockholders’ Equity	$	309,934						$	178,561
Net interest income			$	9,805							5,578
Interest-rate spread						3.02	%						2.99	%
Net interest margin						3.42	%						3.37	%
Ratio of interest-bearing liabilities to earning assets				81.7	%						83.7	%

¹ Tax-exempt income, to the extent included in the amounts above, is not reflected on a tax equivalent basis.

² For purposes of this analysis, non-accruing loans, if any, are included in the average balance outstanding.

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Interest income increased $5.9 million or 67% to $14.8 million in 2004, reflective of continued strong loan growth coupled with the impact of five quarter point prime rate increases in the third and fourth quarters of 2004. Approximately 55% of loans outstanding immediately adjust to a prime rate change, which resulted in a 52 basis point improvement in the fourth quarter 2004 loan yield compared to the second quarter 2004 loan yield. Though loan growth was vigorous during the year, deposit growth was also strong, resulting in higher temporary investments (largely low-yielding overnight Federal Funds sold to maintain liquidity) especially during that last half of the year; this growth along with the impact of cash received from the July secondary offering reduced the improvement in the yield on earning assets in the fourth quarter versus the second quarter to 16 basis points. For all of 2004, the average yield on interest-earning assets decreased 22 basis points to 5.14%.

Interest expense totaled $5.0 million in 2004, an increase of $1.7 million or 51%. The overall yield on interest-bearing liabilities was 2.12%, a decrease of 25 basis points from the prior year. Combined NOW and money market rates were 16 basis points lower on average, while the average cost of certificates of deposit declined 56 basis points. Renewal of maturing certificates of deposit (“CD”) and expansion of CDs outstanding at lower financial market rates resulted in an overall decrease in the average funding rate for the year.

The Company’s cost of funds began to rise coincident with the prime rate increases which started in July 2004. Because of the maturity structure of the CDs and the Company’s ability to lag increases in non-maturity deposits, the overall cost of interest–bearing liabilities increased by 18 basis points from second quarter 2004 to fourth quarter 2004 compared to the 52 basis increase in average loan yield during the same period as noted above. Because of the improvement in overall earning asset yield was held to 16 basis points, the net interest spread for fourth quarter 2004 was one basis point lower than in second quarter 2004. The net interest margin widened because the cash provided by the July secondary offering decreased the ratio of interest-bearing liabilities to earning assets from 84.5% to 80.8%.

Noninterest Income

Total noninterest income increased by 63% or $841,000 in 2004 to $2.2 million. Fees earned by the Bank of Florida Trust Company climbed 116% to $1.1 million based on growth in assets under advice of 54%. Service charges on deposit accounts increased 77% to $867,000 indicative of growth in demand deposits in both the Naples and Ft. Lauderdale Banks and the early impact of expansion into the Palm Beach and Tampa Bay markets. These improvements were slightly offset by a 29% reduction in fees from the origination and sale of mortgages in the secondary market from the prior year to $242,000; turnover of mortgage originators and reduced mortgage refinancing due to the upturn in financial market rates explain the reduction.

Noninterest Expense

Noninterest expense totaled $13.6 million in 2004, a $4.8 million or 54% increase from the prior year. The primary source of the increase ($2.7 million, including the termination of the Horizon agreement) related to holding company expansion, consistent with providing additional cost-effective services to the Company’s subsidiaries. Holding company expense, net of intercompany eliminations, increased as resources began to be added to provide comprehensive and more cost effective services to the subsidiary Banks than they could afford on their own. A significantly greater share of executive management’s efforts has been directed towards acquisitions, capital-raising activities, and overall risk management, with higher on-staff accounting and finance expertise as well as greater outside auditing, legal and consulting fees.

Of the overall $4.8 million increase in noninterest expense, $1.868 million reflects costs related to establishing our Palm Beach County and Tampa Bay operations and a loss taken on terminating the proposed merger with Horizon Financial Corp. Overall, personnel costs increased $2.3 million or 53%, occupancy expenses increased $708,000 or 47%, and general operating expenses rose $1.6 million or 74%. Included in general operating expenses are professional and outside services, data processing costs and the write-off of deferred expense related to the termination of the Horizon agreement, which increased $343,000, $216,000 and $312,000, respectively.

Asset Quality and Provision for Loan Losses

The Company maintained asset quality at high levels as measured by low nonperforming loans (0.18% of loans outstanding or $586,000), strong coverage of the loan loss allowance to nonperforming loans (4.8 times), minimal past due loans (30—89 days at 0.41% of loans outstanding), and very manageable net charge-offs of $30,000 for the entire year or 0.01% of average loans. The most recently available data for national peer banks

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through September 30, 2004 had ratios of 0.59%, 0.69%, and 0.14%. As of December 31, 2003, nonperforming loans (90+ days past due and nonaccruals) totaled $47,000 or 0.02% of loans outstanding. Net charge-offs for 2003 were $172,000 or 0.16% of average loans.

The allowance for loan losses at December 31, 2004 amounted to $2.817 million or 0.86% of outstanding gross loans compared to $1.568 million or 0.78% of loans outstanding one year earlier. Because of the Company’s lack of historical loss experience, the allowance has been established based principally on loss histories of comparably sized and positioned banking institutions, adjusted for current economic and demographic conditions. The allowance is also influenced by the fact that some 18% of the loan portfolio at December 31, 2004 is related to residential real estate, which historically has resulted in a lower percentage of losses. The loan loss provision was $1.3 million in 2004, 54% higher than the expense in 2004, largely because of strong loan growth of 63% during the year.

Results by Operating Unit

The following tables represent summarized results of operations by operating unit for the years indicated. (*) “Other” includes consolidating eliminating entries and activity at the holding company level. Selected analysis of these results has been included in the text above.

For the Year Ended:	Bank of Florida - Southwest			Bank of Florida, Ft. Lauderdale			Bank of Florida - Tampa Bay			Bank of Florida Trust Company			* Other			Consolidated
December 31, 2004
Net interest income	$	6,364		$	3,304		$	38		$	67		$	32		$	9,805
Provision for loan losses		650			503			126			—			—			1,279
Noninterest income		902			211			—			1,063			—			2,176
Noninterest expense		5,433			3,189			605			1,077			3,278			13,582
Net income (loss)	$	1,183		$	(177	)	$	(693	)	$	53		$	(3,246	)	$	(2,880	)
End of year assets	$	246,862		$	144,853		$	33,404		$	2,333		$	(6,644	)	$	420,808
Assets under advice	$	—		$	—		$	—		$	202,138		$	—		$	202,138
December 31, 2003
Net interest income	$	4,288		$	1,233		$	—		$	57		$	—		$	5,578
Provision for loan losses		445			388			—			—			—			833
Noninterest income		698			145			—			492			—			1,335
Noninterest expense		4,813			2,530			—			861			585			8,789
Net income (loss)	$	(272	)	$	(1,540	)	$	—		$	(312	)	$	(585	)	$	(2,709	)
End of year assets	$	161,697		$	63,462		$	—		$	2,558		$	(5,107	)	$	222,610
Assets under advice	$	—		$	—		$	—		$	131,000		$	—		$	131,000

CAPITAL RESOURCES AND LIQUIDITY

Management of the Company has developed a strategic initiative that provides for the expansion of its banking operations into new primary service areas, as well as continued expansion of its market share in its existing market. As of December 31, 2005, there were no material commitments for capital expenditures, though such expenditures may be incurred in 2006 related to utilization of additional space at the Company’s headquarters location in Naples.

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While it is anticipated that interest income will increase commensurate with interest expense upon the attraction of deposits, non-interest expenses will generally be disproportionately higher until such time as the volume of deposits and interest-earning assets generate net interest income and service fees sufficient to cover these costs. Management’s philosophy in each instance of expansion is to attract deposit relationships through the offering of competitive rates, terms and service.

As it is the Company’s philosophy to consider the investment portfolio principally as a source of liquidity, deposit growth, except to the extent necessary to maintain such liquidity, is generally utilized to fund the higher yielding loan portfolio, particularly commercial and, to a lesser degree, consumer mortgage lending. In addition, it is management’s practice to maintain the Company’s well-capitalized status in compliance with regulatory guidelines when planning its expansion activities.

Consistent with the objective of operating a sound financial organization, the Company maintains high capital ratios. Regulatory agencies including the State of Florida Department of Financial Services, the FDIC and the Federal Reserve System have approved guidelines for a risk-based capital framework that makes capital requirements more sensitive to the risks germane to each individual institution. The guidelines require that total capital of 8% be held against total risk-adjusted assets. At December 31, 2005, the Company’s Tier 1 capital ratio was 10.48 %, total risk-based capital ratio was 13.37%, and the Tier 1 leverage ratio was 10.28%.

The Company’s ability to satisfy demands for credit, deposit withdrawals and other corporate needs depends on its level of liquidity. The Company utilizes several means to manage its liquidity. One of the tools that the Company uses to measure liquidity is a comparison of total liquid assets (cash, due from banks, federal funds sold, and other investments) to total deposits, calculating it on a daily basis and reviewing it monthly with the subsidiary bank management and board of director Asset/Liability Management Committees (ALCO). As of December 31, 2005, consolidated Company liquid assets were $68.7 million or 13.8% of consolidated deposits. It is the policy of the Banks to manage the latter ratio between 5% and 15%. Traditionally, increases in deposits are sufficient to provide adequate levels of liquidity; however, if needed, the Company has approved extensions of credit available from correspondent banks amounting to $20.3 million, sources for loan sales, and primarily short-term investments that could be liquidated if necessary. In addition, two of the Company’s banking subsidiaries are members of the Federal Home Loan Bank and, subject to certain collateral verification requirements, Bank of Florida – Southwest and Bank of Florida in Ft. Lauderdale may borrow up to 20% and 10%, respectively, of their outstanding assets.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss due to adverse changes in market prices and rates. The Company’s’ market risk arises primarily from interest-rate risk inherent in its lending and deposit gathering activities. The measure of market risk associated with financial instruments is meaningful only when all related and offsetting on and off balance sheet transactions are aggregated, and the resulting net positions are identified.

The Company does not engage in trading or hedging activities and has not invested in interest-rate derivatives or entered into interest rate swaps. Bancshares’ primary objective in managing interest-rate risk is to minimize the adverse impact of changes in interest rates on the Company’s net interest income and capital, while adjusting its asset-liability structure to obtain the maximum yield-cost spread on that structure. Disclosures about the fair value of financial instruments, which reflects changes in market prices and rates, can be found in “Note 16 – Fair Values of Financial Instruments” in the “Notes to Consolidated Financial Statements”.

ASSET/LIABILITY MANAGEMENT

It is the objective of the Company to manage assets and liabilities to provide a satisfactory, consistent level of profitability within the framework of established cash, loan, investment, borrowing and capital policies. Certain of the officers of the Banks are responsible for monitoring policies and procedures that are designed to ensure acceptable composition of the asset/liability mix, stability and leverage of all sources of funds while adhering to prudent banking practices. It is the overall philosophy of management to support asset growth primarily through growth of core deposits, which include deposits of all categories made by individuals, partnerships and corporations. Management of the Company seeks to invest the largest portion of its assets in commercial, consumer and real estate loans.

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The asset/liability mix is monitored on a monthly basis and a monthly report reflecting interest-sensitive assets and interest-sensitive liabilities is prepared and presented to the respective Banks’ Boards of Directors. The objective of this policy is to control interest-sensitive assets and liabilities to minimize the impact of substantial movements in interest rates on the Banks’ earnings.

INTEREST SENSITIVITY

The objective of interest sensitivity management is to minimize the risk associated with the effect of interest rate changes on net interest margins while maintaining net interest income at acceptable levels. Managing this risk involves monthly monitoring of the interest sensitive assets relative to interest sensitive liabilities over specific time intervals. All assets and liabilities are evaluated as maturing at the earlier of re-pricing date or contractual maturity date. While liabilities without specific terms such as money market, NOW and savings accounts are generally considered core deposits for liquidity purposes, 65% are deemed to re-price for purposes of interest rate sensitivity analysis within the first twelve months. Management subjectively sets rates on all accounts.

The principal measure of our exposure to interest rate risk is the difference between interest sensitive assets and liabilities for the periods being measured, commonly referred to as “gap” for such period. A positive gap position represents a greater amount of interest sensitive assets re-pricing (or maturing). Thus, an increase in rates would positively impact net interest income, as the yield on interest-earning assets would increase prior to the increase in the cost of interest bearing liabilities. Conversely, a negative gap position is indicative of a bank that has a greater amount of interest sensitive liabilities re-pricing (or maturing) than it does interest sensitive assets, in a given time interval. In this instance, the impact on net interest income would be positive in a declining rate environment and negative if rates were rising. The impact on net interest income described above is general, as other factors would additionally maximize or minimize the effect. For example, a change in the prime interest rate could effect an immediate change to rates on prime related assets, whereas a liability which re-prices according to changes in Treasury rates might (1) lag in the timing of the change and (2) change rates in an amount less than the change in the prime interest rate. It is common to focus on the one year gap, which is the difference between the dollar amount of assets and the dollar amount of liabilities maturing or repricing within the next twelve months.

The following is a consolidated maturity and re-pricing analysis of rate sensitive assets and liabilities as of December 31, 2005.

	0-90 DAYS			91-180 DAYS			181-365 DAYS			OVER 1 YEAR			TOTAL
	(IN THOUSANDS)
Interest-earning assets:
Federal funds sold	$	28,739		$	—		$	—		$	—		$	28,739
Interest-bearing deposits		2,402			—			—			—			2,402
Investment securities		—			1,538			—			17,084			18,622
Restricted securities		—			—			—			918			918
Loans		255,321			13,436			14,060			204,757			487,574
Total interest-earning assets		286,462			14,974			14,060			222,759			538,255
Interest-bearing demand deposits		15,197			38,275			76,550			82,438			212,460
Savings		5,148			—			—			—			5,148
Certificates of Deposit		42,956			45,091			45,494			60,169			193,710
Other borrowings		—			—			—			14,000			14,000
Total interest-bearing liabilities		63,301			83,366			122,044			156,607			425,318
Interest Sensitivity Gap:
Sensitive assets less rate sensitive liabilities	$	223,161		$	(68,392	)	$	(107,984	)	$	66,152		$	112,937
Cumulative interest sensitivity gap		223,161			154,769			46,785			112,937
Interest sensitivity gap ratio as a percent of total assets		41.4	%		(12.7	)%		(20.1	)%		12.3	%
Cumulative interest sensitivity gap ratio as a percent of total assets		41.4	%		28.8	%		8.7	%		21.0	%

39

At December 31, 2005, the Company had $315.5 million in interest sensitive assets compared to $268.7 million in interest sensitive liabilities that will mature or re-price within a year, resulting in a positive gap position of $46.8 million (or 8.7%, expressed as a percentage of total assets).

Management believes that the current balance sheet structure of interest sensitive assets and liabilities does not represent a material risk to earnings or liquidity in the event of a change in market rates.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Certain information required by this item is included in Item 6 of Part II of this report under the heading “Selected Quarterly Financial Data” and is incorporated by reference. All other information required by this item is included in Item15 of Part IV of this report and is incorporated into this item by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On August 22, 2005, Bancshares of Florida, Inc. (the “Company”) dismissed KPMG LLP (“KPMG”) as the Company’s independent public accountants effective immediately. The decision to change accountants was approved by the Audit Committee of the Board of Directors. The audit reports of KPMG on the Company’s consolidated financial statements as of and for the years ended December 31, 2004 and 2003 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.

In connection with the audits of the two fiscal years ended December 31, 2004 and 2003 and the subsequent interim period through the date of this report, there were no disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to KPMG’s satisfaction, would have caused them to make reference to the subject matter of the disagreements in connection with their opinion on the Company’s consolidated financial statements; in addition, there were no reportable events as listed in Item 304(a)(1)(v) of Regulation S-K.

The Company provided KPMG with a copy of the foregoing disclosures and requested a letter addressed to the Securities and Exchange Commission (“SEC”) stating whether it agrees with the statements made by the Company. KPMG’s letter was attached, as exhibit 16.1, to Form 8-K filed with the SEC on August 25, 2005.

The Company has engaged Hacker, Johnson & Smith PA (“Hacker/Johnson”) effective August 22, 2005 as its new principal accountant to audit its financial statements. The decision to change auditors and retain Hacker/Johnson was approved by the Audit Committee of the Company’s Board of the Directors.

Hacker/Johnson, a Registered Public Accounting Firm, currently provides independent audit, review, and tax services to nearly one hundred community banks in Florida, making it the largest provider of such services in the state. Founded in 1974, the firm has offices in Tampa, Fort Lauderdale, and Orlando. Its experience in auditing multi-bank holding companies includes Southwest Florida Community Bancorp, which owns three banks, and Southern Community Bancorp, which prior to its sale in 2004, owned three banks with total assets in excess of $1.0 billion. In the last three years, Hacker/Johnson has been the external auditor associated with more than $150 million in capital raising for Florida banking companies in 13 separate transactions.

During the years ended December 31, 2004 and 2003, and through the date hereof, the Company did not consult Hacker/Johnson with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, or any other matters or reportable events as set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.

The Company has requested that Hacker/Johnson review the foregoing disclosures and has given the firm the opportunity to furnish a letter addressed to the SEC containing any new information or clarification, or in what respects it does not agree with the Company’s statements. No such letter has been received.

Bancshares of Florida, Inc. did not have any disagreements with accountants on accounting and financial disclosures during 2005 or 2004.

40

ITEM 9A. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Bancshares of Florida, Inc. maintains controls and procedures designed to ensure that information required to be disclosed in the reports that Bancshares of Florida, Inc. files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon management’s evaluation of those controls and procedures performed within the 90 days preceding the filing of this Report, the Chief Executive Officer and Chief Financial Officer of Bancshares of Florida, Inc. concluded that, subject to the limitations noted below, Bancshares of Florida, Inc.’s disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms.

(b) Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Such internal controls over financial reporting were designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based upon our evaluation under the framework in Internal Control-Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2005. Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005 has been audited by Hacker, Johnson & Smith PA, an independent registered public accounting firm, as stated in their report which is included herein.

(c) Changes in Internal Controls

Bancshares of Florida, Inc. has made no significant changes in its internal controls over financial reporting during the quarter ended December 31, 2005 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

(d) Limitations on the Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Bancshares of Florida, Inc. have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

41

ITEM 9B. OTHER INFORMATION

The Company did not fail to file any Form 8-K or to disclose any information required to be disclosed therein during the fourth quarter of 2005.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information required by this item appears in the Company’s Proxy Statement for the 2006 Annual Meeting of Shareholders under the caption, “Election of Directors”, “Non-Director Executive Officers”, “Report of the Audit Committee” and “Compliance with Section 16(a) of the Securities and Exchange Act of 1934”, and is hereby incorporated by reference.

CODE OF ETHICS

Bancshares of Florida has adopted a Code of Ethics applicable to its Senior Financial Officers. This code is posted on our website at www.bankofflorida.com and a copy will be provided free of charge, upon request to Arlette Yassa, Corporate Secretary, 110 E. Broward Boulevard, Suite 100, Ft. Lauderdale, Florida 33301, (954) 653-2000.

ITEM 11. EXECUTIVE COMPENSATION

Information required by this item appears in the Company’s Proxy Statement for the 2006 Annual Meeting of Shareholders under the caption, “Executive Compensation” and “Compensation Committee Report”, and is hereby incorporated by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Information required by this item appears in the Company’s Proxy Statement for the 2006 Annual Meeting of Shareholders under the caption, “Beneficial Stock Ownership of Directors and Executive Officers”, and is hereby incorporated by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by this item appears in the Company’s Proxy Statement for the 2006 Annual Meeting of Shareholders under the caption, “Certain Transactions”, and is hereby incorporated by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees. The aggregate fees which will be billed for professional services by Hacker Johnson & Smith P.A. in connection with the reviews of the financial statements included in the Company’s September 2005 and December 2005 quarterly filings with the Securities and Exchange Commission and the audit of the annual financial statements and internal controls over financial reporting for the fiscal year ended December 31, 2005 was $173,000. In 2005, KPMG LLP also billed Bancshares of Florida, Inc. approximately $31,000, for fees related to the quarterly filings ended March 31, 2005 and June 30, 2005 and approximately $105,000 in connection with the audit of the 2004 annual financial statements. The aggregate fees billed in prior years for professional services by KPMG LLP in connection with the audit of the annual financial statements and the reviews of the financial statements included in the Company’s quarterly filings with the Securities and Exchange Commission for the fiscal year ended December 31, 2004 and 2003, were $95,000 and $67,000, respectively.

Audit-Related and Other Fees: In 2005, KPMG LLP also billed Bancshares of Florida, Inc. approximately

42

$9,000, and Hill, Barth & King, LLC billed $9,800, for fees related to the common stock offering and conversion of preferred stock into common stock in the quarter ended June 30, 2005. In 2004 and 2003, KPMG LLP also billed Bancshares of Florida, Inc. approximately $5,077 and $8,500, respectively, for fees reasonably related to the performance of its audit and reviews of financial statements. Such fees included travel and miscellaneous related fees. In 2004, KPMG LLP also billed Bancshares of Florida, Inc. approximately $85,325, and Hill, Barth & King, LLC billed $18,758, for fees related to the common stock offering in the quarter ended September 30, 2004.

Tax Fees: The fees that will be billed by Hacker, Johnson & Smith P.A. for tax compliance and advice, including the preparation of Bancshares of Florida, Inc.’s 2005 corporate consolidated tax returns is $14,000. In 2005, KPMG LLP also billed Bancshares of Florida, Inc. $15,450 for tax compliance and advice, including the preparation of Bancshares of Florida, Inc.’s corporate tax returns. In 2004 and 2003, KPMG LLP also billed Bancshares of Florida, Inc. $14,000 and $12,500, respectively, for tax compliance and advice, including the preparation of Bancshares of Florida, Inc.’s corporate tax returns.

In all instances, Hacker, Johnson, & Smith P.A’s, KPMG LLP’s or Hill, Barth & King, LLC’s performance of those services was pre-approved by Bancshares of Florida, Inc’s Audit Committee.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report at pages 45 through 78.

• Consolidated Financial Statements of Bancshares of Florida, Inc. (including all required schedules):

1. Independent Auditor’s Report;

2. Consolidated Balance Sheets at December 31, 2005 and 2004;

3. Consolidated Statements of Operations, Stockholders’ Equity, Comprehensive Income (Loss), and Statements of Cash Flows for years ended December 31, 2005, 2004 and 2003.

4. Notes to Consolidated Financial Statements

• Exhibits

The following exhibits are filed with the Securities and Exchange Commission and are incorporated by reference into this Form 10-K. The exhibits that are denominated by an (a.) were previously filed as a part of a Registration Statement on Form SB-2 for Bancshares of Florida, Inc. with the SEC on March 24, 1999, File No. 333-74997. The exhibits that are denominated by a (b.) were previously filed as a part of Amendment No. 1 to Form SB-2, filed with the SEC on May 7, 1999. The exhibits that are denominated by a (c.) were previously filed as a part of Form 10-KSB filed with the SEC on March 30, 2000. The exhibits that are denominated by a (d.) were previously filed as a part of an exhibit to Form 10-QSB/A-1 filed on December 3, 2001. The exhibits that are denominated by an (e.) were previously filed as a part of a Registration Statement on Form SB-2 for Bancshares of Florida with the SEC on December 28, 2001, File No. 333-76094. The exhibits that are denominated by an (f.) were previously filed as part of a Form 10-QSB/A filed on September 10, 2002. The exhibits that are denominated by a (g.) were previously filed as a part of Form 10-KSB filed with the SEC on March 30, 2003. The exhibits that are denominated by an (h.) were previously filed as part of a Form 10-QSB/A filed on August 12, 2003. The exhibits that are denominated by an (i.) were previously filed as a part of a Registration Statement on Form SB-2 filed with the SEC on June 24, 2004, File No. 333-116833. The exhibits that are denominated by an (j.) were previously filed as part of a Form 10-KSB filed with the SEC on March 30, 2005. The exhibits that are denominated by a (k.) were previously filed as part of Form 10-Q filed with the SEC on August 4, 2005. The exhibits that are denominated by an (l.) were previously filed as part of Form 10-Q filed with the SEC on November 3, 2005. The exhibit numbers correspond to the exhibit numbers in the referenced document.

Exhibit Number	Description of Exhibit
2.1	Agreement and Plan of Merger to acquire Bristol Bank dated March 7, 2006
k.3.1	Amended and Restated Articles of Incorporation
a.3.2	Bylaws

43

Exhibit Number	Description of Exhibit
b.4.1	Specimen Common Stock Certificate
b.4.3	Form of Stock Purchase Warrant – 1999 Offering
e.4.4	Form of Stock Purchase Warrant – 2002 Offering
i.4.5	Form of Stock Purchase Warrant A – 2004 Offering.
i.4.6	Form of Stock Purchase Warrant B – 2004 Offering.
l.10.1	Amendment and Restated Employment Agreement of Michael L. McMullan dated February 1, 2005.
l.10.2	Amendment and Restated Employment Agreement of Martin P. Mahan dated February 1, 2005.
c.10.4	1999 Stock Option Plan
c.10.5	Form of Incentive Stock Option Agreement
d.10.6	Employment Agreement of Craig Sherman, dated as of May 3, 1999
f.10.6.1	Amendment to Employment Agreement of Craig Sherman, dated as of July 30, 2001
f.10.8	Employment Agreement of John B. James, dated as of October 1, 2001
f.10.9	Lease between Citizens Reserve, LLC and Citizens National Bank of Southwest Florida
h.10.13	Employee Severance Agreement of John S. Chaperon, dated as of March 1, 2003
j.10.14	Employment Agreement of Julie W. Husler, dated as of May 1, 2002.
10.15	Change in Control Agreement of Jim Goehler, dated as of November 30, 2005.
10.16	Change in Control Agreement of Daniel Taylor, dated as of March 18, 2005.
j.14.1	Code of Ethical Conduct
21.1	Subsidiaries of the Registrant
31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – President and Chief Executive Officer
31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Chief Financial Officer
32.1	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – President and Chief Executive Officer
32.2	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Financial Officer

44

Report of Independent Registered Public Accounting Firm

The Board of Directors

Bancshares of Florida, Inc.:

We have audited the accompanying consolidated balance sheet of Bancshares of Florida, Inc. (the “Company”) and the related consolidated statements of operations, stockholders’ equity, comprehensive income (loss) and cash flows for the year ended December 31, 2005. We also have audited management’s assessment, included in the accompanying Management Report on Internal Control Over Financial Reporting appearing under Item 9A of Form 10-K, that the Company maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness for internal control over financial reporting. Our responsibility is to express an opinion on these financial statements, an opinion on management’s assessment, and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audit of financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respect, the financial position of the Company as of December 31, 2005 and the results of its operations and its cash flows for the year ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) .

HACKER, JOHNSON & SMITH PA

Fort Lauderdale, Florida

March 7, 2006

45

Report of Independent Registered Public Accounting Firm

The Board of Directors

Bancshares of Florida, Inc.:

We have audited the accompanying consolidated balance sheet of Bancshares of Florida, Inc. and subsidiaries as of December 31, 2004, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2004. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Bancshares of Florida, Inc. and subsidiaries as of December 31, 2004, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2004, in conformity with U. S. generally accepted accounting principles.

KPMG LLP

Fort Lauderdale, Florida

March 8, 2005

46

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2005 and 2004

(In Thousands, except share and per share data)

	2005			2004
ASSETS
Cash and due from banks	$	18,976		$	16,011
Interest-bearing deposits due from other banks		2,402			67
Federal funds sold		28,739			41,819
TOTAL CASH AND CASH EQUIVALENTS		50,117			57,897
Securities held to maturity		25			—
Securities available for sale		18,597			25,945
Loans held for sale		1,323			—
Loans held for investment		486,251			325,981
Less:
Allowance for loan losses		4,603			2,817
Deferred loan fees (costs), net		852			202
Net loans held for investment		480,796			322,962
Restricted securities, Federal Home Loan Bank and Federal Reserve stock, at cost		918			1,039
Premises and equipment		6,716			6,828
Accrued interest receivable		2,196			1,119
Cash Surrender Value of Life Insurance		3,128			3,021
Deferred Tax Asset		3,951			—
Intangible asset		925			964
Other assets		1,090			1,033
TOTAL ASSETS	$	569,782		$	420,808
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	$	495,080		$	376,064
Subordinated debt		11,000			2,000
Federal Home Loan Bank Advances		3,000			—
Accrued interest payable		352			187
Accrued expenses and other liabilities		1,289			603
TOTAL LIABILITIES		510,721			378,854
Stockholders’ Equity
Series A Preferred stock, par value $.01 per share, aggregate liquidation preference of $3.5 million; no shares designated, authorized, issued or outstanding at December 31, 2005; 50,000 shares authorized, 36,097 shares issued and outstanding at December 31, 2004		—			3,610
Undesignated Preferred stock, par value $.01 per share, 950,000 and 1,000,000 shares authorized, no shares issued and outstanding at December 31, 2005 and 2004, respectively		—			—
Common stock, par value $.01 per share, 20,000,000 shares authorized, 5,943,783 and 4,835,632 shares issued and outstanding for 2005 and 2004, respectively		59			48
Additional paid-in capital		66,066			49,817
Accumulated deficit		(6,870	)		(11,479	)
Accumulated other comprehensive loss		(194	)		(42	)
TOTAL STOCKHOLDERS’ EQUITY		59,061			41,954
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	569,782		$	420,808

See accompanying notes to consolidated financial statements

47

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended December 31, 2005, 2004 and 2003

(In Thousands, except share and per share data)

	2005			2004			2003
INTEREST INCOME
Interest and fees on loans	$	26,370		$	14,151		$	8,363
Interest on securities and other		701			322			421
Interest on federal funds sold		1,420			294			72
TOTAL INTEREST INCOME		28,491			14,767			8,856
INTEREST EXPENSE
Interest on deposits		8,966			4,893			3,256
Interest on subordinated debt		302			54			—
Interest on other borrowings		80			15			22
TOTAL INTEREST EXPENSE		9,348			4,962			3,278
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES		19,143			9,805			5,578
PROVISION FOR LOAN LOSSES		1,903			1,279			833
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		17,240			8,526			4,745
NONINTEREST INCOME
Mortgage banking		333			242			343
Trust fees		1,546			1,063			492
Service charges and fees		1,380			867			491
Gain on sale of securities-available for sale		—			4			9
TOTAL NONINTEREST INCOME		3,259			2,176			1,335
NONINTEREST EXPENSES
Salaries and employee benefits		10,513			6,702			4,379
Occupancy		2,910			2,226			1,518
Equipment, depreciation and maintenance		1,216			803			683
Data processing		1,349			842			626
Stationary, postage and office supplies		532			350			173
Professional fees		1,081			758			415
Advertising, marketing and public relations		403			261			127
Other		1,340			1,640			868
TOTAL NONINTEREST EXPENSES		19,344			13,582			8,789
INCOME (LOSS) BEFORE INCOME TAX BENEFIT		1,155			(2,880	)		(2,709	)
Income tax benefit		(3,728	)		—			—
NET INCOME (LOSS)	$	4,883		$	(2,880	)	$	(2,709	)
NET INCOME (LOSS) PER SHARE: BASIC	$	0.82		$	(0.81	)	$	(0.92	)
NET INCOME (LOSS) PER SHARE: DILUTED	$	0.79		$	(0.81	)	$	(0.92	)
WEIGHTED AVERAGE SHARES OUTSTANDING: BASIC		5,595,233			3,811,270			2,948,514
WEIGHTED AVERAGE SHARES OUTSTANDING: DILUTED		5,813,230			3,811,270			2,948,514

See accompanying notes to consolidated financial statements

48

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years Ended December 31, 2005, 2004 and 2003

(In Thousands, except share and per share data)

	Preferred Stock					Common Stock			Additional Paid-In Capital		Accumulated Deficit			Accumulated Comprehensive Income (Loss)			Total
	Shares Issued		Amount			Shares Issued	Amount
Balance, December 31, 2002	—			—		2,079,199		21		20,661		(5,680	)		4			15,006
Net loss												(2,709	)					(2,709	)
Common stock issued, net of offering cost of $1,017						1,000,000		10		8,973		—			—			8,983
Changes in fair value on available-for-sale securities															(60	)		(60	)
Balance, December 31, 2003	—			—		3,079,199		31		29,634		(8,389	)		(56	)		21,220
Net loss												(2,880	)					(2,880	)
Preferred stock issued	34,000			3,400														3,400
Exercise of stock options & warrants						31,433		—		314		—			—			314
Adjustments to additional paid-in-capital from stock compensation expense	—			—		—		—		119		—			—			119
Common stock issued, net of offering cost of $1,698						1,725,000		17		19,750		—			—			19,767
Preferred stock dividends paid at a quarterly rate of 0.02 shares of preferred stock	2,097			210								(210	)					—
Changes in fair value on available-for-sale securities															14			14
Balance, December 31, 2004	36,097		$	3,610		4,835,632	$	48	$	49,817	$	(11,479	)	$	(42	)	$	41,954
Net income												4,883						4,883
Exercise of stock options, warrants & other	—			—		27,797		—		384		—			—			384
Adjustments to additional paid-in-capital from stock compensation expense	—			—		—		—		280		—			—			280
Common stock issued, net of offering cost of $1,698	—			—		915,000		9		12,978		—			—			12,987
Preferred stock dividends paid at a quarterly rate of 0.02 shares of preferred stock	1,251			125		—		—		—		(125	)		—			—
Preferred stock converted to common at $15.78 per share	(25,090	)		(2,509	)	165,354		2		2,607		(100	)		—			—
Redemption of preferred stock at $104.00 per share	(12,258	)		(1,226	)	—		—		—		(49	)		—			(1,275	)
Changes in fair value on available-for-sale securities, net of tax	—			—		—		—		—		—			(152	)		(152	)
Balance, December 31, 2005	—		$	—		5,943,783	$	59	$	66,066	$	(6,870	)	$	(194	)	$	59,061

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In Thousands)

	Years ended December 31,
	2005			2004			2003
Net income (loss)	$	4,883		$	(2,880	)	$	(2,709	)
Other comprehensive income (loss) -
Unrealized (losses) gains on available-for-sale securities:
Unrealized holding (losses) gains arising during the year, net of income tax benefit of $117 in 2005		(152	)		18			(69	)
Less reclassification adjustment for gains realized in net income (loss)		—			4			9
Net unrealized (losses) gains		(152	)		14			(60	)
Comprehensive income (loss)	$	4,731		$	(2,866	)	$	(2,769	)

See accompanying notes to condensed consolidated financial statements.

49

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2005, 2004 and 2003

(In Thousands)

	2005			2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	4,883		$	(2,880	)	$	(2,709	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		1,227			770			653
Provision for loan losses		1,903			1,279			833
Accretion of deferred loan fees and costs, net		(419	)		(103	)		(68	)
(Accretion) amortization of investments, net		(42	)		1			46
Gain on sale of securities, net-available for sale		—			(4	)		(9	)
Gain on sale of loans held for sale, net		(333	)		—			—
Originations of loans held for sale		(80,999	)		—			—
Proceeds from sale of loans held for sale		80,009			—			—
Amortization of intangible assets		39			10			—
Increase in accrued interest receivable		(1,077	)		(331	)		(314	)
Deferred income tax benefit		(3,728	)		—			—
Increase in bank-owned life insurance		(107	)		(25	)		—
(Increase) decrease in other assets		(57	)		117			(465	)
Stock compensation expense		280			119			—
Increase in accrued interest payable		165			146			15
Increase in accrued expenses and other liabilities		686			305			19
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		2,430			(596	)		(1,999	)
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans held for investment		(159,318	)		(125,331	)		(94,637	)
Acquisition of net assets, net of cash acquired		—			561			—
Proceeds from the sale of securities available for sale		—			504			5,342
Proceeds from maturing securities and principal payments on available-for-sale securities		333,175			53,007			1,230
Purchase of securities available for sale		(326,079	)		(71,367	)		(8,077	)
Repayment (Purchase) of FHLB stock and Bank-owned life insurance, net		121			(3,321	)		(278	)
Purchase of premises and equipment		(1,115	)		(2,242	)		(340	)
NET CASH USED IN INVESTING ACTIVITIES		(153,216	)		(148,189	)		(96,760	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		119,016			174,910			71,827
Takedown of Advances		20,000			—			—
Repayment of Advances		(17,000	)		—			—
Repayment of short-term notes		—			(2,133	)		—
Proceeds from issuance of subordinated debt, net		9,000			2,000			—
(Redemption) issuance of Series A preferred stock		(1,275	)		3,400			—
Net proceeds from issuance of common stock		13,265			20,081			8,983
NET CASH PROVIDED BY FINANCING ACTIVITIES		143,006			198,258			80,810
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(7,780	)		49,473			(17,949	)
CASH AND CASH EQUIVALENTS
Beginning of year		57,897			8,424			26,373
End of year	$	50,117		$	57,897		$	8,424
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for -
Interest	$	9,183		$	4,816		$	3,263
Noncash Transactions:
Unrealized holding (loss) gain on securities available for sale	$	(152	)	$	14		$	(60	)
Increase in preferred stock for dividends paid	$	125		$	210		$	—
Preferred stock exchanged for common stock	$	2,609		$	—		$	—
Tax benefit from exercise of common stock options and warrants	$	106		$	—		$	—

See accompanying notes to consolidated financial statements

50

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004 and 2003

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Consolidation:

The consolidated financial statements of Bancshares of Florida, Inc. (the “Company”) include the accounts of the Company and its wholly-owned subsidiaries, Bank of Florida – Southwest, Bank of Florida, and Bank of Florida – Tampa Bay (collectively, the Banks), and Bank of Florida Trust Company. All significant intercompany balances and transactions have been eliminated.

The assets under advice by Bank of Florida Trust Company, as well as the obligations associated with those assets, are not included as part of the consolidated financial statements of the Company.

Nature of Operations:

The Company’s primary source of income is from the Banks, which provide a full range of commercial and consumer banking services primarily within the Naples, Ft. Lauderdale, Palm Beach and Tampa Bay areas of Florida. Bank of Florida – Southwest converted from a national charter to a state chartered bank effective January 1, 2005 and became subject to regulation of the Florida Department of Financial Services as of that date in addition to the continued regulation of the Federal Deposit Insurance Corporation. Bank of Florida and Bank of Florida – Tampa Bay are also state-chartered banks and subject to regulation of both the Florida Department of Financial Services and the Federal Deposit Insurance Corporation.

Bank of Florida Trust Company (the “Trust Company”) was incorporated under the laws of the State of Florida as a wholly-owned subsidiary of Bank of Florida - Southwest. Bank of Florida Trust Company offers investment management, trust administration, estate planning, and financial planning services.

Use of Estimates:

The accompanying consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. Management is required 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Changes in such estimates and assumptions might be required because of rapidly changing economic conditions, changing economic prospects of borrowers and other factors. Material estimates that are particularly susceptible to significant changes in the near term are related to the determination of the allowance for loan losses and the deferred tax asset. Actual results could differ from those estimates.

Cash and Cash Equivalents:

Cash and cash equivalents include cash, demand balances due from banks, interest-bearing deposits with banks, and federal funds sold. These assets have original maturities of three months or less and their carrying amount is considered a reasonable estimate of their fair value.

51

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Investment Securities:

At date of purchase, securities are classified as held to maturity, trading, or available for sale. Premiums and discounts on securities are amortized as an adjustment to yield using the interest method.

Securities for which the Company has the positive intent and ability to hold to maturity are classified as “held to maturity” and reported at amortized cost. Securities are classified as “trading” securities if bought and held principally for the purpose of selling them in the near future. Trading securities are recorded at fair value with unrealized gains and losses included in operations. No investments were held for trading purposes at December 31, 2005 and 2004. Securities classified as “available for sale” are those securities that may be sold prior to maturity as part of the Company’s asset/liability management strategies or in response to other factors. These securities are reported at fair value with unrealized gains and losses excluded from operations and reported net of tax as a separate component of stockholders’ equity until realized. Other investments, which include Federal Home Loan Bank stock and other Bank stock, are carried at cost as such investments do not have readily determinable fair values.

A decline in the fair value of any available for sale security or held to maturity security below cost that is deemed other than temporary results in a reduction of the carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. Declines in the value of investment securities judged to be other than temporary are recognized as losses in the statements of operations. Realized gains and losses on sales of investment securities are determined by specific identification of the security sold.

Loans held for sale:

Loans held for sale, which are composed of residential mortgage loans, are reported at the lower of cost or fair value on an aggregate loan portfolio basis. Gains or losses realized on the sale of loans held for sale are recognized at the time of sale and are determined by the difference between the net sales proceeds and the carrying value of the loans sold including any deferred origination fees and costs, adjusted for any servicing asset or liability retained. Gains and losses on sales of residential mortgage loans are included in mortgage banking income in the consolidated statements of operations.

Loans:

Loans held for investment are stated at the principal amount outstanding, net of unearned income, any net deferred fees and costs on originated loans, and an allowance for loan losses. Loan origination and commitment fees and certain direct costs associated with originating or acquiring loans are deferred and amortized as an adjustment to interest income using a method that approximates the interest method, generally over the contractual life of the loan. Interest income on all loans is accrued based on the outstanding daily balances.

Management has established a policy to discontinue accruing interest (non-accrual status) on a loan after it has become 90 days delinquent as to payment of principal or interest unless the loan is considered to be well collateralized and the Company is actively in the process of collection. In addition, a loan will be placed on non-accrual status before it becomes 90 days delinquent if management believes that the borrower’s financial condition is such that collection of interest or principal is doubtful. Interest previously accrued but uncollected on such loans is reversed and charged against current income when the receivable is estimated to be uncollectible. Interest income on non-accrual loans is recognized only as received.

52

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Allowance for Loan Losses:

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

The allowance for loan losses is comprised of: (1) a component for individual loan impairment measured according to SFAS No. 114, “Accounting by Creditors for Impairment of a Loan” , and (2) a measure of collective loan impairment according to SFAS No. 5, “Accounting for Contingencies”. The allowance for loan losses is established and maintained at levels deemed adequate to cover losses inherent in the portfolio as of the balance sheet date. This estimate is based upon management’s evaluation of the risks in the loan portfolio and changes in the nature and volume of loan activity. Estimates for loan losses are derived by analyzing historical loss experience, current trends in delinquencies and charge-offs, historical peer bank experience, changes in the size and composition of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Larger impaired credits that are measured according to SFAS No. 114 have been defined to include loans which are classified as doubtful, substandard or special mention risk grades where the borrower relationship is greater than $250,000. For such loans that are considered impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.

Loans made outside the scope of SFAS No. 114 are measured according to SFAS No. 5 and include commercial and commercial real estate loans that are performing or have not been specifically identified under SFAS No. 114 and large groups of smaller balance homogeneous loans evaluated based on regulatory guidelines and historical peer bank loss experience which are adjusted for qualitative factors.

Premises and Equipment:

Premises and equipment are stated at cost, less accumulated depreciation and amortization. Gains and losses on routine dispositions, if any, are reflected in current operations. Depreciation is computed on the straight-line method over the estimated useful lives of the depreciable assets, ranging from three to thirty years. Leasehold improvements are amortized over the lives of the respective leases or the service lives of the improvements, whichever is less. The useful lives used in computing depreciation and amortizations are as follows:

Buildings and improvements	30 years
Furniture and equipment	3 - 7 years
Leasehold improvements	5 - 20 years

Valuation of Long-Lived Assets:

The Company periodically evaluates the carrying value of long-lived assets to be held and used, including intangible assets, when events or circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated separately identifiable undiscounted cash flows from such asset are less than the carrying value of the asset. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Impairment losses on long-lived assets held for sale are determined in a similar manner, except that fair values are reduced for the cost to dispose of the assets.

53

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes:

Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, as well as net operating loss carryforwards and tax credit carryforwards. Deferred tax assets and liabilities are included in the consolidated financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. In the event of changes in the tax laws, deferred tax assets and liabilities are adjusted in the period of the enactment of those changes, with the cumulative effects included in the current year’s income tax provision. Net deferred tax assets, whose realization is dependent on taxable earnings of future years, are recognized when a more-likely-than-not criterion is met. The Company and its subsidiaries file consolidated tax returns.

Intangible Assets:

Intangible assets subject to amortization include a market value adjustment related to the acquisition of Bank of Florida – Tampa Bay on July 27, 2004. On that date, the Company acquired 100% ownership of Bank of Florida – Tampa Bay (In Organization) that had not yet been incorporated or commenced its planned principal operations. The Company does not believe this acquisition was a business combination pursuant to the provisions of SFAS No. 141, “Accounting for Business Combinations,” but rather an acquisition of net assets. Accordingly, the excess of fair value of the liabilities assumed over the fair value of the assets acquired of $974,000 was allocated to an amortizable identifiable intangible. The balance of the intangible asset was $925,000 ($974,000 gross carrying amount less $49,000 accumulated amortization) and $964,000 ($974,000 gross carrying amount less $10,000 accumulated amortization) at December 31, 2005 and 2004, respectively. This intangible is being amortized on a straight-line basis over 25 years. The estimated amortization expense for each of the five succeeding years ending December 31^st is $38,955 per year.

Off-Balance-Sheet Financial instruments:

In the ordinary course of business the Company has entered into off-balance sheet financial instruments consisting of commitments to extend credit, standby letters of credit and unfunded commitments under lines of credit. Such financial instruments are recorded in the consolidated financial statements when they are funded.

Reclassifications:

Certain reclassifications have been made to prior period financial statements to conform to the 2005 financial statements presentation. These reclassifications only changed the reporting categories but did not affect our results of operations or financial position.

Income (Loss) Per Common and Common Equivalent Share:

Basic income (loss) per share represents net income (loss) available to common shareholders minus preferred stock dividends divided by the weighted-average number of common shares outstanding during the year. Dilutive income per share is computed based on the weighted-average number of common shares outstanding plus the effect of stock options computed using the treasury stock method. Because the Company reported net losses in 2004 and 2003, all common stock equivalents were anti-dilutive and basic during those periods and diluted loss per share was the same as basic in those periods.

54

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income (Loss) Per Common and Common Equivalent Share (continued):

Components used in computing income (loss) per share are summarized as follows (In Thousands, except share data):

	For the three Years ended December 31,
	2005						2004							2003
	Net Income			Weighted Average Shares Outstanding	Income Per Share		Net Loss			Weighted Average Shares Outstanding	Loss Per Share			Net Loss			Weighted Average Shares Outstanding	Loss Per Share
Net income (loss)	$	4,883					$	(2,880	)					$	(2,709	)
Less preferred stock dividends and redemption premium		(274	)					(210	)						—
Income (loss) available to common shareholders - basic		4,609		5,595,233	$	0.82		(3,090	)	3,811,270	$	(0.81	)		(2,709	)	2,948,514	$	(0.92	)
Dilutive effect of stock options outstanding				153,933		—				—		—					—
Dilutive effect of warrants outstanding				64,064		—				—		—					—
Income (loss) available to common shareholders – diluted	$	4,609		5,813,230	$	0.79	$	(3,090	)	3,811,270	$	(0.81	)	$	(2,709	)	2,948,514	$	(0.92	)

At December 31, 2004, there were 446,949 common stock options and 303,856 warrants, respectively, that were antidilutive and therefore not included in the above calculation. At December 31, 2003, there were 311,799 common stock options and 191,856 warrants, respectively, that were antidilutive and therefore not included in the above calculation.

Stock-based Compensation:

The Company applies the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including FASB Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation, and Interpretation of APB Opinion No. 25, to account for its fixed-plan stock options. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. FASB Statement No. 123, Accounting for Stock-Based Compensation and FASB Statement No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, an amendment of FASB Statement No. 123, established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based compensation plans. As permitted by existing standards, the Company has elected to continue to apply the intrinsic-value-based method of accounting described above, and has adopted only the disclosure requirements of Statement 123, as amended.

On December 16, 2004, the FASB issued FASB Statement No. 123 (revised 2004), Share-Based Payment. Statement 123(R) that replaces FASB Statement No. 123, Accounting for Stock-Based Compensation, supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees and amends FASB Statement No. 95, Statement of

55

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Stock-based Compensation (continued):

Cash Flows. Statement 123(R) requires that all share-based payments to employees, including grants of employee stock options, be recognized in the financial statements based on their fair values. The provisions of Statement 123(R) are effective prospectively as of the first interim or annual reporting period that begins after June 15, 2005. On March 30, 2005, the SEC Staff issued Staff Accounting Bulletin No. 107, “Application of FASB Statement 123R, Share-Based Payment” which amends the effective date to begin the first annual period beginning after June 15, 2005. In anticipation of the adoption of Statement 123(R), the Company accelerated vesting of nearly all outstanding unvested stock options and warrants (“Instruments”) to purchase shares of common stock on December 14, 2005.

Stock options totaling 222,064 and stock warrants totaling 83,010, which would otherwise have vested from time to time over the next five years, became immediately exercisable as a result of this action. The number of shares, exercise prices and remaining terms of the options and warrants remain unchanged. The decision to accelerate the vesting of these instruments, which the Company believes to be in the best interest of its stockholders, was made primarily to reduce non-cash compensation expense that would have been recorded in its statement of operations in future periods upon the adoption of Statement 123(R) beginning in January 2006.

The per share weighted-average fair value of stock options granted during 2005, 2004 and 2003 was $10.19, $6.30 and $5.56, respectively, on the date of grant using the Black Scholes option-pricing model with the following weighted average assumptions:

	2005		2004		2003
Expected dividend yield	0.00	%	0.00	%	0.00	%
Expected volatility	40.00	%	34.00	%	32.00	%
Risk free interest rate	4.20	%	3.45	%	3.81	%
Expected life	7 years		10 years		10 years

Had compensation cost for the Company’s stock option plan been determined under Statement 123, based on the fair market value at the grant dates, the Company’s proforma net income (loss) and net income (loss) per share would have been as follows (Dollars In Thousands, except per share data):

	2005			2004			2003
Net income (loss) as reported	$	4,883		$	(2,880	)	$	(2,709	)
Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(1,945	)		(481	)		(415	)
Proforma net income (loss)	$	2,938		$	(3,361	)	$	(3,124	)
Income (loss) per share as reported:
Net income (loss) per share - basic	$	0.82		$	(0.81	)	$	(0.92	)
Net income (loss) per share - diluted	$	0.79		$	(0.81	)	$	(0.92	)
Proforma Income (loss) per share:
Net income (loss) per share - basic	$	0.48		$	(0.94	)	$	(1.06	)
Net income (loss) per share - diluted	$	0.46		$	(0.94	)	$	(1.06	)

56

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

New Accounting Pronouncements:

In May 2005, the FASB issued FASB Statement No. 154, “Accounting Changes and Error Corrections-a replacement of APB Opinion 20 and FASB Statement 3.” This Statement provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. This statement also provides guidance for determining whether retrospective application of a change is impracticable and for reporting a change when retrospective application is impracticable. This statement shall be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Management believes this Statement will not have a material effect on the Company’s consolidated financial statements.

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

On December 16, 2004, the FASB issued Statement 123(R). Statement 123(R) replaces FASB Statement No. 123, Accounting for Stock-Based Compensation, supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees and amends FASB Statement No. 95, Statement of Cash Flows. Statement 123(R) requires that all share-based payments to employees, including grants of employee stock options, be recognized in the financial statements based on their fair values. The provisions of Statement 123(R) are effective prospectively as of the first interim or annual reporting period that begins after June 15, 2005. On March 30, 2005, the SEC Staff issued Staff Accounting Bulletin No. 107, “Application of FASB Statement 123R, Share-Based Payment” which amends the effective date to begin the first annual period beginning after June 15, 2005. In anticipation of the adoption of SFAS No. 123(R), the Company accelerated vesting of nearly all outstanding unvested stock options and warrants (“Instruments”) to purchase shares of common stock on December 14, 2005. The decision to accelerate the vesting of these instruments, which the Company believes to be in the best interest of its stockholders, was made primarily to reduce non-cash compensation expense that would have been recorded in its statements of operations in future periods upon the adoption of SFAS 123(R) beginning in January 2006. As a result, the implementation of this statement is expected to result in an additional $49,000 in expense for fiscal year 2006, based on current options outstanding.

In the second quarter of 2004, the Emerging Issues Task Force (“EITF”) released EITF Issue 03-01, “The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments.” The issue provided guidance for evaluating whether an investment is other-than-temporarily impaired and requires certain disclosures with respect to these investments. On September 30, 2004, the FASB issued FASB Staff Position (“FSP”) EITF 3-1-1, “Effective Date of Paragraph 10-20 of EITF Issue 03-1, “The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments.” This Staff Position delayed certain measurement and recognition provisions of EITF 03-1. Please see Note 2 – Securities for information relating to the required disclosures with respect to these investments.

57

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005 2004 and 2003

NOTE 2—SECURITIES

The amortized cost, gross unrealized gains and losses and estimated fair value of securities available for sale shown in the consolidated balance sheets are as follows (In Thousands):

	Amortized Cost		Gross Unrealized					Estimated
			Gains		Losses			Fair Value
At December 31, 2005
Available for sale securities:
Mortgage-backed securities	$	4,827	$	—	$	(132	)	$	4,695
U.S. Treasury securities and other U.S. agency obligations		14,030		3		(182	)		13,851
Independent Bankers Bank stock		51		—		—			51
Total Securities available for sale	$	18,908	$	3	$	(314	)	$	18,597
Securities held to maturity- Other Bonds	$	25	$	—	$	—		$	25
Total Securities	$	18,933	$	3	$	(314	)	$	18,622
	Amortized Cost		Gross Unrealized					Estimated Fair Value
			Gains		Losses
At December 31, 2004
Available for sale securities:
Mortgage-backed securities	$	3,943	$	10	$	(34	)	$	3,919
U.S. Treasury securities and other U.S. agency obligations		21,993		3		(21	)		21,975
Independent Bankers Bank stock		51		—		—			51
Total Securities available for sale	$	25,987	$	13	$	(55	)	$	25,945

There were no sales of available for sale securities in 2005. Proceeds from sales of securities available for sale for the year ended December 31, 2004 and 2003 totaled $504,000 and $5,342,000, respectively. Gross gains recorded on sales of securities available for sale for the years ended December 31, 2004 and 2003 totaled $4,000 and $9,000, respectively. There were no securities pledged as collateral as of December 31, 2005 and 2004, respectively. The Company did not hold any tax exempt securities and there were no investments in securities from a single issuer which exceeded ten percent of stockholders’ equity as of December 31, 2005 and 2004, respectively.

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

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

58

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 2—SECURITIES (continued)

Information pertaining to securities with gross unrealized losses at December 31, 2005, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is as follows (In Thousand):

	Less Than Twelve Months					Over Twelve Months
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
	(In Thousands)
Securities available for sale:
Mortgage-backed securities	$	(18	)	$	735	$	(114	)	$	3,961
U.S. Treasury securities and other U.S. agency obligations		(131	)		12,399		(51	)		1,424
Total securities available for sale	$	(149	)	$	13,134	$	(165	)	$	5,385

Expected maturities of investment securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Periodic payments are received of mortgage-backed securities based on the payment patterns of the underlying collateral. Maturities of mortgage-based securities are included below based on their expected average life of similar investments as determined by the Banks’ portfolios and analysis servicer. As of December 31, 2005, the amortized cost and estimated fair value of investment securities, by contractual maturities, are as follows (In Thousands):

	Amortized Cost		Fair Value		Average Yield
Due after one through five years	$	14,051	$	13,865	3.90	%
Due after five through ten years		2,784		2,721	4.28	%
Due after ten years		2,047		1,985	4.11	%
Subtotal		18,882		18,571	3.98	%
Independent Bankers Bank Stock		51		51	—
Totals	$	18,933		18,622	3.97	%

59

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 3—LOANS

The composition of the loan portfolio at December 31 is as follows (In Thousands):

	2005			2004
Real estate:
Commercial real estate	$	180,039		$	103,597
Real estate - construction		141,534			65,172
One-to-four family residential		64,805			60,124
Multi-family		25,255			14,627
Total Real Estate Loans		411,633			243,520
Commercial Loans		36,834			42,721
Lines of credit		26,393			23,871
Consumer loans		11,391			15,869
Total Gross loans held for investment		486,251			325,981
Less: allowance for loan losses		(4,603	)		(2,817	)
Less: deferred loan (fees) costs, net		(852	)		(202	)
Total loans held for investment, net	$	480,796		$	322,962
Residential one-to-four family - loans held for sale	$	1,323		$	—

At December 31, 2005, the Company had one loan totaling $500,000 which was classified as impaired under SFAS No. 114. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Specific impairment on loans in this category is calculated based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or for collateral-dependent loans, at the fair value of the collateral. A specific allowance was not required on this impaired loan as no loss is expected. At December 31, 2004, the Company did not hold any loans that were classified as impaired. The average recorded investment in impaired loans was approximately $260,000 and zero for the years ended December 31, 2005 and 2004, respectively. The amount of interest recognized on impaired loans during the portion of the year that they were impaired was not significant for 2005.

The Company had five loans totaling $321,000 and four loans totaling $544,000 on which interest was not being accrued as of December 31, 2005 and 2004, respectively. Income that would have been recognized during 2005, 2004 and 2003 on such loans, if they were in accordance with their original terms, was $18,000, $30,000 and $4,000, respectively. There were no loans past due 90 days or more and still accruing interest at December 31, 2005. Loans past due 90 days or more and still accruing interest totaled $42,000, at December 31, 2004. There were no outstanding commitments to extend credit related to those loans in non accrual status or 90 days or more past due.

The activity in the allowance for loan losses for the years ended December 31 is as follows (In Thousands):

	2005			2004			2003
Balance at beginning of year	$	2,817		$	1,568		$	907
Provision charged to operations		1,903			1,279			833
Charge-offs		(122	)		(40	)		(176	)
Recoveries		5			10			4
Balance at end of year	$	4,603		$	2,817		$	1,568

60

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 4—PREMISES AND EQUIPMENT

Premises and equipment at December 31 consisted of the following (In Thousands):

	2005		2004
Land	$	545	$	545
Building		1,056		1,056
Leasehold improvements		2,793		2,809
Furniture, fixtures and equipment		2,534		2,137
EDP equipment and software		2,715		2,475
Construction in Progress		209		—
Total premises and equipment		9,852		9,022
Less: accumulated depreciation and amortization		3,136		2,194
Total premises and equipment, net	$	6,716	$	6,828

NOTE 5—INCOME TAXES

At December 31, 2005, the Company assessed its earnings history and trend over the past year, its estimate of future earnings, and the expiration dates of the net operating loss carryforwards. Based upon that assessment, the Company reversed its valuation allowance on its deferred tax assets at December 31, 2005, resulting in a $3.7 million income tax benefit. This action was taken following the culmination of three profitable quarters in 2005 and management’s completion of projections for 2006. As a result, the Company determined that it is more likely than not that the deferred tax assets will be realized against future taxable income and therefore, the valuation allowance was reversed. At December 31, 2004, the Company had recorded a valuation allowance of $4,157,000.

The components of deferred tax assets and deferred tax liabilities at December 31 are as follows (In Thousands):

	2005		2004
Deferred tax assets:
Net operating loss carryforwards	$	2,311	$	3,488
Allowance for loan losses		1,635		956
Organizational and startup costs		137		102
Compensation costs		196		—
Other deferred tax assets		5		86
Unrealized loss on securities available for sale		117		16
		4,401		4,648
Valuation allowance		—		(4,157	)
Deferred tax assets		4,401		491
Deferred tax liabilities:
Depreciation on premises and equipment		439		488
Other deferred tax liabilities		11		3
Deferred tax liabilities		450		491
Deferred tax assets, net	$	3,951	$	—

61

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 5—INCOME TAXES (continued)

At December 31, 2005, the Company had Federal and State tax net operating loss carryforwards of approximately $6,145,000 expiring during 2022 through 2024.

A deferred income tax benefit totaling $3,728,000 was recorded for the year ended December 31, 2005. No income tax provision has been recorded for each of the years in the two year period ended December 31, 2004. The income tax benefit differs from the amount of income tax determined by applying the US federal income tax rate to pretax income for the years ended December 31, 2005, 2004 and 2003 due to the following (In Thousand):

	2005					2004					2003
Computed tax benefit, at statutory rate	$	393		34.0	%	$	(979	)	(34.0	)%	$	(921	)	(34.0	)%
Increase (decrease) in income taxes resulting from:
Valuation allowance on deferred tax asset		(4,157	)	(359.9	)%		1,145		36.9	%		991		36.6	%
State income taxes, net of Federal tax benefit		42		3.6	%		(104	)	(3.6	)%		(94	)	(3.5	)%
Tax exempt life insurance income		(40	)	(37.6	)%		(9	)	(37.6	)%		—
Other		34		37.1	)%		(53	)	38.3	%		24		.9	%
	$	(3,728	)	(322.8	)%	$	—		0.0	%	$	—		0.0	%

NOTE 6—DEPOSITS

Deposits at December 31 are comprised of the following (In Thousands):

	2005		2004
Interest-bearing:
Money market	$	162,346	$	107,331
NOW accounts		50,114		33,771
Savings		5,148		5,107
Certificates of deposit:
Less than $100,000		50,319		94,074
$100,000 or more		143,391		74,750
Total interest bearing deposits		411,318		315,033
Demand (non-interest bearing)		83,762		61,031
Total deposits	$	495,080	$	376,064

The maturities on all certificates of deposits as of December 31, 2005 for each of the five successive years are as follows (In Thousands):

2006	$	136,524
2007		37,541
2008		13,326
2009		1,748
2010		4,571
Total	$	193,710

62

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 6—DEPOSITS (continued)

The following table indicates amounts outstanding of time certificates of deposit of $100,000 or more and their respective maturities as of December 31, 2005 (In Thousands):

	TIME CERTIFICATES OF DEPOSITS
Three months or less	$	31,775
Four – six months		23,689
Seven – 12 months		44,546
Over 12 months		43,381
Total	$	143,391

Included in interest expense is $1,927,000, $1,477,000 and $1,005,000, which relates to interest on certificates of deposit of $100,000 or more for 2005, 2004 and 2003, respectively.

NOTE 7—SUBORDINATED DEBT

On October 7, 2005, Bank of Florida, Ft. Lauderdale, issued $3.0 million in subordinated debt with a maturity of December 15, 2015. Interest is payable quarterly in arrears, commencing December 15, 2005, at a rate of 1.9% over the quarterly adjustable three-month LIBOR rate. The interest rate at December 31, 2005 was 6.39%. Upon the occurrence and continuation of a Tax Event (a “Special Event”), Bank of Florida may prepay the debt at its option (and with the approval of its regulators, if necessary), in whole or in part, without penalty, at par through December 15, 2010. After that date, Bank of Florida may prepay the debt at its option (and with the approval of its regulators, if necessary), in whole or in part, without penalty, at par, irrespective of the occurrence of a “Special Event”. The subordinated debt issued qualifies as Tier II capital for regulatory risk-based capital guidelines for the Company and its Bank of Florida, Ft. Lauderdale subsidiary.

On September 30, 2005, Bank of Florida, Ft. Lauderdale, issued $3.0 million in subordinated debt with a maturity of December 15, 2011. Interest is payable quarterly in arrears, commencing December 15, 2005, at a rate of two and one-half percent over the quarterly adjustable three-month LIBOR rate. The interest rate at December 31, 2005 was 6.99%. Bank of Florida may prepay the debt at its option (and with the approval of its regulators, if necessary), in whole or in part, without penalty, at par after December 15, 2006. The subordinated debt issued qualifies as Tier II capital for regulatory risk-based capital guidelines for the Company and its Bank of Florida, Ft. Lauderdale subsidiary.

On August 5, 2005, Bank of Florida – Southwest issued $5.0 million in junior subordinated debt with a maturity of October 7, 2015. Interest is payable quarterly in arrears, commencing October 7, 2005, at a rate of two percent over the quarterly adjustable three-month LIBOR rate. The interest rate at December 31, 2005 was 6.15%. Upon the occurrence and continuation of a Tax Event (a “Special Event”), Bank of Florida – Southwest may prepay the debt at its option (and with the approval of its regulators, if necessary) in whole at a redemption price of 105% of par plus accrued interest during the first five years. The Bank will also have the right to repay this debt security at par, anytime on or after October 7, 2010. The subordinated debt issued qualifies as Tier II capital for regulatory risk-based capital guidelines for the Company and its Bank of Florida - Southwest subsidiary.

During June of 2004, Bank of Florida – Southwest issued $2 million in subordinated debt to a local community bank. Interest was payable at a rate of Prime less one percent during the first sixty days, Prime plus zero percent for the next sixty days, and Prime plus one percent thereafter. This debenture was redeemable by Bank of Florida – Southwest at its option, without penalty. Bank of Florida – Southwest repaid the subordinated debt plus accrued interest on August 8, 2005.

63

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 8—FEDERAL HOME LOAN BANK ADVANCES

At December 31, 2005, the Company had $3.0 million in advances from the Federal Home Loan Bank (FHLB), at a rate of 4.26%, maturing on June 24, 2008. The Company did not have any FHLB advances at December 31, 2004. At December 31, 2005, the Company had an unused credit line of $32.1 million. Borrowings from the Federal Home Loan Bank of Atlanta (FHLB) may be either on a fixed or variable rate basis. These borrowings are collateralized by the Company’s FHLB stock and a blanket lien on one-to-four family residential loans and certain loans secured by multifamily dwellings for Bank of Florida – Southwest totaling $17,568,000 as of December 31, 2005.

NOTE 9—COMMITMENTS AND CONTINGENCIES

The Company has entered into operating lease agreements for certain bank offices, which expire on various dates through 2019. In addition, the Company has operating leases for office equipment, which expire on various dates through 2011. Certain of these leases require the payment of common area maintenance expenses and may also include renewal options. Rent expense was $2,005,000 for 2005, $1,423,000 for 2004, and $976,000 for 2003 related to these leases.

Future minimum lease commitments as of December 31, 2005 are as follows (In Thousands):

Year ending December 31st:
2006	$	2,556
2007		2,372
2008		2,148
2009		1,912
2010		1,583
Thereafter		7,263
Total minimum payments required	$	17,834

As of December 31, 2005, the Company had available $20.3 million in lines of credit with financial institutions, all of which are for variable rate borrowing. In addition, two of the Company’s banking subsidiaries are members of the Federal Home Loan Bank and, subject to certain collateral verification requirements, the Bank of Florida – Southwest and Bank of Florida in Ft. Lauderdale may borrow up to 20% and 10%, respectively of their outstanding assets. Please refer to “Note-8 Federal Home Loan Bank Advances” of the “Notes to the Consolidated Financial Statements” for further information on these borrowings.

From time-to-time, we are involved in litigation arising in the ordinary course of our business. The Company believes that the ultimate aggregate liability represented thereby, if any, will not have a material adverse effect on our consolidated financial condition or results of operations.

64

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 10—RETIREMENT PLAN

The Company maintains a 401(k) Retirement Plan (the Plan) to which eligible employees may contribute a percentage of their pay. Currently the Company makes matching contributions to the Plan on behalf of eligible employees equal to 50% of the first 8% of the employees’ contributions. The Company contributed to the Plan in the amounts of $225,000, $98,000 and $93,000 during 2005, 2004 and 2003, respectively. Employees who have completed at least three months of service and have attained age 21 are generally eligible to participate. Employee contributions are 100% vested as amounts are credited to the employee’s account. Company contributions, if made, become 20% vested when an employee has completed 1 year of service, and vest at a rate of 20% per year thereafter, fully vesting when an employee has completed 5 years of service.

During 2004, the Company implemented a supplemental executive retirement plan (the “Plan”) to provide supplemental income for certain key executives after their retirement. The Plan, which is unfunded, is structured such that each participant is scheduled to receive specified levels of salary continuation income after the retirement age of 65 for a certain number of years. In the event a participant leaves the employment of the Company before retirement, only the benefits vested through that date would be paid to the employee. The Plan also provides for 100% vesting in the event of a change in Company ownership. The Company has approximately $121,300 and $22,700 accrued at December 31, 2005 and 2004, respectively, towards this plan, which is included in other liabilities in the accompanying consolidated balance sheets.

The Company also purchased bank-life insurance (“BOLI”) policies on these plan participants. The BOLI is recorded at the amounts to be realized under the insurance contract, which represents the amounts contributed to the cash surrender value of the policies. The Company recognizes revenue from the investment returns from the BOLI and compensation expense for the amounts accrued toward the participants’ retirement fund. Revenue earned from the BOLI amounted to $107,000 and $25,000 during the years ended December 31, 2005 and 2004, respectively. Such revenue is included in other income in the accompanying consolidated statements of operations. The Company recognized net earnings of $8,400 and $2,300, consisting of earnings on bank-owned life insurance policies, net of compensation expenses accrued in connection with the Plan during 2005 and 2004, respectively. No income or expense items were recognized during fiscal year 2003.

NOTE 11—RELATED PARTY TRANSACTIONS

The Banks have granted loans to executive officers and directors of the Banks, Bank of Florida Trust Company, and the Company and to associates of such executive officers and directors. Such loans were made in the ordinary course of business under normal credit terms and do not represent more than the normal risk of collection. The activity for these loans is as follows (In Thousands):

	2005		2004
Loan balances at beginning of year	$	7,154	$	10,027
New loans		13,906		2,782
Advances (Repayments), net		1,873		(5,655	)
Loan balances at end of year	$	22,933	$	7,154

The Banks also accept deposits from employees, officers and directors of the Banks and the Company and from affiliates of such officers and directors. The deposits are accepted on substantially the same terms as those of other depositors.

During 2002, the Company engaged Centuric LLC (f/k/a MSMR Business Solutions) of Ft. Lauderdale, Florida, to manage the Information Technology functions of the Company and the Banks. This service primarily includes the purchase of computer hardware and software, telephones, network management services and disaster recovery. Centuric, LLC, a consulting and outsourcing firm specializing in system integration, network management and security, disaster recovery and business contingency planning was an affiliate of Madsen, Sapp

65

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 11—RELATED PARTY TRANSACTIONS (Cont’d)

Mena Rodriquez & Co. until 2004. Ramon A. Rodriguez, a director of Bancshares of Florida, is the President and CEO of Madsen Sapp Mena Rodriguez & Co. Ramon A. Rodriguez also currently serves as a director of Centuric, LLC. The Company paid Centuric, LLC approximately $632,000, $690,000 and $135,000 in 2005, 2004, and 2003, respectively. Of the $632,000 paid to Centuric, LLC in 2005, $251,000 was for the purchase of computer equipment and software.

In 2002, the Company entered into a lease for a banking facility and office space located at 1185 Immokalee Road, Naples, Florida owned by Citizens Reserve, LLC. Citizens Reserve, LLC is principally owned by several directors of the Company. Monthly lease payments as of December 31, 2005 were $68,000. Total rent charged to operations under this lease was $720,000, $734,000 and $645,000 in 2005, 2004 and 2003, respectively. The lease term expires in 2012. Commitments under this lease agreement are included in NOTE 9.

On August 11, 2005, Bank of Florida, Ft. Lauderdale signed a letter of intent for a nonbinding ten year lease of a new office facility in downtown Ft. Lauderdale. The lease will commence on or about April 2007 with 200 Brickell Associates, Ltd., of which Terry W. Stiles, a director of Bancshares of Florida, is a limited partner. The Company did not incur any cost in connection with this agreement in 2005.

On June 29, 2005, Bank of Florida – Tampa Bay signed a sublease agreement with Florida Financial Advisors, Inc. (“Florida Financial”), whereby Florida Financial would sublease space from Bank of Florida – Tampa Bay for a period of one year. The lease commenced on July 1, 2005 with Florida Financial, of which Edward Kaloust, a director of Bancshares of Florida, is a managing member. The Company received $18,000 in sublease income during 2005.

NOTE 12—STOCK WARRANTS AND OPTIONS

In connection with its initial offering of common stock, the Company granted to certain organizers of the Company warrants to purchase 113,330 shares of common stock at an exercise price of $10 per share. These warrants were fully vested as of December 31, 2005 and will expire 10 years after the date of grant.

In connection with the opening of Bank of Florida, a newly formed state-chartered bank, in Ft. Lauderdale, Florida, the Company granted to certain organizers warrants to purchase 78,526 shares of common stock at an exercise price of $10 per share. The warrants were vesting in equal increments of 20% commencing on the first anniversary of the date of grant (July 31, 2002) and on each anniversary date thereafter until fully vested. The vesting period on these warrants was accelerated in December 2005. Warrants may be exercised in whole or in part for $10 per share beginning on the one year anniversary of the date of grant and expiring 10 years after the grant date.

In connection with the opening of a branch of the Bank of Florida, Ft. Lauderdale, in the Palm Beach area of Florida, the Company granted to Advisory Board members warrants to purchase 40,000 shares of common stock at an exercise price of $12.50 per share. The warrants will vest in equal increments of 20% commencing on the date operations commenced (October 4, 2004) and on each anniversary date thereafter until fully vested. Warrants may be exercised in whole or in part for $12.50 per share beginning on the commencement date and expiring 10 years after the commencement date. Compensation expense totaling $115,000 and $57,000 was recognized during 2005 and 2004, respectively, in connection with these warrants. In addition, compensation expense totaling $51,000 and $6,000 was recognized during 2005 and 2004, respectively, in connection with certain stock options which were also granted to these Advisory Board members during 2004.

As a result of the acquisition of Bank of Florida–Tampa Bay (In Organization), the Company named certain individuals of the investor group as directors of Bank of Florida–Tampa Bay. These directors have been awarded warrants to purchase 85,333 shares of common stock at an exercise price of $12.50. Twenty percent of the warrants became exercisable on the date that the bank opened for business (November 5, 2004), and twenty percent was scheduled to become exercisable on each of the four succeeding anniversaries of that date. The vesting period on

66

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 12—STOCK WARRANTS AND OPTIONS (continued)

these warrants was accelerated in December 2005. All of the warrants will expire five years from the date the bank opened for business. The Company may call the warrants if it or any of its subsidiaries is the subject of a formal capital call by a governmental agency. Compensation expense totaling $114,000 and $56,000 was recognized during 2005 and 2004, respectively, in connection with these warrants.

If, at any time, the holders of these warrants cease to serve as a director of the Company or a Company subsidiary, or an Advisory Board member, the warrants shall immediately expire. At December 31, 2005 warrants to purchase 288,190 common shares were outstanding, of which 265,390 were fully vested.

In 2000, the Company adopted the 1999 Stock Option Plan (the Plan) pursuant to which the Company’s board of directors may grant stock options to officers and key employees. The Plan, as amended at the 2005 Annual Shareholders meeting, authorizes grants of options to purchase no less than 11.5% of outstanding shares. In no event, however, will the number of reserved shares ever exceed 1,000,000 shares. The exercise price of the stock options may not be less than the fair market value of common stock on the date the option is granted. The Plan provides for the grants of options at the discretion of the Board of Directors or a committee designated by the Board of Directors to administer the Plan. Each stock option granted under the Plan has a maximum term of ten years, subject to earlier termination in the event the participant ceases to be an employee. The stock options vest ratably over a three to five-year periods commencing one year from the date of grant, except as otherwise decided by the Board of Directors. The Plan will terminate on August 24, 2009.

In anticipation of the adoption of SFAS No. 123(R), the Company accelerated vesting of nearly all outstanding unvested stock options and warrants (“Instruments”) to purchase shares of common stock on December 14, 2005. Stock options’ totaling 222,064 and stock warrants totaling 83,010, which would otherwise have vested from time to time over the next five years, became immediately exercisable as a result of this action. The number of shares, exercise prices and remaining terms of the options and warrants remain unchanged. The decision to accelerate the vesting of these instruments, which the Company believes to be in the best interest of its stockholders, was made primarily to reduce non-cash compensation expense that would have been recorded in its statement of operations in future periods upon the adoption of SFAS 123(R) beginning in January 2006.

At December 31, 2005, there were no additional shares available for grant under the Plan. Stock option activity during the periods indicated were as follows:

	OPTIONS OUTSTANDING		WEIGHTED AVERAGE OPTION PRICE PER SHARE
Balance December 31, 2002	142,600		$	10.00
Granted	191,649			10.50
Forfeited	(22,450	)		10.00
Balance December 31, 2003	311,799			10.31
Granted	161,500			15.51
Exercised	(18,100	)		10.00
Forfeited	(8,250	)		11.36
Balance December 31, 2004	446,949			12.18
Granted	223,195			19.26
Exercised	(10,131	)		10.87
Forfeited	(4,824	)		12.76
Balance December 31, 2005	655,189		$	14.61

67

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 12—STOCK WARRANTS AND OPTIONS (continued)

The following table summarizes information about the stock options outstanding at December 31, 2005:

Range of Exercise Prices	Number Outstanding	Remaining Contractual Life (years)	Options Exercisable
$10.00 - $12.94	294,853	6.1	294,853
$13.00 - $15.90	122,640	8.6	122,640
$16.01 - $18.30	119,650	8.8	114,650
$19.83 - $23.10	118,046	10.0	118,046
Total	655,189		650,189

NOTE 13—STOCKHOLDERS’ EQUITY

On July 30, 2004, the Company completed a common stock offering, selling 1,500,000 shares of common stock at $12.50 per share. On August 18, 2004, the underwriter, Advest, Inc., acquired an additional 225,000 shares at $12.50 per share. After underwriting discounts and commissions and other offering expenses, the Company received $19.8 million in proceeds.

During 2004, the Company authorized the issuance and sale of up to 50,000 shares of Series A Preferred Stock, par value $0.01, to only accredited investors. During March 2004, the Company issued 34,000 shares of the Series A Preferred Stock for consideration of $3,400,000 at an offering price of $100 per share. The dividends were payable at a quarterly rate of 0.02 shares of Series A Preferred Stock.

On April 26, 2005, the Company completed a private placement offering through Allen & Company LLC, selling 915,000 shares of common stock at $15.00 a share to accredited investors. The shares of the Company’s common stock issued in conjunction with the private placement offering were issued pursuant to exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and are “restricted securities”. Such shares may not be offered or sold in the United States absent registration with the Securities and Exchange Commission under the Securities Act or an applicable exception therefrom. The Company agreed to file a registration statement covering the resale of the Company’s common stock within 60 days from the date of the closing, with the registration statement being declared effective no later than 210 days after the closing date. The Company received approximately $13.0 million in net proceeds. The registration was declared effective on September 13, 2005.

On May 23, 2005, certain holders of the preferred stock elected to exchange the redemption value of their shares for common stock. The Company paid a premium on 25,090 shares of Series A Preferred Stock equal to $4 per share or $100,000. The resulting value, after payment of the premium, was exchanged for 165,354 shares of the Company’s common stock at $15.78 per share.

On June 30, 2005, the Company elected to redeem the remaining 12,258 shares of Series A Preferred Stock. The redemption price for the shares of Series A Preferred Stock was based on a declining premium scale. The redemption price at June 30^th was $104 per share, which included a premium of $49,000.

NOTE 14—REGULATORY MATTERS

Effective January 1, 2005, all of the Banks are Florida-chartered banks and are regulated and supervised by the Florida Department of Financial Services (the “Department”). As Florida-chartered banks, they are also subject to Florida statutes regarding payment of dividends. Under the Florida Financial Institutions Code, the prior approval of the Department is required for dividend payments if the total of all dividends declared by a bank in any calendar year will exceed the sum of a bank’s net retained income (net income less any dividends paid) for that year and its retained income for the preceding two years.

The Company is subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and

68

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 14—REGULATORY MATTERS (continued)

certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors, and the regulator can lower classifications in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements.

At December 31 actual capital levels and minimum required levels were as follows (In Thousands):

	Actual				Minimum Required For Capital Adequacy Purposes				Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio		Amount		Ratio		Amount		Ratio
2005
Total capital (to risk weighted assets)
Consolidated	$	72,228	13.37	%	$	43,206	8.00	%	$	—	N/A
Bank of Florida – Southwest		32,308	10.96	%		23,587	8.00	%		29,483	10.00	%
Bank of Florida		24,600	13.49	%		14,584	8.00	%		18,229	10.00	%
Bank of Florida – Tampa Bay		7,603	11.76	%		5,170	8.00	%		6,463	10.00	%
Tier 1 capital (to risk weighted assets)
Consolidated	$	56,625	10.48	%	$	21,603	4.00	%	$	—	N/A
Bank of Florida – Southwest		24,795	8.41	%		11,793	4.00	%		17,690	6.00	%
Bank of Florida		17,060	9.36	%		7,292	4.00	%		10,938	6.00	%
Bank of Florida – Tampa Bay		7,053	10.91	%		2,585	4.00	%		3,878	6.00	%
Tier 1 leverage (to average assets) – leverage ratio
Consolidated	$	56,625	10.28	%	$	22,026	4.00	%	$	—	N/A
Bank of Florida – Southwest		24,795	8.73	%		11,364	4.00	%		14,205	5.00	%
Bank of Florida		17,060	8.35	%		8,174	4.00	%		10,217	5.00	%
Bank of Florida – Tampa Bay		7,053	10.77	%		2,620	4.00	%		3,275	5.00	%
2004
Total capital (to risk weighted assets)
Consolidated	$	45,731	13.24	%	$	27,628	8.00	%	$	—	N/A
Bank of Florida – Southwest		22,030	10.03	%		17,578	8.00	%	$	21,973	10.00	%
Bank of Florida		11,882	10.98	%		8,656	8.00	%	$	10,821	10.00	%
Bank of Florida – Tampa Bay		7,859	41.15	%		1,528	8.00	%		1,910	10.00	%
Tier 1 capital (to risk weighted assets)
Consolidated	$	40,914	11.85	%	$	13,814	4.00	%	$	—	N/A
Bank of Florida – Southwest		18,361	8.36	%		8,789	4.00	%		13,184	6.00	%
Bank of Florida		10,861	10.04	%		4,328	4.00	%		6,492	6.00	%
Bank of Florida – Tampa Bay		7,733	40.49	%		764	4.00	%		1,146	6.00	%
Tier 1 capital (to average assets) – leverage ratio
Consolidated	$	40,914	11.07	%	$	14,787	4.00	%	$	—	N/A
Bank of Florida – Southwest		18,361	8.01	%		9,165	4.00	%		11,456	5.00	%
Bank of Florida		10,861	8.27	%		5,253	4.00	%		6,566	5.00	%
Bank of Florida – Tampa Bay		7,733	59.12	%		523	4.00	%		654	5.00	%

69

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 14—REGULATORY MATTERS (continued)

The prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required.

The minimum requirements are:

	Capital to risk-weighted assets		Tier 1 Capital to Average Assets
	Total	Tier 1
Well capitalized	10%	6%	5%
Adequately capitalized	8%	4%	4%
Undercapitalized	6%	3%	3%

The Company was considered well capitalized as of December 31, 2005 and 2004. Management is not aware of any events or circumstances that have occurred since December 31, 2005 that would change the Company’s capital category.

NOTE 15—OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

In the normal course of business, the Banks utilize various financial instruments with off-balance sheet risk to meet the financing needs of their customers. These instruments include commitments to extend credit through loans approved but not yet funded, lines of credit and standby letters of credit. The credit risks associated with financial instruments are generally managed in conjunction with the Banks’ balance sheet activities and are subject to normal credit policies, financial controls and risk limiting and monitoring procedures.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. In addition, large portions of the commitments are scheduled to be participated to other financial institutions. The Banks evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Banks upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include compensating balances, accounts receivable, inventory, property, plant and equipment and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Banks to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. Most guarantees expire within one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Credit losses are incurred when one of the parties fails to perform in accordance with the terms of the contract. These standby letters of credit are secured by real estate with a fair value of $455,000 and $1.9 million in Certificates of Deposits maintained by the Banks.

70

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 15—OFF-BALANCE SHEET FINANCIAL INSTRUMENTS (cont’d)

The Banks’ exposure to off-balance sheet financial risk is represented by the contractual amount of the commitments to extend credit and standby letters of credit. At December 31, 2005 and 2004, the following financial instruments were outstanding whose contract amounts represent credit risk (In Thousands):

	Contract Amount
	2005		2004
Unfunded commitments under lines of credit	$	149,380	$	87,183
Standby letters of credit		2,345		1,646
Commitments to extend credit		99,767		—

The Company does not currently have any financial guarantees which must be disclosed pursuant to the requirements of FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.

NOTE 16—FAIR VALUES OF FINANCIAL INSTRUMENTS

The fair value estimates are presented for financial instruments without attempting to estimate the value of the Banks’ long-term relationships with depositors and the benefit that results from low cost funding provided by deposit liabilities. In addition, significant assets which are not considered financial instruments and are, therefore, not a part of the fair value estimates include office properties and equipment.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and cash equivalents: For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities: For securities held to maturity, fair value equals the carrying amount. For securities available for sale, fair value equals quoted market price, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Restricted securities: The carrying value of Federal Home Loan Bank and Federal Reserve Bank Stock approximates its fair value since it is restricted stock and would only be sold to the Federal Home Loan Bank at cost.

Deposits: The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity deposits is estimated by discounting future cash flows using rates currently offered for deposits of similar remaining maturities. The fair value estimates do not include the benefits that result from low-cost funding provided by the deposit liabilities compared to the cost of alternate sources of funds.

Subordinated debt: The fair value of this variable rate subordinated debt is estimated by discounting future cash flows using rates currently offered for instruments of similar remaining maturities.

Federal Home Loan Bank Advances: The fair value for Federal Home Loan Bank Advances are estimated by discounting future cash flows using rates currently offered for instruments of similar remaining maturities.

Accrued interest: The carrying amounts of accrued interest receivable and accrued interest payable approximate their fair values.

71

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 16—FAIR VALUES OF FINANCIAL INSTRUMENTS (Cont’d)

Off-balance sheet instruments: The fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of these financial instruments is not significant.

The following tables present the estimates of fair value of financial instruments as of December 31(In Thousands):

	2005
	CARRYING AMOUNT		ESTIMATED FAIR VALUE
Financial assets:
Cash and cash equivalents	$	50,117	$	50,117
Securities held to maturity		25		25
Securities available for sale		18,597		18,597
Loans held for sale		1,323		1,323
Net loans held for investment		480,796		476,997
Restricted securities		918		918
Accrued interest receivable		2,196		2,196
Financial liabilities:
Deposits		495,080		488,464
Subordinated debt		11,000		11,683
Federal Home Loan Bank advances		3,000		2,974
Accrued interest payable		352		352
Off-balance-sheet financial instruments		—		—
	2004
	CARRYING AMOUNT		ESTIMATED FAIR VALUE
Financial assets:
Cash and cash equivalents	$	57,897	$	57,897
Securities available for sale		25,945		25,945
Net loans held for investment		322,962		322,818
Restricted securities		1,039		1,039
Accrued interest receivable		1,119		1,119
Financial liabilities:
Deposits		376,064		360,026
Subordinated debt		2,000		1,990
Accrued interest payable		187		187
Off-balance-sheet financial instruments		—		—

72

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 17—CONDENSED FINANCIAL INFORMATION

The condensed financial information of Bancshares of Florida, Inc. (parent company only) as of December 31, 2005 and 2004, and for the years ended December 31, 2005, 2004 and 2003, is as follows (In Thousands):

BALANCE SHEETS
	December 31
	2005			2004
Assets:
Investment in and indebtedness of subsidiaries	$	53,502		$	39,336
Cash and due from banks		4,172			1,319
Premises and equipment		547			456
Deferred tax asset		1,081			—
Intangible assets		—			964
Other assets		245			165
TOTAL ASSETS	$	59,547		$	42,240
Liabilities:
Accrued expenses and other liabilities	$	486		$	286
Stockholders’ equity:
Preferred stock		—			3,610
Common stock		59			48
Additional paid-in capital		66,066			49,817
Accumulated deficit		(6,870	)		(11,479	)
Accumulated other comprehensive (loss) income		(194	)		(42	)
TOTAL STOCKHOLDERS’ EQUITY		59,061			41,954
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	59,547		$	42,240

STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT

	2005			2004			2003
Income:
Interest on investment securities and other	$	17		$	32		$	—
Holding Company service fee income		3,183			—			—
TOTAL INCOME		3,200			32			—
Expenses:
Salaries and employee benefits		3,926			1,534			151
Occupancy		753			439			1
General operating		1,642			1,305			433
TOTAL EXPENSES		6,321			3,278			585
LOSS FROM OPERATIONS BEFORE INCOME TAX BENEFIT AND EQUITY IN UNDISTRIBUTED NET INCOME (LOSS) OF SUBSIDIARIES		(3,121	)		(3,246	)		(585	)
Income tax benefit		(974	)		—			—
LOSS BEFORE EQUITY IN UNDISTRIBUTED NET INCOME (LOSS) OF SUBSIDIARIES		(2,147	)		(3,246	)		(585	)
Equity in undistributed net income (loss) of subsidiaries		7,030			366			(2,124	)
NET INCOME (LOSS)		4,883			(2,880	)		(2,709	)
Accumulated deficit:
Preferred stock dividends		(125	)		(210	)		—
Premiums paid on redemption/conversion of Preferred stock		(149	)		—			—
Beginning of year		(11,479	)		(8,389	)		(5,680	)
End of year	$	(6,870	)	$	(11,479	)	$	(8,389	)

73

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 17—CONDENSED FINANCIAL INFORMATION (continued)

STATEMENTS OF CASH FLOWS

	2005			2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	4,883		$	(2,880	)	$	(2,709	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Equity in undistributed net (income) loss of subsidiaries		(7,030	)		(366	)		2,124
Accretion of investments, net		—			(32	)		—
Amortization of intangible asset		—			10			—
Stock compensation expense		280			—			—
Deferred income tax benefit		(975	)		—			—
(Increase) Decrease in other assets		(80	)		205			(50	)
Increase (decrease) in accrued expenses and other liabilities		200			273			(49	)
NET CASH USED IN OPERATING ACTIVITIES		(2,722	)		(2,790	)		(684	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in subsidiary banks		(6,324	)		(19,606	)		(8,233	)
Proceeds from maturing securities		—			50,406			—
Purchase of securities available for sale		—			(50,374	)		—
Purchase of premises and equipment		(91	)		(456	)		—
NET CASH USED IN INVESTING ACTIVITIES		(6,415	)		(20,030	)		(8,233	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock		13,265			20,081			8,983
(Redemption) issuance of Series A preferred stock		(1,275	)		3,400			—
NET CASH PROVIDED BY FINANCING ACTIVITIES		11,990			23,481			8,983
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		2,853			661			66
Cash and cash equivalents:
Beginning of year		1,319			658			592
End of year	$	4,172		$	1,319		$	658

74

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 18— MERGERS AND ACQUISITIONS

Bristol Bank

On March 7, 2006, the Company announced the execution of a definitive agreement with Bristol Bank, a $93 million-asset bank based in Coral Gables, Florida, by which Bancshares of Florida, Inc. will acquire Bristol Bank by merging it into Bank of Florida, in Ft. Lauderdale, a wholly-owned subsidiary of Bancshares of Florida, Inc..

Under the terms of the definitive agreement, Bristol’s shareholders will receive $20.9 million, of which 70% will be paid in Bancshares common stock and 30% in cash. This equates to approximately 2.07 times Bristol’s book value as of September 30, 2005. The merger is subject to customary closing conditions, including approval from the shareholders of Bristol Bank and banking regulators. The transaction is expected to close early in the third quarter of 2006.

Upon completion of the acquisition, the Company will have assets exceeding $663 million based on December 31, 2005 balances, with the following affiliates: Bank of Florida, Fort Lauderdale in Broward, Dade and Palm Beach Counties; Bank of Florida, Southwest in Collier County; Bank of Florida, Tampa Bay in Hillsborough County; and Bank of Florida Trust Company.

Bank of Florida - Tampa Bay

On July 27, 2004, the Company acquired 100% ownership of Bank of Florida—Tampa Bay (In Organization), which had not yet been incorporated or commenced its planned principal operations. For this acquisition the Company paid $300,000 in cash to an investor group. The acquisition was consummated as a means for Bancshares to expand its business in Florida and provide traditional banking services in the Tampa Bay area.

The Company does not believe this acquisition is a business combination pursuant to the provisions of SFAS No. 141, “Accounting for Business Combinations,” but rather an acquisition of net assets. Accordingly, the excess of the fair value of the liabilities assumed over the fair value of the assets acquired was allocated to an amortizable identifiable intangible. The following table sets forth the assets acquired and liabilities assumed in the acquisition (In Thousands):

Cash	$	861
Equipment		632
Intangible asset – bank charter (1)		974
Other assets		69
Accounts payable		(103	)
Notes payable		(2,133	)
Purchase price of net assets	$	300
Cash acquired		(861	)
Net cash acquired	$	(561	)

(1) Identifiable intangible assets will be amortized on a straight-line basis over a period of 25 years.

75

BANCSHARES OF FLORIDA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2005, 2004 and 2003

NOTE 19—SEGMENT INFORMATION

Segment information for the Company as of and for the years ended December 31, 2005, 2004 and 2003 is as shown below. Other (*) includes consolidating eliminating entries and activity at the holding company level. The four business segments are comprised of the following: Bank of Florida - Southwest commenced operations in August 1999, based in Naples, Florida; Bank of Florida commenced operations in July 2002, based in Fort Lauderdale, Florida; Bank of Florida - Tampa Bay commenced operations in November 2004, based in Tampa, Florida; Bank of Florida Trust Company commenced operations in August 2000, based in Naples, Florida; and Bancshares of Florida, Inc., incorporated in September 1998, serves as a holding company for Bank of Florida - Southwest, Bank of Florida, Bank of Florida - Tampa Bay and Bank of Florida Trust Company. Segment information is as follows (In Thousands):

For the Year Ended:	Bank of Florida—Southwest			Bank of Florida, Ft. Lauderdale			Bank of Florida-- Tampa Bay			Bank of Florida Trust Company			* Other			Consolidated
December 31, 2005
Net interest income	$	9,411		$	7,947		$	1,700		$	67		$	18		$	19,143
Provision for loan losses		961			518			424			—			—			1,903
Noninterest income		1,140			495			78			1,546			—			3,259
Noninterest expense		4,628			5,172			1,866			1,356			6,322			19,344
Holding company servicing costs		1,907			925			266			84			(3,182	)		—
Net income (loss) before income tax benefit		3,055			1,827			(778	)		173			(3,122	)		1,155
Income tax benefit		(966	)		(1,109	)		(424	)		(255	)		(974	)		(3,728	)
Net income (loss)	$	4,021		$	2,936		$	(354	)	$	428		$	(2,148	)	$	4,883
End of Period assets	$	304,156		$	211,542		$	64,488		$	2,787		$	(13,191	)	$	569,782
Assets under advice	$	—		$	—		$	—		$	390,002		$	—		$	390,002
December 31, 2004
Net interest income	$	6,364		$	3,304		$	38		$	67		$	32		$	9,805
Provision for loan losses		650			503			126			—			—			1,279
Noninterest income		902			211			—			1,063			—			2,176
Noninterest expense		5,433			3,189			605			1,077			3,278			13,582
Net income (loss)	$	1,183		$	(177	)	$	(693	)	$	53		$	(3,246	)	$	(2,880	)
End of Period assets	$	246,862		$	144,853		$	33,404		$	2,333		$	(6,644	)	$	420,808
Assets under advice	$	—		$	—		$	—		$	202,138		$	—		$	202,138
December 31, 2003
Net interest income	$	4,288		$	1,233		$	—		$	57		$	—		$	5,578
Provision for loan losses		445			388			—			—			—			833
Noninterest income		698			145			—			492			—			1,335
Noninterest expense		4,813			2,530			—			861			585			8,789
Net loss	$	(272	)	$	(1,540	)	$	—		$	(312	)	$	(585	)	$	(2,709	)
End of Period assets	$	161,697		$	63,462		$	—		$	2,558		$	(5,107	)	$	222,610
Assets under advice	$	—		$	—		$	—		$	131,000		$	—		$	131,000

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SIGNATURES

Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BANCSHARES OF FLORIDA, INC.
Date: March 7, 2006	By:	/s/ Michael L. McMullan
		Michael L. McMullan
		Chief Executive Officer
Date: March 7, 2006	By:	/s/ Tracy L. Keegan
		Tracy Keegan
		Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K has been signed by the following persons in the capacities and as of the dates indicated:

Signature	Title	Date
/s/ Michael L. McMullan
Michael L. McMullan	President, Chief Executive Officer, Director	March 7, 2006
/s/ Donald R . Barber
Donald R. Barber	Director	March 7,2006
/s/ Joe B. Cox
Joe B. Cox	Director	March 7,2006
/s/ Earl L. Frye
Earl L. Frye	Chairman and Director	March 7,2006
/s/ H. Wayne Huizenga Jr.
H. Wayne Huizenga, Jr.	Director	March 7,2006
/s/ John B. James
John B. James	Director	March 7,2006
/s/ Edward. Kaloust
Edward Kaloust	Director	March 7,2006
/s/ LaVonne Johnson
LaVonne Johnson	Director	March 7,2006
/s/ Martin P. Mahan
Martin P. Mahan	Director	March 7,2006

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Signature	Title	Date
/s/ Harry K. Moon
Harry K. Moon, MD	Director	March 7,2006
/s/ Michael T. Putziger
Michael T. Putziger	Director	March 7,2006
/s/ Richard Rochon
Richard Rochon	Director	March 7,2006
/s/ Ramon Rodriguez
Ramon A. Rodriguez	Director	March 7,2006
/s/ Terry W. Stiles
Terry W. Stiles	Director	March 7,2006

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EX-2.1

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (“Agreement”) is made effective as of March 7, 2006, by and among Bancshares of Florida, Inc. (“Bancshares”), a Florida corporation, and Bank of Florida (“BOF”), a Florida banking corporation and Bristol Bank (“Bristol”), a Florida banking corporation. Bancshares, BOF and Bristol shall be hereinafter collectively referred to as the “Constituent Corporations.”

PREAMBLE

WHEREAS, the Boards of Directors of Bancshares, BOF and Bristol have determined that it is desirable and in the best interests of their respective corporations and shareholders that Bristol merge into the BOF (the “Merger”) on the terms and subject to the conditions set forth in this Agreement.

NOW THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

SECTION 1. THE MERGER AND CLOSING

1.01. MERGER

(a) Subject to the terms and conditions of this Agreement, at the Effective Time (as hereinafter defined in Section 1.03), Bristol shall be merged with and into BOF, which will be the surviving banking corporation, in accordance with the Florida Business Corporation Act (the “FBCA”) and the Florida Financial Institutions Codes (the “FFIC”), and the separate corporate existence of Bristol shall thereupon cease.

(b) The Merger shall have the effects set forth in the FBCA and the FFIC, as applicable. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property and assets, rights and privileges and all debts, liabilities and obligations of Bristol will become the property and assets, rights, privileges, debts, liabilities and obligations of BOF as the surviving banking corporation in the Merger.

1.02. THE CLOSING

The “Closing” of the transactions contemplated hereby will take place in the Board Room of Bancshares, 1185 Immokalee Road, Naples, Florida 34110 (or such other place to which the parties may agree), at 9:00 a.m., Eastern Time, on a mutually agreeable date as soon as practicable following satisfaction of the conditions set forth in Subsections (a), (b), (d), and (e) of Section 6.01 hereof, or if no date has been agreed to, on any date specified by any party to the others upon ten days notice following satisfaction of such conditions; provided, however, that in no event shall the Closing occur in the last calendar month of any Bancshares fiscal quarter. The date on which the Closing occurs is herein called the “Closing Date.” If all conditions set forth in Section 6 hereof are satisfied or waived by the party entitled to grant such waiver, at the Closing: (i) the Constituent Corporations shall each provide to the other such proof of satisfaction of the conditions set forth in Section 6 as the party whose obligations are conditioned upon such

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satisfaction may reasonably request; (ii) the certificates, letters, opinions and other items required by Section 6 shall be delivered; (iii) Bristol and BOF shall, as applicable, execute articles of merger complying with the requirements of the FBCA and the FFIC (the “Articles of Merger”); and (iv) the parties shall take such further action as is required to effect the Merger and to otherwise consummate the transactions contemplated by this Agreement. If on any date established for the Closing all conditions in Section 6 hereof have not been satisfied or waived by the party entitled to grant such waiver, then such party, on one or more occasions, may declare a delay of the Closing of such duration, not exceeding ten business days, as the declaring party shall select, but no such delay shall extend beyond the date set forth in Subsection (c) of Section 7.01, and no such delay shall interfere with the right of any party to terminate this Agreement pursuant to Section 7.

1.03. THE EFFECTIVE DATE AND TIME

Immediately following (or concurrently with) the Closing, the Articles of Merger shall be filed with and recorded by the Florida Department of State. The Merger will be effective on the date (the “Effective Date”) and time (the “Effective Time”) specified in the Articles of Merger.

1.04. SURVIVING CORPORATIONS

The Articles of Incorporation and Bylaws of BOF as in effect immediately prior to the Effective Time shall remain unchanged by reason of the Merger and shall be the Articles of Incorporation and Bylaws of BOF as the surviving entity in the Merger. The directors and officers of BOF at the Effective Time of the Merger shall be the directors and officers of BOF as the surviving banking corporation in the Merger until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.

1.05. TAX CONSEQUENCES

It is the intention of the parties hereto that the Merger shall constitute a reorganization within the meaning of Section 368(a)(1)(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and that this Agreement shall constitute a “plan of reorganization” for purposes of Section 368 of the Code.

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SECTION 2. CONVERSION OF STOCK IN THE COMPANY MERGER

2.01. CONVERSION OF SHARES

All of the shares of BOF Common Stock issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding after the Effective Time and shall be unaffected by the Merger. The manner and basis of converting the shares of Class A common stock par value $5.00 per share and Class B common stock par value $5.00 of Bristol (collectively, the “Bristol Common Stock”) upon consummation of the Merger shall be as follows:

(a) At the Effective Time, by virtue of the Merger, and without any action on the part of Bancshares, BOF, Bristol or the holders of Bristol Common Stock, the holders of Bristol Common Stock shall receive the following Merger Consideration (as defined herein):

(i) Subject to the other provisions of this Section 2.01, each share of Bristol Common Stock issued and outstanding immediately prior to the Effective Time (excluding any treasury shares, shares held by Bristol and shares of Bristol Common Stock as to which Dissenters’ Rights have been perfected and not withdrawn or otherwise forfeited under Section 658.44 of the FFIC [“Dissenters’ Shares”]), shall be converted into the right to receive the appropriate elected or otherwise assigned Merger Consideration. The “Merger Consideration” shall mean either:

(a) cash in the amount of $16.83, without interest (the “Cash Consideration”);

(b) a number of shares of Bancshares Common Stock equal to the Exchange Ratio (the “Stock Consideration”); or

(c) a combination of Cash Consideration and Stock Consideration in accordance with Subsection (ii) of this Subsection 2.01(a).

“Exchange Ratio” shall be equal to:

(x) 0.9471, if the Average Closing Price is less than or equal to $17.77;

(y) the quotient (rounded to the nearest ten-thousandth) of $16.83 divided by the Average Closing Price, if the Average Closing Price is greater than $17.77 and less than $24.04; or

(z) 0.7001, if the Average Closing Price is greater than or equal to $24.04.

“Average Closing Price” means the average of the closing price per share of Bancshares Common Stock on the NASDAQ National Market at the end of the regular session as reported on the Consolidated Tape for the 20 consecutive trading days ending on (and including) the trading day that is two trading days prior to (but not including) the Effective Date.

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(ii) The number of shares of Bristol Common Stock to be converted into the right to receive Cash Consideration (including any Dissenters’ Shares and any such shares subject to the cash portion of a Combination Election [as defined in Subsection (iii) herein]) shall not exceed 30% in the aggregate of the number of shares of Bristol Common Stock outstanding immediately prior to the Effective Time (the “Maximum Cash Election Number”). The number of shares of Bristol Common Stock to be converted into the right to receive Stock Consideration (including any such shares subject to the stock portion of a Combination Election) shall be at least 70% in the aggregate of the number of shares of Bristol Common Stock outstanding immediately prior to the Effective Time (the “Minimum Stock Election Number”).

(iii) Subject to the proration and election procedures set forth in this Subsection 2.01(a), each holder of record of shares of Bristol Common Stock (excluding any treasury shares, shares held by Bristol and Dissenters’ Shares) will be entitled to elect to receive: (1) Cash Consideration for all such shares (a “Cash Election”); (2) Stock Consideration for all of such shares (a “Stock Election”); or (3) Cash Consideration for some such shares and Stock Consideration for some such shares (a “Combination Election”). All such elections shall be made on a form designed for that purpose prepared by Bancshares and reasonably acceptable to Bristol (the “Forms of Election” or a “Form of Election”). Holders of record of shares of Bristol Common Stock who hold such shares as nominees, trustees or in other representative capacities (a “Representative”) may submit multiple Forms of Election, provided that such Representative certifies that each such Form of Election covers all the shares of Bristol Common Stock held by each such Representative for a particular beneficial owner.

(iv) Bancshares, with the assistance of Bristol, shall mail the Form of Election to all persons who are holders of Bristol Common Stock on the record date for the shareholders meeting described in Section 5.08 of this Agreement (the “Special Meeting”), on a date that is not less than twenty (20) business days prior to the Effective Time, and thereafter each of Bancshares and Bristol shall use its reasonable efforts to: (A) cause Bancshares to mail the Form of Election to all persons who become holders of Bristol Common Stock during the period between the record date for the Special Meeting and 10:00 a.m., Eastern Time, on the date ten (10) business days prior to the Effective Time; and (B) make the Form of Election available to all persons who become holders of Bristol Common Stock subsequent to such day and no later than the close of business on the fifth business day prior to the Effective Time. A Form of Election must be received by Bancshares in the manner described below no later than by the close of business on the fifth business day prior to the Effective Time (the “Election Deadline”) in order to be effective. All elections will be irrevocable.

(v) Elections shall be made by holders of Bristol Common Stock by mailing, faxing or otherwise delivering to Bancshares, in a manner reasonably acceptable to Bancshares, a Form of Election. To be effective, a Form of Election must be properly completed, signed and submitted to Bancshares. Bancshares will have the discretion to determine whether Forms of Election have been properly completed, signed and submitted and to disregard immaterial defects in Forms of Election. Provided such decision is made reasonably, the decision of Bancshares in such matters shall be conclusive and binding. Bancshares shall use reasonable efforts to notify Bristol of any defect in a Form of Election.

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(vi) A holder of Bristol Common Stock who does not properly submit a Form of Election that is received by Bancshares prior to the Election Deadline shall be deemed to have made a Stock Election. If Bancshares shall determine that any purported Cash Election or Stock Election was not properly made, such purported Cash Election or Stock Election shall be deemed to be of no force and effect and the holder of shares of Bristol Common Stock making such purported Cash Election or Stock Election shall for purposes hereof be deemed to have made a Stock Election.

(vii) All shares of Bristol Common Stock, which are subject to Cash Elections, are referred to herein as “Cash Election Shares.” All shares of Bristol Common Stock which are subject to Stock Elections are referred to herein as “Stock Election Shares.” If, after the results of the Forms of Election are calculated, the number of shares of Bristol Common Stock to be converted into cash exceeds the Maximum Cash Election Number, Bancshares shall determine the number of Cash Election Shares which must be redesignated as Stock Election Shares in order to reduce the amount of such cash to the Maximum Cash Election Number. All holders who have Cash Election Shares shall, on a prorata basis, have such number of their Cash Election Shares redesignated as Stock Election Shares so that the Maximum Cash Election Number is achieved. Holders who make Combination Elections with at least a 70% stock component will not be subject to the redesignation procedures described herein. Bancshares shall make all computations contemplated by this Subsection 2.01(a) in consultation with Bristol, but, provided the results of such computations are reasonably determined, Bancshares ultimate computations shall be conclusive and binding on the holders of Bristol Common Stock.

(viii) The redesignation procedure set forth in this Subsection 2.01(a) shall be completed within five business days after the Effective Date. Promptly after such procedure is completed, all Cash Election Shares and the appropriate shares of Bristol Common Stock subject to Combination Elections and to be converted into Cash Consideration, shall be converted into the right to receive the Cash Consideration and all Stock Election Shares and appropriate shares of Bristol Common Stock which are subject to Combination Elections and to be converted into Stock Consideration, shall be converted into the right to receive the Stock Consideration. Bristol certificates previously evidencing shares of Bristol Common Stock shall be exchanged, as applicable, for (a) certificates evidencing the Stock Consideration, or (b) the Cash Consideration, multiplied in each case by the number of shares previously evidenced by the canceled certificate, upon the surrender of such certificates in accordance with the provisions of Section 2.02, without interest. Notwithstanding the foregoing, however, no fractional shares of Bancshares Common Stock shall be issued, and, in lieu thereof, a cash payment shall be made pursuant to Subsection 2.01(c).

(ix) Each share of Bristol Common Stock held in the treasury of Bristol immediately prior to the Effective Time shall be canceled and extinguished without any conversion thereof and no payment shall be made with respect thereto.

(b) To the extent not prohibited by 12 USC Section 1828(k) or 12 CFR Part 359, each Stock Option under the Stock Option Plan (as such terms are hereinafter defined) that is outstanding at the Effective Time (which cover 86,400 shares of Bristol Common Stock and that each have an exercise price of $10.00) shall be converted into the right to receive a number of shares of Bancshares Common Stock equal to the Stock Option Exchange Ratio, without the payment by such Stock Option Holder of any consideration

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therefor, other than the cancellation of such Stock Option. Notwithstanding the foregoing, however, no fractional shares of Bancshares Common Stock shall be issued, and, in lieu thereof, a cash payment shall be made pursuant to Subsection 2.01(c).

“Stock Option Exchange Ratio” shall be equal (rounded to the nearest ten-thousandth) to:

(x) 0.3844, if the Average Closing Price is less than or equal to $17.77;

(y) the quotient of $6.83 divided by the Average Closing Price, if the Average Closing Price is greater than $17.77 and less than $24.04; or

(z) 0.2841, if the Average Closing Price is greater than or equal to $24.04.

(c) No certificates or scrip representing fractional shares of Bancshares Common Stock will be issued as a result of the Merger. In lieu of the issuance of fractional shares pursuant to Subsections 2.01(a) or (b) of this Agreement, cash adjustments (without interest) will be paid to the holder of Bristol Common Stock in respect of any fraction of a share of Bancshares Common Stock that would otherwise be issuable to such holder of Bristol Common Stock, and the amount of such cash adjustment shall be determined by multiplying the fraction of a share of Bancshares Common Stock otherwise issuable by $20.90, and no such holder shall be entitled to dividends, voting rights or any other right of stockholders in respect of any fractional share.

2.02. EXCHANGE OF CERTIFICATES; DISSENTERS’ SHARES

(a) After the Effective Time, each holder of an outstanding certificate or certificates theretofore representing a share or shares of Bristol Common Stock, other than Dissenters’ Shares and treasury shares, upon surrender thereof to Bancshares, together with duly executed transmittal materials provided pursuant to Subsection 2.02(b) or upon compliance by the holder or holders thereof with the procedures of Bancshares with respect to lost, stolen or destroyed certificates, shall be entitled to receive in exchange therefor any Merger Consideration payable in exchange for such shares. In effecting the exchange of Bristol shares, Bancshares shall use its independent stock transfer agent to serve as exchange agent. On the Effective Date, Bancshares shall place in escrow with such exchange agent funds adequate to pay all Cash Consideration to be paid in the Merger.

(b) Promptly after the Effective Time, Bancshares shall send or cause to be sent to each shareholder of record of Bristol at the Effective Time, excluding the holders, if any, of Dissenters’ Shares, transmittal materials (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates (as hereinafter defined) shall pass, only upon proper delivery of the Certificates to Bancshares) for use in exchanging certificates of Bristol Common Stock (the “Certificates”).

(c) Upon surrender to Bancshares of a Certificate, together with such letter of transmittal duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor his or her portion of the Merger Consideration (in the form or forms elected by such holder subject to the provisions hereof) deliverable in respect of the shares of Bristol Common Stock represented by such Certificate, and such Certificate shall forthwith be cancelled. No interest will be paid or accrued on the Merger Consideration deliverable upon surrender of the Certificate. If payment is to be made to a person other than the person in whose name the Certificate

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surrendered is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer. The person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of the Certificate surrendered or establish to the satisfaction of Bancshares that such tax has been paid or is not applicable. Until surrendered in accordance with the provisions of this Section 2.02, each Certificate (other than Certificates representing Dissenters’ Shares) shall represent for all purposes the right to receive the corresponding portion of the Merger Consideration without any interest thereon. Payments to holders of Dissenters’ Shares shall be made as required by the FFIC.

(d) Notwithstanding anything in this Agreement to the contrary, Dissenters’ Shares shall not be converted into or be exchangeable for the right to receive the corresponding portion of the Merger Consideration provided in Subsection 2.01(a) of this Agreement, unless and until such holder shall have failed to perfect or shall have effectively withdrawn or lost his right to appraisal and payment under the FFIC. If any such holder shall have so failed to perfect or shall have effectively withdrawn or lost such right, such holder’s shares of Bristol Common Stock shall thereupon be deemed to have been converted into and to have become exchangeable for, at the Effective Time, the right to receive the corresponding portion of the Merger Consideration without any interest thereon.

2.03. CLOSING TRANSFER BOOKS

At the Effective Time, the stock transfer books of Bristol shall be closed and no transfer of shares of Bristol Common Stock shall be made thereafter. All shares of Bancshares Common Stock issued and cash payments paid upon surrender for exchange of certificates representing shares of Bristol Common Stock in accordance with this Section 2 shall be deemed to have been issued in full satisfaction of all rights pertaining to the shares of Bristol Common Stock theretofore represented by such certificates.

2.04. ESCROW OF CASH CONSIDERATION

(a) Notwithstanding any other provision of this Agreement, in the event there are any Dissenters’ Shares following the Special Meting, $100,000 shall be withheld from the Cash Consideration and shall be paid to BOF as escrow agent, and BOF agrees to act and serve as escrow agent therefor in accordance with this Section 2.04, and BOF shall place such $100,000 in an escrow account (“Escrow Account”).

(b) Upon submitting a written request to BOF, Bancshares shall be permitted to withdraw and expend funds from the Escrow Account to pay for costs incurred in complying with the dissenters’ rights procedures under Section 658.44 of the FFIC (but not for payment to the holders of Dissenters’ Shares).

(c) Upon the termination of the dissenters’ rights proceedings or the issuance of a final, non-appealable order in such proceedings, Bancshares shall instruct BOF to disburse any funds remaining in the Escrow Account, including any amounts replenished in accordance with Subsection 2.04(d) below, to those former holders of Bristol Common Stock who received Cash Consideration, on a pro rata basis.

(d) In the event that the final valuation of a Dissenters’ Share is less than the Cash Consideration, BOF, as escrow agent, shall credit and increase the amount of money in the

7

Escrow Account by an amount equal to the difference between the final valuation amount per share and the Cash Consideration, multiplied by the number of Dissenters’ Shares, to replenish the Escrow Account, up to a maximum of $100,000, for amounts that may have been withdrawn in accordance with Subsection 2.04(b) above. To clarify, such credit shall not exceed the lesser of $100,000 or the amount that was withdrawn from the Escrow Account in accordance with Subsection 2.04(b) above. Such credited funds shall then be disbursed to the former holders of Bristol Common Stock who received Cash Consideration, on a pro rata basis, in accordance with Subsection 2.04(c) above.

SECTION 3. REPRESENTATIONS AND WARRANTIES OF BRISTOL

For purposes of this Section 3, the term “material adverse effect” shall mean, a condition, event, change or occurrence that is likely to have a material adverse effect upon the financial condition, results of operations, loans, securities, deposit accounts, business or properties of Bristol; provided, however, that in determining whether a material adverse effect has occurred there shall be excluded any effect, to the extent attributable to or resulting from, (a) any changes in the laws, regulations or interpretations of laws or regulations generally affecting the banking business, but not uniquely relating to Bristol; (b) any changes in generally accepted accounting principles or regulatory accounting requirements generally affecting the banking or bank holding company businesses, but not uniquely relating to Bristol; (c)changes in national or international political or social conditions including the engagement by the Untied States in hostilities, whether or not pursuant to the declaration of a national emergency or war or the occurrence of any military or terrorist attack upon or within the United States, or any of its territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States; (d) actions or omissions of Bristol taken with the prior written consent of Bancshares in contemplation of the transactions contemplated hereby; (e) any facts existing on the date of this Agreement as fully disclosed in the schedules of exceptions delivered by Bristol with this Agreement; and (f) any action taken at the specific request or direction of Bancshares. Bristol represents and warrants to Bancshares and BOF that, except as disclosed in the schedule of exceptions delivered by Bristol to Bancshares (the “Schedule of Exceptions”), as of the date of this Agreement and as of the Closing Date (it being agreed that any item listed on the Schedule of Exceptions is deemed to be disclosed in regard to any relevant section of the Schedule of Exceptions):

3.01. ORGANIZATION; QUALIFICATION

Bristol has no subsidiaries and is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida and is a Florida state-chartered commercial bank, duly organized, validly existing and in good standing under the laws of the State of Florida and is domiciled in the State of Florida. Bristol has all requisite corporate power and authority to own and lease its property and to carry on its business as it is currently being conducted and to execute this Agreement and to consummate the transactions contemplated hereby, and is qualified and in good standing as a foreign corporation in all jurisdictions in which the failure to so qualify would have a material adverse effect on Bristol’s financial condition, results of operations or business.

3.02. CAPITAL STOCK; OTHER INTERESTS

As of December 31, 2005, the authorized capital stock of Bristol consists of 1,000,000 shares of preferred stock (none of which are issued and outstanding) and 3,500,000 shares of

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Bristol Common Stock (2,500,000 of which are designated as Class A and 1,000,000 of which are designated as Class B). Also as of December 31, 2005, 402,400 shares of Class B Bristol Common Stock and 804,800 shares of Bristol Class A Common Stock are outstanding and there are no shares held as treasury stock. All issued and outstanding shares of capital stock of Bristol have been duly authorized and are validly issued, fully paid and nonassessable. Other than outstanding options to acquire up to an aggregate of 86,400 shares of Bristol Common Stock (the “Stock Options”) granted pursuant to Bristol’s 1999 Stock Option Plan (the “Stock Option Plan”) Bristol has no outstanding stock options or other rights to acquire any shares of its capital stock or any security convertible into such shares, or has any obligation or commitment to issue, sell or deliver any of the foregoing or any shares of its capital stock. There are no agreements among Bristol and Bristol’s shareholders or by which Bristol is bound with respect to the voting or transfer of Bristol Common Stock or granting registration rights to any holder thereof. The outstanding capital stock of Bristol has been issued in compliance with all legal requirements and in compliance with any preemptive or similar rights. Except as set forth on Schedule 3.02 of the Schedule of Exceptions, Bristol has no subsidiaries or any direct or indirect ownership interest in any firm, corporation, partnership or other entity.

3.03. CORPORATE AUTHORIZATION; NO CONFLICTS

Subject to the approval of this Agreement by the shareholders of Bristol in accordance with the FBCA and FFIC, and applicable federal law, all corporate acts and other proceedings required of Bristol for the due and valid authorization, execution, delivery and performance of this Agreement and consummation of the Merger have been validly and appropriately taken. Subject to their approval by the shareholders of Bristol and to such regulatory approvals as are required by law, this Agreement is a legal, valid and binding obligation of Bristol and is enforceable against Bristol in accordance with the terms hereof, except that enforcement may be limited by: (a) bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship, and other laws now or hereafter in effect relating to or affecting the enforcement of creditors’ rights generally or the rights of creditors of insured depository institutions; (b) general equitable principles; and (c) laws relating to the safety and soundness of insured depository institutions, and except that no representation is made as to the effect or availability of equitable remedies or injunctive relief (regardless of whether such enforceability is considered in a proceeding in equity or at law). Except as set forth on Schedule 3.03 of the Schedule of Exceptions, with respect to Bristol, neither the execution, delivery or performance of this Agreement, nor the consummation of the transactions contemplated hereby will: (i) violate, conflict with, or result in a breach of any provision of; (ii) constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under; (iii) result in the termination of or accelerate the performance required by; or (iv) result in the creation of any lien, security interest, charge or encumbrance upon any of its properties or assets under, any of the terms, conditions or provisions of its articles of incorporation or association or Bylaws or any material note, bond, mortgage, indenture, deed of trust, lease, license, agreement or other instrument or obligation to or by which it or any of its assets is bound; or violate any order, writ, injunction, decree, statute, rule or regulation of any governmental body applicable to it or any of its assets.

3.04. FINANCIAL STATEMENTS, REPORTS AND PROXY STATEMENTS

(a) Bristol has delivered to Bancshares true and complete copies of: (i) its balance sheets as of December 31, 2003 and December 31, 2004, the related consolidated statements of income, shareholders’ equity and cash flows for the respective years then ended, the related notes thereto,

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and the reports of its independent public accountants (collectively, the “Financial Statements”); (ii) the unaudited consolidated balance sheets as of September 30, 2004 and September 30, 2005 of Bristol, and the related unaudited statements of income and cash flows for the nine-month periods then ended (collectively, the “Interim Financial Statements”); (iii) all monthly reports and financial statements of Bristol that were prepared for Bristol’s Board of Directors since September 30, 2005; (iv) all “call reports” and financial statements, including all amendments thereto, made to the Federal Deposit Insurance Corporation (the “FDIC”) or the Florida Department of Financial Services, Office of Financial Regulation (the “OFR”) since December 31, 2002; (v) Bristol’s Annual Report to Shareholders for the year ended 2004 and all subsequent Quarterly Reports to Shareholders, if any; and (vi) all proxy or information statements (or similar materials) disseminated to Bristol’s shareholders since December 31, 2002, if any.

(b) The Financial Statements have been and will be prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) applied on a basis consistent with prior periods, and present fairly, in conformity with GAAP the financial position, results of operations, changes in shareholders’ equity and cash flows of Bristol as of the dates thereof and for the periods covered thereby. All other financial statements delivered by Bristol in connection with this Agreement, including the Interim Financial Statements, shall fairly present the financial information reflected therein. All call and other regulatory reports referred to above have been filed on the appropriate form and prepared in all material respects in accordance with such form’s instructions and the applicable rules and regulations of the regulating federal and/or state agency. As of the date of the latest balance sheet forming part of the Interim Financial Statements (the “Latest Balance Sheet”), Bristol has not had, nor are any of its assets subject to, any material liability, commitment, indebtedness or obligation (of any kind whatsoever, whether absolute, accrued, contingent, known or unknown, matured or unmatured) which is not reflected and adequately provided for in accordance with GAAP. No report, including any report filed with the FDIC, the OFR, or other bank regulatory agency, and no report, proxy statement, registration statement or offering materials made or given to shareholders of Bristol since December 31, 2002, as of the respective dates thereof, if any, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. No report, including any report filed with the FDIC, the OFR, or other bank regulatory agency, and no report, proxy statement, registration statement or offering materials made or given to shareholders of Bristol to be filed or disseminated after the date of this Agreement, if any, will contain any untrue statement of a material fact or will omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they will be made, not misleading. The Financial Statements and the Interim Financial Statements are supported by and consistent with a general ledger and detailed trial balances of investment securities, loans and commitments, depositors’ accounts and cash balances on deposit with other institutions, copies of which have been made available to Bancshares.

3.05. LOAN AND INVESTMENT PORTFOLIOS

To Bristol’s knowledge, all loans, discounts and financing leases reflected on the Latest Balance Sheet: (a) were, at the time and under the circumstances in which made, made for good, valuable and adequate consideration in the ordinary course of business and are the legal, valid and binding obligations of the obligors thereof; (b) are evidenced by genuine notes, agreements or other evidences of indebtedness; and (c) to the extent secured, have been secured, to the knowledge of Bristol, by valid liens and security interests which have been perfected. Accurate

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lists of all loans, discounts and financing leases as of the date of the Latest Balance Sheet (or a more recent date), and of the investment portfolio of Bristol as of such date, have been delivered to Bancshares. Except as specifically set forth on Schedule 3.05 of the Schedule of Exceptions, Bristol is not a party to any written or oral loan agreement, note or borrowing arrangement, including any loan guaranty, that was, as of the most recent month-end: (i) delinquent by more than 30 days in the payment of principal or interest; (ii) known by Bristol to be otherwise in material default for more than 30 days; (iii) classified as “substandard,” “doubtful,” “loss,” “other assets especially mentioned” or any comparable classification by Bristol or the FDIC or the OFR; (iv) an obligation of any director, executive officer or 10% shareholder of Bristol who is subject to Regulation O of the Federal Reserve Board (12 C.F.R. Part 215), or any person, corporation or enterprise controlling, controlled by or under common control with any of the foregoing; or (v) in violation of any law, regulation or rule of any governmental authority, other than those that are immaterial in amount.

3.06. ADEQUACY OF ALLOWANCES FOR LOSSES

Each of the allowances for losses on loans, financing leases and other real estate shown on the Latest Balance Sheet was adequate in accordance with applicable regulatory guidelines and GAAP in all material respects, and there are no facts or circumstances known to Bristol which are likely to require in accordance with applicable regulatory guidelines or GAAP a future material increase in any such provisions for losses or a material decrease in any of the allowances therefor reflected in the Latest Balance Sheet. Each of the allowances for losses on loans, financing leases and other real estate reflected on the books of Bristol at all times from and after the date of the Latest Balance Sheet was adequate in accordance with applicable regulatory guidelines and GAAP in all material respects, and there are no facts or circumstances known to Bristol which are likely to require, in accordance with applicable regulatory guidelines or GAAP, a future material increase in any of such provisions for losses or a material decrease in any of the allowances therefor reflected in the Latest Balance Sheet.

3.07. ABSENCE OF CERTAIN CHANGES OR EVENTS

Since the date of the Latest Balance Sheet, except as provided in Subsection 5.06(a), Bristol has not declared, set aside for payment or paid any dividend to holders of, or declared or made any distribution on, any shares of Bristol capital stock, nor will Bristol declare or pay any dividend between the date of this Agreement and the Effective Time. Since the date of the Latest Balance Sheet, there has been no event or condition of any character (whether actual or threatened, to the knowledge of Bristol) that has had, or can reasonably be anticipated to have, a material adverse effect on the financial condition, results of operations or business of Bristol. Except as may result from the transactions contemplated by this Agreement or that would not have a material adverse effect on Bristol, Bristol has not, since the date of the Latest Balance Sheet (except as set forth on Schedule 3.07[a] of the Schedule of Exceptions):

(a) except in the ordinary course of business and consistent with past practices, borrowed any money or entered into any capital lease or leases;

(b) except in the ordinary course of business and consistent with past practices, lent any money or pledged any of its credit in connection with any aspect of its business whether as a guarantor, surety, issuer of a letter of credit or otherwise;

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(c) mortgaged or otherwise subjected to any lien, encumbrance or other liability any of its assets;

(d) sold, assigned or transferred any of its assets in excess of $50,000.00 in the aggregate;

(e) except in the ordinary course of business and consistent with past practices, incurred any material liability, commitment, indebtedness or obligation (of any kind whatsoever, whether absolute or contingent);

(f) suffered any material damage, destruction or loss to immovable or movable property, whether or not covered by insurance;

(g) experienced any material change in asset concentrations as to customers or industries or in the nature and source of its liabilities or in the mix of interest-bearing versus noninterest bearing deposits such that any such material change would have a material adverse effect on Bristol;

(h) received notice or had knowledge or reason to believe that any material labor unrest exists among any of its employees or that any group, organization or union has attempted to organize any of its employees;

(i) received notice that one or more substantial customers have terminated or intend to terminate such customers’ relationship with it, with the result being a material adverse effect on Bristol;

(j) failed to operate its business in the ordinary course consistent with past practices, or failed to use reasonable efforts to preserve its business organization intact or to preserve the goodwill of its customers and others with whom it has business relations;

(k) incurred any material loss except for losses adequately provided for on the date of this Agreement or on the Latest Balance Sheet and expenses associated with this transaction, or waived any material right in connection with any aspect of its business, whether or not in the ordinary course of business;

(l) forgiven any material debt owed to it, or canceled any of its claims or paid any of its noncurrent obligations or liabilities;

(m) except as set forth on Schedule 3.07(m) of the Schedule of Exceptions, made any capital expenditure or capital addition or betterment in excess of $50,000.00;

(n) except as set forth in Schedule 3.07(n) of the Schedule of Exceptions, entered into any agreement requiring the payment, conditionally or otherwise, of any salary, bonus, extra compensation (including payments for unused vacation or sick time), pension or severance payment to any of its present or former directors, officers or employees, except such agreements as are terminable at will without any penalty or other payment by it or increased (except for increases of not more than 10% consistent with past practices) the compensation (including salaries, fees, bonuses, profit sharing, incentive, pension, retirement or other similar payments) of any such person whose annual compensation would, following such increase, exceed $50,000.00;

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(o) except as required in accordance with GAAP, changed any accounting practice followed or employed in preparing the Financial Statements;

(p) made any loan, given any discount or entered into any financing lease which has not been: (i) made, at the time and under the circumstances in which made, for good, valuable and adequate consideration in the ordinary course of business; (ii) evidenced by genuine notes, agreements or other evidences of indebtedness; and (iii) fully provided for in an amount sufficient in accordance with applicable regulatory guidelines to provide for all charge-offs reasonably anticipated in the ordinary course of business after taking into account all recoveries reasonably anticipated in the ordinary course of business;

(q) entered into any agreement, contract or commitment to do any of the foregoing; or

(r) authorized or issued any additional shares of Bristol Common Stock, Bristol preferred stock, other than the issuance of shares of Bristol Common Stock pursuant to the exercise of Stock Options outstanding as of the date of this Agreement to purchase Bristol Common Stock.

3.08. TAXES

Bristol has timely filed all federal, state and local income, franchise, excise, sales and use, real and personal property, employment, intangible and other tax returns, tax information returns and reports required to be filed, has paid all material taxes, interest payments and penalties as reflected therein which have become due, other than taxes which are being contested in good faith and for which adequate accruals have been made on the Latest Balance Sheet, has made adequate provision for the payment of all such taxes accruable for all periods ending on or before the date of this Agreement (and will make such accruals through the Closing Date) to any city, county, state, the United States or any other taxing authority, and is not delinquent in the payment of any material tax or material governmental charge of any nature. To Bristol’s knowledge, Bristol’s federal income tax return has never been audited by the Internal Revenue Service. No audit or examination is presently being conducted by any taxing authority nor has Bristol received written notice from any such taxing authority of its intention to conduct any investigation or audit or to commence any such proceeding; no material unpaid tax deficiencies or additional liabilities of any sort have been proposed to Bristol by any governmental representative, and no agreements for extension of time for the assessment of any tax have been entered into by or on behalf of Bristol. Bristol has withheld from its employees (and timely paid to the appropriate governmental entity) proper and accurate amounts for all periods in material compliance with all tax withholding provisions of applicable federal, state and local laws (including, without limitation, income, social security and employment tax withholding for all forms of compensation).

3.09. TITLE TO ASSETS

(a) On the date of the Latest Balance Sheet, Bristol had and, except with respect to assets disposed of for adequate consideration in the ordinary course of business since such date, now has, good and marketable title to all real property and good and merchantable title to all other

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material properties and assets reflected on the Latest Balance Sheet, and has good and marketable title to all real property and good and merchantable title to all other material properties and assets acquired since the date of the Latest Balance Sheet, in each case free and clear of all mortgages, liens, pledges, restrictions, security interests, charges and encumbrances of any nature except for: (i) mortgages and encumbrances which secure indebtedness which is properly reflected in the Latest Balance Sheet or which secure deposits of public funds as required by law; (ii) liens for taxes accrued but not yet payable; (iii) liens arising as a matter of law in the ordinary course of business, provided that the obligations secured by such liens are not delinquent or are being contested in good faith; (iv) such imperfections of title and encumbrances, if any, as do not materially detract from the value or materially interfere with the present use of any of such properties or assets or the potential sale of any of such owned properties or assets; and (v) capital leases and leases, if any, to third parties for fair and adequate consideration. Bristol owns, or has valid leasehold interests in, all properties and assets used in the conduct of its business. Any real property and other material assets held under lease by Bristol are held under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made of and proposed to be made of such property by Bristol. No real property held by Bristol, or any real property subject to a security interest, has been deed recorded or otherwise been identified in public records or should have been recorded or so identified as containing Hazardous Materials (as hereinafter defined).

(b) With respect to each lease of any real property or personal property to which Bristol is a party (whether as lessee or lessor), except for financing leases in which Bristol is lessor, (i) such lease is in full force and effect in accordance with its terms; (ii) all rents and other monetary amounts that have become due and payable thereunder have been paid; (iii) there exists no default, or event, occurrence, condition or act, which with the giving of notice, the lapse of time or the happening of any further event, occurrence, condition or act would become a default under such lease; and (iv) the Merger will not constitute a default or a cause for termination or modification of such lease.

(c) Bristol has no legal obligation, absolute or contingent, to any other person to sell or otherwise dispose of any substantial part of its assets or to sell or dispose of any of its assets except in the ordinary course of business consistent with past practices.

3.10. LEGAL MATTERS

(a) To the knowledge of Bristol: (i) there is no material claim, action, suit, proceeding, arbitration or investigation pending in any court or before or by any governmental agency or instrumentality or arbitration panel or otherwise, or threatened against Bristol; nor (ii) do any facts or circumstances exist that would be likely to form the basis for any material claim against Bristol that, if adversely determined, would have a material adverse effect on Bristol.

(b) To the knowledge of Bristol, Bristol is in compliance in all material respects with all applicable laws, rules, regulations, orders, writs, judgments and decrees. There are no governmental investigations pending or, to Bristol’s knowledge, threatened against Bristol. There are no material uncured violations, or violations with respect to which material refunds or restitution may be required, cited in any compliance report to Bristol as a result of examination by any regulatory authority, except those cited in examination reports previously submitted to, and reviewed by, Bancshares.

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(c) There are no material uncured violations, or violations with respect to which material refunds or restitution may be required, cited in any compliance report to Bristol as a result of examination by any regulatory authority.

(d) Bristol is not subject to any written agreement, memorandum, Cease and Desist Order or other order with or by any regulatory authority, nor has any such action been threatened or proposed, other than: (i) a Memorandum of Understanding among Bristol, the FDIC and the OFR dated October 7, 2005 (the “MOU”); and (ii) subsequent actions based on deficiencies or violations of law cited by the FDIC and the OFR in the OFR’s examination exit interview on February 17, 2006, in the MOU or in subsequent correspondence from a regulatory authority and provided to Bancshares prior to the date hereof.

(e) To the knowledge of Bristol, there is no claim, action, suit, proceeding, arbitration, or investigation, pending or threatened, in which any material claim or demand is made or threatened to be made against any officer, director, advisory director or employee of Bristol, in each case by reason of any person being or having been an officer, director, advisory director or employee of Bristol.

(f) Bristol has not received any correspondence from the Financial Crimes Enforcement Network, the United States Department of the Treasury or the United States Department of Justice concerning any compliance deficiencies or violations of law related to anti-money laundering laws or regulations, currency transaction reporting, the Bank Secrecy Act or otherwise.

3.11. EMPLOYEE BENEFIT PLANS

(a) Except for the plans, policies, contracts and arrangements listed on Schedule 3.11(a) of the Schedule of Exceptions (the “Employee Benefit Plans”) or those policies or arrangements that constitute mere payroll practices, Bristol does not sponsor, maintain or contribute to, and has at no time sponsored, maintained or contributed to, any Employee Benefit Plan, severance pay arrangement, employment agreement or similar arrangement, whether or not subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), in which Bristol or Bristol’s employees participate or under which Bristol or Bristol’s employees are entitled to compensation or benefits. Each of the Employee Benefit Plans has been maintained and administered in all material respects in compliance with its terms, the applicable provisions of ERISA and all other applicable laws, and, where applicable, the provisions of the Code. To the knowledge of Bristol, no Employee Benefit Plan, including any “party in interest” or “disqualified person” with respect thereto, has engaged in a nonexempt prohibited transaction under Section 4975 of the Code or Section 502(i) of ERISA; there is no claim relating to any of the Employee Benefit Plans pending or threatened, nor are there any facts or circumstances existing that could reasonably be expected to lead to (other than routine filings such as qualification determination filings), proceedings before, or administrative actions by, any governmental agency; there are no actions, suits or claims pending or threatened (including, without limitation, breach of fiduciary duty actions, but excluding routine uncontested claims for benefits) against any of the Employee Benefit Plans or the assets thereof. Bristol has complied in all material respects with the applicable reporting and disclosure requirements of ERISA and the Code. None of the Employee Benefit Plans is a multi-employer plan within the meaning of Section 3(37) of ERISA. A favorable determination letter has been issued by the Internal Revenue Service, or Bristol is relying upon an opinion or advisory letter issued by the Internal Revenue Service with respect to the prototype or similar document serving as the basis for the

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adoption of such Employee Benefit Plan, with respect to each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code and the Internal Revenue Service has taken no action to revoke any such letter and nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification. Bristol has not sponsored, maintained or made contributions to any plan, fund or arrangement subject to Title IV of ERISA or the requirements of Section 412 of the Code or providing for medical benefits, insurance coverage or other similar benefits for any period extending beyond the termination of employment, except as may be required under the “COBRA” provisions of ERISA and the Code or under similar requirements of state law.

(b) True and complete copies of all Employee Benefit Plans (including all amendments and modifications thereof), together with copies of any tax determination letters, trust agreements, summary plan descriptions, insurance contracts, investment management agreements and the three most recent annual reports on Form Series 5500, if applicable, with respect to such plan or arrangement have been delivered to Bancshares with the Schedule of Exceptions.

(c) All group health plans of Bristol to which Section 4980B(f) of the Code or Section 601 of ERISA applies are in compliance in all material respects with continuation coverage requirements of Section 4980B(f) of the Code and Section 601 of ERISA, and all such group health plans are in compliance in all material respects with the notice, certification and design requirements imposed under Section 701 of ERISA, et seq. (Health Insurance Portability and Accountability Act of 1996).

(d) With respect to each Employee Benefit Plan previously or currently sponsored or maintained by Bristol, or to which Bristol previously made or is currently making contributions, which is ongoing or has been terminated by Bristol, no event has occurred and no condition exists that would subject Bristol, Bancshares or BOF to any material tax, penalty, fine or other liability as a result of the sponsorship, contribution to or maintenance of such Employee Benefit Plan.

(e) No payment or benefit made, to be made or due to any participant under the Employee Benefit Plans, the Stock Option Plan, or other arrangement on account of the transactions contemplated hereunder will be deemed to constitute an “excess parachute payment” within the meaning of Code Section 280G and the regulations promulgated thereunder unless such payment receives shareholder approval as required by the Code.

(f) Each grant, award or other form of incentive relating to shares of Bristol Common Stock made under the Employee Benefit Plans and/or the Stock Option Plan was granted or awarded in compliance with all applicable laws, including federal and state securities laws.

3.12. INSURANCE POLICIES

Bristol maintains in full force and effect insurance policies and bonds in such amounts and against such liabilities and hazards as are considered by it to be adequate. An accurate list of all such insurance policies is attached as Schedule 3.12 in the Schedule of Exceptions. Bristol is not now liable for, nor has it received notice of, any material retroactive premium adjustment. All policies are valid and enforceable and in full force and effect, and Bristol has not received any notice of a material premium increase or cancellation with respect to any of its insurance policies or bonds. Within the last three years, Bristol has not been refused any basic insurance

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coverage sought or applied for (other than certain exclusions for coverage of certain events or circumstances as stated in such polices), and Bristol has no reason to believe that its existing insurance coverage cannot be renewed as and when the same shall expire, upon terms and conditions standard in the market at the time renewal is sought as favorable as those presently in effect.

3.13. AGREEMENTS

(a) Bristol is not a party to:

(i) any collective bargaining agreement;

(ii) any employment or other agreement or contract with or commitment to any employee other than the Employee Benefit Plans and the Stock Option Plan, and the employment related agreements, arrangements, policies and practices referred to in Schedule 3.13(a)(ii) of the Schedule of Exceptions;

(iii) any obligation of guaranty or indemnification, other than as set forth on Schedule 3.13(a)(iii) of the Schedule of Exceptions, except such indemnification of officers, directors, employees and agents of Bristol as on the date of this Agreement may be provided in their respective articles of incorporation or association and by-laws (and no indemnification of any such officer, director, employee or agent has been authorized, granted or awarded), except if entered into in the ordinary course of business with respect to customers of Bristol, letters of credit, guaranties of endorsements and guaranties of signatures;

(iv) any agreement, contract or commitment which is or if performed will be materially adverse to the financial condition, results of operations or business of Bristol;

(v) any agreement, contract or commitment containing any covenant limiting the freedom of Bristol to engage in any line of business permitted by regulatory authorities, to compete with any person in a line of business permitted by applicable regulatory guidelines to be engaged in by Florida state or national banks, or to fulfill any of its requirements or needs for services or products (including, for example, contracts with vendors to supply customers with credit insurance) except those designated as such on Schedule 3.13(b) of the Schedule of Exceptions; or

(vi) any written agreement, memorandum, letter, order or decree, formal or informal, with any federal or state regulatory agency, nor has Bristol been advised by any regulatory agency that it is considering issuing or requesting any such written agreement, memorandum, letter, order or decree, except the MOU.

(b) Schedule 3.13(b) of the Schedule of Exceptions contains a list of each agreement, contract or commitment (except those entered into in the ordinary course of business with respect to loans, lines of credit, letters of credit, depositor agreements, certificates of deposit and similar banking activities and equipment maintenance agreements that are not material) to which Bristol

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is a party or which affects Bristol and requires payment of more than $10,000 individually or $50,000 in the aggregate. To Bristol’s knowledge, Bristol has not in any material respect breached, nor is there any pending or threatened claim that it has materially breached, any of the terms or conditions of any of such agreements, contracts or commitments or of any material agreement, contract or commitment that it enters into after the date of this Agreement. Bristol is not in violation of any written agreement, memorandum, letter, order or decree, formal or informal, with any federal or state regulatory agency.

3.14. LICENSES, FRANCHISES AND GOVERNMENTAL AUTHORIZATIONS

Bristol possesses all licenses, franchises, permits and other governmental authorizations necessary for the continued conduct of its business without interference or interruption. The deposits of Bristol are insured by the FDIC to the extent provided by applicable law, and there are no pending or threatened proceedings to revoke or modify that insurance or for relief under 12 U.S.C. Section 1818.

3.15. CORPORATE DOCUMENTS

Bristol has delivered to Bancshares, true and correct copies of its Articles of Incorporation and its Bylaws, all as amended and currently in effect. All of the foregoing and all of the corporate minutes and stock transfer records of Bristol have been made available to Bancshares and are current, complete and correct in all material respects.

3.16. CERTAIN TRANSACTIONS

No past or present director, executive officer or five percent or greater shareholder of Bristol has, since January 1, 2004, engaged in any transaction or series of transactions which, if Bristol had been subject to Section 14(a) of the Exchange Act, would be required to be disclosed pursuant to Item 404 of Regulation S-B of the Rules and Regulations of the Securities and Exchange Commission.

3.17. BROKER’S OR FINDER’S FEES

Except for Sandler O’Neill & Partners, L.P. (“Sandler”), whose fees and right to reimbursement of expenses are as disclosed pursuant to a contract dated November 10, 2005 and amended as of January 11, 2006 (copies of which have been provided to Bancshares) (the “Sandler Agreement”), no agent, broker, investment banker, investment or financial advisor or other person acting on behalf of Bristol is entitled to any commission, broker’s or finder’s fee from any of the parties hereto in connection with any of the transactions contemplated by this Agreement.

3.18. ENVIRONMENTAL MATTERS

(a) Bristol has obtained all material permits, licenses and other authorizations that are required to be obtained by it under any applicable Environmental Law Requirements (as hereinafter defined) in connection with the operation of its businesses and ownership of its properties (collectively, the “Subject Properties”), including without limitation, to the knowledge of Bristol, properties acquired by foreclosure or in settlement of loans;

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(b) Bristol is in compliance with all terms and conditions of such permits, licenses and authorizations and with all applicable Environmental Law Requirements, except for such noncompliance as would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the financial condition, results of operations or business of Bristol;

(c) To Bristol’s knowledge, there are no past or present events, conditions, circumstances, activities or plans by Bristol related in any manner to Bristol or the Subject Properties that did or would violate or prevent compliance or continued compliance with any of the Environmental Law Requirements, or give rise to any Environmental Liability, as hereinafter defined, except for such as would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the financial condition, results of operations or business of Bristol;

(d) To Bristol’s knowledge, there is no civil, criminal or administrative action, suit, demand, claim, order, judgment, hearing, notice or demand letter, notice of violation, investigation or proceeding pending or threatened by any person against Bristol, or any prior owner of any of the Subject Properties which relates to the Subject Properties and relates in any way to any Environmental Law Requirement or seeks to impose any Environmental Liability;

(e) To Bristol’s knowledge, Bristol is not subject to or responsible for any material Environmental Liability which is not set forth and adequately provided for on the Latest Balance Sheet;

(f) “Environmental Law Requirement” means all applicable statutes, regulations, rules, ordinances, codes, licenses, permits, orders, approvals, plans, authorizations, concessions, franchises and similar items, of all governmental agencies, departments, commissions, boards, bureaus, or instrumentalities of the United States, states and political subdivisions thereof and all applicable judicial, administrative, and regulatory decrees, judgments and orders relating to the protection of human health or the environment, including without limitation: (i) all requirements, including but not limited to those pertaining to reporting, licensing, permitting, investigation, and remediation of emissions, discharges, releases, or threatened releases of Hazardous Materials, chemical substances, pollutants, contaminants, or hazardous or toxic substances, materials or wastes whether solid, liquid, or gaseous in nature, into the air, surface water, groundwater, or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of Hazardous Materials, chemical substances, pollutants, contaminants, or hazardous or toxic substances, materials or wastes, whether solid, liquid, or gaseous in nature; (ii) all requirements pertaining to protection of the health and safety of employees or the public; and (iii) all requirements pertaining to the: (1) drilling, production, and abandonment of oil and gas wells; (2) the transportation of produced oil and gas; and (3) the remediation of sites related to that drilling, production or transportation;

(g) “Hazardous Materials” shall mean: (i) any “hazardous substance” as defined by either the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. Section 9601, et seq.) (“CERCLA”) as amended from time to time, or regulations promulgated thereunder; (ii) asbestos; (iii) polychlorinated biphenyls; (iv) any “regulated substance” as defined by 40 C.F.R. Section 280.12 or the FL Ad. Code, Title 62, Chapter 62-761 and Sec. 62-761.200; (v) any naturally occurring radioactive material (“NORM”), as defined by applicable federal or state laws or regulations as amended from time to time, irrespective of whether the NORM is located in Florida or another jurisdiction; (vi) any nonhazardous oilfield wastes (“NOW”) defined under applicable federal or state laws or regulations, irrespective of whether those wastes are located in Florida or another jurisdiction; (vii) any substance the

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presence of which on the Subject Properties is prohibited by any laws, rules and regulations of legally constituted authorities from time to time in force and effect relating to the Subject Properties; and (viii) any other substance which by any such rule or regulation requires special handling in its collection, storage, treatment or disposal;

(h) “Environmental Liability” shall mean: (i) any liability or obligation arising under any Environmental Law Requirement; or (ii) any liability or obligation under any other theory of law or equity (including without limitation any liability for personal injury, property damage or remediation) that results from, or is based upon or related to, the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Material, pollutant, contaminant, chemical, or industrial, toxic or hazardous substance or waste; and

(i) To Bristol’s knowledge, there is currently no contamination of the Subject Properties by stachybotrys chartarum mold or other mold in quantity, concentration and location that could reasonably present a hazard to human health.

3.19. INTELLECTUAL PROPERTY

(a) Schedule 3.19 of the Schedule of Exceptions sets forth a complete list of all patents, trademarks, trade names, trade secrets, copyrights, processes, service marks, royalty rights or design rights owned, used or licensed (as licensor or licensee) by Bristol in the operation of its business and all applications therefor and registrations thereof, whether foreign or domestic, owned or controlled by Bristol (the “Intellectual Property”), and, in the case of any such rights that are so owned, the jurisdiction in which such rights or applications have been registered, filed or issued, and, in the case of any such rights that are not so owned, the agreements under which such rights arise. Bristol is the sole and exclusive owner of the Intellectual Property listed on Schedule 3.19 as being owned by it, with the sole and exclusive right, except to the extent indicated therein, to use and license such property. No claim has been asserted or threatened seeking cancellation or concurrent use of any registered trademark, tradename or service mark listed on Schedule 3.19.

(b) There are no claims, demands or suits pending or threatened against Bristol claiming an infringement by Bristol of any patents, copyrights, processes, licenses, trademarks, service marks or trade names of others in connection with its business; none of the Intellectual Property or, as the case may be, the rights granted to Bristol in respect thereof, infringes on the rights of any person or is being infringed upon by any person, and none is subject to any outstanding order, decree, judgment, stipulation, injunction, restriction or agreement restricting the scope of their use by Bristol.

3.20. COMMUNITY REINVESTMENT ACT

Bristol has complied in all material respects with the provisions of the Community Reinvestment Act (“CRA”) and the rules and regulations thereunder, has a CRA rating of not less than “satisfactory,” has received no material criticism from regulators with respect to discriminatory lending practices, and has no knowledge of any conditions or circumstances that are likely to result in a CRA rating of less than “satisfactory” or material criticism from regulators with respect to discriminatory lending practices.

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3.21. LOANS TO EXECUTIVES; INTERNAL CONTROLS

Bristol has not, directly or indirectly, extended or maintained credit, arranged for the extension of credit, or renewed any extension of credit, in the form of a personal loan to or for any director or executive officer (or an equivalent thereof) which would be in violation of the Board of Governors of the Federal Reserve System’s Regulation O. Bristol has devised and maintains a system of internal accounting controls as described in the “management letter” prepared in conjunction with the most annual audit of Bristol’s financial statements, a copy of which has been provided to Bancshares. Bristol has devised and maintained a system of disclosure controls and procedures sufficient to assure that information required to be disclosed by Bristol to its regulatory authorities is accumulated and communicated to Bristol’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.

3.22. ACCURACY OF STATEMENTS

No warranty or representation made or to be made by Bristol in this Agreement or in any document furnished or to be furnished by Bristol pursuant to this Agreement contains or will contain, as of the date of this Agreement, the effective date of the Registration Statement (as defined in Section 5.13 hereof) and the Closing Date, an untrue statement of a material fact or an omission of a material fact necessary to make the statements contained herein and therein, in light of the circumstances in which they are made, not misleading.

SECTION 4. REPRESENTATIONS AND WARRANTIES OF BANCSHARES AND BOF

For purposes of this Section 4, the term “material adverse effect” shall mean, a condition, event, change or occurrence that is likely to have a material adverse effect upon the financial condition, results of operations, loans, securities, deposit accounts, business or properties of Bancshares; provided, however, that in determining whether a material adverse effect has occurred there shall be excluded any effect, to the extent attributable to or resulting from, (a) any changes in the laws, regulations or interpretations of laws or regulations generally affecting the banking business, but not uniquely relating to Bancshares; (b) any changes in generally accepted accounting principles or regulatory accounting requirements generally affecting the banking or bank holding company businesses, but not uniquely relating to Bancshares; (c)changes in national or international political or social conditions including the engagement by the Untied States in hostilities, whether or not pursuant to the declaration of a national emergency or war or the occurrence of any military or terrorist attack upon or within the United States, or any of its territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States; (d) actions or omissions of Bancshares taken with the prior written consent of the other party in contemplation of the transactions contemplated hereby and (e) any facts existing on the date of this Agreement as fully disclosed in the schedules of exceptions delivered by Bancshares with this Agreement. Bancshares and BOF represent and warrant to Bristol that as of the date of this Agreement and as of the Closing Date;

4.01. CONSOLIDATED GROUP; ORGANIZATION; QUALIFICATION

“Bancshares’ consolidated group,” as such term is used in this Agreement, consists of Bancshares, BOF, Bank of Florida – Southwest, Bank of Florida – Tampa Bay and Bank of Florida Trust Company. Bancshares is a corporation duly organized and validly existing and in

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good standing under the laws of the State of Florida and is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended. BOF is a Florida state-chartered commercial bank duly organized and validly existing and in good standing under the laws of the State of Florida and is domiciled in the State of Florida. Each of Bancshares and BOF have all requisite corporate power and authority to own and lease its property and to carry on its business as it is currently being conducted and to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and is qualified and in good standing as a foreign corporation in all jurisdictions in which the failure to so qualify would have a material adverse effect on the financial condition, results of operations or business of Bancshares’ consolidated group, taken as a whole.

4.02. CAPITAL STOCK

As of the date of this Agreement, the authorized capital stock of Bancshares consists of 20,000,000 shares of Bancshares Common Stock and 1,000,000 shares of preferred stock (none of which are issued or outstanding). As of January 13, 2006, 5,930,450 shares of Bancshares Common Stock were issued and outstanding. All issued and outstanding shares of capital stock of Bancshares and BOF have been duly authorized and are validly issued, fully paid and nonassessable. The outstanding capital stock of Bancshares and BOF has been issued in compliance with all legal requirements and any preemptive or similar rights. Bancshares owns all of the issued and outstanding shares of capital stock of BOF free and clear of all liens, charges, security interests, mortgages, pledges and other encumbrances.

4.03. CORPORATE AUTHORIZATION; NO CONFLICTS

Subject to approval of Bancshares as the sole shareholder of BOF, all corporate acts and other proceedings required of Bancshares and BOF for the due and valid authorization, execution, delivery and performance of this Agreement and consummation of the Merger have been validly and appropriately taken. Subject to such regulatory approvals as are required by law, this Agreement constitutes legal, valid and binding obligations of Bancshares and BOF as the case may be, and is enforceable against them in accordance with the terms hereof, except that enforcement may be limited by: (a) bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship, and other laws now or hereafter in effect relating to or affecting the enforcement of creditors’ rights generally or the rights of creditors of insured depository institutions; (b) general equitable principles; and (c) laws relating to the safety and soundness of insured depository institutions, and except that no representation is made as to the effect or availability of equitable remedies or injunctive relief (regardless of whether such enforceability is considered in a proceeding in equity or at law). With respect to each of Bancshares and BOF, the execution, delivery or performance of this Agreement and the consummation of the transactions contemplated hereby or thereby will not: (i) violate, conflict with, or result in a breach of any provision of; (ii) constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under; (iii) result in the termination of or accelerate the performance required by; or (iv) result in the creation of any lien, security interest, charge or encumbrance upon any of its properties or assets under, any of the terms, conditions or provisions of its articles of incorporation or association or its Bylaws (or comparable documents) or any material note, bond, mortgage, indenture, deed of trust, lease, license, agreement or other instrument or obligation to or by which it or any of its assets is bound; or violate any order, writ, injunction, decree, statute, rule or regulation of any governmental body applicable to it or any of its assets.

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4.04. FINANCIAL STATEMENTS; REPORTS AND PROXY STATEMENTS

(a) Bancshares has delivered to Bristol true and complete copies of the: (i) consolidated balance sheets as of December 31, 2003 and December 31, 2004 of Bancshares and its subsidiaries, the related consolidated statements of income, changes in shareholders’ equity and cash flows for the respective years then ended, the related notes thereto, and the report of its independent public accountants with respect thereto, as presented in Bancshares’ Annual Report on Form 10-K for the fiscal year ended December 31, 2004 filed with the SEC (collectively, the “Bancshares Financial Statements”); (ii) the unaudited consolidated balance sheet as of September 30, 2004 and September 30, 2005, of Bancshares and its subsidiaries and the related unaudited statements of income and cash flows for the nine-month period then ended, as presented in Bancshares’ quarterly reports on Form 10-QSB and Form 10-Q for the quarters then ended filed with the SEC (the “Bancshares Interim Financial Statements”); and (iii) all proxy or information statements (or similar materials) disseminated to Bancshares’ shareholders since December 31, 2002.

(b) The Bancshares Financial Statements and the Bancshares Interim Financial Statements have been (and all financial statements delivered to Bristol as required by this Agreement will be) prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) applied on a basis consistent with prior periods, and present fairly, in conformity with GAAP the financial position, results of operations, changes in shareholders’ equity and cash flows of Bancshares and its subsidiaries as of the dates thereof and for the periods covered thereby. All call and other regulatory reports referred to above have been filed on the appropriate form and prepared in all material respects in accordance with such forms’ instructions and the applicable rules and regulations of the regulating federal and/or state agency. As of the date of the latest balance sheet forming part of the Bancshares Interim Financial Statements (the “Bancshares Latest Balance Sheet”), none of Bancshares and its subsidiaries has had, nor are any of such members’ assets subject to, any material liability, commitment, indebtedness or obligation (of any kind whatsoever, whether absolute, accrued, contingent, known or unknown, matured or unmatured) which is not reflected and adequately provided for in accordance with GAAP. No report, including any report filed with the FDIC, the OFR, or other bank regulatory agency, and no report, proxy statement, registration statement or offering materials made or given to shareholders of Bancshares since December 31, 2002, as of the respective dates thereof, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. No report, including any report filed with the FDIC, the OFR, or other bank regulatory agency, and no report, proxy statement, registration statement or offering materials made or given to shareholders of Bancshares to be filed or disseminated after the date of this Agreement will contain any untrue statement of a material fact or will omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they will be made, not misleading.

4.05. LEGALITY OF BANCSHARES SECURITIES

All shares of Bancshares Common Stock to be issued pursuant to the Merger have been duly authorized and, when issued pursuant to this Agreement, will be validly and legally issued, fully paid and nonassessable, and will be, at the time of their delivery, free and clear of all liens, charges, security interests, mortgages, pledges and other encumbrances and any preemptive or similar rights.

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4.06. SEC REPORTS

Bancshares has previously delivered to Bristol an accurate and complete copy of the following Bancshares reports filed with the SEC pursuant to the Exchange Act: (i) annual reports on Forms 10-KSB and 10-K for the years ended December 31, 2003 and 2004; (ii) quarterly reports on Forms 10-QSB and 10-Q for the quarters ended September 30, 2004 and 2005; and (iii) proxy statements for the years 2004 and 2005; as of their respective dates, no such report or communication contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

4.07. LOAN AND INVESTMENT PORTFOLIOS

To Bancshares’ knowledge, all loans, discounts and financing leases reflected on the Bancshares Latest Balance Sheet were: (i) at the time and under the circumstances in which made, made for good, valuable and adequate consideration in the ordinary course of business and are the legal, valid and binding obligations of the obligors thereof; (ii) are evidenced by genuine notes, agreements or other evidences of indebtedness; and (iii) to the extent secured, have been secured, to the knowledge of Bancshares, by valid liens and security interests which have been perfected.

4.08. ABSENCE OF CERTAIN CHANGES OR EVENTS

Since the date of the Bancshares Latest Balance Sheet, Bancshares has not declared, set aside for payment or paid any dividend to holders of, or declared or made any distribution on, any shares of Bancshares capital stock. Since the date of the Bancshares Latest Balance Sheet, there has been no event or condition of any character (whether actual or threatened, to the knowledge of Bancshares) that has had, or can reasonably be anticipated to have, a material adverse effect on the financial condition, results of operations or business of Bancshares. Except as may result from the transactions contemplated by this Agreement or that would not have a material adverse effect on Bancshares, Bancshares has not, since the date of the Bancshares Latest Balance Sheet (except as set forth on Schedule 4.08[a] of the Schedule of Exceptions):

(a) except in the ordinary course of business and consistent with past practices, borrowed or lent any money;

(b) except in the ordinary course of business and consistent with past practices, sold, assigned or transferred any of its assets in excess of $500,000.00 in the aggregate;

(c) except in the ordinary course of business and consistent with past practices, incurred any material liability, commitment, indebtedness or obligation (of any kind whatsoever, whether absolute or contingent);

(d) suffered any material damage, destruction or loss to immovable or movable property, whether or not covered by insurance;

(e) received notice or had knowledge or reason to believe that any material labor unrest exists among any of its employees or that any group, organization or union has attempted to organize any of its employees;

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(f) failed to operate its business in the ordinary course consistent with past practices, or failed to use reasonable efforts to preserve its business organization intact;

(g) incurred any material loss except for losses adequately provided for on the date of this Agreement or on the Bancshares Latest Balance Sheet and expenses associated with this transaction, or waived any material right in connection with any aspect of its business, whether or not in the ordinary course of business;

(h) forgiven any material debt owed to it, or canceled any of its claims or paid any of its noncurrent obligations or liabilities;

(i) except as required in accordance with GAAP, changed any accounting practice followed or employed in preparing the Financial Statements; or

(j) entered into any agreement, contract or commitment to do any of the foregoing.

4.09. TAXES

Each member of Bancshares’ consolidated group has timely filed all federal, state and local income, franchise, excise, sales and use, real and personal property, employment, intangible and other tax returns, tax information returns and reports required to be filed, has paid all material taxes, interest payments and penalties as reflected therein which have become due, other than taxes which are being contested in good faith and for which adequate accruals have been made on the Bancshares Latest Balance Sheet, has made adequate provision for the payment of all such taxes accruable for all periods ending on or before the date of this Agreement (and will make such accruals through the Closing Date) to any city, county, state, the United States or any other taxing authority, and is not delinquent in the payment of any material tax or material governmental charge of any nature. No member of Bancshares’ consolidated group’s federal income tax return has ever been audited by the Internal Revenue Service. No audit or examination is presently being conducted by any taxing authority nor has any member of Bancshares’ consolidate group received written notice from any such taxing authority of its intention to conduct any investigation or audit or to commence any such proceeding; no material unpaid tax deficiencies or additional liabilities of any sort have been proposed to any member of Bancshares’ consolidated group by any governmental representative, and no agreements for extension of time for the assessment of any tax have been entered into by or on behalf of any member of Bancshares’ consolidated group. All members of Bancshares’ consolidated group has withheld from its employees (and timely paid to the appropriate governmental entity) proper and accurate amounts for all periods in material compliance with all tax withholding provisions of applicable federal, state and local laws (including, without limitation, income, social security and employment tax withholding for all forms of compensation).

4.10. TITLE TO ASSETS

(a) On the date of the Bancshares Latest Balance Sheet, all members of Bancshares’ consolidated group had and, except with respect to assets disposed of for adequate consideration in the ordinary course of business since such date, now has, good and marketable title to all real property and good and merchantable title to all other material properties and assets reflected on the Bancshares Latest Balance Sheet, and has good and marketable title to all real property and good and merchantable title to all other material properties and assets acquired since the date of the Bancshares Latest Balance Sheet, in each case free and clear of all mortgages, liens, pledges,

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restrictions, security interests, charges and encumbrances of any nature except for: (i) mortgages and encumbrances which secure indebtedness which is properly reflected in the Bancshares Latest Balance Sheet or which secure deposits of public funds as required by law; (ii) liens for taxes accrued but not yet payable; (iii) liens arising as a matter of law in the ordinary course of business, provided that the obligations secured by such liens are not delinquent or are being contested in good faith; (iv) such imperfections of title and encumbrances, if any, as do not materially detract from the value or materially interfere with the present use of any of such properties or assets or the potential sale of any of such owned properties or assets; and (v) capital leases and leases, if any, to third parties for fair and adequate consideration. All members of Bancshares’ consolidated group own, or has valid leasehold interests in, all properties and assets used in the conduct of their business. Any real property and other material assets held under lease by any such member are held under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made of and proposed to be made of such property by such member. No real property held by any member of Bancshares’ consolidated group, or any real property subject to a security interest, has been deed recorded or otherwise been identified in public records or should have been recorded or so identified as containing Hazardous Materials (as hereinafter defined).

(b) With respect to each lease of any real property or personal property to which any member of Bancshares’ consolidated group is a party (whether as lessee or lessor), except for financing leases in which a member of such consolidated group is lessor: (i) such lease is in full force and effect in accordance with its terms; (ii) all rents and other monetary amounts that have become due and payable thereunder have been paid; and (iii) there exists no default, or event, occurrence, condition or act, which with the giving of notice, the lapse of time or the happening of any further event, occurrence, condition or act would become a default under such lease.

(c) No member of Bancshares’ consolidated group has a legal obligation, absolute or contingent, to any other person to sell or otherwise dispose of any substantial part of its assets or to sell or dispose of any of its assets except in the ordinary course of business consistent with past practices.

4.11. LEGAL MATTERS

(a) To the knowledge of Bancshares: (i) there is no material claim, action, suit, proceeding, arbitration or investigation pending in any court or before or by any governmental agency or instrumentality or arbitration panel or otherwise, or threatened against any member of Bancshares’ consolidated group; nor (ii) do any facts or circumstances exist that would be likely to form the basis for any material claim against a member of Bancshares’ consolidated group that, if adversely determined, would have a material adverse effect on Bancshares.

(b) To the knowledge of Bancshares, each member of Bancshares’ consolidated group has complied in all material respects with and is not in default in any material respect under (and has not been charged or threatened with or come under investigation with respect to any charge concerning any material violation of any provision of) any federal, state or local law, regulation, ordinance, rule or order (whether executive, judicial, legislative or administrative) or any order, writ, injunction or decree of any court, agency or instrumentality.

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(c) There are no material uncured violations, or violations with respect to which material refunds or restitution may be required, cited in any compliance report to any member of Bancshares’ consolidated group as a result of examination by any regulatory authority.

(d) No member of Bancshares’ consolidated group is subject to any written agreement, memorandum or order with or by any regulatory authority.

(e) To the knowledge of Bancshares, there is no claim, action, suit, proceeding, arbitration, or investigation, pending or threatened, in which any material claim or demand is made or threatened to be made against any officer, director, advisory director or employee of any member of Bancshares’ consolidated group, in each case by reason of any person being or having been an officer, director, advisory director or employee of any such member.

4.12. EMPLOYEE BENEFIT PLANS

(a) Each of the employee benefit plans sponsored by any member of Bancshares’ consolidated group (the “Bancshares Employee Benefit Plans”) has been maintained and administered in all material respects in compliance with its terms, the applicable provisions of ERISA and all other applicable laws, and, where applicable, the provisions of the Code. No Bancshares Employee Benefit Plan, including any “party in interest” or “disqualified person” with respect thereto, has engaged in a nonexempt prohibited transaction under Section 4975 of the Code or Section 502(i) of ERISA; there is no claim relating to any of the Bancshares Employee Benefit Plans pending or threatened, nor are there any facts or circumstances existing that could reasonably be expected to lead to (other than routine filings such as qualification determination filings), proceedings before, or administrative actions by, any governmental agency; there are no actions, suits or claims pending or threatened (including, without limitation, breach of fiduciary duty actions, but excluding routine uncontested claims for benefits) against any of the Employee Benefit Plans or the assets thereof. Each member of Bancshares’ consolidated group has complied in all material respects with the applicable reporting and disclosure requirements of ERISA and the Code. A favorable determination letter has been issued by the Internal Revenue Service with respect to each Bancshares Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code and the Internal Revenue Service has taken no action to revoke any such letter and nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification.

(b) To the best of Bancshares’ knowledge, all group health plans of all members of Bancshares’ consolidated group to which Section 4980B(f) of the Code or Section 601 of ERISA applies are in compliance in all material respects with continuation coverage requirements of Section 4980B(f) of the Code and Section 601 of ERISA and any prior violations of such sections have been cured prior to the date hereof, and all such group health plans are in compliance in all material respects with the notice, certification and design requirements imposed under Section 701 of ERISA, et seq. (Health Insurance Portability and Accountability Act of 1996).

(c) With respect to each Bancshares Employee Benefit Plan previously or currently sponsored or maintained by any member of Bancshares consolidated group, or to which any member of Bancshares consolidated group previously made or is currently making contributions, which is ongoing or has been terminated by such member of Bancshares consolidated group, no event has occurred and no condition exists that would subject any member of Bancshares consolidated group to any material tax, penalty, fine or other liability as a result of the sponsorship, contribution to or maintenance of such Bancshares Employee Benefit Plan.

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4.13. INSURANCE POLICIES

Each member of Bancshares’ consolidated group maintains in full force and effect insurance policies and bonds in such amounts and against such liabilities and hazards as are considered by it to be adequate. All policies are valid and enforceable and in full force and effect. Within the last three years, no member of Bancshares’ consolidated group has been refused any basic insurance coverage sought or applied for (other than certain exclusions for coverage of certain events or circumstances as stated in such polices), and Bancshares has no reason to believe that its existing insurance coverage cannot be renewed as and when the same shall expire, upon terms and conditions standard in the market at the time renewal is sought as favorable as those presently in effect.

4.14. AGREEMENTS

No member of Bancshares’ consolidated group is a party to:

(a) any collective bargaining agreement;

(b) any agreement, contract or commitment which is or if performed will be materially adverse to the financial condition, results of operations or business of Bancshares;

(c) any agreement, contract or commitment containing any covenant limiting the freedom of any member of Bancshares’ consolidated group to engage in any line of business permitted by regulatory authorities, to compete with any person in a line of business permitted by applicable regulatory guidelines to be engaged in by Florida state or national banks, or to fulfill any of its requirements or needs for services or products (including, for example, contracts with vendors to supply customers with credit insurance) except those designated as such on Schedule 4.14 of the Schedule of Exceptions; or

(d) any written agreement, memorandum, letter, order or decree, formal or informal, with any federal or state regulatory agency, nor has any member of Bancshares’ consolidated group been advised by any regulatory agency that it is considering issuing or requesting any such written agreement, memorandum, letter, order or decree.

4.15. LICENSES, FRANCHISES AND GOVERNMENTAL AUTHORIZATIONS

All members of Bancshares’ consolidated group possess all licenses, franchises, permits and other governmental authorizations necessary for the continued conduct of their business without interference or interruption. The deposits of all bank subsidiaries of Bancshares are insured by the FDIC to the extent provided by applicable law, and there are no pending or threatened proceedings to revoke or modify that insurance or for relief under 12 U.S.C. Section 1818.

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4.16. CORPORATE DOCUMENTS

Bancshares has delivered to Bristol, true and correct copies of its Articles of Incorporation and its Bylaws, all as amended and currently in effect.

4.17. CERTAIN TRANSACTIONS

No past or present director, executive officer or five percent or greater shareholder of any member of Bancshares’ consolidated group has, since January 1, 2003, engaged in any transaction or series of transactions which, if such member had been subject to Section 14(a) of the Exchange Act, would be required to be disclosed pursuant to Item 404 of Regulation S-B of the Rules and Regulations of the Securities and Exchange Commission.

4.18. BROKER’S OR FINDER’S FEES

Except for Raymond James & Associates, Inc. (“Raymond James”), whose fees and right to reimbursement of expenses are as disclosed pursuant to a contract dated January 5, 2006 (a copy of which has been provided to Bristol) (the “Raymond James Agreement”), no agent, broker, investment banker, investment or financial advisor or other person acting on behalf of Bancshares is entitled to any commission, broker’s or finder’s fee from any of the parties hereto in connection with any of the transactions contemplated by this Agreement.

4.19. ENVIRONMENTAL MATTERS

(a) Each member of Bancshares’ consolidated group has obtained all material permits, licenses and other authorizations that are required to be obtained by it under any applicable Environmental Law Requirements (as hereinafter defined) in connection with the operation of its businesses and ownership of its properties (collectively, the “Subject Properties”), including without limitation, to the knowledge of Bancshares, properties acquired by foreclosure or in settlement of loans;

(b) Each member of Bancshares’ consolidated group is in compliance with all terms and conditions of such permits, licenses and authorizations and with all applicable Environmental Law Requirements, except for such noncompliance as would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the financial condition, results of operations or business of Bancshares;

(c) To Bancshares’ knowledge, there are no past or present events, conditions, circumstances, activities or plans by any member of Bancshares’ consolidated group related in any manner to any member of Bancshares’ consolidated group or the Subject Properties that did or would violate or prevent compliance or continued compliance with any of the Environmental Law Requirements, or give rise to any Environmental Liability, as hereinafter defined, except for such as would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the financial condition, results of operations or business of Bancshares;

(d) To Bancshares’ knowledge, there is no civil, criminal or administrative action, suit, demand, claim, order, judgment, hearing, notice or demand letter, notice of violation, investigation or proceeding pending or threatened by any person against Bancshares or any member of Bancshares’ consolidated group, or any prior owner of any of the Subject Properties which relates to the Subject Properties and relates in any way to any Environmental Law Requirement or seeks to impose any Environmental Liability;

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(e) To Bancshares’ knowledge, no member of Bancshares’ consolidated group is subject to or responsible for any material Environmental Liability which is not set forth and adequately provided for on the Bancshares Latest Balance Sheet; and

(f) To Bancshares’ knowledge, there is currently no contamination of the Subject Properties by stachybotrys chartarum mold or other mold in quantity, concentration and location that could reasonably present a hazard to human health.

4.20. COMMUNITY REINVESTMENT ACT

All bank members of Bancshares’ consolidated group have complied in all material respects with the provisions of the Community Reinvestment Act (“CRA”) and the rules and regulations thereunder, has a CRA rating of not less than “satisfactory,” has received no material criticism from regulators with respect to discriminatory lending practices, and has no knowledge of any conditions or circumstances that are likely to result in a CRA rating of less than “satisfactory” or material criticism from regulators with respect to discriminatory lending practices.

4.21. LOANS TO EXECUTIVES; INTERNAL CONTROLS

Bancshares has not, directly or indirectly, extended or maintained credit, arranged for the extension of credit, or renewed any extension of credit, in the form of a personal loan to or for any director or executive officer (or an equivalent thereof) in violation of Section 13(k) of the Exchange Act. Bancshares has devised and maintains a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Bancshares has devised and maintained a system of disclosure controls and procedures sufficient to assure that information required to be disclosed by Bancshares to its regulatory authorities is accumulated and communicated to Bancshares’ management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.

4.22. ACCURACY OF STATEMENTS

No warranty or representation made or to be made by Bancshares in this Agreement or in any document furnished or to be furnished by Bancshares pursuant to this Agreement contains or will contain, as of the date of this Agreement, the effective date of the Registration Statement (as defined in Section 5.13 hereof) and the Closing Date, an untrue statement of a material fact or an omission of a material fact necessary to make the statements contained herein and therein, in light of the circumstances in which they are made, not misleading.

4.23. SHAREHOLDER APPROVAL

The approval of Bancshares’ shareholders is not necessary to consummate the Merger.

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4.24. REGULATORY APPROVAL

Neither Bancshares nor BOF is aware of any reason or basis that they will not obtain the required regulatory approvals necessary to consummate the Merger and neither has received any advice or information to indicate that there is such a basis.

SECTION 5. COVENANTS AND CONDUCT OF PARTIES PRIOR TO THE

EFFECTIVE DATE

The parties further covenant and agree as follows:

5.01. INVESTIGATIONS; PLANNING

Bristol shall continue to provide to Bancshares and BOF and to their authorized representatives, full access during all reasonable times to its premises, properties, books and records (including, without limitation, all corporate minutes and stock transfer records), and to furnish Bancshares and BOF and such representatives with such financial and operating data and other information of any kind respecting its business and properties as Bancshares and BOF shall from time to time reasonably request. Any such access shall be conducted in a manner that does not unreasonably interfere with the operation of the business of Bristol. Bristol agrees to cooperate with Bancshares and BOF in connection with planning for the efficient and orderly combination of the parties and the operation of Bancshares and BOF after consummation of the Merger; provided, however, that Bristol will have no obligation to consolidate or integrate operations unless and until the regulatory approval process is substantially complete. In the event of termination of this Agreement prior to the Effective Date, Bancshares shall, except to any extent necessary to assert any rights under this Agreement, return, without retaining copies thereof, or destroy (and certify to same under penalty of perjury) all confidential or nonpublic documents, work papers and other materials obtained from Bristol in connection with the transactions contemplated hereby and shall keep such information confidential, not disclose such information to any other person or entity except as may be required by legal process, and not use such information in connection with its business. Bancshares shall cause all of its employees, agents and representatives to keep such information confidential and not to disclose such information or to use it in connection with its business, in each case unless and until such information shall come into the public domain through no fault of Bancshares, BOF, or their agents or representatives. Bancshares and BOF shall continue to provide Bristol’s executive officers with access to Bancshares’ and BOF’s respective executive officers, during normal business hours and upon reasonable notice, to discuss the business and affairs of Bancshares and BOF to the extent customary in transactions of the nature contemplated by this Agreement.

5.02. COOPERATION AND COMMERCIALLY REASONABLE EFFORTS

Each of the parties hereto will cooperate with the other parties and use all commercially reasonable efforts to: (a) procure all necessary consents and approvals of third parties; (b) complete all necessary filings, registrations, applications, schedules and certificates; (c) satisfy all requirements prescribed by law for, and all conditions set forth in this Agreement to, the consummation of the Merger and the transactions contemplated hereby; and (d) effect the transactions contemplated by this Agreement at the earliest practicable date. Bristol shall provide Bancshares and BOF full and complete access to all its third party vendors and shall consult Bancshares and BOF prior to negotiating new third party vendor agreements or amendments to or modifications of existing third party agreements.

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5.03. INFORMATION FOR, AND PREPARATION OF, REGISTRATION STATEMENT AND PROXY STATEMENT

Each of the parties hereto will cooperate in the preparation of the Registration Statement referred to in Section 5.13 and a proxy statement of Bristol (the “Proxy Statement”) which complies with the requirements of the Securities Act, the Exchange Act, the rules and regulations promulgated thereunder and other applicable federal and state laws, for the purpose of submitting this Agreement and the transactions contemplated hereby to Bristol’s shareholders for approval. Each of the parties will as promptly as practicable after the date hereof furnish all such data and information relating to it and its subsidiaries as any of the other parties may reasonably request for the purpose of including such data and information in the Registration Statement and the Proxy Statement.

5.04. PRESS RELEASES

Bancshares and Bristol will cooperate with each other in the preparation of any press releases announcing the execution of this Agreement or the consummation of the transactions contemplated hereby. Without the prior written consent of the chief executive officer of the other party, neither Bancshares’ nor Bristol will issue any press release or other written statement for general circulation relating to the transactions contemplated hereby, except as may otherwise be required by law in the reasonable judgment of the disclosing party and, if practical, prior notice of such release is provided to the other parties.

5.05. PRESERVATION OF BUSINESS

Bristol will use its best efforts to preserve the possession and control of all of its assets other than those consumed or disposed of for value in the ordinary course of business, to preserve the goodwill of customers and others having business relations with it, and to do nothing knowingly to impair its ability to keep and preserve its business as it exists on the date of this Agreement.

5.06. CONDUCT OF BUSINESS IN THE ORDINARY COURSE

Subject to the requirements imposed by this Agreement, including those set forth in Section 5.02, Bristol shall conduct its business only in the ordinary course consistent with past practices, specifically including loans on commercially reasonable terms and participations with other banks on commercially reasonable terms, and shall not, without the prior written consent of the chief executive officer of Bancshares or his duly authorized designee:

(a) declare, set aside, increase or pay any dividend, or declare or make any distribution on, or directly or indirectly combine, redeem, reclassify, purchase, or otherwise acquire, any shares of its capital stock or authorize the creation or issuance of or issue any additional shares of its capital stock or any securities or obligations convertible into or exchangeable for its capital stock; other than in connection with the issuance of shares of Bristol Common Stock pursuant to the exercise of Stock Options outstanding as of the date of this Agreement to purchase Bristol Common Stock;

(b) amend its Articles of Incorporation or Bylaws or adopt or amend any resolution or agreement concerning indemnification of its directors or officers;

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(c) enter into or modify any agreement so as to require the payment, conditionally or otherwise, of any salary, bonus, extra compensation (including payments for unused vacation or sick time), pension or severance payment to any of its present or former directors, officers or employees except such agreements as are terminable at will without any penalty or other payment by it (except as may be required by law),

(d) increase (except for increases of not more than 10% consistent with past practices) the compensation (including salaries, fees, bonuses, profit sharing, incentive, pension, retirement or other similar benefits and payments) of its present or former directors, officers or employees;

(e) except in the ordinary course of business consistent with past practices, place or suffer to exist on any of its assets or properties any mortgage, pledge, lien, charge or other encumbrance, except those of the character described in clauses (i) through (v) of Subsection 3.09(a) hereof, or cancel any material indebtedness owing to it or any claims which it may have possessed, or waive any right of substantial value or discharge or satisfy any material noncurrent liability;

(f) acquire another business or merge or consolidate with another entity, or sell or otherwise dispose of a material part of its assets, except in the ordinary course of business consistent with past practices;

(g) commit any act that is intended or reasonably may be expected to result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect, or in any of the conditions to the Merger set forth in Section 6 not being satisfied, or in a violation of any provision of this Agreement, except, in every case, as may be required by applicable law;

(h) commit or fail to take any act which act or omission is intended or reasonably may be expected to result in a material breach or violation of any applicable law, statute, rule, governmental regulation or order;

(i) fail to maintain its books, accounts and records in the usual manner on a basis consistent with that heretofore employed;

(j) fail to pay, or to make adequate provision in all material respects for the payment of, all taxes, interest payments and penalties due and payable (for all periods up to the Effective Date, including that portion of its fiscal year to and including the Effective Date) to any city, county, state, the United States or any other taxing authority, except those being contested in good faith by appropriate proceedings and for which sufficient reserves have been established;

(k) dispose of investment securities in amounts or in a manner inconsistent with past practices; or make investments in noninvestment grade securities or which are inconsistent with past investment practices;

(l) enter into any new line of banking or nonbanking business in which it is not actively engaged as of the date of this Agreement;

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(m) charge off (except as may otherwise be required by law or by regulatory authorities or by GAAP consistently applied) or sell (except in the ordinary course of business consistent with past practices) any of its portfolio of loans, discounts or financing leases;

(n) sell any material asset held as other real estate or other foreclosed assets for an amount materially less than 100% of its book value at the date of the Latest Balance Sheet;

(o) make any extension of credit which, when added to all other extensions of credit to a borrower and its affiliates, would exceed Bristol’s applicable regulatory lending limits;

(p) take or cause to be taken any action that would disqualify the Merger as a “reorganization” within the meaning of Section 368(a)(1)(a) of the Code; or

(q) agree or commit to do any of the foregoing.

5.07. ADDITIONAL INFORMATION

(a) Bristol will provide Bancshares with prompt written notice of any change in the financial condition, results of operations, business or prospects of Bristol, or any action taken or proposed to be taken by any regulatory agency, any of which would have a material adverse effect on Bristol; (b) Bristol will provide Bancshares and Bancshares will provide Bristol with: (i) prompt written notice of any material breach by any member of such party’s consolidated group of any of its warranties, representations or covenants in this Agreement; (ii) as soon as they become available, as to Bristol, true and complete copies of any financial statements, reports and other documents of the type referred to in Section 3.04, and quarterly unaudited consolidated balance sheets of Bristol, and the related unaudited statements of income, shareholders’ equity and cash flows for the periods then ended, with respect to Bristol; and, as to Bancshares, true and complete copies of financial statements, reports and other documents of the type referred to in Sections 4.04 and 4.06, with respect to Bancshares and its subsidiaries; and (iii) promptly upon its dissemination, any report disseminated to their respective shareholders; (c) Bristol shall make available for inspection by Bancshares at the Bristol’s executive offices true and complete copies of any examination reports issued by any regulatory authority.

5.08. BRISTOL SHAREHOLDER APPROVAL

Promptly after Bristol has received copies of all necessary regulatory applications described in Section 5.14 hereinbelow, as filed with the appropriate regulatory agencies, Bristol’s Board of Directors shall submit this Agreement to its shareholders for approval in accordance with applicable law, together with its recommendation that such approval be given, at a Special Meeting of the Shareholders of Bristol duly called and convened for that purpose as soon as practicable after the effective date of the Registration Statement (as defined in Section 5.13 herein). The foregoing obligations of Bristol and its Board of Directors specified in this Section 5.08 are subject to the proviso in the last sentence of Section 5.11.

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5.09. RESTRICTED BANCSHARES COMMON STOCK

Bristol shall obtain and deliver to Bancshares, contemporaneously with the execution of this Agreement, a written agreement in the form attached as Exhibit 5.09 hereto from each person who is a director or executive officer of Bristol who will receive shares of Bancshares Common Stock by virtue of the Merger to the effect that such person: (i) has not disposed of any Bristol Common Stock; (ii) will not dispose of any Bristol Common Stock unless the transferee agrees to be bound by such written agreement; and (iii) will not dispose of any Bancshares Common Stock received pursuant to the Merger in violation of Rule 145 of the Securities Act or the rules and regulations of the SEC thereunder or in a manner that would disqualify the transactions contemplated hereby tax-free reorganization treatment. The directors and executive officers of Bristol further agree to vote in favor of this Agreement and the Merger all shares registered in their name individually or as to which they otherwise have sole voting power, and to use their best efforts, subject to any fiduciary duty they may have, to cause all shares as to which they share voting power with others to be voted in favor of this Agreement and the Merger (the “Director’s and Officer’s Commitment”).

5.10. LOAN POLICY

From the date hereof through the Effective Time, Bristol will not make any loans, or enter into any commitments to make loans, which vary other than in immaterial respects from its written loan policies, a true and correct copy of which loan policies has been provided to Bancshares, provided that this covenant shall not prohibit Bristol from extending or renewing credit or loans in the ordinary course of business consistent with past lending practices or in connection with the workout or renegotiation of loans currently in its loan portfolio. Concurrent with the execution of this Agreement, Bristol shall provide Bancshares a calendar of any Board or committee meetings of Bristol at which the Board or any committee will vote on proposed new or renewal loans or investments. Bristol will allow a representative of BOF to be present at all such meetings for informational purposes only and such BOF representative shall not take part in discussions or voting on any matters presented at such meetings.

5.11. NO SOLICITATIONS

Prior to the Effective Time, or until the termination of this Agreement, Bristol shall not, without the prior approval of Bancshares, directly or indirectly, solicit or initiate inquiries or proposals with respect to, or, except to the extent determined by the Board of Directors of Bristol in good faith, after consultation with its financial advisors and its legal counsel, to be required to discharge properly the directors’ fiduciary duties to Bristol and its shareholders, furnish any information relating to, or participate in any negotiations or discussions concerning, any Acquisition Transaction (as defined in Subsection 7.01[e]) or any other acquisition or purchase of all or a substantial portion of its assets, or of a substantial equity interest in it or withdraw its recommendation to the shareholders of Bristol of the Merger or make a recommendation of any other Acquisition Transaction, or any other business combination with it, other than as contemplated by this Agreement (and in no event will any such information be supplied except pursuant to a confidentiality agreement in form and substance as to confidentiality substantially the same as the confidentiality agreement between Bristol and Bancshares). Bristol shall instruct its officers, directors, agents and affiliates to refrain from doing any of the foregoing, and will notify Bancshares immediately if any such inquiries or proposals are received by it, any such information is requested from it, or any such negotiations or discussions are sought to be initiated with it or any of its officers, directors, agents and affiliates; provided, however, that nothing contained herein shall be deemed to prohibit any officer or director of Bristol from taking any

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action that the Board of Directors of Bristol, as the case may be, determines, in good faith after consultation with and receipt of a written opinion of counsel, is required by law or is required to discharge his fiduciary duties to Bristol and its shareholders.

5.12. OPERATING FUNCTIONS

Bristol agrees to cooperate in the consolidation of appropriate operating functions with Bancshares to be effective on the Effective Date; provided that the foregoing shall not be deemed to require any action that, in the opinion of Bristol’s Board of Directors, would adversely affect its operations if the Merger was not consummated.

5.13. BANCSHARES REGISTRATION STATEMENT

(a) Bancshares will prepare and file on Form S-4 a registration statement (the “Registration Statement”) under the Securities Act (which will include the Proxy Statement) complying with all the requirements of the Securities Act (and the rules and regulations thereunder) applicable thereto, for the purpose, among other things, of registering the Bancshares Common Stock which will be issued to the holders of Bristol Common Stock pursuant to the Merger. Bancshares shall use its best efforts to cause the Registration Statement to become effective as soon as practicable, to qualify the Bancshares Common Stock under the securities or blue sky laws of such jurisdictions as may be required and to keep the Registration Statement and such qualifications current and in effect for so long as is necessary to consummate the transactions contemplated hereby. As a result of the registration of the Bancshares Common Stock pursuant to the Registration Statement, such stock shall be freely tradeable by the shareholders of Bristol except to the extent that the transfer of any shares of Bancshares Common Stock received by shareholders of Bristol is subject to the provisions of Rule 145 under the Securities Act or restricted under applicable tax rules. Bristol and its counsel shall have reasonable opportunity to review and comment on the Registration Statement being filed with the SEC and any responses filed with the SEC regarding the Registration Statement.

(b) Bancshares will indemnify and hold harmless Bristol and its directors, officers and other persons, if any, who control Bristol within the meaning of the Securities Act from and against any losses, claims, damages, liabilities or judgments, joint or several, to which they or any of them may become subject, insofar as such losses, claims, damages, liabilities, or judgments (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, or in any amendment or supplement thereto, or in any state application for qualification, permit, exemption or registration as a broker/dealer, or in any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each such person for any legal or other expenses reasonably incurred by such person in connection with investigating or defending any such action or claim; provided, however, that Bancshares shall not be liable, in any such case, to the extent that any such loss, claim, damage, liability, or judgment (or action in respect thereof) arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, or any such amendment or supplement thereto, or in any such state application, or in any amendment or supplement thereto, in reliance upon and in conformity with information furnished to Bancshares by or on behalf of Bristol or any of its officers, directors or affiliates for use therein.

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(c) Promptly after receipt by an indemnified party under Subsection (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against Bancshares under such Subsection, notify Bancshares in writing of the commencement thereof. In case any such action shall be brought against any indemnified party and it notifies Bancshares of the commencement thereof, Bancshares shall be entitled to participate therein and, to the extent that it shall wish, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and, after notice from Bancshares to such indemnified party of its election so to assume the defense thereof, Bancshares shall not be liable to such indemnified party under such Subsection for any legal expenses of other counsel or any other expenses subsequently incurred by such indemnified party; provided, however, if Bancshares elects not to assume such defense or if counsel for the indemnified party advises Bancshares in writing that there are material substantive issues which raise conflicts of interest between Bancshares or Bristol and the indemnified party, such indemnified party may retain counsel satisfactory to it and Bancshares shall pay all reasonable fees and expenses of such counsel for the indemnified party promptly as statements therefor are received. Notwithstanding the foregoing, Bancshares shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by Bancshares in respect of such claim unless in the reasonable judgment of any such indemnified party a conflict of interest exists between such indemnified party and any other of such indemnified parties in respect to such claims.

(d) The provisions of Subsection 5.13(b) and (c) are intended for the benefit of, and shall be enforceable by, the parties entitled to indemnification thereunder and each such party’s heirs, representatives or successors.

5.14. APPLICATION TO REGULATORY AUTHORITIES

(a) Bancshares shall prepare and file, within 50 days from the date this Agreement is signed, all regulatory applications and filings that are required to be made with respect to the Merger; provided, however, that if Bancshares is unable to prepare and file such applications and filings within the time period specified herein due to the failure of Bristol to timely provide Bancshares any information necessary to complete such applications and filings, provided Bancshares has used its best efforts to cause such filing to occur on a timely basis and provided Bancshares continues to diligently pursue such filing, then Bancshares’ failure to comply with the provisions of this Section 5.14 shall not be deemed a breach of this Agreement.

(b) Bancshares shall provide Bristol copies of all such regulatory applications and filings at the time of filing with the appropriate regulatory agency. In a reasonably prompt manner, Bancshares shall both provide Bristol copies of all correspondence with regulators in connection with such applications and filings and advise Bristol of any substantive oral communications with regulators in connection with such applications and filings.

(c) No provision of this Agreement shall be construed to require Bancshares or BOF to seek the consent of the FDIC to make a payment or distribution that is otherwise prohibited by 12 USC Section 1828(k) or 12 CFR Part 359.

5.15. REVENUE RULING

Bancshares may elect to prepare (and in that event Bristol shall cooperate in the preparation of) a request for a ruling from the Internal Revenue Service with respect to certain tax matters in connection with the transactions contemplated by this Agreement.

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5.16. BOND FOR LOST CERTIFICATES

Upon receipt of notice from any of its shareholders that a certificate representing Bristol Common Stock has been lost or destroyed, and prior to issuing a new certificate, Bristol shall require such shareholder to post a bond in such amount as is sufficient to support the shareholder’s agreement to indemnify Bristol against any claim made by the owner of such certificate, unless Bancshares agrees to the waiver of such bond requirement.

5.17. WITHHOLDING

Bancshares shall be entitled to deduct and withhold from the consideration otherwise payable to any holder of Bristol Common Stock after the Effective Time such amounts as Bancshares may be required by law to deduct and withhold therefrom. All such deductions and withholding shall be deemed for all purposes of this Agreement to have been paid to the person with respect to whom such deduction and withholding was made.

5.18. DISSENTERS

Bristol shall give Bancshares: (i) prompt written notice of, and a copy of, any instrument received by Bristol with respect to the assertion or perfection of Dissenters’ Rights, and (ii) the opportunity to participate in any and all negotiations and proceedings with respect to Dissenters’ Rights, should Bancshares desire to do so.

5.19. NASDAQ STOCK MARKET

Bancshares shall cause the shares of Bancshares Common Stock to be issued in the Merger to be duly authorized, validly issued, fully paid and nonassessable, free of any preemptive or similar right and to be approved for quotation in the Nasdaq Stock Market National Market System prior to or at the Effective Time.

5.20. CONTINUING INDEMNITY; INSURANCE

(a) Bancshares covenants and agrees that all rights to indemnification (including, without limitation, rights to mandatory advancement of expenses) and all limitations of liability existing in favor of indemnified parties under Bristol’s Articles of Incorporation and Bylaws as in effect as of the date of this Agreement with respect to matters occurring prior to or at the Effective Time (an “Indemnified Party”) shall survive the Merger and shall continue in full force and effect, without any amendment thereto, for a period concurrent with the applicable statute of limitations; provided, however, that all rights to indemnification in respect of any claim asserted or made as to which Bancshares is notified in writing within such period shall continue until the final disposition of such claim. Without limiting the foregoing, in any case in which approval is required to effectuate any indemnification, the determination of any such approval shall be made, at the election of the Indemnified Party, by independent counsel mutually agreed upon between Bancshares and the Indemnified Party.

(b) Promptly after receipt by an Indemnified Party of notice of the commencement of any action, such Indemnified Party shall, if a claim in respect thereof is to be made against Bancshares under such Subsection, notify Bancshares in writing of the commencement thereof. In case any such action shall be brought against any Indemnified Party, Bancshares shall be entitled to participate therein and, to the extent that it shall wish, to assume the defense thereof,

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with counsel reasonably satisfactory to such Indemnified Party, and, after notice from Bancshares to such Indemnified Party of its election to assume the defense thereof, Bancshares shall not be liable to such Indemnified Party under such Subsection for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Party; provided, however, if Bancshares elects not to assume such defense or if counsel for the Indemnified Party advises Bancshares in writing that there are material substantive issues which raise conflicts of interest between Bancshares or Bristol and the Indemnified Party, such Indemnified Party may retain counsel satisfactory to it, and Bancshares shall pay all reasonable fees and expenses of such counsel for the Indemnified Party promptly as statements therefor are received. Notwithstanding the foregoing, Bancshares shall not be obligated to pay the fees and expenses of more than one counsel for all Indemnified Parties in respect of such claim unless in the reasonable judgment of an Indemnified Party a conflict of interest exists between an Indemnified Party and any other Indemnified Parties in respect to such claims.

(c) Bristol shall cause the persons serving as officers or directors of Bristol, immediately prior to the Effective Time; to be covered for a period of three years from the Effective Time by the directors’ and officers’ liability insurance policy maintained by Bristol with respect to acts or omissions occurring prior to or at the respective effective times which were committed by such officers and directors in their capacity as such; provided that the annual premium to be paid by Bristol for such insurance shall not exceed 150% of the most current annual premium paid by Bristol for its directors and officers liability insurance, without Bancshares’ prior approval.

(d) If Bancshares or any of its successors or assigns (i) shall consolidate with or merge into any corporation or entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger; or (ii) shall transfer all or substantially all of its properties and assets to any individual, corporation or other entity, then and in each such case, proper provisions shall be made so that the successors and assigns of Bancshares shall assume the obligations set forth in this Section 5.20, to the extent Bristol does not elect to terminate this Agreement pursuant to Section 7.03 herein below.

(e) The provisions of this Section 5.20 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and representatives.

5.21. EMPLOYEES AND CERTAIN OTHER MATTERS

(a) Upon consummation of the Merger all employees of Bristol at the Effective Time of the Merger shall become employees of BOF. Bancshares, Bristol and BOF reserve the right to terminate any such employee, and to modify the job duties, compensation and authority of such employee. At the Effective Time, all such employees shall be eligible for such employee benefits as are generally available to employees of BOF having like tenure, officer status and compensation levels except: (i) all executive and senior level management bonuses, stock options, restricted stock and similar benefits shall be at the discretion of Bancshares’ Compensation Committee; and (ii) all such employees shall be given full credit for all prior service as employees of Bristol.

(b) Bancshares and BOF will obtain a waiver of any pre-existing condition exclusion under any Bancshares Employee Benefit Plans that are group health plans for which any employees and/or officers (or dependents thereof) of Bristol covered by Employee Benefit Plans as of the date of Closing shall become eligible, to the extent: (i) such pre-existing condition was covered for a period of at least one year under a similar group health plan previously maintained

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by Bristol; and (ii) the individual affected by the pre-existing condition was covered by Bristol’s corresponding group health plan on the date immediately preceding the Effective Time. Bancshares and BOF shall further use their reasonable best efforts to shorten any pre-existing exclusion periods under any Bancshares Employee Benefit Plan to the extent that such period exceeds in duration any corresponding provision in an Employee Benefit Plan immediately prior to Closing. Bancshares and BOF shall credit employees of Bristol for amounts paid under Employee Benefit Plans during the year of Closing, that are group health plans for purposes of applying deductibles, co-payments and out-of-pocket limitations under such Bancshares Employee Benefit Plan.

5.22. UNDERTAKING TO FILE REPORTS AND COOPERATE IN RULE 144 TRANSACTIONS

Bancshares covenants to use its best efforts to file in a timely manner all materials required to be filed pursuant to Section 13, 14 or 15(d) of the Exchange Act, or the rules and regulations promulgated thereunder, so as to continue the availability of Rule 144 for resales by affiliates of Bristol of the shares of Bancshares Common Stock received by them in the Merger. In the event of any proposed sale of such Bancshares Common Stock by any such former shareholder of Bristol Common Stock who receives shares of Bancshares Common Stock by reason of the Merger, Bancshares covenants to use its best efforts to cooperate with such shareholder so as to enable such sale to be made in accordance with the requirements of Bancshares’ transfer agents and the reasonable requirements of the broker through which such sale is proposed to be executed. Without limiting the generality of the foregoing, Bancshares agrees to furnish, upon request and at its expense, to the extent it is able, with respect to each such sale a written statement certifying that Bancshares has filed all reports required to be filed by it under the Exchange Act for a period of at least one year preceding the sale of the proposed sale, and, in addition, has filed the most recent annual report required to be filed by it thereunder. Notwithstanding anything contained in this Section 5.22, Bancshares shall not be required to maintain the registration of the Bancshares Common Stock under Section 12 of the Exchange Act if it shall at any time be entitled to deregister those shares pursuant to the Exchange Act and the rules and regulations thereunder.

5.23. BANCSHARES CONDUCT OF BUSINESS

From the date hereof through the Closing, without the prior written consent of the chief executive officer of Bristol or his duly authorized designee, Bancshares shall not take or cause to be taken any action that would disqualify the Merger as a “reorganization” within the meaning of Section 368(a) of the Code.

5.24. COMPLIANCE DEFICIENCIES

From the date hereof through the Closing, Bristol shall use its best efforts (including, without limitation, expending capital resources, hiring such employees and engaging such consultants as may be required) to address, remediate, cure and prevent from reoccurring, all deficiencies or violations of law, cited by the FDIC or the OFR in any Report of Examination, examination exit interview, correspondence, or otherwise.

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SECTION 6. CONDITIONS OF CLOSING

6.01. CONDITIONS OF ALL PARTIES

The obligations of each of the parties hereto to consummate the Merger are subject to the satisfaction of the following conditions at or prior to the Closing:

(a) This Agreement and the Merger shall have been duly approved by the shareholders of Bristol.

(b) The Registration Statement shall have become effective prior to the mailing of the Proxy Statement, no stop order suspending the effectiveness of the Registration Statement shall have been issued, and no proceedings for that purpose shall have been instituted or, to the knowledge of any party, shall be contemplated, and Bancshares shall have received all state securities laws permits and authorizations necessary to consummate the transactions contemplated hereby.

(c) No action or proceeding shall have been threatened or instituted before a court or other governmental body to restrain or prohibit the transactions contemplated by this Agreement or to obtain damages or other relief in connection with the execution of such agreements or the consummation of the transactions contemplated hereby or thereby; and no governmental agency shall have given notice to any party hereto to the effect that consummation of the transactions contemplated by this Agreement would constitute a violation of any law or that it intends to commence proceedings to restrain consummation of the Merger.

(d) All statutory requirements for the valid consummation of the transactions contemplated by the this Agreement shall have been fulfilled; all appropriate orders, consents and approvals from all regulatory agencies and other governmental authorities whose order, consent or approval is required by law for the consummation of the transactions contemplated by this Agreement shall have been received; and the terms of all requisite orders, consents and approvals shall then permit the effectuation of the Merger without imposing any material conditions with respect thereto that Bancshares reasonably determines to be unduly burdensome.

(e) Bristol shall have received a written opinion from Igler & Dougherty, P.A. in a form reasonably satisfactory to Bancshares and Bristol (the “Tax Opinion”), dated the date of the Effective Time, substantially to the effect that: (i) the Merger will constitute a reorganization within the meaning of Section 368(a) of the Code; (ii) each of Bancshares and Bristol will be a party to a reorganization within the meaning of Section 368(b) of the Code; (iii) no gain or loss will be recognized by holders of Bristol Common Stock who exchange all of their Bristol Common Stock solely for Bancshares Common Stock pursuant to the Merger (except with respect to any cash received in lieu of a fractional share interest in Bancshares Common Stock); (iv) the tax basis of the Bancshares Common Stock received (including fractional shares deemed received and redeemed) by holders of Bristol Common Stock who exchange all of their Bristol Common Stock solely for Bancshares Common Stock in the Merger will be the same as the tax basis of the Bristol Common Stock surrendered in exchange for the Bancshares Common Stock (reduced by an amount allocable to a fractional share interest in Bancshares Common Stock deemed received and redeemed); and (v) the holding period of the Bancshares Common Stock received (including fractional shares deemed received and redeemed) by holders who exchange all of their Bristol Common Stock solely for Bancshares Common Stock in the Merger will be the same as the Bristol period of the Bristol Common Stock surrendered in exchange therefor,

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provided that such Bristol Common Stock is held as a capital asset at the Effective Time. In rendering such Tax Opinion, such counsel shall be entitled to rely upon representations of officers of Bristol and Bancshares reasonably satisfactory in form and substance to such counsel.

(f) Bancshares shall have offered a seat on its Board of Directors to Pat Frost, a current member of Bristol’s Board of Directors, who has been jointly selected by Bancshares and Bristol. Ms. Frost’s service on Bancshares’ Board of Directors shall commence as soon as practicable after the Effective Time.

6.02. ADDITIONAL CONDITIONS OF BANCSHARES

The obligations of Bancshares to consummate the Merger are also subject to the satisfaction of the following additional conditions at or prior to the Closing:

(a) The representations and warranties of Bristol contained in this Agreement shall be in all material respects true and correct, individually and in the aggregate, on and as of the Closing Date, with the same effect as though made on and as of such date, except to the extent of changes permitted by the terms of this Agreement, and Bristol shall have in all material respects performed all obligations and complied with all covenants required by this Agreement to be performed or complied with by it at or prior to the Closing. In addition, Bristol shall have delivered to Bancshares and BOF its certificate dated as of the Closing Date and signed by its chief executive officer and chief financial officer (or their functional equivalents) to the foregoing effect and to the effect that, except as specified in such certificate, such persons do not know, and have no reasonable grounds to know, of any material failure or breach of any representation, warranty or covenant made by it in this Agreement.

(b) There shall not have occurred any change from the date of the Latest Balance Sheet to the Closing Date in the financial condition, results of operations, or business of Bristol which has a material adverse effect on Bristol; provided, however, that: (i) the incurrence by Bristol of reasonable expenses in connection with the Merger (including fees and expenses of attorneys, accountants or other consultants not to exceed $200,000 in the aggregate and the payment to Sandler of its fee not to exceed 1.1% of the value of the Merger Consideration (as distinct from any expense reimbursement, which shall be included in the aforementioned $200,000) in accordance with the Sandler Agreement [the “Permitted Expenses”]); (ii) amounts payable under existing agreements; (iii) employee retention payments that do not exceed $50,000 in the aggregate, unless Bristol obtains Bancshares’ prior approval, which shall not be unreasonably withheld; (iv) the occurrence of an event specifically permitted under Section 5.07 and each of items (i), (ii), (iii) and (iv) are expressly deemed not to constitute such a material adverse effect.

(c) Bancshares shall have received “comfort” letters from Hacker, Johnson & Smith, P.A. dated, respectively, within three (3) days prior to the date of the Proxy Statement and within three (3) days prior to the Closing Date, in customary form for transactions of this sort and in substance reasonably satisfactory to Bancshares.

(d) Bancshares and BOF shall have received from Powell Goldstein, LLP, special counsel to Bristol, an opinion, dated as of the Closing Date, customary in scope and in form and substance substantially as set forth on Exhibit 6.02(d). In giving such opinions, such counsel may rely as to questions of fact upon certificates of one or more officers of Bristol and governmental officials.

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(e) Bancshares shall have received from Christopher Roden a signed non-competition agreement and from Jasper Eanes a signed employment agreement termination and release, in form and substance reasonably satisfactory to Bancshares. Mr. Eanes’ agreement shall terminate his employment related agreement listed on Schedule 3.13(a)(ii) of the Schedule of Exceptions, acknowledge receipt by Mr. Eanes of any and all payments due under such agreement (to the extent such payments are permissible pursuant to12 USC Section 1828(k) or 12 CFR Part 359) and releasing Bristol, Bancshares and BOF from any and all obligations thereunder.

(f) Bancshares shall have received a Director’s and Officer’s Commitment in the form specified on Exhibit 5.09 hereto (as contemplated by and within the timeframe specified in Subsection 5.09) from each person who serves as an executive officer or director of Bristol; and Bancshares shall have received from each such person a written confirmation dated not earlier than five (5) days prior to the Closing Date to the effect that each representation made in such person’s Director’s and Officer’s Commitment is true and correct as of the date of such confirmation and that such person has complied with all of his or her covenants therein through the date of such confirmation; in each case to the extent necessary to ensure, in the reasonable judgment of Bancshares, compliance with Rule 145 under the Securities Act.

(g) No adverse regulatory action shall be pending or threatened against Bristol, including (without limitation) any proposed amendment to the MOU or any other existing agreement, memorandum, letter, agreement, order or decree, formal or informal, between any regulator and Bristol, if such action would or could impose any material liability on Bancshares, interfere in any material respect with the conduct of the businesses of Bancshares’ consolidated group following the Merger or impede Bancshares’ ability to obtain any required regulatory approval for the Merger.

6.03. ADDITIONAL CONDITIONS OF BRISTOL

The obligations of Bristol to consummate the Merger are also subject to the satisfaction of the following additional conditions at or prior to the Closing:

(a) The representations and warranties of Bancshares and BOF contained in this Agreement shall be true and correct in all material respects, individually and in the aggregate, on the Closing Date, with the same effect as though made on and as of such date, except to the extent of changes permitted by the terms of this Agreement, and each of Bancshares and BOF shall have in all material respects performed all obligations and complied with all covenants required by this Agreement to be performed or complied with by it at or prior to the Closing. In addition, each of Bancshares and BOF shall have delivered to Bristol its certificate dated as of the Closing Date and signed by its chief executive officer and chief financial officer to the foregoing effect and to the effect that, except as specified in such certificate, such persons do not know, and have no reasonable grounds to know, of any material failure or breach of any representation, warranty or covenant made by it in this Agreement.

(b) Bristol shall have received from Igler & Dougherty, P.A., counsel for Bancshares and BOF, an opinion, dated as of the Closing Date, customary in scope and in form and substance substantially as set forth on Exhibit 6.03(b). In giving such opinion, such counsel may rely as to questions of fact upon certificates of one or more officers of Bancshares or members of Bancshares’ consolidated group, and governmental officials.

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(c) Bristol shall have received a fairness opinion from Sandler dated the date of the meeting of the Board of Directors approving this Agreement and updated to the date of the proxy statement related to the Special Meeting of Shareholders of Bristol is sent to Bristol’s shareholders, in each case in form and substance satisfactory to Bristol, confirming such financial advisor’s prior opinion to the Board of Directors of Bristol to the effect that the consideration to be paid in the Merger is fair to its shareholders from a financial point of view.

(d) There shall not have occurred any change from the date of Bancshares’ Latest Balance Sheet to the Closing Date in the financial condition, results of operations or business of Bancshares’ consolidated group taken as a whole which has a material adverse effect on Bancshares’ consolidated group taken as a whole.

6.04. WAIVER OF CONDITIONS

Any condition to a party’s obligations hereunder may be waived by that party, other than the conditions specified in Subsections (a), (b), (c) and (d) of Section 6.01 hereof and the condition specified in Subsection (c) of Section 6.03 hereof. The failure to waive any condition hereunder shall not be deemed a breach of Section 5.02 hereof.

SECTION 7. TERMINATION

7.01. TERMINATION

This Agreement may be terminated and the Merger contemplated herein abandoned at any time before the Effective Time, whether before or after approval by the shareholders of Bristol as follows:

(a) By the mutual consent of the Boards of Directors of Bancshares and Bristol.

(b) By the Board of Directors of either Bancshares or Bristol in the event of a breach by the other of them of any representation or warranty contained in this Agreement or of any covenant contained in this Agreement which individually or in the aggregate may be deemed to have a material adverse effect on such party (it being specifically agreed, without limitation, that a breach of Bristol’s covenant contained in Section 5.24 shall be deemed to have a material adverse effect on Bristol), which in either case cannot be, or has not been, cured within thirty (30) days after written notice of such breach is given to the entity committing such breach, provided that the right to effect such cure shall not extend beyond the date set forth in Subsection (c)(i) of this section.

(c) By the Board of Directors of either Bancshares or Bristol if: (i) all conditions to Closing required by Section 6 hereof have not been met by or can not be met by November 30, 2006, and has not been waived by each party in whose favor such condition inures, or (ii) if the Merger has not been consummated by December 31, 2006, provided, in either instance, that the failure to consummate the transactions contemplated hereby is not caused by the party electing to terminate pursuant to clause (i) or (ii).

(d) By Bancshares if this Agreement or the Merger fails to receive the requisite vote at any meeting of the Bristol’s shareholders called for the purpose of voting thereon or by Bristol if Bancshares fails to obtain regulatory approval of the Merger or obtain effectiveness of the Registration Statement.

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(e) By Bancshares if the Board of Directors of Bristol shall: (i) withdraw, modify or change its recommendation to its shareholders of this Agreement or the Merger, or shall have resolved to do any of the foregoing or; (ii) sell, lease, transfer or dispose of all or substantially all of the assets of Bristol; or (iii) permit the acquisition, by any person or group, of the beneficial ownership of 15% or more of any class of Bristol capital stock; or shall have made any announcement of any agreement to do any of the foregoing.

(f) By Bristol in the event Bristol receives a bona fide written offer with respect to any tender or exchange or any a merger, consolidation, or acquisition of all of the stock or assets of Bristol, or other business combination involving Bristol, or any transaction to acquire in any manner, a 10% or greater equity interest in, or more than 10% of the assets of Bristol (“Acquisition Transaction”) and the Board of Directors of Bristol determines in good faith, after consultation with its financial advisors and counsel, that such Acquisition Transaction is more favorable to Bristol’s shareholders than the transaction contemplated by this Agreement.

(g) By Bancshares, if the holders of more than 30% in the aggregate of the outstanding Bristol Common Stock shall have voted such shares against this Agreement or the Merger at any meeting called for the purpose of voting thereon and shall have exercised their Dissenters’ Rights in accordance with the FFIC.

(h) By Bancshares, upon the entry of a formal enforcement agreement or order [e.g., a Cease and Desist Order] against Bristol by the OFR or the FDIC.

(i) By Bristol, upon Bancshares’ failure to timely file the regulatory applications required by Subsection 5.14(a).

7.02. EFFECT OF TERMINATION

Upon termination of this Agreement pursuant to this Section 7, there shall be no liability by reason of this Agreement, or the termination thereof, on the part of any party or their respective directors, officers, employees, agents or shareholders except for any liability of a party hereto arising out of (i) a willful breach of any representation, warranty or covenant in this Agreement prior to the date of termination, except if such breach was required by law or by any regulatory authority; (ii) a termination pursuant to Section 7.01 and causing payment to be made under Section 7.03; or (iii) a breach of any of the following provisions: the second to last sentence of Section 5.01 or Subsections 5.13(b) and (c).

7.03. TERMINATION PAYMENT

If this Agreement is terminated by Bancshares pursuant to Subsection 7.01(b), Subsection 7.01(c), Subsection 7.01(d), or Subsection 7.01(e), then Bristol (or its successor) shall pay or cause to be paid to Bancshares upon demand a termination payment of $250,000 payable in same day funds. If this Agreement is terminated by Bristol pursuant to Subsection 7.01(f), then Bristol (or its successor) shall pay or cause to be paid to Bancshares upon demand a termination payment of $1,000,000 payable in same day funds. If this Agreement is terminated by Bristol pursuant to Subsections 7.01(b), 7.01(c), or 7.01(d), then Bancshares shall pay or cause to be paid to Bristol upon demand a termination payment of $250,000 payable in same day funds. If a party elects to so demand a termination payment pursuant to this Section 7.03, such party shall be deemed to have elected its remedy and such termination payment shall be such party’s

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exclusive remedy hereunder. If this Agreement is terminated pursuant to Subsection 7.01(a), by Bancshares pursuant to Subsection 7.01(h), or by Bristol pursuant to Subsection 7.01(i), neither Bancshares nor Bristol shall be entitled to a termination payment.

SECTION 8. MISCELLANEOUS

8.01. NOTICES

Any notice, communication, request, reply, advice or disclosure (hereinafter severally and collectively “notice”) required or permitted to be given or made by any party to another in connection with this Agreement or the transactions herein contemplated must be in writing and may be given or served by depositing the same in the United States mail, postage prepaid and registered or certified with return receipt requested, or by delivering the same to the address of the person or entity to be notified, or by sending the same by a national commercial courier service (such as Airborne Express, Federal Express, Emery Air Freight, Network Courier, UPS or the like) for next day delivery provided such delivery is confirmed in writing by such courier. Notice deposited in the mail in the manner hereinabove described shall be effective 48 hours after such deposit, and notice delivered in person or by commercial courier shall be effective at the time of delivery. A party delivering notice shall endeavor to obtain a receipt therefor. For purposes of notice, the addresses of the parties shall, until changed as hereinafter provided, be as follows:

If to Bancshares or BOF:

Michael L. McMullan

President and Chief Executive Officer

Bancshares of Florida, Inc.

1185 Immokalee Road

Naples, Florida 34110

With copies to:

A. George Igler, Esq.

Igler & Dougherty, P.A.

2457 Care Drive

Tallahassee, Florida 32308

If to Bristol:

Christopher Roden

Chief Executive Officer

Bristol Bank

1493 Sunset Drive

Coral Gables, Florida 33143

With copies to:

Walter G. Moeling, IV, Esq.

Powell Goldstein LLP

One Atlantic Center - Fourteenth Floor

1201 West Peachtree Street, NW

Atlanta, Georgia 30309

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8.02. WAIVER

The failure by any party to enforce any of its rights hereunder shall not be deemed to be a waiver of such rights, unless such waiver is an express written waiver which has been signed by the waiving party. Waiver of any one breach shall not be deemed to be a waiver of any other breach of the same or any other provision hereof.

8.03. EXPENSES

Except as otherwise provided herein, regardless of whether the Merger is consummated, all expenses incurred in connection with this Agreement and the transactions contemplated hereby and thereby shall be borne by the party incurring them.

8.04. HEADINGS

The headings in this Agreement have been included solely for reference and shall not be considered in the interpretation or construction of this Agreement.

8.05. ANNEXES, EXHIBITS AND SCHEDULES

The exhibits and schedules to this Agreement are incorporated herein by this reference and expressly made a part hereof.

8.06. INTEGRATED AGREEMENT

This Agreement constitutes the entire understanding and agreement among the parties hereto with respect to the subject matter hereof, and there are no agreements, understandings, restrictions, representations or warranties among the parties other than those set forth herein or therein, all prior agreements and understandings being superseded hereby.

8.07. CHOICE OF LAW

The validity of this Agreement, the construction of its terms and the determination of the rights and duties of the parties hereto in accordance therewith shall be governed by and construed in accordance with the laws of the United States and those of the State of Florida applicable to contracts made and to be performed wholly within such State. The parties hereto mutually consent and submit to the personal jurisdiction of the state and federal courts located in the State of Florida and agree that any action, suit or proceeding concerning or related to this Agreement must be brought exclusively in the federal courts located in Broward County, Florida to the extent federal courts will accept jurisdiction over such matters, or exclusively in the Florida state courts located in Broward County in the event federal courts do not accept jurisdiction over the subject matter.

8.08. PARTIES IN INTEREST

This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, except that this Agreement may not be transferred or assigned by any member of Bancshares’ consolidated group or Bristol without the prior written consent of the other parties hereto, including any transfer or assignment by operation of law. Nothing in this Agreement is intended or shall be construed to confer upon or to give any person other than the parties hereto any rights or remedies under or by reason of this Agreement, except as expressly provided for herein and therein.

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8.09. AMENDMENT

The parties may, by mutual agreement of their respective Boards of Directors, amend, modify or supplement this Agreement, or any exhibit or schedule of any of them, in such manner as may be agreed upon by the parties in writing, at any time before or after approval of this Agreement and the transactions contemplated hereby by the shareholders of the parties hereto. This Agreement and any exhibit or schedule to this Agreement may be amended at any time and, as amended, restated by the chief executive officers of the respective parties (or their respective designees) without the necessity for approval by their respective Boards of Directors or shareholders, to correct typographical errors or to change erroneous references or cross references, or in any other manner which is not material to the substance of the transactions contemplated hereby.

8.10. COUNTERPARTS

This Agreement may be executed by the parties in any number of counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same document.

8.11. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES; COVENANTS

None of the representations and warranties in this Agreement or in any instrument delivered pursuant hereto shall survive the Effective Time. The covenants of the parties set forth herein shall survive the Effective Time in accordance with their terms and, in the absence of a specified survival term, for the applicable statute of limitations.

THE FOREGOING AGREEMENT WAS AGREED TO AND ENTERED INTO AS OF THE DATE FIRST WRITTEN ABOVE.

BRISTOL BANK
By:	/s/ Christopher Roden
	Christopher Roden
	Chief Executive Officer
BANCSHARES OF FLORIDA, INC.
By:	John B. James
	John B. James
	Executive Vice President and Director of Corporate Risk Management
BANK OF FLORIDA
By:	R. Mark Manitz
	R. Mark Manitz
	President and Chief Executive Officer

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EX-10.15

Exhibit 10.15

BANCSHARES OF FLORIDA, INC.

CHANGE IN CONTROL AGREEMENT

THIS CHANGE IN CONTROL AGREEMENT (“Agreement”) is entered into by and between Bancshares of Florida, Inc. (“Employer”) and James L. Goehler (“Employee”).

WHEREAS, in recognition of Employee’s prior and continuing contribution to Employer and its subsidiaries, Employer wishes to protect Employee’s position therewith in the manner provided in the Agreement in the event of a Change in Control of the Employer.

NOW, THEREFORE, in consideration of Employee’s management position, contribution and responsibilities, Employer hereby agrees to provide Employee with certain severance benefits as specifically provided herein.

SECTION 1 – DEFINITIONS

(a) “Change in Control” means an event that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”) or any successor disclosure item; provided that, without limitation, such a Change in Control (as set forth in 12 U.S.C. Section 1841 (a)(2) of the Bank Holding Company Act of 1956, as amended) shall be deemed to have occurred if any person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than any person who on the date hereof is a director or officer of Employer: (i) directly or indirectly, or acting in concert through one or more other persons, owns, controls, or has power to vote 25% or more of any class of the then outstanding voting securities of Employer; or (ii) controls in any manner the election of the directors of Employer. For purposes of this Agreement, a “Change in Control” shall be deemed not to have occurred in connection with a reorganization, consolidation, or merger of Employer whereby the stockholders of Employer, immediately before the consummation of the transaction, will own over 50% of the total combined voting power of all classes of stock entitled to vote of the surviving entity immediately after the transaction.

(b) Termination for “just cause” means termination because of Employee’s personal dishonesty, incompetence, insubordination, misconduct or conduct which negatively reflects upon the Employer, breach of fiduciary duty, intentional failure to perform stated duties, willful violation of any law, rule, or regulation (other than minor traffic violations or similar offenses), or final cease-and desist order. In determining “incompetence,” the acts or omissions shall be measured against standards generally prevailing in the banking industry. No act, or failure to act on Employee’s part, shall be considered “willful” unless done, or omitted to be done, by Employee not in good faith and without reasonable belief that Employee’s action or omission was in the best interest of Employer; provided that any act or omission to act on Employee’s behalf in reliance upon advice or written opinion of Employer’s counsel shall not be deemed to be willful.

(c) “Protected Period” means the term of this Agreement and six months following termination hereof if Employee is employed by Employer at the time Employee first learns of a potential Change in Control, which is in fact later consummated.

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SECTION 2 – TERM OF AGREEMENT

This Agreement shall remain in effect for two years commencing on August 29, 2005, and terminating on August 28, 2007, unless extended or terminated in accordance with the terms and conditions set forth in Section 8 herein.

SECTION 3 – PAYMENTS TO EMPLOYEE UPON CHANGE IN CONTROL

If Employer terminates Employee’s employment without “just cause,” Employee shall be entitled to receive the termination benefits described in Section 4 herein, if a Change in Control also occurs or has occurred within the Protected Period. Employee shall also be entitled to receive such termination benefits described in Section 4 herein, if within 90 days of a Change in Control Employee elects to terminate his employment; provided, however, if the surviving entity following a Change in Control offers Employee a position at the same salary as he was receiving from Employer at the time of the Change in Control, Employee shall not be entitled to receive the termination benefits described in Section 4 herein.

SECTION 4 – TERMINATION BENEFITS

(a) Upon a termination described in Section 3, Employer or its successor(s) shall pay Employee, or in the event of Employee’s subsequent death, Employee’s estate, as severance pay, a sum equal to two-and-one-half years of Employee’s “highest annual base salary.” For purposes of this Agreement, Employee’s “highest annual base salary” shall mean the Employee’s highest base salary, plus Employee’s average annual bonus during the three years immediately preceding Employee’s termination. Such payment shall be made in one lump sum payment within ten business days of such a termination of employment.

(b) Upon a termination described in Section 3, Employer or its successor(s) shall continue to provide life, health, and disability coverage (“Coverage”) comparable to the coverage maintained by Employer for Employee prior to Employee’s severance. Such Coverage shall cease upon the earlier of Employee obtaining new employment and receiving Coverage through another employer, which provides comparable coverage, or six months from the date of Employee’s termination.

SECTION 5 – SUSPENSION OF OBLIGATIONS

(a) If Employee is suspended from office and/or temporarily prohibited from participating in the conduct of Employer’s affairs pursuant to an action brought by the Florida Office of Financial Regulation, Office of the Comptroller of the Currency, Office of Thrift Supervision, or the Federal Deposit Insurance Corporation (any and all referred to herein as “Regulatory Agency”), Employer’s obligations under this Agreement shall be suspended as of the date of such action. The obligations of this Agreement shall be suspended as of the date of such action. The obligations of this Agreement shall be reinstated if the chargers of the Regulatory Agency are subsequently dismissed, or if the Employee is otherwise determined to be not guilty of such charges.

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(b) If Employee is removed from office and/or permanently prohibited from participating in the conduct or affairs of Employer by a final order resulting from an action brought by a Regulatory Agency, all obligations of Employer under this Agreement shall terminate as of the effective date of such order.

SECTION 6 – NOTICE OF TERMINATION

Any purported termination by Employer or by Employee shall be communicated by a Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee’s employment under the provision so indicated.

SECTION 7 – AGREEMENT NOT TO COMPETE

(a) In consideration of the benefits and protections provided under this Agreement, Employee agrees that during the term of this Agreement, and for a period of six months following the termination of Employee’s employment for any reason other than a termination that would entitle Employee to receive the severance benefits described in Section 4, Employee shall not become employed, directly or indirectly, whether as an employee, independent contractor, consultant, or otherwise, with any federally-insured financial institution, financial holding company, bank holding company, or other financial services provider located in Collier or Lee Counties, Florida that offers similar products or services as those offered by the Employer, or with any person or entity whose intent it is to organize another such company or entity located in Collier or Lee Counties, Florida.

(b) Employee hereby agrees that the duration of the anti-competitive covenant set forth herein is reasonable, and that its geographic scope is not unduly restrictive.

(c) The parties acknowledge and agree that money damages cannot fully compensate Employer in the event of Employee’s violation of the provisions of this Section 7. Thus, in the event of a breach of any of the provisions of this Section 7, Employee agrees that Employer, upon application to a court of competent jurisdiction, shall be entitled to an injunction restraining Employee from any further breach of the terms and provisions of this Section 7. Employee’s sole remedy, in the event of the wrongful entry of such injunction, shall be the dissolution of such injunction and any costs as provided for in Section 10 herein. Employee hereby waives any and all claims for damages by reason of the wrongful issuance of any such injunction.

SECTION 8 – MODIFICATION AND WAIVER

(a) This Agreement may not be modified or amended except as agreed to in writing by the parties hereto.

(b) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppels against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition in the future, or as to any act other than that specifically waived.

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SECTION 9 – ARBITRATION

The parties agree that, except for the specific remedies for injunctive relief as contained in Section 7, any controversy or claim arising out of or relating to this Agreement or any breach hereof, including, without limitation, any claim that this Agreement or any portion hereof is invalid, illegal, or otherwise voidable, shall be submitted to binding arbitration before and in accordance with the rules of the American Arbitration Association and judgment upon the determination and/or award of such arbitrator(s) may be entered in any court having jurisdiction thereof. Provided, however, that this Section shall not be construed to permit the award of punitive damages to either party. The venue of any arbitration shall be in Collier County, Florida.

SECTION 10 – ATTORNEYS’ FEES

In the event of any proceeding occurring out of or involving this Agreement, the prevailing party shall be entitled to the recovery of reasonable attorneys’ fees, expenses, and costs, including fees and costs to enforce an award.

SECTION 11 – SEVERABILITY

The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

SECTION 12 – HEADINGS FOR REFERENCE ONLY

The headings of the Sections herein are included solely for convenience of reference and shall not control the meaning or the interpretation of any of the provisions of this Agreement.

SECTION 13 – APPLICABLE LAW AND VENUE

This Agreement shall be governed in all respects and be interpreted by and under the laws of the State of Florida. Any litigation regarding this Agreement shall be brought in the appropriate court in Collier County, Florida.

SECTION 14 – SUCCESSORS

Employer shall require any successor to the business and/or assets of Employer in connection with a Change in Control to assume and agree to perform its obligations under this Agreement in writing.

SECTION 15 – NO CONTRACT OF EMPLOYMENT

This Agreement shall not, under any circumstances, be deemed to constitute an employment contract between Employer and Employee or to be in consideration of or an inducement for the continued employment of Employee. Nothing contained in this Agreement shall be deemed to give Employee the right to be retained in the service of Employer, or to interfere with the right of Employer to discharge Employee at any time.

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SECTION 16 – LIMITATION OF RIGHTS

Neither this Agreement, nor any amendment hereof, nor the payment of any benefits hereunder shall be construed as giving Employee or any other person any legal or equitable right against Employer except as expressly provided herein.

IN WITNESS WHEREOF, Employer has duly executed this Agreement this 30th day of November, 2005.

EMPLOYEE	BANCSHARES OF FLORIDA, INC.
/s/ James L. Goehler	By:	/s/ Martin P. Mahan
James L. Goehler		Martin P. Mahan
		Executive Vice President and Chief Operating Officer

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EX-10.16

Exhibit 10.16

BANCSHARES OF FLORIDA, INC.

CHANGE IN CONTROL AGREEMENT

THIS CHANGE IN CONTROL AGREEMENT (“Agreement”) is entered into by and between Bancshares of Florida, Inc. (“Employer”) and Daniel W. Taylor (“Employee”).

WHEREAS, in recognition of Employee’s prior and continuing contribution to Employer and its subsidiaries, Employer wishes to protect Employee’s position therewith in the manner provided in the Agreement in the event of a Change in Control of the Employer;

NOW, THEREFORE, in consideration of Employee’s management position, contribution and responsibilities, Employer hereby agrees to provide Employee with certain severance benefits as specifically provided herein.

SECTION 1 – DEFINITIONS

(a) “Change in Control” means an event that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”) or any successor disclosure item; provided that, without limitation, such a Change in Control (as set forth in 12 U.S.C. Section 1841 (a)(2) of the Bank Holding Company Act of 1956, as amended) shall be deemed to have occurred if any person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than any person who on the date hereof is a director or officer of Employer: (i) directly or indirectly, or acting in concert through one or more other persons, owns, controls, or has power to vote 25% or more of any class of the then outstanding voting securities of Employer; or (ii) controls in any manner the election of the directors of Employer. For purposes of this Agreement, a “Change in Control” shall be deemed not to have occurred in connection with a reorganization, consolidation, or merger of Employer whereby the stockholders of Employer, immediately before the consummation of the transaction, will own over 50% of the total combined voting power of all classes of stock entitled to vote of the surviving entity immediately after the transaction.

(b) Termination for “just cause” means termination because of Employee’s personal dishonesty, incompetence, insubordination, misconduct or conduct which negatively reflects upon the Employer, breach of fiduciary duty, intentional failure to perform stated duties, willful violation of any law, rule, or regulation (other than minor traffic violations or similar offenses), or final cease-and desist order. In determining “incompetence,” the acts or omissions shall be measured against standards generally prevailing in the banking industry. No act, or failure to act on Employee’s part, shall be considered “willful” unless done, or omitted to be done, by Employee not in good faith and without reasonable belief that Employee’s action or omission was in the best interest of Employer; provided that any act or omission to act on Employee’s behalf in reliance upon advice or written opinion of Employer’s counsel shall not be deemed to be willful.

(c) “Protected Period” means the term of this Agreement and six months following termination hereof if Employee is employed by Employer at the time Employee first learns of a potential Change in Control, which is later consummated.

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SECTION 2 – TERM OF AGREEMENT

This Agreement shall remain in effect for two years commencing on September 1, 2004, and terminating on August 31, 2006, unless extended or terminated in accordance with the terms and conditions set forth in Section 8 herein.

SECTION 3 – PAYMENTS TO EMPLOYEE UPON CHANGE IN CONTROL

Following a Change in Control and within the Protected Period, if either (i) Employer terminates Employee’s employment without “just cause;” or (ii) Employee terminates his own employment for any reason, Employee shall be entitled to receive the termination benefits described in Section 4 hereof.

SECTION 4 – TERMINATION BENEFITS

(a) Upon a termination described in Section 3, Employer or its successor(s) shall pay Employee, or in the event of Employee’s subsequent death, his estate, as severance pay, a sum equal to two-and-one-half years of his “highest annual base salary.” For purposes of this Agreement, Employee’s “highest annual base salary” shall mean the Employee’s highest base salary during the three years immediately preceding Employee’s termination. Such payment shall be made in one lump sum payment within ten business days of such a termination of employment.

(b) Upon a termination described in Section 3, Employer or its successor(s) shall continue to provide life, health, and disability coverage (“Coverage”) comparable to the coverage maintained by Employer for Employee prior to his severance. Such Coverage shall cease upon the earlier of Employee obtaining new employment and receiving Coverage through another employer, which provides comparable coverage, or six-months from the date of Employee’s termination.

SECTION 5 – SUSPENSION OF OBLIGATIONS

(a) If Employee is suspended from office and/or temporarily prohibited from participating in the conduct of Employer’s affairs pursuant to an action brought by the Florida Office of Financial Regulation, Office of the Comptroller of the Currency, Office of Thrift Supervision, or the Federal Deposit Insurance Corporation (either referred to herein as a “Regulatory Agency”), Employer’s obligations under this Agreement shall be suspended as of the date of such action. The obligations of this Agreement shall be reinstated if the charges of the Regulatory Agency are subsequently dismissed, or if the Employee is otherwise determined to be not guilty of such charges.

(b) If Employee is removed from office and/or permanently prohibited from participating in the conduct or affairs of Employer by a final order resulting from an action brought by a Regulatory Agency, all obligations of Employer under this Agreement shall terminate as of the effective date of such order.

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SECTION 6 – NOTICE OF TERMINATION

Any purported termination by Employer or by Employee shall be communicated by a Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee’s employment under the provision so indicated.

SECTION 7 – AGREEMENT NOT TO COMPETE

(a) In consideration of the benefits and protections provided under this Agreement, Employee agrees that during the term of this Agreement, and for a period of six months following the termination of Employee’s employment for any reason other than that contemplated by Section 3, Employee shall not become employed, directly or indirectly, whether as an employee, independent contractor, consultant, or otherwise, with any federally-insured financial institution, financial holding company, bank holding company, or other financial services provider located in Collier, Hillsborough, Broward or Palm Beach Counties, Florida that offers similar products or services as those offered by the Employer, or with any person or entity whose intent it is to organize another such company or entity located in Collier, Hillsborough, Broward or Palm Beach Counties, Florida.

(b) Employee hereby agrees that the duration of the anti-competitive covenant set forth herein is reasonable, and that its geographic scope is not unduly restrictive.

(c) The parties acknowledge and agree that money damages cannot fully compensate Employer in the event of Employee’s violation of the provisions of this Section 7. Thus, in the event of a breach of any of the provisions of this Section 7, Employee agrees that Employer, upon application to a court of competent jurisdiction, shall be entitled to an injunction restraining Employee from any further breach of the terms and provisions of this Section 7. Employee’s sole remedy, in the event of the wrongful entry of such injunction, shall be the dissolution of such injunction and any costs as provided for in Section 10 herein. Employee hereby waives any and all claims for damages by reason of the wrongful issuance of any such injunction.

SECTION 8 – MODIFICATION AND WAIVER

(a) This Agreement may not be modified or amended except as agreed to in writing by the parties hereto.

(b) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppels against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition in the future, or as to any act other than that specifically waived.

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SECTION 9 – ARBITRATION

The parties agree that, except for the specific remedies for injunctive relief as contained in Section 7, any controversy or claim arising out of or relating to this Agreement or any breach hereof, including, without limitation, any claim that this Agreement or any portion hereof is invalid, illegal, or otherwise voidable, shall be submitted to binding arbitration before and in accordance with the rules of the American Arbitration Association and judgment upon the determination and/or award of such arbitrator(s) may be entered in any court having jurisdiction thereof. Provided, however, that this Section shall not be construed to permit the award of punitive damages to either party. The venue of any arbitration shall be in Collier County, Florida.

SECTION 10 – ATTORNEYS’ FEES

In the event of any proceeding occurring out of or involving this Agreement, the prevailing party shall be entitled to the recovery of reasonable attorneys’ fees, expenses, and costs, including fees and costs to enforce an award.

SECTION 11 – SEVERABILITY

The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

SECTION 12 – HEADINGS FOR REFERENCE ONLY

The headings of the Sections herein are included solely for convenience of reference and shall not control the meaning or the interpretation of any of the provisions of this Agreement.

SECTION 13 – APPLICABLE LAW AND VENUE

This Agreement shall be governed in all respects and be interpreted by and under the laws of the State of Florida. Any litigation regarding this Agreement shall be brought in the appropriate court in Collier County, Florida.

SECTION 14 – SUCCESSORS

Employer shall require any successor to the business and/or assets of Employer in connection with a Change in Control to assume and agree to perform its obligations under this Agreement in writing.

SECTION 15 – NO CONTRACT OF EMPLOYMENT

This Agreement shall not, under any circumstances, be deemed to constitute an employment contract between Employer and Employee or to be in consideration of or an inducement for the continued employment of Employee. Nothing contained in this Agreement shall be deemed to give Employee the right to be retained in the service of Employer, or to interfere with the right of Employer to discharge Employee at any time.

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SECTION 16 – LIMITATION OF RIGHTS

Neither this Agreement, nor any amendment hereof, nor the payment of any benefits hereunder shall be construed as giving Employee or any other person any legal or equitable right against Employer except as expressly provided herein.

IN WITNESS WHEREOF, Employer has duly executed this Agreement this 18^th day of March, 2005.

EMPLOYEE	BANCSHARES OF FLORIDA, INC.
/s/ Daniel W. Taylor	By:	/s/ Michael L. McMullan
Daniel W. Taylor		Michael L. McMullan
		President and Chief Executive Officer
		(by authority of the Compensation Committee)

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EX-21.1

Exhibit 21.1

Subsidiaries of the Registrant

1. Bank of Florida – Southwest

1185 Immokalee Road

Naples, Fl 34110

FEI # 59-3615345

Ownership = 100%

2. Bank of Florida

110 East Broward Blvd., STE 100

Ft. Lauderdale, Fl 33301

FEI # 75-3001396

Ownership = 100%

3. Bank of Florida Trust Company

1185 Immokalee Road

Naples, Fl 34110

FEI # 59-658784

Ownership = 100%

4. Bank of Florida – Tampa Bay

777 So. Harbour Island Blvd., Ste 125

Tampa, Fl 33602

FEI # 59-658784

Ownership = 100%

EX-31.1

Exhibit 31.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER

I, Michael L. McMullan, certify that:

1. I have reviewed this annual report on Form 10-K of Bancshares of Florida, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer, as of, and for, the periods presented in this report;

4. The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report are conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s fourth quarter that has materially affected or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting;

5. The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of small business issuer’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting;

Date: March 7, 2006	By:	/s/ Michael L. McMullan
		Michael L. McMullan,
		Principal Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS OF CHIEF FINANCIAL OFFICER

I, Tracy L. Keegan, certify that:

1. I have reviewed this annual report on Form 10-K of Bancshares of Florida, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer, as of, and for, the periods presented in this report;

4. The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report are conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s fourth quarter that has materially affected or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting;

5. The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of small business issuer’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting;

Date: March 7, 2006	By:	/s/ Tracy L. Keegan
		Tracy L. Keegan
		Principal Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Annual Report of Bancshares of Florida, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2005 as filed with the Securities and Exchange Commission (the “Report”), I, Michael L. McMullan, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

Date: March 7, 2006	By:	/s/ Michael L. McMullan
		Michael L. McMullan,
		Principal Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Annual Report of Bancshares of Florida, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2005 as filed with the Securities and Exchange Commission (the “Report”), I, Tracy L. Keegan, Executive Vice President, Chief Financial Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002, that:

3. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

4. To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

Date: March 7, 2006	By:	/s/ Tracy L. Keegan
		Tracy L. Keegan,
		Principal Financial Officer