SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2001
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-32139
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FLORIDAFIRST BANCORP, INC.
--------------------------
(Exact name of registrant as specified in its charter)
Florida 59-3662010
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(State or other jurisdiction of incorporation (I.R.S. employer
or organization) identification no.)
205 East Orange Street, Lakeland, Florida 33801-4611
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (863) 688-6811
-----------------------------
N/A
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Former name, former address and former fiscal year,
if changed since last report.
Indicate by check |X| 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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date August 10, 2001.
Class Outstanding
- --------------------------------------- ------------------
$.10 par value common stock 5,521,850 shares
FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2001
INDEX
Page
Number
------
PART I - CONDENSED CONSOLIDATED FINANCIAL INFORMATION OF
FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY
Item 1. Financial Statements and Notes Thereto............................. 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 6
Item 3. Qualitative and Quantitative Disclosure About Market Risk.......... 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................................. 16
Item 2. Changes in Securities.............................................. 16
Item 3. Defaults upon Senior Securities.................................... 16
Item 4. Submission of Matters to a Vote of Security Holders................ 16
Item 5. Other Information.................................................. 16
Item 6. Exhibits and Reports on Form 8-K................................... 16
SIGNATURES.................................................................. 17
FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Financial Condition
(In thousands except share amounts)
(Unaudited)
June 30, September 30,
2001 2000
--------- -------------
ASSETS
Cash and cash equivalents $ 5,972 $ 6,734
Investment securities available for sale, at fair value 111,008 96,661
Investment securities held to maturity,
market value $8,750 and $9,391 8,685 9,687
Loans receivable,
net of allowance for loan losses of $3,588 and $3,321 474,216 440,386
Premises and equipment, net 9,896 8,935
Federal Home Loan Bank stock, at cost 7,670 7,925
Other assets 16,224 11,852
--------- ---------
Total assets $ 633,671 $ 582,180
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 389,174 $ 354,554
Federal Home Loan Bank advances 139,500 158,000
Other borrowings 6,542 2,937
Other liabilities 5,609 5,608
--------- ---------
Total liabilities 540,825 521,099
--------- ---------
Stockholders' equity:
Common stock, $ .10 par value, 80,000,000 shares authorized,
5,521,850 and 5,752,875 issued 552 575
Additional paid-in capital 52,018 25,085
Retained earnings 45,487 42,506
Treasury stock, at cost, -0- and 314,000 shares - (3,606)
Unallocated shares held by the employee stock ownership plan (5,410) (1,838)
Unallocated restricted stock plan shares (986) (410)
Accumulated other comprehensive income (loss) 1,185 (1,231)
--------- ---------
Total stockholders' equity 92,846 61,081
--------- ---------
Total liabilities and stockholders' equity $ 633,671 $ 582,180
========= =========
See accompanying notes to unaudited condensed consolidated financial statements
1
FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Earnings
(Unaudited)
For the three months ended For the nine months ended
June 30, June 30,
2001 2000 2001 2000
-------- -------- -------- --------
(In thousands, except per share amounts)
Interest income:
Loans $ 9,344 $ 8,318 $ 27,367 $ 23,894
Investments and other 2,041 1,953 5,990 5,269
-------- -------- -------- --------
Total interest income 11,385 10,271 33,357 29,163
-------- -------- -------- --------
Interest expense:
Deposits 4,450 3,995 13,395 11,433
Federal Home Loan Bank advances
and other borrowings 1,981 2,217 6,132 5,388
-------- -------- -------- --------
Total interest expense 6,431 6,212 19,527 16,821
-------- -------- -------- --------
Net interest income 4,954 4,059 13,830 12,342
Provision for loan losses 150 180 465 450
-------- -------- -------- --------
Net interest income after
provision for loan losses 4,804 3,879 13,365 11,892
-------- -------- -------- --------
Other income:
Fees and service charges 396 355 1,140 1,017
Net gain on sale of loans and investments 56 - 133 24
Other, net 277 168 706 432
-------- -------- -------- --------
Total other income 729 523 1,979 1,473
-------- -------- -------- --------
Other expenses:
Compensation and employee benefits 1,942 1,613 5,613 4,744
Occupancy and equipment 551 430 1,574 1,306
Marketing 66 76 260 382
Data processing 118 126 375 382
Federal insurance premiums 43 17 104 85
Other 739 642 2,189 2,095
-------- -------- -------- --------
Total other expenses 3,459 2,904 10,115 8,994
-------- -------- -------- --------
Income before income taxes 2,074 1,498 5,229 4,371
Income taxes 640 530 1,643 1,540
-------- -------- -------- --------
NET INCOME $ 1,434 $ 968 $ 3,586 $ 2,831
======== ======== ======== ========
Basic earnings per share $ 0.27 $ 0.18 $ 0.67 $ 0.52
======== ======== ======== ========
Diluted earnings per share $ 0.26 $ 0.18 $ 0.66 $ 0.51
======== ======== ======== ========
Dividends per share $ 0.05 $ 0.04 $ 0.14 $ 0.12
======== ======== ======== ========
Weighted average common and
common equivalent shares outstanding:
Basic 5,297 5,344(1) 5,344 5,449(1)
======== ======== ======== ========
Diluted 5,417 5,408(1) 5,467 5,543(1)
======== ======== ======== ========
(1) Shares outstanding for all applicable periods have been adjusted as of
the beginning of the periods to give effect to the 1.0321 exchange
ratio of previously issued shares in conjunction with the conversion
that was effective December 21, 2000.
See accompanying notes to unaudited condensed consolidated financial statements.
2
FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For The Nine Months
Ended June 30,
2001 2000
-------- --------
(In thousands)
Operating activities:
Net income $ 3,586 $ 2,831
Adjustments to reconcile net income to net cash used in operating activities:
Provision for loan losses 465 450
Depreciation 728 554
Increase in other assets (5,494) (5,335)
Increase in other liabilities 423 42
-------- --------
Net cash used in operating activities (292) (1,458)
-------- --------
Investing activities:
Proceeds from calls, maturities, sales and repayment of investment securities 28,228 16,860
Increase in loans, net (34,592) (35,222)
Purchase of investments available for sale (37,738) (40,877)
Net redemption (purchase) of FHLB stock 255 (2,980)
Purchases of premises and equipment (1,693) (2,001)
Proceeds on sale of premises and equipment 4 26
-------- --------
Net cash used in investing activities (45,536) (64,194)
-------- --------
Financing activities:
Net increase in deposits 34,620 18,311
Net increase (decrease) in FHLB advances (18,500) 56,425
Net increase (decrease) in other borrowings 3,605 (1,872)
Payments to acquire treasury stock - (3,606)
Payments to acquire shares held by the ESOP (3,897) -
Payments to acquire shares held by the RSP (673) (449)
Dividends paid (644) (282)
Net proceeds received from issuance of common stock 30,555 -
-------- --------
Net cash provided by financing activities 45,066 68,527
-------- --------
Net increase (decrease) in cash and cash equivalents (762) 2,875
Cash and cash equivalents at beginning of period 6,734 2,598
-------- --------
Cash and cash equivalents at end of period $ 5,972 $ 5,473
======== ========
Supplemental disclosure of cash flow information - Cash paid during the period
for:
Interest $ 19,625 $ 16,462
======== ========
Taxes $ 1,934 $ 1,071
======== ========
Supplemental disclosure of non-cash information:
Additions to investment in real estate acquired through foreclosure $ 297 $ 190
======== ========
Change in unrealized gain (loss) on investments available for sale, net of
deferred tax expense (benefit) of $1,419 and $(244) $ 2,416 $ (789)
========= ========
Net distribution of restricted stock plan shares $ 97 -
=========
Allocation of shares held by the ESOP $ 325 $ 360
========= ========
See accompanying notes to unaudited condensed consolidated financial statements.
3
FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and, therefore, do not include all
information necessary for a complete presentation of financial condition,
results of operations, and cash flows in conformity with generally accepted
accounting principles. However, all adjustments, consisting of normal recurring
accruals, which, in the opinion of management, are necessary for a fair
presentation of the consolidated financial statements have been included. The
results of operations for the three and nine-month periods ended June 30, 2001
and 2000 are not necessarily indicative of the results that may be expected for
the entire fiscal year or any other period. These statements should be read in
conjunction with the consolidated financial statements and related notes, which
are included in the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 2000.
FloridaFirst Bancorp, Inc. (the "Company") was formed as a corporation chartered
under the laws of the State of Florida in July 2000 at the direction of the
FloridaFirst Bank (the "Bank") to acquire all of the outstanding stock of the
Bank issued in connection with the Bank's plan of conversion and reorganization
from the mutual holding company form of organization to a full stock corporation
(the "Conversion"). The Conversion was completed on December 21, 2000.
Accordingly, all references prior to December 21, 2000 refer to FloridaFirst
Bancorp, the former middle tier holding company, which had stock outstanding
while in the mutual holding company form of organization prior to the
Conversion. The stock of FloridaFirst Bancorp was exchanged for stock of the
Company along with new shares issued in the Conversion. See Note 2 below for a
description of the Conversion.
Note 2 - CONVERSION FROM MUTUAL HOLDING COMPANY TO FULL STOCK COMPANY
The Bank, FloridaFirst Bancorp, and the former mutual holding company adopted
plans of merger and conversion to convert from a federally chartered mutual
holding company to a state chartered capital stock holding company known as
FloridaFirst Bancorp, Inc. The Conversion was accounted for similar to a pooling
of interests with no resulting change in the historical basis of the Company's
assets, liabilities and equity. The shares formerly held by the mutual holding
company were cancelled, the Company sold 3,147,952 new shares to the public and
the shares held by stockholders of FloridaFirst Bancorp were exchanged for
2,371,669 shares of the Company (the exchange ratio was 1.0321). Cash in lieu of
shares was issued for all fractional shares. As a result of the Conversion,
approximately $30.5 million was added to stockholders' equity in December 2000.
Note 3 - COMPREHENSIVE INCOME
Comprehensive income for the periods presented was as follows:
Three Months Ended Nine Months Ended
June 30, June 30,
2001 2000 2001 2000
------- ------- ------- -------
Net income $ 1,434 $ 968 $ 3,586 $ 2,831
Other comprehensive income (loss) 543 (376) 2,416 (789)
------- ------- ------- -------
Comprehensive income $ 1,977 $ 592 $ 6,002 $ 2,042
======= ======= ======= =======
Other comprehensive income (loss) consisted entirely of unrealized gains
(losses), net of deferred taxes, on available for sale securities.
4
Note 4 - WEIGHTED AVERAGE SHARES OUTSTANDING
The weighted average shares outstanding utilized for computing basic earnings
per share differs from the shares utilized for computing diluted earnings per
share due to net shares that are issuable pursuant to certain employee stock
benefit plans utilizing the treasury stock method.
Note 5 - EMPLOYEE STOCK OWNERSHIP PLAN
In connection with the Conversion, the Company's board of directors authorized
the Employee Stock Ownership Plan ("ESOP") to acquire 8% of the newly issued
shares, or 251,836 shares, for the benefit of the employees. The shares are to
be allocated over a ten-year period. During the quarter ended June 30, 2001, the
ESOP completed acquisition of all authorized shares through open market
purchases at an average cost of $15.27 per share. As of June 30, 2001 the ESOP
owned 475,086 shares of stock of the Company, or 8.6% of the outstanding shares.
5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward-Looking Statements
The Company may from time to time make written or oral forward-looking
statements, including statements contained in the Company's filings with the
Securities and Exchange Commission (the "Commission") and its reports to
stockholders. Statements made in such documents, other than those concerning
historical information, should be considered forward-looking and subject to
various risks and uncertainties. Such forward-looking statements are made based
upon management's belief as well as assumptions made by, and information
currently available to management, pursuant to "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. The Company's actual results
may differ materially from the results anticipated in forward-looking statements
due to a variety of factors, including governmental monetary and fiscal
policies, deposit levels, loan demand, loan collateral values, securities
portfolio values, and interest rate risk management; the effects of competition
in the banking business from other commercial banks, savings and loan
associations, mortgage banking firms, consumer finance companies, credit unions,
securities brokerage firms, insurance companies, money market mutual funds and
other financial institutions operating in the Company's market area and
elsewhere, including institutions operating through the Internet; changes in
governmental regulation relating to the banking industry, including regulations
relating to branching and acquisitions; failure of assumptions underlying the
establishment of reserves for losses, including the value of collateral
underlying delinquent loans, and other factors. The Company cautions that such
factors are not exclusive.
Overview
On December 21, 2000, FloridaFirst Bancorp, Inc. completed its second step
conversion from a mutual holding company structure to a full stock company. As
part of the mutual holding company reorganization, the shares formerly held by
the mutual holding company were cancelled, the Company sold 3,147,952 new shares
to the public and the shares held by stockholders of FloridaFirst Bancorp, the
former middle tier holding company, were exchanged for 2,371,669 shares of the
Company.
Unless the context otherwise indicates, all references to the Company include
its wholly owned subsidiary, the Bank. Prior to December 21, 2000, all
references refer to the Bank and FloridaFirst Bancorp.
Comparison of Financial Condition at June 30, 2001 and September 30, 2000
Assets. Total assets increased $51.5 million, or 8.8%, to $633.7 million at June
30, 2001 from $582.2 million at September 30, 2000. The increase in total assets
resulted primarily from a $33.8 million, or a 10.2% annualized, increase in the
loan portfolio attributable to steady loan demand in our market areas and
funding of construction loans. In addition, total investment securities
increased $13.3 million from September 30, 2000. Management plans to focus on
commercial and consumer loan growth to effectively utilize the new capital
raised in fiscal 2001. The capital leveraging strategy will also include the
purchase of investment securities to complement its loan origination efforts.
Other assets increased primarily due to a $5.0 million premium paid to purchase
bank owned life insurance in January 2001.
6
Liabilities. Total liabilities increased $19.7 million, or 3.8%, to $540.8
million at June 30, 2001 from $521.1 million at September 30, 2000. The increase
in total liabilities resulted primarily from a net deposit increase of $34.6
million offset by a $14.9 million net decrease in FHLB advances and other
borrowings. The increase in deposits in recent months reflects increases in
lower cost checking and money market accounts attributable to expansion of our
customer base and acquisition of additional certificate accounts through the
State of Florida public deposits program. Recent actions by the Federal Reserve
to decrease short-term interest rates appear to have caused customers to move
maturing certificates into the more liquid checking and money market accounts
until the interest rate environment settles.
Management continues to evaluate the available funding sources. The attributes
of the alternative funding sources that management considers in its analysis
include the interest and other costs of such funding, the maturity
considerations and the nature and characteristics of assets being funded.
Stockholders' Equity. The increase in the Company's stockholders' equity
reflects:
> net income for the nine months ended June 30, 2001 of $3.6 million
> net distribution of $97,000 from the restricted stock plan
> repurchase of shares of Company stock for the RSP at a cost of $673,000
> repurchase of shares of Company stock for the ESOP at a cost of $3.9
million
> repayment of $325,000 on the ESOP loan
> increase in accumulated other comprehensive income (loss) of $2.4 million
(attributable to the change in net unrealized market value on investments
available for sale)
> dividends paid that totaled $644,000
> net proceeds from the sale of common stock of $30.6 million
The increased value in accumulated other comprehensive income (loss) resulted
from the fluctuation in market value of the Company's investment securities
available for sale. Because of continued interest rate volatility, accumulated
other comprehensive income (loss) and stockholders' equity could materially
fluctuate for each interim and year-end period.
Comparison of Operating Results for the Three Months Ended June 30, 2001 and
June 30, 2000
Net Income. Net income for the three months ended June 30, 2001 increased 48.1%
to $1.4 million, compared to $968,000 for the same period in 2000. Net income
for the three months ended June 30, 2001 benefited from the deployment of $30.6
million in new capital for the entire period.
Net interest income increased $895,000, or 22.0%, for the three months ended
June 30, 2001 compared to the same period in 2000. This increase resulted
primarily from an increase in interest income of $1.1 million, offset by an
increase in interest expense of $219,000. Other expenses increased to $3.5
million for the three months ended June 30, 2001 from $2.9 million for the three
months ended June 30, 2000, primarily due to increases in compensation and
employee benefits, and occupancy and equipment costs related to an upgrade in
information technology.
7
Interest Income. The following discussion highlights the major factors that
impacted the changes in interest income during the quarter when compared to the
prior year. Details are contained in the Average Balance Sheet table at page 9.
> Loan growth remains steady, as the Company continues its increased emphasis
on commercial and consumer loan growth in an effort to restructure its loan
portfolio. Average commercial loans outstanding during the quarter
increased by approximately 51% from the same quarter in the preceding year.
> The average yield on loans increased 22 basis points to 7.94%, for the
three months ended June 30, 2001 compared to the same period in 2000,
primarily due to a change in the composition of the loan portfolio. Average
commercial and consumer loans represent approximately 31% of the loan
portfolio, compared to 28% last year. In addition, the sharp rise in
shorter-term interest rates throughout 2000 caused the consumer loan yields
to rise more quickly. The yield on mortgage and consumer loans increased 20
and 55 basis points, respectively, while the yield on commercial loans
decreased 50 basis points, for the three months ended June 30, 2001
compared to the same period in 2000. The decrease in the commercial loan
yield can be attributed to a change in the mix of the portfolio and the
intense competition for these loans, in addition to continued reduction in
short-term interest rates by the Federal Reserve.
> The average balances in the investment securities portfolio grew 10% as the
Company continued to pursue the strategy of leveraging the capital raised
in April 1999 and December 2000.
> The lower yield in the investment portfolio resulted from a shift to
shorter duration and adjustable rate investments in fiscal year 2001 to
manage the interest rate risk profile of the Company.
Interest Expense. The following discussion highlights the major factors that
impacted the changes in Interest Expense during the quarter when compared to the
prior year. Detailed changes are contained in the Average Balance Sheet table at
page 9.
> The increase in average deposits is attributable mainly to an increase in
rates to attract new deposits and retain current deposits. The inverted
yield curve that existed through much of fiscal 2000 and early 2001 placed
significant rate pressure on the shorter-term certificate accounts, which
represent a large part of the deposit base. The growth in average balances
in money market accounts has helped offset the increase costs related to
certificate accounts.
> Average FHLB advances outstanding increased this quarter compared to the
same quarter last year due to significant growth in earning assets that
were not funded through traditional deposit growth.
> The higher cost of deposits is reflective of the rise in interest rates
over the past year. The decrease in the cost of FHLB advances reflects the
Company's decision to keep the advances in very short-term maturities while
we were experiencing an inverted yield curve. Recent actions by the Federal
Reserve to decrease short-term interest rates has provided a more immediate
reduction in the cost of the advances.
Provision for Loan Losses. The provision for loan losses is charged to
operations to bring the total allowance for loan losses to an amount that
represents management's best estimate of the losses inherent in the loan
portfolio, based on historical experience, volume and type of lending conducted
by the Company, industry standards, the level and status of past due and
non-performing loans, the general economic conditions in its lending area and
other factors affecting the ability to collect on the loans in its portfolio.
8
Average Balance Sheet. The following table sets forth certain information
relating to the Company for the periods indicated. The average yields and costs
are derived by dividing income or expense by the average daily balance of assets
or liabilities, respectively, for the periods presented.
Three months Three months
June 30, 2001 June 30, 2000 Changes in
---------------------------- ----------------------------- --------------------------------
Average Yield/ Average Yield/ Yield/
Balance Interest Cost Balance Interest Cost Balances % Interest Cost
---------------------------- --------- ------------------ --------------------------------
Interest-earnings assets (IEA):
Mortgage loans $ 325,909 $ 6,234 7.65% $ 309,686 $ 5,767 7.45% $ 16,223 5% $ 467 0.20%
Consumer loans 84,148 1,847 8.78% 80,850 1,663 8.23% 3,298 4% 184 0.55%
Commercial loans 60,859 1,263 8.30% 40,362 888 8.80% 20,497 51% 375 -0.50%
--------- ------ --------- ---- ------- ----
Total loans
receivable $ 470,916 $ 9,344 7.94% $ 430,898 8,318 7.72% $ 40,018 9% $ 1,026 0.22%
Investments and other (1) 121,538 2,119 6.97% 110,826 2,016 7.28% 10,712 10% 103 -0.30%
--------- ------ --------- ------- -------- -------
Total (1) 592,454 $11,463 7.74% 541,724 $10,334 7.63% $ 50,730 9% $ 1,129 0.11%
======= ======= ======== =======
Other assets 29,598 19,632
--------- -------
Total assets $ 622,052 $ 561,356
========= =========
Interest-bearing liabilities (IBL):
Interest checking $ 32,670 $ 142 1.74% $ 32,870 $ 152 1.85% $ (200) -1% $ (10) -0.11%
Savings 27,537 119 1.73% 30,738 154 2.00% (3,201) -10% (35) -0.27%
Money market accounts 29,492 297 4.04% 25,213 263 4.17% 4,279 17% 34 -0.13%
Certificate accounts 264,393 3,892 5.90% 246,048 3,426 5.57% 18,345 7% 466 0.34%
-------- ------- -------- ------- -------- -------
Total deposits 354,092 4,450 5.04% 334,869 3,995 4.77% 19,223 6% 455 0.27%
Advances and other borrowings 148,188 1,981 5.29% 144,992 2,217 6.12% 3,196 2% (236) -0.83%
-------- ------- -------- ------- -------- -------
Total 502,280 $ 6,431 5.11% 479,861 $ 6,212 5.18% $ 22,419 5% $ 219 -0.06%
======= ======= ======== =======
Other liabilities 25,514 22,134
-------- --------
Total liabilities 527,794 501,995
Stockholders' equity 94,258 59,361
-------- --------
Total liabilities and equity $ 622,052 $561,356
========= ========
Net interest income (1) $ 5,032 $ 4,122
======= =======
Average IEA to IBL 118% 113%
Interest rate spread 2.63% 2.45%
Interest margin 3.40% 3.04%
(1) Interest income and net interest income do not agree to the statement of
operations because the tax equivalent income on municipal bonds is included
in this schedule.
9
The provision for loan losses was $150,000 for the three months ended June 30,
2001 compared to $180,000 for the three months ended June 30, 2000. The
provision for loan losses decreased for the current three-month period primarily
as a result of the Company's relatively low level of loss experience in
commercial real estate and residential mortgage loans. The allowance for loan
losses increased to $3.6 million at June 30, 2001 from $3.2 million at June 30,
2000. The current allowance represents .75% of loans outstanding at June 30,
2001. The Company had net charge-offs of $77,000 for the three months ended June
30, 2001 compared to net charge-offs of $37,000 for the same period in 2000. The
Company intends to maintain its allowance for loan losses commensurate with its
loan portfolio, especially its commercial real estate and consumer loan
portfolio.
Other Income. Other income increased $206,000 to $729,000 for the three months
ended June 30, 2001 from $523,000 for the three months ended June 30, 2000. The
major changes were:
> Net gain of $60,000 on sale of $4.5 million of mortgage loans
> Increase of $88,000 in the cash surrender value of bank owned life
insurance policies purchased in January 2001
> Increase of $40,000 in account service fees related to mortgage loans and
deposit accounts during the quarter.
Other Expense. Other expense increased by $555,000 to $3.5 million for the three
months ended June 30, 2001 from $2.9 million for the three months ended June 30,
2000.
> Compensation and employee benefits increased $329,000 primarily due to six
key staff positions added since last year, a new retail sales office was
operating in the current quarter (five new staff positions), 5% average
salary increases due to merit and cost of living adjustments, an increase
in retirement plan costs due to the increased price of Company stock in the
ESOP, an increased accrual for 401(k) plan contributions and other
compensation related accruals.
> Occupancy and equipment increased $121,000 due to implementation of new
technology and the opening of a new retail sales office
> Federal insurance premiums increased $26,000 due the assessment of federal
insurance premiums on deposits effective January 1, 2001 based on our
applicable risk classification by the Federal Deposit Insurance
Corporation.
> Other expense increased $97,000, including higher costs associated with the
outsourcing of additional internal audits and additional costs relating to
our deposit account administration.
Comparison of Operating Results for the Nine months Ended June 30, 2001 and June
30, 2000
Net Income. Net income for the nine months ended June 30, 2001 increased 26.7%
to $3.6 million, compared to $2.8 million for the same period in 2000. Net
income for the nine months ended June 30, 2001 benefited from the deployment of
$30.6 million in new capital raised in December 2000.
Net interest income increased $1.5 million or 12.1%, for the nine months ended
June 30, 2001 compared to the same period in 2000. This increase resulted
primarily from an increase in interest income of $ 4.2 million, offset by an
increase in interest expense of $2.7 million. Other income increased $506,000,
or 34.4%, to $2.0 million for the nine months ended June 30, 2001. Other
expenses increased to $10.1 million for the nine months ended June 30, 2001 from
$9.0 million for the nine months ended June 30, 2000, due to an accumulation of
several expense categories, as discussed at Other Expense.
10
Interest Income. The following discussion highlights the major factors that
impacted the changes in interest income during the nine months ended June 30,
2001 when compared to the prior year. Details are contained in the Average
Balance Sheet table at page 12.
> Loan growth remains steady, as the Company continues its increased emphasis
on commercial and consumer loan growth to restructure the loan portfolio.
Average commercial loans outstanding during the nine-month period increased
by approximately 47% from the same period in the preceding year. Mortgage
loans and consumer loans increased 6% and 6%, respectively, for the same
period.
> The average yield on loans increased 33 basis points to 7.95%, for the nine
months ended June 30, 2001 compared to the same period in 2000. The yield
on mortgage and consumer loans increased 31 basis points and 52 basis
points, respectively, while the yield on commercial loans decreased 10
basis points for the nine months ended June 30, 2001 compared to the same
period in 2000. The increased yields for mortgage and consumer loans was
primarily due to rising interest rates through 2000, while the decreased
yield for commercial loans was attributable to a change in the mix of the
portfolio and the intense competition for these loans.
> Average balances in the investment securities portfolio grew 16%, as the
Company continued to pursue the strategy of leveraging the capital raised
in April 1999 and December 2000.
> The slightly lower yield in the investment portfolio resulted from a shift
to shorter duration and adjustable rate investments in fiscal 2001 to
manage the interest rate risk profile of the Company.
Interest Expense. The following discussion highlights the major factors that
impacted the changes in Interest Expense during the nine months ended June 30,
2001 when compared to the prior year. Detailed changes are contained in the
Average Balance Sheet table at page 12.
> The increase in average deposits is attributable mainly to an increase in
rates to attract new deposits and retain current deposits. The inverted
yield curve that existed through much of fiscal 2000 and early 2001 placed
significant rate pressure on the shorter-term certificate accounts, which
represent a large part of the deposit base. The growth in average balances
in checking and money market accounts has helped offset the increased costs
related to certificate accounts.
> Average FHLB advances outstanding increased this six-month period compared
to the same period last year due to significant growth in earning assets
that were not funded through traditional deposit growth.
> The higher cost of funds related to deposits and FHLB advances is
reflective of the rise in interest rates over the past year; however,
recent actions by the Federal Reserve to decrease short-term interest rates
is beginning to provide relief to the overall cost of funds.
Provision for Loan Losses. The provision for loan losses was $465,000 for the
nine months ended June 30, 2001, compared to $450,000 for the nine months ended
June 30, 2000. The Company had net charge-offs of $199,000 for the nine months
ended June 30, 2001 compared to net charge-offs of $128,000 for the nine months
ended June 30, 2000.
Other Income. Other income increased $506,000 to $2.0 million for the nine-month
period ended June 30, 2001 from $1.5 million for the nine-month period ended
June 30, 2000. The major changes were:
> Net gain of $148,000 on the sales of $10.0 million of mortgage loans
> Increase of $248,000 in the cash surrender value of bank owned life
insurance policies purchased in January 2000 and 2001.
> Increase of $82,000 in retail account service charges, including
interchange fee income.
11
Average Balance Sheet. The following table sets forth certain information
relating to the Company for the periods indicated. The average yields and costs
are derived by dividing income or expense by the average daily balance of assets
or liabilities, respectively, for the periods presented.
Nine months Nine months
June 30, 2001 June 30, 2000 Changes in
---------------------------- ----------------------------- --------------------------------
Average Yield/ Average Yield/ Yield/
Balance Interest Cost Balance Interest Cost Balances % Interest Cost
---------------------------- --------- ------------------ --------------------------------
Interest-earnings assets (IEA):
Mortgage loans $ 321,585 $18,446 7.65% $ 302,883 $16,671 7.34% $ 18,702 6% $ 1,775 0.31%
Consumer loans 81,962 5,359 8.72% 77,624 4,776 8.20% 4,338 6% 583 0.52%
Commercial loans 55,574 3,561 8.54% 37,762 2,447 8.64% 17,812 47% 1,114 -0.10%
--------- ------ --------- ------- -------- -------
Total loans receivable $ 459,121 $27,366 7.95% $ 418,269 23,894 7.62% $ 40,852 10% $ 3,472 0.33%
Investments and other (1) (2) 117,439 6,203 7.04% 101,576 5,426 7.12% 15,863 16% 777 -0.08%
--------- ------ --------- ------- -------- -------
Total (1) 576,560 $33,569 7.76% 519,845 $29,320 7.52% $ 56,715 11% $ 4,249 0.24%
======= ======= ======== =======
Other assets 26,087 17,300
--------- ---------
Total assets $ 602,647 $ 537,145
========= =========
Interest-bearing liabilities (IBL):
Interest checking $ 32,254 $ 427 1.77% $ 31,354 $ 437 1.86% $ 900 3% $ (10) -0.09%
Savings 28,075 395 1.88% 31,476 404 1.71% (3,401) -11% (9) 0.17%
Money market accounts 27,537 947 4.60% 25,222 788 4.17% 2,315 9% 159 0.43%
Certificate accounts 258,648 11,549 5.97% 243,418 9,804 5.37% 15,230 6% 1,745 0.60%
--------- ------- --------- ------- -------- -------
Total deposits 346,514 13,318 5.14% 331,470 11,433 4.60% 15,044 5% 1,885 0.54%
Advances and other borrowings 140,361 6,132 5.76% 125,276 5,388 5.73% 15,085 12% 744 0.03%
--------- ------- --------- ------- -------- -------
Total 486,875 $19,450 5.32% 456,746 $16,821 4.91% $ 30,129 7% $ 2,629 0.41%
======= ======== =======
Other liabilities (3) 31,269 77 20,680
--------- ------- ---------
Total liabilities 518,144 $19,527 477,426
=======
Stockholders' equity 84,503 59,719
--------- ---------
Total liabilities and equity $ 602,647 $ 537,145
========= =========
Net interest income (1) $14,042 $12,499
======= =======
Average IEA to IBL 118% 114%
Interest rate spread 2.45% 2.61%
Interest margin 3.25% 3.21%
(1) Interest income and net interest income do not agree to the statement of
operations because the tax equivalent income on municipal bonds is included
in this schedule.
(2) Interest for fiscal 2001 includes interest income on $80.9 million of funds
received from the public stock offering.
(3) Interest includes interest expense on $80.9 million of funds received from
the public stock offering.
12
Other Expense. Other expense increased by $1.1 million to $10.1 million for the
nine months ended June 30, 2001 from $9.0 million for the nine months ended June
30, 2000.
> Compensation and employee benefits increased $869,000 primarily due to six
key positions added this year compared to last year, staffing for a new
retail sales office, 5% average salary increases due to merit and cost of
living adjustments, an increase in retirement plan costs due to the
increased price of Company stock in the ESOP, an increased accrual for
401(k) plan contributions and other compensation related accruals.
> Occupancy and equipment increased $268,000 due to implementation of new
technology and the opening a new retail sales office.
13
Liquidity and Capital Resources
The liquidity of a savings institution reflects its ability to provide funds to
meet loan requests, to accommodate possible outflows in deposits, and to take
advantage of interest rate market opportunities. Funding of loan requests,
providing for liability outflows, and management of interest rate fluctuations
require continuous analysis in order to match the maturities of specific
categories of short-term loans and investments with specific types of deposits
and borrowing. Savings institution liquidity is normally considered in terms of
the nature and mix of the savings institution's sources and uses of funds.
Asset liquidity is provided through loan repayments and the management of
maturity distributions for loans and securities. An important aspect of
liquidity lies in maintaining sufficient levels of loans and mortgage-backed
securities that generate monthly cash flows.
Cash and cash equivalents decreased $762,000 to $6.0 million for the nine months
ended June 30, 2001. Significant cash flows or uses (amounts shown in
parentheses) were as follows:
(In millions)
-----------
Cash used by operations $ ( .3)
FHLB advances and other borrowings (14.9)
Increase in net deposits 34.6
Maturities of and repayments on investment securities 28.2
Purchases of investment securities (37.7)
Net increase in loans (34.6)
Purchase of shares for employee benefit plans ( 4.6)
Net proceeds received from issuance of common stock 30.6
Other - net ( 2.1)
-------
Net decrease in cash and cash equivalents $ ( .8)
=======
See "Comparison of Financial Condition at June 30, 2001 and September 30, 2000"
for discussion of significant cash flows.
On June 30, 2001, the Bank was in compliance with its three regulatory capital
requirements as follows:
Amount Percent
------ -------
(In thousands)
Tangible capital........................... $ 68,126 10.82%
Tangible capital requirement............... 9,447 1.50
Excess over requirement.................... 58,679 9.32
Core capital............................... $ 68,126 10.82%
Core capital requirement................... 25,192 4.00
Excess over requirement.................... 42,934 6.82
Risk based capital......................... $ 71,641 17.70%
Risk based capital requirement............. 32,377 8.00
Excess over requirement.................... 39,264 9.70
Management believes that under current regulations, the Bank will continue to
meet its minimum capital requirements in the foreseeable future. Events beyond
the control of the Bank, such as increased interest rates or a downturn in the
economy in areas in which the Bank operates could adversely affect future
earnings and as a result, the ability of the Bank to meet its future minimum
capital requirements.
14
ITEM 3. Qualitative and Quantitative Disclosure About Market Risk
Qualitative Analysis. There have been no material changes from the Qualitative
Analysis information regarding market risk disclosed under the heading
"Management of Interest Rate Risk and Market Risk" in the Company's Management's
Discussion and Analysis of Financial Condition and Results of Operations for the
year ended September 30, 2000.
Quantitative Analysis. Exposure to interest rate risk is actively monitored by
management. The Company's objective is to maintain a consistent level of
profitability within acceptable risk tolerances across a broad range of
potential interest rate environments. The Company uses the OTS Net Portfolio
Value ("NPV") Model to monitor its exposure to interest rate risk, which
calculates changes in net portfolio value. Reports generated from assumptions
provided and modified by management are reviewed by the Asset/Liability
Management Committee and reported to the Board of Directors quarterly. The
Interest Rate Sensitivity of Net Portfolio Value Report shows the degree to
which balance sheet line items and net portfolio value are potentially affected
by a 100 to 300 basis point (1 basis point equals 1/100th of a percentage point)
upward and downward parallel shift (shock) in the Treasury yield curve.
Since the OTS NPV Model measures exposure to interest rate risk of the Bank to
assure capital adequacy for the protection of the depositors, only the Bank's
financial information is used for the model. However, the Bank is the only
subsidiary and significant asset of the Company, therefore the OTS NPV model
provides a reliable basis upon which to perform the quantitative analysis. The
following table presents the Company's NPV as of March 31, 2001. The results of
the NPV model are not yet available for June 30, 2001, but no significant
changes are anticipated in the NPV as a Percentage of Present Value of Assets.
The NPV was calculated by the OTS, based on information provided by the Company.
Net Portfolio Value ("NPV") NPV as % of Present Value of Assets
----------------------------------- -----------------------------------
Change Basis Point
In Rates $ Amount $ Change % Change NPV Ratio Change
- -------- -------- -------- -------- --------- ------
(Dollars in thousands)
- -----------------------------------------------------------------------------------
+300 bp $ 35,796 -37,382 -51% 6.26% -548 bp
- -----------------------------------------------------------------------------------
+200 bp 48,946 -24,232 -33% 8.31% -343 bp
- -----------------------------------------------------------------------------------
+100 bp 61,498 -11,680 -16% 10.14% -159 bp
- -----------------------------------------------------------------------------------
0 bp 73,178 11.74%
- -----------------------------------------------------------------------------------
-100 bp 80,455 +7,277 +10% 12.62% +89 bp
- -----------------------------------------------------------------------------------
-200 bp 84,554 +11,376 +16% 13.03% +129 bp
- -----------------------------------------------------------------------------------
-300 bp 88,581 +15,402 +21% 13.39% +165 bp
- -----------------------------------------------------------------------------------
The Bank received a $16.0 million capital infusion in December from the holding
company in connection with the Conversion. The Bank's NPV ratio as of March 31,
2001, at a 200 basis point upward shock in interest rates, increased to 8.31%, a
significant increase from the 4.81% as of September 30, 2000. The OTS defines
the sensitivity measure as the change in NPV Ratio with a 200 basis point shock.
The Bank's sensitivity measure reflects a 343 basis point decline in NPV ratio
as of March 31, 2001. This compares to a sensitivity measure of 437 basis points
as of September 30, 2000. The Bank performs, on a quarterly basis, a dynamic
business simulation that reflects an on-going business entity.
15
FLORIDAFIRST BANCORP, INC.
PART II
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor the Bank was engaged in any legal
proceeding of a material nature at June 30, 2001. From time to
time, the Company is a party to routine legal proceedings in
the ordinary course of business, such as claims to enforce
liens, condemnation proceedings on properties in which the
Company holds security interests, claims involving the making
and servicing of real property loans, and other issues
incident to the business of the Company. There were no
lawsuits pending or known to be contemplated against the
Company at June 30, 2001 that would have a material effect on
the operations or income of the Company or the Bank, taken as
a whole.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit Number
--------------
3(i) Articles of Incorporation for FloridaFirst Bancorp, Inc.*
3(ii) Bylaws of FloridaFirst Bancorp, Inc.*
4 Specimen Stock Certificate of FloridaFirst Bancorp, Inc.*
10.1 Employment Agreement with Gregory C. Wilkes*
10.2 Form of Employment Agreement with Four Employees of the Bank*
10.3 1999 Stock Option Plan **
10.4 Restricted Stock Plan **
* Incorporated by reference to the Registrant's Registration Statement on
Form S-1 initially filed with the Commission on September 5, 2000 (File No.
333-45150).
** Incorporated by reference to the identically numbered exhibits to the Form
10-K filed by FloridaFirst Bancorp, Inc. on December 29, 1999 (File No.
0-25693).
16
(b) Reports on Form 8-K
On May 29, 2001 FloridaFirst Bancorp, Inc. filed a
Form 8-K to announce that the Board of Directors had
changed its independent auditors from KPMG LLP to
Hacker, Johnson & Smith PA for the fiscal year ending
September 30, 2001.
FLORIDAFIRST BANCORP, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FLORIDAFIRST BANCORP, INC.
Date: August 10, 2001 By: /s/Gregory C. Wilkes
-------------------------------------
Gregory C. Wilkes
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 10, 2001 By: /s/Kerry P. Charlet
------------------------------------
Kerry P. Charlet
Chief Financial Officer
(Principal Accounting Officer)
17