FLORIDAFIRST BANCORP, INC.
Corporate Profile
FloridaFirst Bancorp, Inc. is the parent company of and conducts most of its
business operations through FloridaFirst Bank (the "Bank"). The Bank, a
federally-chartered savings bank headquartered in Lakeland, Florida, is a
community-oriented retail savings bank offering a full range of deposit services
to both consumers and commercial entities. The Bank's lending activities include
residential real estate mortgage loans, commercial real estate loans, other
commercial loans and consumer loans. The Bank has operated within its market
areas since 1934 and delivers its products and services through eleven offices
located in Florida's Polk and Manatee Counties.
On April 6, 1999, FloridaFirst Bank reorganized from a mutual savings
association into a mutual holding company named FloridaFirst Bancorp MHC and
formed FloridaFirst Bancorp, a middle-tier holding company, whereby FloridaFirst
Bank became a wholly-owned subsidiary of FloridaFirst Bancorp. In connection
with the reorganization, FloridaFirst Bancorp sold 2,703,851 shares of its
Common Stock to the public and the remaining 3,049,024 shares were held by
FloridaFirst Bancorp MHC. On December 21, 2000, FloridaFirst Bancorp, Inc. (the
"Company") completed its stock offering in connection with the conversion and
reorganization of FloridaFirst Bank (the "Bank") and its holding company,
FloridaFirst Bancorp, from the mutual holding company form of organization to a
full stock company. As part of the conversion and reorganization, the shares
formerly held by FloridaFirst Bancorp MHC 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 2,372,048 shares of the Company.
Stock Market Information and Dividends
Since its issuance on April 6, 1999, the Company's common stock has traded on
the Nasdaq National Market under the symbol FFBK. Upon completion of the
conversion and reorganization on December 21, 2000, the common stock continues
to trade on the Nasdaq National Market under the same symbol, FFBK. The
following table sets forth market price information, based on closing prices, as
reported by the Nasdaq National Market for the common stock high and low sales
prices for the periods indicated. The stock prices prior to December 22, 2000
are adjusted to reflect the exchange ratio of 1.0321 after the conversion and
reorganization. See Note 17 of the consolidated financial statements for a
summary of quarterly financial data.
Cash Dividends
High Low Per Share Declared
---- --- ------------------
Fiscal 2001
- -----------
First Quarter................ $12.56 $10.62 $.04
Second Quarter............... 15.00 12.31 .05
Third Quarter................ 16.10 14.53 .05
Fourth Quarter............... 17.48 13.75 .05
Fiscal 2000
- -----------
First Quarter................ $9.09 $8.24 $.04
Second Quarter............... 8.60 7.08 .04
Third Quarter................ 7.99 7.02 .04
Fourth Quarter............... 11.87 7.63 .04
The number of stockholders of record of common stock as of September 30, 2001
was approximately 756, which do not include the number of persons or entities
who held stock in nominee or "street" name through various brokerage firms.
3
Selected Financial Highlights
(In thousands except per share data)
2001 2000 1999 1998(3) 1997
-------- -------- -------- -------- --------
At September 30:
Assets ............................... $660,369 $582,180 $498,358 $414,472 $466,765
Loans, net ........................... 474,155 440,386 397,910 338,610 355,551
Securities ........................... 129,534 106,348 80,876 60,961 74,573
Cash and cash equivalents ............ 21,676 6,734 2,598 647 21,842
Deposits ............................. 399,537 354,554 339,224 352,180 429,714
FHLB advances and other borrowings ... 160,548 160,937 92,472 21,000 --
Stockholders' equity ................. 93,814 61,081 61,337 36,107 33,588
Actual number (not in thousands):
Real estate loans outstanding ........ 4,481 4,615 4,696 4,433 5,149
Deposit accounts ..................... 36,168 36,747 38,409 38,409 46,012
Full service offices ................. 11 9 9 9 14
For the year ended September 30:
Interest income ................... $ 44,846 $ 39,840 $ 32,648 $ 32,141 $ 33,865
Interest expense .................. 25,895 23,575 17,128 18,966 19,702
-------- -------- -------- -------- --------
Net interest income ............... 18,951 16,265 15,520 13,175 14,163
Provision for loan losses ......... 615 630 540 405 317
-------- -------- -------- -------- --------
Net interest income after provision
for loan losses .............. 18,336 15,635 14,980 12,770 13,846
Noninterest income ................ 2,487 2,114 1,473 4,347 1,189
Noninterest expenses .............. 13,776 11,813 11,448 13,581 11,209
-------- -------- -------- -------- --------
Income before income taxes ........ 7,047 5,936 5,005 3,536 3,826
Income taxes ...................... 2,178 2,094 1,748 1,151 1,299
-------- -------- -------- -------- --------
Net income ........................ $ 4,869 $ 3,842 $ 3,257 $ 2,385 $ 2,527
======== ======== ======== ======== ========
Basic earnings per share (1) (2)... $ .92 $ .71 $ .33 -- --
======== ======== ======== ======== ========
Diluted earnings per share (1) (2). $ .90 $ .70 $ .33 -- --
======== ======== ======== ======== ========
Weighted average common and common
Equivalent shares
outstanding: (1) (2)
Basic (4).................... 5,293 5,424 5,727 -- --
Diluted(4)................... 5,429 5,516 5,727 -- --
- -----------------
(1) Year 2001 includes $30.6 million in net proceeds from the issuance of
common stock in connection with the conversion from a mutual holding
company to a full stock company on December 21, 2000.
(2) Years 2000 and 1999 include $25.7 million in net proceeds from the
reorganization on April 6, 1999. Prior to April 6, 1999, the Bank was a
mutual institution. Therefore, earnings per share and weighted average
shares outstanding in 1999 are for the six months ended September 30,
1999 (period subsequent to the reorganization.)
(3) During fiscal year 1998, the Bank sold five branches (and $55.5 million
in related deposits) that were not contiguous to its primary market area
for a pre-tax gain of $3.0 million. In connection with the sale of
branches, the Bank transferred $44.6 million in loans. In addition,
noninterest expenses includes special benefit plan adjustments of $2.2
million.
(4) Shares outstanding for the years ended 2000 and 1999 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.
4
Selected Financial Ratios
At or For the Year Ended September 30,
---------------------------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Performance Ratios:
Return on average assets (net income
divided by average total assets) ..... .80% .70% .72% .55% .56%
Return on average equity (net income
divided by average equity) ........... 5.61 6.43 6.65 6.55 7.71
Net interest-rate spread ................. 2.51 2.54 2.95 2.65 2.87
Net interest margin on average
interest-earnings assets ............. 3.30 3.13 3.56 3.10 3.23
Average interest-earning assets to
average interest-bearing liabilities . 118 113 116 110 108
Efficiency ratio (noninterest expense,
other than the $2.5 million SAIF
special assessment in 1997, divided
by the sum of net interest income and
noninterest income) .................. 64 64 67 78 74
Asset Quality Ratios:
Nonperforming loans to total loans, net .. .20 .17 .21 .25
Nonperforming assets to total assets ..... .30 .17 .21 .32 .53
Net charge-offs to average loans
outstanding ......................... .06 .06 .04 .14 .02
Allowance for loan losses to total loans . .76 .75 .74 .76 .74
Capital Ratios:
Average equity to average assets
(average equity divided by average
total assets) ...................... 14.17 10.94 10.84 8.31 7.25
Equity to assets at period end ........... 14.21 10.49 12.31 8.62 7.20
Dividend payout ratio .................... 21 22 12 -- --
5
Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the Selected
Financial Highlights, Selected Financial Ratios and the Consolidated Financial
Statements and related notes beginning at page 17.
General
On April 6, 1999, FloridaFirst Bank reorganized from a mutual savings
association into a mutual holding company named FloridaFirst Bancorp MHC and
formed FloridaFirst Bancorp, a middle-tier holding company, whereby FloridaFirst
Bank became a wholly-owned subsidiary of FloridaFirst Bancorp. In connection
with the reorganization, FloridaFirst Bancorp sold 2,703,851 shares of its
Common Stock to the public and the remaining 3,049,024 shares were held by
FloridaFirst Bancorp MHC.
On December 21, 2000, FloridaFirst Bancorp, Inc. (the "Company") completed its
stock offering in connection with the conversion and reorganization of
FloridaFirst Bank (the "Bank") and its holding company, FloridaFirst Bancorp,
from the mutual holding company form of organization to a full stock company. As
part of the conversion and reorganization, the shares formerly held by
FloridaFirst Bancorp MHC 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 2,372,048 shares of the Company. The conversion and reorganization
was accounted for in a manner similar to a pooling of interests, whereby the
assets and liabilities of FloridaFirst Bancorp became the Company's assets and
liabilities.
Forward-Looking Statements
The following discussions contain forward-looking statements that are based on
assumptions and describe future plans, strategies, and expectations of the Bank
and the Company. These forward-looking statements are generally identified by
use of the words "believe," "expect," "intend," "anticipate," "estimate,"
"project," or similar expressions. The Company's ability to predict results or
the actual effect of future plans or strategies is inherently uncertain. Factors
that could have a material adverse effect on the operations of the Company and
its subsidiaries include, but are not limited to, changes in interest rates,
general economic conditions, legislative/regulatory changes, monetary and fiscal
policies of the U.S. Government, including policies of the U.S. Treasury and the
Federal Reserve Board, the quality and composition of the loan and investment
portfolios, demand for loan products, deposit flows, competition, demand for
financial services in the Company's market area, and changes in relevant
accounting principles. These risks and uncertainties should be considered in
evaluating forward-looking statements and undue reliance should not be placed on
such statements. The Company does not undertake--and specifically disclaims--any
obligation to publicly release the results of any revisions after the date of
the statements or to reflect the occurrence of anticipated or unanticipated
events.
Business Strategy
The Board of Directors and management have developed expansion plans that
include three de novo retail sales offices within its existing market areas (two
were opened during the current year) and continued deployment of a strategic
technology plan. By seeking to broaden the range of its products and services
offered, the Company believes its strategies will offset the declining margins
in the competitive market for one- to four-family residential mortgage loans.
The strategic plan includes:
> increasing the percentage of higher yielding and more interest sensitive
assets;
> increasing the percentage of commercial and consumer loans and commercial
deposit accounts;
> utilizing alternative sources of funding at reasonable rates;
> increasing sources of non-interest income;
> utilizing our computer network for enhanced sales, service and security
features; and
> utilizing alternative delivery systems, including our internet banking
product, and investigating an enhanced customer care center strategy.
6
Highlights of the business strategy are as follows:
Community-Oriented Institution. Based on total assets, the Bank is the largest
independent financial institution headquartered in Polk County, Florida. The
Bank is committed to meeting the financial needs of the communities in which it
operates. Management believes that the Bank is large enough to provide a full
range of personal and business financial services, and yet is small enough to
provide such services in a personalized and efficient manner. It is the Bank's
current plan to deliver the products and services that meet the needs of its
customers, including the recent introduction of an Internet banking product.
Commercial Banking. The Bank continues to expand its lending programs for
commercial business and commercial real estate loans in an effort to satisfy a
perceived need within its market area and increase its loan portfolio. The Bank
continues to realize a positive impact on its net interest margin since
commercial customers generally provide a higher loan yield and a source of lower
cost funds. The risks of commercial lending relate to the source of repayment of
the loan which is weighted toward the ability to repay versus being primarily
collateral dependent. In recent years, the Bank has assembled a very strong
commercial lending team to support its increased activities in this area and to
increase its penetration into the smaller businesses operating in its market
areas.
Management of Interest Rate-Risk and Market Risk
Qualitative Analysis. Because the majority of the Company assets and liabilities
are sensitive to changes in interest rates, its most significant form of market
risk is interest-rate risk, or changes in interest rates. The Company is
vulnerable to an increase in interest rates to the extent that interest-bearing
liabilities mature or reprice more rapidly than interest-earning assets. Its
lending activities have historically emphasized the origination of long-term,
fixed-rate loans secured by single-family residences. The primary source of
funds has been deposits with substantially shorter maturities. While having
interest-bearing liabilities that reprice more frequently than interest-earning
assets is generally beneficial to net interest income during a period of
declining interest rates, such an asset/liability mismatch is generally
detrimental during periods of rising interest rates. In addition, the customers'
optionality to repay a loan or renegotiate the interest rate on the loan when
interest rates move in their favor creates an additional variable in managing
the asset/liability structure of the Bank.
The Board of Directors has established an asset/liability committee that
consists of the Company's president and senior banking officers. The committee
meets on a monthly basis to review loan and deposit pricing and production
volumes, interest rate risk analysis, liquidity and borrowing needs, and a
variety of other asset and liability management issues.
To reduce the effect of interest rate changes on net interest income, the
Company has adopted various strategies to improve the matching of
interest-earning asset maturities to interest-bearing liability maturities. The
principal elements of these strategies include:
> the origination of commercial and consumer loans with adjustable-rate
features or fixed-rate loans with shorter term maturities;
> lengthening the maturities of liabilities when deemed cost effective
through the pricing and promotion of certificates of deposit and
utilization of Federal Home Loan Bank advances;
> attracting low cost checking and transaction accounts which tend to be less
sensitive to rising rates; and
> when market conditions permit, to originate and hold in its portfolio
adjustable-rate mortgage loans which have periodic interest rate
adjustments. The Company also maintains a securities portfolio that
provides a stable cash flow, thereby providing investable funds in varying
interest rate cycles.
The Company has also made a significant effort to maintain its level of lower
cost deposits as a method of enhancing profitability. At September 30, 2001, the
Company had 29.1% of its deposits in savings, checking and money market
accounts. These deposits have traditionally remained relatively stable and are
expected to be only moderately affected in a period of rising interest rates.
This stability has enabled the Company to offset the impact of rising rates in
other deposit accounts.
7
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 NPV. The NPV Model measures interest-rate risk by
computing estimated changes in the NPV of cash flow from assets, liabilities and
off-balance sheet items in the event of a range of assumed changes in market
interest rates. The NPV Model shows the degree to which balance sheet line items
and NPV are potentially affected by a 100 to 300 basis point change. One basis
point equals 1/100th of a percentage point. Reports generated by the NPV Model
are reviewed by the Asset/Liability Management Committee and reported to the
Board of Directors quarterly.
The NPV Model uses an option-based pricing approach to value one- to four-family
mortgages, mortgages serviced by or for others, and firm commitments to buy,
sell, or originate mortgages. This approach makes use of an interest rate
simulation program to generate numerous random interest rate paths that, in
conjunction with a prepayment model, are used to estimate mortgage cash flows.
Prepayment options and interest rate caps and floors contained in mortgages and
mortgage-related securities introduce significant uncertainty in estimating the
timing of cash flows for these instruments that warrants the use of this
sophisticated methodology. All other financial instruments are valued using a
static discounted cash flow method. Under this approach, the present value is
determined by discounting the cash flows the instrument is expected to generate
by the yields currently available to investors from an instrument of comparable
risk and duration.
Future interest rates and their effects on NPV and net interest income are not
predictable. Computations of prospective effects of hypothetical interest rate
changes are based on numerous assumptions, including relative levels of market
interest rates, prepayments, and deposit run-offs, and should not be relied upon
as indicative of actual results. Certain shortcomings are inherent in such
computations. Although certain assets and liabilities may have similar maturity
or periods of repricing, they may react at different times and in different
degrees to changes in the market interest rates. The interest rate on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while rates on other types of assets and liabilities may lag
behind changes in market interest rates. Certain assets, such as adjustable rate
mortgages, generally have features that restrict changes in interest rates on a
short-term basis and over the life of the asset. After a change in interest
rates, prepayments and early withdrawal levels could deviate significantly from
those assumed in making calculations set forth above. Additionally, an increased
credit risk may result if our borrowers are unable to meet their repayment
obligations as interest rates increase.
The following table presents our NPV as of September 30, 2001. The NPV was
calculated by the OTS, based upon the above model assumptions and financial
information provided by the Company. As illustrated in the table, the
calculations show that the Company would be adversely affected by increases in
interest rates and would benefit slightly by decreases in interest rates
(dollars in thousands).
Net Portfolio Value ("NPV") NPV as % of Present Value of Assets
--------------------------------- -----------------------------------
Change Basis Point
In Rates $ Amount $ Change % Change NPV Ratio Change
- -------- -------- -------- -------- --------- ------
+300 bp 32,642 (42,790) (57)% 5.30% (584) bp
+200 bp 47,080 (28,352) (38)% 7.40% (373) bp
+100 bp 61,954 (13,478) (18)% 9.43% (171) bp
0 bp 75,432 11.14%
-100 bp 83,708 8,276 11% 12.07% 93 bp
-200 bp 85,886 10,455 14% 12.19% 105 bp
The OTS defines the sensitivity measure as the change in NPV ratio with a 200
basis point shock. Our sensitivity measure reflects a 373 basis point decline in
NPV ratio as of September 30, 2001 compared to a sensitivity measure of 437
basis points as of September 30, 2000. The improvement in our sensitivity
measure at September 30, 2001 primarily reflects the significant decrease in
short-term interest rates from September 30, 2000.
8
Comparison of Financial Condition at September 30, 2001 and September 30, 2000
Assets. Total assets increased $78.2 million, or 13.4%, to $660.4 million at
September 30, 2001 from $582.2 million at September 30, 2000. The increase in
total assets resulted primarily from a $33.8 million, or a 7.7% increase in the
loan portfolio attributable to steady loan demand in our market areas, and
funding of construction loans. In addition, securities increased $23.2 million.
Management plans to focus on loan growth to effectively leverage its capital.
The capital leveraging strategy will include the purchase of securities to
complement its loan origination efforts.
Cash and cash equivalents increased $14.9 million due to: (a) excess funds
resulting from $11.0 million in a treasury borrowings program that placed funds
in the Bank late in the year; and (b) higher mortgage loan prepayments in
September 2001.
Premises and equipment increased $2.0 million primarily due to the construction
of a new office, equipment for two offices, renovations at several offices and
capital expenditures to implement certain phases of the strategic technology
plan.
Other assets increased primarily due to the cash surrender value of bank owned
life insurance policies that were purchased in January 2001.
Liabilities. Total liabilities increased $45.5 million, or 8.7%, to $566.6
million at September 30, 2001 from $521.1 million at September 30, 2000. The
increase in total liabilities resulted primarily from a net deposit increase of
$45.0 million. The increase in deposits in the last half of the year reflects
renewed consumer interest in insured deposit accounts as the equity markets
declined significantly. In addition, our checking and money market accounts
continue to grow through expansion of our customer base.
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.
On December 6, 2001, the Bank signed a definitive agreement with SunTrust Bank
("SunTrust") to purchase seven Florida branches from SunTrust coincident with
SunTrust's acquisition of such branches from Huntington National Bank
("Huntington"). Four of the Huntington branches are located in Lakeland,
Florida, and one each in Avon Park and Sebring in Highlands County, and one
branch in Wildwood, Florida. The transaction will include assumption of
approximately $165 million in deposits and the purchase of approximately $25
million in loans related to the seven branches.
Stockholder's Equity. The $32.7 million increase in the stockholders' equity
reflects the $30.6 million in net proceeds from the issuance of common stock,
and $4.9 million in net income. The net increase in stockholders' equity for the
year also reflects:
> repurchase of 35,000 shares of the Company's stock at a cost of $481,000;
> purchase of 51,889 shares of the Company's stock for the restricted stock
plan at a cost of $733,000, less shares issued at a cost of approximately
$157,000;
> repayment of $325,000 on the Employee Stock Ownership Plan ("ESOP") loan;
> purchase of 251,836 shares of the Company's stock for the ESOP at a cost of
$3.9 million; and
> dividends paid that totaled $921,000.
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 market opportunities. Funding loan requests, providing for
liability outflows, and managing interest rate fluctuations require continuous
analysis in order to match the maturities of short-term loans and investments
with specific types of deposits and borrowings. An institution's liquidity is
normally considered in terms of the nature and mix of the institution's sources
and uses of funds.
9
Assets providing liquidity are generated through loan repayments, loan sale and
the management of maturity distributions for loans and securities. An important
aspect of liquidity management lies in maintaining sufficient levels of loans
and mortgage-backed securities that generate monthly cash flows.
Cash and cash equivalents increased $14.9 million to $21.7 million for the year
ended September 30, 2001. Significant cash flows or uses (amounts shown in
parentheses) were as follows (in millions):
Cash provided by operations................................................. $ 7.2
Federal Home Loan Bank advances and other borrowings........................ (.4)
Increase in net deposits.................................................... 45.0
Sales, maturities of and repayments on securities........................... 46.6
Net purchases of securities and FHLB stock.................................. (65.2)
Net purchases of premises and equipment..................................... (3.4)
Net increase in loans....................................................... (34.7)
Purchase of bank owned life insurance....................................... (5.0)
Payments to acquire treasury stock, ESOP and restricted stock plan shares... (5.1)
Net proceeds from the issuance of common stock.............................. 30.6
Dividends paid.............................................................. (.9)
Other - net................................................................. .2
------
Net increase in cash and cash equivalents................................... $ 14.9
======
The Company is subject to federal regulations that impose certain minimum
capital requirements. For a discussion on such capital levels, see Note 10 in
the consolidated financial statements.
Management is not aware of any known trends, events or uncertainties that will
have or are reasonably likely to have a material effect on the Company's
liquidity, capital or operations nor is management aware of any current
recommendation by regulatory authorities, which if implemented, would have such
an effect.
Analysis of Net Interest Income
Historically, the Company's earnings have depended primarily on its net interest
income, which is the difference between interest income earned on its loans and
securities ("interest-earning assets") and interest paid on its deposits and any
borrowed funds ("interest-bearing liabilities"). Net interest income is affected
by:
> the interest-rate spread - the difference between rates of interest earned
on interest-earning assets and rates paid on its interest-bearing
liabilities; and
> the aggregate amounts of its interest-earning assets and interest-bearing
liabilities.
10
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 balance of assets or
liabilities, respectively, for the periods presented. Similar information is
provided as of September 30, 2001. Average balances are derived from daily
average balances.
Year ended September 30,
---------------------------------------------------------------------------------------
September 30, 2001 2001 2000 1999
------------------ ---------------------------- --------------------------- ----------------------------
Average Average Average
Average Yield/ Average Yield/ Average Yield/
Balance Rate Balance Interest Cost Balance Interest Cost Balance Interest Cost
------- ---- ------- -------- ---- ------- -------- ---- ------- -------- ----
(Dollars in thousands)
Interest-earning assets:
Mortgage $ 322,569 7.42% $ 322,388 $ 24,544 7.61% $ 305,854 $ 22,686 7.42% $ 270,939 $ 20,442 7.54%
Consumer 86,199 8.53 82,966 7,233 8.72 78,438 6,487 8.27 64,025 5,340 8.34
Commercial 69,039 7.72 58,215 4,894 8.41 39,117 3,297 8.43 33,549 2,700 8.05
--------- --------- ------- --------- ------- --------- -------
Total loans (1) 477,807 7.66 463,569 36,671 7.91 423,409 32,470 7.67 368,513 28,482 7.73
Securities and
other (2) (6) 151,791 6.57 121,925 8,552 7.01 102,800 7,592 7.39 71,557 4,314 6.03
--------- --------- ------- --------- ------- --------- -------
Total interest-
earning assets 629,598 7.40 585,494 45,223 7.72 526,209 40,062 7.61 440,070 32,796 7.45
------- ------- -------
Noninterest-earning
assets 30,771 26,915 19,890 11,606
--------- --------- --------- ---------
Total assets $ 660,369 $ 612,409 $ 546,099 $ 451,676
========= ========= ========= =========
Interest-bearing
liabilities:
Checking accounts $ 34,705 1.67 $ 32,937 590 1.79 $ 31,416 576 1.83 $ 27,193 486 1.79
Savings accounts 27,547 1.51 27,940 486 1.74 31,012 581 1.87 36,469 612 1.68
Money market accounts 33,768 3.19 28,766 1,205 4.19 25,008 1,068 4.27 20,740 796 3.84
Certificate accounts 283,211 5.64 263,512 15,519 5.89 245,754 13,519 5.50 245,915 12,833 5.22
--------- --------- ------- --------- ------- --------- -------
Total deposits 379,231 4.76 353,155 17,800 5.04 333,190 15,744 4.73 330,317 14,727 4.46
FHLB advances and other
borrowings 160,548 5.20 142,536 8,018 5.63 132,054 7,831 5.93 49,884 2,401 4.81
--------- --------- ------- --------- ------- --------- -------
Total interest-
bearing
liabilities 539,779 4.89 495,691 25,818 5.21 465,244 23,575 5.07 380,201 17,128 4.50
------- -------
Noninterest-
bearing
liabilities (3)(7) 26,776 29,960 77 21,094 22,491
--------- --------- ------- --------- ---------
Total liabilities 566,555 525,651 25,895 486,338 402,692
Stockholders' equity 93,814 86,758 59,761 48,984
--------- --------- --------- ---------
Total liabilities and
stockholders' equity $ 660,369 $ 612,409 $ 546,099 $ 451,676
========= ========= ========= =========
Net interest income (6) $19,328 $ 16,487 $ 15,668
======= ======== ========
Interest rate spread (4) 2.51% 2.51% 2.54% 2.95%
==== ==== ==== ====
Net margin on interest-
earning assets (5) 3.20% 3.30% 3.13% 3.56%
==== ==== ==== ====
Average interest-earning
assets to average
interest-bearing
liabilities 117% 118% 113% 116%
==== ==== ==== ====
- --------------------
(1) Average balances include non-accrual loans.
(2) Securities includes both securities that are available for sale and held to
maturity. Includes interest-bearing deposits in other financial
institutions and FHLB stock.
(3) Includes noninterest-bearing checking accounts.
(4) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(5) Net margin on interest-earning assets represents net interest income as a
percentage of average interest-earning assets.
(6) Interest income and net interest income do not agree to the consolidated
statement of earnings because the tax equivalent income (based on effective
tax rate of 34%) on municipal bonds is included in this schedule.
(7) Interest includes interest expense on $80.9 million of funds received from
the public stock offering.
11
Rate/Volume Analysis. The relationship between the volume and rates of the
Company's interest-earning assets and interest-bearing liabilities affects the
Company's net interest income. The following table reflects the sensitivity of
the Company's interest income and interest expense to changes in volume and in
prevailing interest rates during the periods indicated. Each category reflects
the: (1) changes in volume (changes in volume multiplied by old rate); (2)
changes in rate (changes in rate multiplied by old volume); and (3) net change.
The net change attributable to the combined impact of volume and rate has been
allocated proportionally to the absolute dollar amounts of change in each.
Year Ended September 30, Year Ended September 30,
----------------------------- -----------------------------
2001 vs. 2000 2000 vs. 1999
----------------------------- -----------------------------
Increase (Decrease) Due to Increase (Decrease) Due to
----------------------------- -----------------------------
Volume Rate Net Volume Rate Net
------- ------- ------- ------- ------- -------
(Dollars in thousands)
Interest income:
Loans............................... $ 3,153 $ 1,048 $ 4,201 $ 4,208 $ (220) $ 3,988
Securities and other ............... 1,315 (355) 960 2,163 1,115 3,278
------- ------- ------- ------- ------- -------
Total interest income ......... $ 4,468 $ 693 $ 5,161 $ 6,371 $ 895 $ 7,266
======= ======= ======= ======= ======= =======
Interest expense:
Checking accounts .................. $ 27 $ (13) $ 14 $ 77 $ 13 $ 90
Savings accounts ................... (55) (40) (95) (140) 109 (31)
Money market accounts .............. 157 (20) 137 176 96 272
Certificates of deposit ............ 1,011 989 2,000 (8) 694 686
FHLB advances and other borrowings.. 567 (303) 264 4,760 670 5,430
------- ------- ------- ------- ------- -------
Total interest expense ........ $ 1,707 $ 613 $ 2,320 $ 4,865 $ 1,582 $ 6,447
======= ======= ======= ======= ======= =======
Change in net interest income ...... $ 2,761 $ 80 $ 2,841 $ 1,506 $ (687) $ 819
======= ======= ======= ======= ======= =======
12
Comparison of Operating Results for the Years Ended September 30, 2001 and
September 30, 2000
Net Income. Net income for the year ended September 30, 2001 increased $1.0
million, or 26.7% to $4.9 million, compared to $3.8 million for the same period
in 2000. Net income for the year ended September 30, 2001 benefited from the
deployment of $30.6 million in new capital received from stock issued in
December 2000.
> Net interest income increased $2.7 million, or 16.5%, for the year ended
September 30, 2001 compared to the same period in 2000. This increase
resulted primarily from interest income increasing $5.0 million, offset by
an increase in interest expense of $2.3 million,
> Noninterest income increased by $373,000 from 2000 to 2001 due mainly to
increase in cash surrender value on the bank owned life insurance product
and gains on sale of mortgage loans, offset by a writedown of a security,
and
> Noninterest expenses increased $2.0 million to $13.8 million for the year
ended September 30, 2001 from $11.8 million for the year ended September
30, 2000, due to an accumulation of several expense categories, as
discussed below.
Interest Income. The following discussion highlights the major factors that
impacted the changes in interest income during the year ended September 30, 2001
when compared to the prior year. Details are contained in the table at page 11.
> Loan growth reflected strong commercial loan demand over the past year.
While the Company's major emphasis was on commercial and consumer loan
origination efforts, mortgage originations remained strong throughout 2001.
> The yield on loans increased due to the emphasis placed on commercial and
consumer loans in our market areas. New mortgage loan rates decreased
throughout the latter half of 2001. Although new mortgage loan rates
decreased throughout most of the year, about 54% of the Company's new
originations were construction loans that were not fully disbursed during
the year. The result of the timing on the construction loan disbursements
kept the yields on mortgage loans from decreasing in relation to the
overall decrease in mortgage loan pricing.
> The average balances in the securities portfolio grew 5.2% primarily due to
the Company's strategy to leverage capital that was raised in the stock
offering.
> The yield in the securities portfolio decreased as a result of a steady
decrease in market interest rates throughout fiscal 2001. In addition,
securities growth followed a strategy that saw securities purchased that
had slightly shorter average lives.
Interest Expense. The following discussion highlights the major factors that
impacted the changes in interest expense during the year ended September 30,
2001 when compared to the prior year. Detailed changes are contained in the
table at page 11.
> Deposits grew 6.0% because the Company pursued a slightly aggressive
pricing strategy as interest rates fell and the equity markets experienced
significant volatility.
> FHLB advances grew because the Company considers the advances to be a
cost-effective funding alternative. Although the costs of the advances
exceed the cost of certificate accounts, funding asset growth through
certificate accounts was deemed to be more expensive than wholesale
funding. In addition, FHLB advances provide a funding vehicle to assist the
Company in extending the duration of its liabilities.
> The reduction in cost of funds related to the FHLB advances is reflective
of the drop in interest rates over the past year. The reduction in the cost
of the advances was not as significant as the overall drop in interest
rates because of certain higher rate convertible advances taken in fiscal
2000 that have extended liability duration as rates have dropped.
13
Provision for Loan Losses. The provision for loan losses is charged to
operations to bring the total allowance for loan losses to a level that
represents management's best estimates of the losses inherent in the portfolio,
based on historical experience, volume and type of lending conducted by the
Company, industry standards, the level and status of past due and nonperforming
loans, the general economic conditions in the Company's lending area and other
factors affecting the collectibility of the loans in its portfolio. For the year
ended September 30, 2001, the provision for loan losses was $615,000 compared to
$630,000 for fiscal 2000. The allowance for loan losses at September 30, 2001
increased $331,000 from September 30, 2000. Our non-performing loans increased
$198,000 for the period, classified assets increased $2.0 million and our
commercial and consumer loans increased in the aggregate of approximately $22.5
million from September 30, 2000. Such increases in classified loans and
commercial and consumer loans precipitated the increase in the provision for
loan losses. The allowance for loan loss is maintained at a level that
represents management's best estimates of losses in the loan portfolio at the
balance sheet date. However, there can be no assurance that the allowance for
losses will be adequate to cover losses which may be realized in the future and
that additional provisions for losses will not be required.
Noninterest Income. Noninterest income increased by $373,000 to $2.5 million for
the year ended September 30, 2001. The major components of the increase was due
to the following:
> Gains of $228,000 recognized on the sale of $13.9 million in long term
fixed-rate mortgage loans.
> Loss of $257,000 due to the impairment of a security classified as
available for sale. The security had been downgraded below investment grade
and during the fourth quarter the issuer had filed for bankruptcy. The fair
value of this security could decline further and the Company could
recognize further losses.
> Increase of $331,000 in cash surrender value of bank-owned life insurance.
> Increase of $60,000 in checking and savings account service fees.
> Increase of $64,000 in income from increased debit card and ATM usage.
Noninterest Expenses. Noninterest expenses increased by $2.0 million to $13.8
million for the year ended September 30, 2001 from $11.8 million for the year
ended September 30, 2000. The major components of the increase was due to the
following:
> Compensation and employee benefits increased $1.4 million due primarily to:
o an approximate 10% increase in staffing;
o annual salary adjustments;
o increased health insurance claims during the year;
o increased expenses related to the ESOP due to the increase in the
Company's stock price.
> Occupancy and equipment costs of $410,000, due primarily to:
o new customer delivery software, including an internet banking package;
o the opening of two new branch office locations;
o remodeling costs at the main office.
> Other expenses increased by $303,000 primarily due to the following:
o increased telephone expense due to enhanced data and voice
communications;
o increase in ATM and debit card usage;
o increased check clearing charges due to increased volume of items
processed;
> Offsetting the increase in noninterest expenses was a $116,000 decrease in
marketing expense due to:
o a bidding process instituted for vendors in order to better control
costs;
o emphasis on community support programs versus media advertising,
providing greater exposure within the communities we serve.
14
Comparison of Operating Results for the Years Ended September 30, 2000 and
September 30, 1999
Net Income. Net income for the year ended September 30, 2000 increased 18.0% to
$3.8 million, compared to $3.3 million for the same period in 1999. Net income
for the year ended September 30, 2000 benefited from the deployment of $23.5
million in new capital received from stock issued in April 1999.
> Net interest income increased $745,000, or 4.8%, for the year ended
September 30, 2000 compared to the same period in 1999. This increase
resulted primarily from interest income increasing $7.2 million, offset by
an increase in interest expense of $6.4 million,
> Noninterest income increased by $641,000 from 1999 to 2000 due mainly to
increase in cash surrender value on the bank owned life insurance product
and an increase in fees from consumer related products, and
> Noninterest expenses increased to $11.8 million for the year ended
September 30, 2000 from $11.4 million for the year ended September 30,
1999, due to an accumulation of several expense categories, as discussed
below.
Interest Income. The following discussion highlights the major factors that
impacted the changes in interest income during the year ended September 30, 2000
when compared to the prior year. Details are contained in the table at page 11.
> Loan growth reflects strong loan demand over the past year and the
Company's increased emphasis on loan origination efforts.
> The yield on loans decreased slightly due to the competitive pricing for
commercial and consumer loans in our market areas. Although new mortgage
loan rates increased throughout most of the year, about 50% of the
Company's new originations were construction loans that were not fully
disbursed during the year. In addition, construction loans that were
originated in 1999 when mortgage loan rates were lower were funded during
2000. The result of the timing on the construction loan disbursements kept
the yields on mortgage loans from increasing in relation to the overall
increase in mortgage loan pricing.
> The average balances in the investment securities portfolio grew 44%
primarily due to the Company's strategy to leverage capital that was raised
in the stock offering.
> The higher yield in the investment portfolio resulted from the leveraging
strategy in the latter part of fiscal 1999 and throughout fiscal 2000 when
rates had risen significantly over the prior year. In addition, the
investment growth occurred in securities that had slightly longer average
lives with higher yields.
Interest Expense. The following discussion highlights the major factors that
impacted the changes in Interest Expense during the year ended September 30,
2000 when compared to the prior year. Detailed changes are contained in the
table at page 11.
> Deposits remained fairly level primarily by maintaining a conservative
deposit pricing strategy, utilizing more cost effective funding
alternatives that are available for the terms the Company has considered
appropriate to fit its interest rate management strategies. This strategy
was offset however, by special promotions to increase certificate accounts.
The growth in checking account average balances has helped offset the
slight decline in certificate accounts.
> FHLB advances grew because the Company considered the advances to be a more
cost-effective funding alternative during the course of the year. Although
the costs of the advances exceed the cost of certificate accounts, funding
asset growth through certificate accounts was deemed to be more expensive
than wholesale funding.
> The higher cost of funds related to the FHLB advances is reflective of the
significant rise in interest rates over the past year.
15
Provision for Loan Losses. The provision for loan losses is charged to
operations to bring the total allowance for loan losses to a level that
represents management's best estimates of the losses inherent in the portfolio,
based on historical experience, volume and type of lending conducted by the
Company, industry standards, the level and status of past due and nonperforming
loans, the general economic conditions in the Company's lending area and other
factors affecting the collectibility of the loans in its portfolio. For the year
ended September 30, 2000, the provision for loan losses was $630,000 compared to
$540,000 for the comparable 1999 period. The allowance for loan losses at
September 30, 2000 increased $380,000 from September 30, 1999. Though our
non-performing loans decreased $68,000 for the period, our classified assets
increased slightly and our commercial and consumer loans increased in the
aggregate of approximately $16.7 million from September 30, 1999. Such increases
in classified loans and commercial and consumer loans precipitated the increase
in the provision for loan losses.
Noninterest Expenses. Noninterest expenses increased by $365,000 to $11.8
million for the year ended September 30, 2000 from $11.4 million for the year
ended September 30, 1999. The major components of the increase was due to the
following:
> Compensation and employee benefits increased $505,000 due primarily to an
approximate 5% increase in staffing and annual salary adjustments and
$180,000 in expenses relating to the restricted stock plan.
> Other expenses increased by $202,000 primarily due to the following:
o certain Year 2000 costs totaling $50,000;
o direct costs related to stockholder meetings, communications, legal
matters and new financial reporting requirements as a public company
totalling $45,000;
o increased effort on charging off uncollected fees and overdrawn
accounts totalling $90,000;
o accelerated vesting of restricted stock due to the death of a director
totalling $35,000.
> Offsetting the increase in noninterest expenses was a decrease of:
o occupancy and equipment costs of $126,000 primarily due to the
elimination of franchise taxes previously accrued in property taxes;
and
o federal insurance premiums of $111,000 due to the decrease in premium
rates by the FDIC on January 1, 2000.
Impact of Inflation and Changing Prices
The consolidated financial statements and accompanying notes presented elsewhere
in this prospectus have been prepared in accordance with generally accepted
accounting principles which generally requires the measurement of financial
position and operating results in terms of historical dollars without
considering the change in the relative purchasing power of money over time and
due to inflation. The impact of inflation is reflected in the increased cost of
the Company's operations. As a result, interest rates have a greater impact on
the Company's performance than do the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or, to the same
extent, as prices of goods and services.
16
FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
For the Three Years Ended
SEPTEMBER 30, 2001
17
FLORIDAFIRST BANCORP, INC. and SUBSIDIARY
Consolidated Statements of Financial Condition
(In thousands, except share amounts)
At September 30,
----------------------
ASSETS 2001 2000
--------- ---------
Cash and due from banks $ 7,439 $ 6,189
Interest-bearing deposits 14,237 545
--------- ---------
Total cash and cash equivalents 21,676 6,734
Securities available for sale, at fair value 129,534 96,661
Securities held to maturity, market value of $9,391 -- 9,687
Loans, net of allowance for loan losses of $3,652 and $3,321 474,155 440,386
Premises and equipment, net 10,944 8,935
Federal Home Loan Bank stock, at cost 7,670 7,925
Cash surrender value of bank-owned life insurance 10,795 5,232
Other assets 5,595 6,620
--------- ---------
TOTAL ASSETS $ 660,369 $ 582,180
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 399,537 $ 354,554
Federal Home Loan Bank advances 149,500 158,000
Other borrowings 11,048 2,937
Other liabilities 6,470 5,608
--------- ---------
Total liabilities 566,555 521,099
--------- ---------
Commitments and contingencies (Notes 4, 5, 14 and 15) -- --
Stockholders' equity:
Preferred stock, $ .10 par value,
20,000,000 shares authorized, none issued or outstanding -- --
Common stock, $ .10 par value,
80,000,000 shares authorized, 5,521,850 and 5,937,542 issued 552 575
Additional paid-in capital 52,059 25,085
Retained earnings 46,454 42,506
Treasury stock, at cost, 35,000 and 418,597 shares (481) (3,606)
Unallocated shares held by the employee stock ownership plan (5,410) (1,838)
Unallocated shares held by the restricted stock plan (986) (410)
Accumulated other comprehensive income (loss) 1,626 (1,231)
--------- ---------
Total stockholders' equity 93,814 61,081
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 660,369 $ 582,180
========= =========
See notes to consolidated financial statements.
18
FLORIDAFIRST BANCORP, INC. and SUBSIDIARY
Consolidated Statements of Earnings
(In thousands, except per share amounts)
Year ended September 30,
------------------------------
2001 2000 1999
-------- -------- --------
Interest and dividend income:
Loans $ 36,671 $ 32,470 $ 28,482
Securities 7,526 6,837 3,671
Other 649 533 495
-------- -------- --------
Total interest and dividend income 44,846 39,840 32,648
-------- -------- --------
Interest expense:
Deposits 17,800 15,744 14,727
Federal Home Loan Bank advances and other borrowings 8,095 7,831 2,401
-------- -------- --------
Total interest expense 25,895 23,575 17,128
-------- -------- --------
Net interest income 18,951 16,265 15,520
Provision for loan losses 615 630 540
-------- -------- --------
Net interest income after provision for loan losses 18,336 15,635 14,980
-------- -------- --------
Noninterest income:
Fees and service charges 1,264 1,147 991
Gain (loss) on sale of loans and securities (25) 16 (22)
Increase in cash surrender value of bank-owned life insurance 563 232 --
Other, net 685 719 504
-------- -------- --------
Total noninterest income 2,487 2,114 1,473
-------- -------- --------
Noninterest expenses:
Compensation and employee benefits 7,689 6,325 5,820
Occupancy and equipment costs 2,165 1,755 1,881
Marketing 336 452 534
Data processing costs 500 498 521
Other 3,086 2,783 2,692
-------- -------- --------
Total noninterest expenses 13,776 11,813 11,448
-------- -------- --------
Income before income taxes 7,047 5,936 5,005
Income taxes 2,178 2,094 1,748
-------- -------- --------
NET INCOME $ 4,869 $ 3,842 $ 3,257
======== ======== ========
Basic earnings per share (1) (2) $ 0.92 $ 0.71 $ 0.33
======== ======== ========
Diluted earnings per share (1) (2) $ 0.90 $ 0.70 $ 0.33
======== ======== ========
Weighted-average common and common equivalents shares outstanding: (1) (2)
Basic 5,293 5,424 5,727
======== ======== ========
Diluted 5,429 5,516 5,727
======== ======== ========
(1) FloridaFirst converted from a mutual holding company to a full stock
company on December 21, 2000.
(2) FloridaFirst converted to a stock company on April 6, 1999. Earnings per
share and weighted average shares outstanding for 1999 represent the six
months ended September 30, 1999 (period subsequent to the conversion.)
See notes to consolidated financial statements.
19
FLORIDAFIRST BANCORP, INC. and SUBSIDIARY
Consolidated Statements of Stockholders' Equity and Comprehensive Income
(In thousands, except per share data)
Accumu-
lated
other
compre- Total
Number Additional hensive Compre- Unallocated Unallocated stock-
of Common paid-in Retained Treasury income hensive shares held shares held holders'
shares stock capital earnings Stock (loss) income by the ESOP by RSP equity
-------- ------ ---------- -------- -------- ---------------- ------------ ----------- ----------
Balance at September 30, 1998 $ 35,887 $ 220 $36,107
Stock issuance, net
of issuance costs of $1,239 5,753 $ 575 $ 25,124 $ (2,163) 23,536
Comprehensive income:
Net income 3,257 $ 3,257 3,257
Change in unrealized loss
on securities available
for sale, net (1,456) (1,456) (1,456)
-------
Total comprehensive income $ 1,801
=======
Dividends ($ .04 per share) (107) (107)
-------- ----- -------- -------- ------- ------- ------ -------
Balance at September 30, 1999 5,753 575 25,124 39,037 (1,236) (2,163) 61,337
Shares repurchased, at cost $(3,606) (3,606)
Fair value of ESOP shares
allocated (39) 325 286
Shares acquired for RSP,
at cost $ (410) (410)
Comprehensive income:
Net income 3,842 $ 3,842 3,842
Change in unrealized gain
(loss) on securities
available for sale, net 5 5 5
-------
Total comprehensive income $ 3,847
=======
Dividends ($ .16 per share) (373) (373)
-------- ----- -------- -------- ------- ------- ------- ------ -------
Balance at September 30, 2000 5,753 575 25,085 42,506 (3,606) (1,231) (1,838) (410) 61,081
Stock issuance, net of
issuance costs of $1,007 3,148 315 30,245 30,560
Convert common and retire
treasury stock (3,381) (338) (3,268) 3,606 -
Proceeds from exercise of
stock options 2 18 18
Shares repurchased, at cost (35) (481) (481)
Fair value of ESOP and RSP
shares allocated (21) 325 157 461
Shares acquired for ESOP
and RSP, at cost (3,897) (733) (4,630)
Comprehensive income:
Net income 4,869 $ 4,869 4,869
Change in unrealized gain
(loss) on securities
available for sale, net 2,857 2,857 2,857
-------
Total comprehensive income $ 7,726
=======
Dividends ($ .19 per share) (921) (921)
-------- ----- -------- -------- ------- ------- ------- ------ -------
Balance at September 30, 2001 5,487 $ 552 $ 52,059 $ 46,454 $ (481) $ 1,626 $(5,410) $ (986) $93,814
======== ===== ======== ======== ======= ======= ======= ====== =======
See notes to consolidated financial statements.
20
FLORIDAFIRST BANCORP, INC. and SUBSIDIARY
Consolidated Statements of Cash Flows
(Dollars in thousands)
Year ended September 30,
--------------------------------
2001 2000 1999
-------- -------- --------
Cash flows from operating activities:
Net income $ 4,869 $ 3,842 $ 3,257
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Provision for loan losses 615 630 540
Deferred income tax benefit (278) (187) (39)
Depreciation 995 700 759
(Gain) loss on sale of securities available for sale 222 (5) 22
Loss of sale of securities held to maturity 12 -- --
Originations of loans held for sale (14,989) -- --
Gain on sale of loans held for sale (209) (14) --
Proceeds from sale of loans held for sale 15,258 -- --
Allocation of shares held by ESOP and RSP 461 286 --
Increase in cash surrender value of life insurance policies (563) (232) --
Increase in accrued interest receivable (281) (962) (366)
Decrease in other assets 205 210 95
Increase (decrease) in other liabilities 862 104 (338)
-------- -------- --------
Net cash provided by operating activities 7,179 4,372 3,930
-------- -------- --------
Cash flows from investing activities:
Proceeds from calls, maturities, sales and
repayments of securities available for sale 36,879 16,353 24,069
Proceeds from calls, maturities, sales and
repayments of securities held to maturity 9,675 3,037 6,012
Net increase in loans (34,742) (42,813) (59,782)
Purchases of securities available for sale (65,440) (44,845) (52,358)
Purchase of bank owned life insurance (5,000) (5,000) --
Net redemption (purchase) of FHLB stock 255 (3,450) (1,611)
Purchases of premises and equipment (3,408) (2,843) (883)
Proceeds on sale of premises and equipment 404 26 520
-------- -------- --------
Net cash used in investing activities (61,377) (79,535) (84,033)
-------- -------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits 44,983 15,330 (12,956)
Net increase (decrease) in FHLB advances (8,500) 70,400 66,600
Net increase (decrease) in other borrowings 8,111 (1,935) 4,874
Payments to acquire treasury stock (481) (3,606) --
Payments to acquire shares held by the ESOP (3,897) -- --
Payments to acquire shares held by the RSP (733) (410) --
Net proceeds received from issuance of common stock 30,578 -- 23,536
Dividends paid (921) (480) --
-------- -------- --------
Net cash provided by financing activities 69,140 79,299 82,054
-------- -------- --------
Net increase in cash and cash equivalents 14,942 4,136 1,951
Cash and cash equivalents at beginning of year 6,734 2,598 647
-------- -------- --------
Cash and cash equivalents at end of year $ 21,676 $ 6,734 $ 2,598
======== ======== ========
Supplemental disclosure of cash flow information -
Cash paid during the year for:
Interest $ 25,948 $ 22,966 $ 15,963
======== ======== ========
Taxes $ 2,374 $ 2,099 $ 1,406
======== ======== ========
Supplemental disclosure of non-cash information:
Additions to real estate acquired through foreclosure $ 298 $ 221 $ 76
======== ======== ========
Transfer loans to loans held for sale $ 1,253 -- --
========
Change in unrealized gain (loss) on securities available for sale,
net of deferred taxes (benefit) of $1,677, $3 and $(852), respectively $ 2,857 $ 5 $ (1,456)
======== ======== ========
Dividends declared -- -- $ 107
========
See notes to consolidated financial statements.
21
FLORIDAFIRST BANCORP, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
September 30, 2001 and 2000 and each of the years in the three-year period ended
September 30, 2001
(1) General, Reorganization and Summary of Significant Accounting Policies
General. FloridaFirst Bancorp, Inc. (the "Company") is the parent of and
conducts its business principally through the FloridaFirst Bank (the
"Bank"). The Bank, a federally-chartered savings bank headquartered in
Lakeland, Florida, is a community-oriented savings institution that
delivers retail and commercial banking services through eleven full
service locations. Principal sources of income are derived through
interest earned on loans and investments. The primary sources of funds
are customer deposits and Federal Home Loan Bank advances. The Bank is
subject to various regulations governing savings institutions and is
subject to periodic examination by its primary regulator, the OTS.
Reorganization. On April 6, 1999, the Bank reorganized from a mutual
savings association into a mutual holding company named FloridaFirst
Bancorp MHC ("MHC") and formed FloridaFirst Bancorp (the "Bancorp"), a
middle-tier holding company, whereby the Bank became a wholly-owned
subsidiary of the Bancorp (the "Reorganization"). In connection with the
Reorganization, the Bancorp sold 2,703,851 shares of its Common Stock to
the public and the remaining 3,049,024 shares were held by MHC. On
December 21, 2000, the Company completed its stock offering in connection
with the conversion and reorganization of the Bank and its holding
company, the Bancorp, from the mutual holding company form of
organization to a full stock company (the "Conversion"). As part of the
conversion and reorganization, the shares formerly held by MHC were
cancelled, the Company sold 3,147,952 new shares to the public and the
shares held by stockholders of the Bancorp were exchanged for 2,372,048
shares of the Company.
At the time of the Conversion, the Bank established a liquidation account
in an amount equal to its equity as reflected in the statement of
financial condition used in the final Conversion prospectus. The
liquidation account will be maintained for the benefit of eligible
account holders and supplemental eligible account holders who continue to
maintain their accounts at the Bank after the Conversion. The liquidation
account will be reduced annually, to the extent that eligible and
supplemental eligible account holders have reduced their qualifying
deposits as of each anniversary date. Subsequent increases in balances
will not restore an eligible or supplemental eligible account holder's
interest in the liquidation account. In the event of a complete
liquidation of the Bank, each eligible and supplemental eligible account
holder will be entitled to receive a distribution from the liquidation
account in an amount proportionate to the current adjusted qualifying
balances for accounts then held.
Subsequent to the Conversion, the Bank may not declare or pay cash
dividends on its shares of common stock if the effect thereof would cause
equity to be reduced below applicable regulatory capital maintenance
requirements or if such declaration and payment would otherwise violate
regulatory requirements.
Principles of Consolidation. The consolidated financial statements have
been prepared in conformity with accounting principles generally accepted
in the United States of America and include the accounts of the Company
and the Bank. All intercompany transactions and balances have been
eliminated in consolidation.
22
Use of Estimates. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, and the
reported amount of revenues and expenses during the reporting period. The
major estimate by management that is critical to the consolidated
financial statements is the appropriate level of allowance for loan
losses which can be significantly impacted by future industry, market and
economic trends and conditions. Actual results could differ from these
estimates. Regulatory agencies, as a part of their examination process,
periodically review the Company's allowance for loan losses. Such
agencies may require the Company to recognize changes in the allowance
based on their judgements of information available to them at the time of
their examination.
Cash and Cash Equivalents. For financial statement purposes, the Company
considers cash, due from banks and interest-bearing accounts with
original maturities of three months or less in other financial
institutions to be cash and cash equivalents.
Securities. Securities available for sale are stated at fair value.
Unrealized gains and losses on securities available for sale, net of
taxes, are included in accumulated other comprehensive income or loss in
the consolidated statements of financial condition until these gains or
losses are realized. Securities available for sale that experience a
decline in fair value that is other than temporary are written down to
fair value and the resultant losses are reflected in the consolidated
statements of earnings. Gains and losses on the sale of securities
available for sale are recorded on the trade date and determined using
the specific identification method.
Securities held to maturity are securities that management has the
intent, and the Company has the ability at the time of purchase, to hold
until maturity. Securities in this category are carried at amortized cost
adjusted for accretion of discounts and amortization of premiums using
the level-yield method over the estimated life of the securities. If a
security has a decline in fair value below its amortized cost that is
other than temporary, then the security will be written down to its new
cost basis by recording a loss in the consolidated statements of
earnings.
Capital stock in the Federal Home Loan Bank of Atlanta ("FHLB") is held
in accordance with certain requirements of the FHLB. The Company's
investment is carried at cost and serves as collateral for FHLB advances.
Loans Held For Sale. Loans originated and held for sale by the Company
are carried at the lower of cost or market using the specific
identification method. Gains and losses on the sale of such loans are
recognized using the specific identification method. The Company held
$1.2 million and $-0- of loans held for sale at September 30, 2001and
September 30, 2000, respectively.
Mortgage Loan Interest Income. The Company provides an allowance for
uncollected interest generally on all accrued interest related to loans
90 days or more delinquent. This allowance is netted against accrued
interest receivable for financial statement disclosure. Such interest, if
ultimately collected, is credited to income in the period of recovery.
Loan Fees. Loan origination and commitment fees and certain related costs
are deferred and amortized over the contractual maturities, adjusted for
anticipated prepayments, as an adjustment to yield using the level-yield
method. For loans on non-accrual, such amortization ceases.
23
Loans and Provisions for Losses. Loans are stated at unpaid principal
balances, less loans in process and an allowance for loan losses.
The Company follows a consistent procedural discipline and accounts for
loan loss contingencies in accordance with Statement of Financial
Accounting Standards (SFAS) No. 5, Accounting for Contingencies, and
accounts for impaired loans in conformity with SFAS No. 114, Accounting
by Creditors for Impairment of a Loan, as amended by SFAS No. 118,
Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosure. The following is a description of how each portion of the
allowance for loan losses is determined.
The Company segregates the loan portfolio for loan loss purposes into the
following broad segments: commercial real estate, residential real
estate, and consumer. The Company provides for an allowance for losses in
the portfolio by the above categories, which consists of two components:
general loss percentages and specific loss analysis.
General loss percentages are calculated based upon historical analyses. A
portion of the allowance is calculated for inherent losses which
management believes exist as of the evaluation date even though they
might not have been identified by the more objective processes used. This
is due to the risk of error and/or inherent imprecision in the process.
This portion of the allowance is particularly subjective and requires
judgments based on qualitative factors which do not lend themselves to
exact mathematical calculations such as: trends in delinquencies and
nonaccruals; migration trends in the portfolio; trends in volume, terms,
and portfolio mix; new credit products and/or changes in the geographic
distribution of those products; changes in lending policies and
procedures; loan review reports on the efficacy of the risk
identification process; changes in the outlook for local, regional and
national economic conditions; concentrations of credit; and peer group
comparison.
Allowances are also provided in the event that the specific collateral
analysis on a loan indicates that the estimated loss upon liquidation of
collateral would be in excess of the general percentage allocation. The
provision for loan losses is debited or credited in order to state the
allowance for loan losses to the required level as determined above.
The Company considers a loan to be impaired when it is probable that the
Company will be unable to collect all amounts due, both principal and
interest, according to the contractual terms of the loan agreement. When
a loan is impaired, the Company may measure impairment based on (a) the
present value of the expected future cash flows of the impaired loan
discounted at the loan's original effective interest rate; (b) the
observable market price of the impaired loan; or (c) the fair value of
the collateral of a collateral-dependent loan. The Company selects the
measurement method on a loan-by-loan basis, except for
collateral-dependent loans for which foreclosure is probable must be
measured at the fair value of the collateral. In a troubled debt
restructuring involving a restructured loan, the Company measures
impairment by discounting the total expected future cash flows at the
loan's original effective rate of interest.
Premises and Equipment. Depreciation of premises and equipment is
accumulated using the straight-line method over the estimated useful
lives of the related assets. Estimated lives are 10 to 50 years for
buildings and leasehold improvements, and 3 to 10 years for furniture,
fixtures and equipment.
Maintenance and repairs are charged to expense when incurred.
Expenditures for renewals and betterments generally are capitalized. The
costs and accumulated depreciation relating to office properties and
equipment retired or otherwise disposed of are eliminated from the
accounts, and any resulting gains and losses are reflected in the
consolidated statements of earnings.
24
Foreclosed Assets. Assets acquired through foreclosure or deed in lieu of
foreclosure are recorded at the lower of cost (principal balance of the
former mortgage loan) or estimated fair value, less estimated selling
expenses. The carrying value of real estate owned properties was $57,000
and $113,000 at September 30, 2001 and 2000 and is included in Other
Assets in the consolidated statements of financial condition. The Company
reported net income (costs) related to real estate owned activities of
$15,000, $6,000 and $(10,000) in operations in fiscal years ended
September 30, 2001, 2000 and 1999, respectively.
Transfer of Financial Assets. Transfers of financial assets are accounted
for as sales, when control over the assets has been surrendered. Control
over financial assets is deemed to be surrendered when (1) the assets
have been isolated from the Company, (2) the transferee obtains the right
(free of conditions that constrain it from taking advantage of that
right) to pledge or exchange the transferred assets, and (3) the Company
does not maintain effective control over the transferred assets through
an agreement to repurchase them before their maturity.
Income Taxes. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that
include the enactment date.
Financial Instruments With Off-Balance Sheet Risk. In the ordinary course
of business, the Company is a party to financial instruments with
off-balance sheet risk. These financial instruments include commitments
to extend credit at both fixed and variable rates and standby letters of
credit. These instruments involve, to varying degrees, elements of credit
risk in excess of the amount recognized, if any, in the consolidated
statements of financial condition. The Company's exposure to credit loss
for commitments to extend credit and standby letters of credit is
represented by the contractual amount of these instruments. The Company
uses the same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. The Company evaluates each
customer's credit worthiness on a case-by-case basis.
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party. The
credit risk involved in issuing letters of credit is essentially the same
as that involved in extending loan facilities to customers.
Self-Insurance. The Company is self-insured for employee medical and
dental benefits, but has a reinsurance contract to limit the amount of
liability for these benefits in any plan year. Benefits are administered
through a third party administrator and the related liabilities are
reflected in the consolidated financial statements. The Company accrues a
liability based on average claims paid over the past three years,
historical information and certain assumptions regarding future events.
The self-insured plan operates on a calendar year basis. For the plan
years ended December 31, 2000 and 1999, claims paid, net of amounts
received under the reinsurance contract and premiums received from
dependent and COBRA coverage, were $379,000 and $441,000, respectively.
The plan covers only active employees as defined in the plan.
25
Derivative Instruments. The Company does not purchase, sell or enter
into derivative financial instruments or derivative commodity
instruments as defined by SFAS No. 119, Disclosures About Derivative
Financial Instruments and Fair Value of Financial Instruments, other
than fixed-rate loan commitments.
Stock Compensation Plans. Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock-Based Compensation, encourages all
entities to adopt a fair value based method of accounting for employee
stock compensation plans, whereby compensation cost is measured at the
grant date based on the value of the award and is recognized over the
service period, which is usually the vesting period. However, it also
allows an entity to continue to measure compensation cost for those plans
using the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
to Employees, whereby compensation cost is the excess, if any, of the
quoted market price of the stock at the grant date (or other measurement
date) over the amount an employee must pay to acquire the stock. Stock
options issued under the Company's stock option plan have no intrinsic
value at the grant date, and under Opinion No. 25 no compensation cost is
recognized for them. The Company has elected to continue with the
accounting methodology in Opinion No. 25 and, as a result, has provided
pro forma disclosures of net income and earnings per share and other
disclosures, as if the fair value based method of accounting had been
applied (See note 12).
Earnings Per Share of Common Stock. The Company follows the provisions of
SFAS No. 128, "Earnings Per Share". SFAS No. 128 provides accounting and
reporting standards for calculating earnings per share. Basic earnings
per share of common stock has been computed by dividing the net income
for the year by the weighted-average number of shares outstanding. Shares
of common stock purchased by the ESOP (see Note 11) are only considered
outstanding when the shares are released or committed to be released for
allocation to participants. For the years ended September 30, 2001 and
2000, shares released for allocation to participants each month were
2,707 and 1,801. Diluted earnings per share is computed by dividing net
income by the weighted-average number of shares outstanding including the
dilutive effect of stock options (see Note 12) and shares needed to
satisfy the requirements of the restricted stock plan, computed using the
treasury stock method prescribed by SFAS No. 128. The following table
presents the calculation of earnings per share of common stock:
Year Ended September 30,
---------------------------------------------
2001 2000 1999
---- ---- ----
Weighted-average shares of common stock issued and
outstanding before adjustments for ESOP and stock options 5,520,047 5,602,021 5,937,542
Adjustment to reflect the effect of unallocated ESOP shares (226,935) (177,670) (210,228)
--------- --------- ---------
Weighted-average shares for basic earnings per share 5,293,112 5,424,351 5,727,314
========= ========= =========
Basic earnings per share $ .92 $ .71 $ .33
===== ===== =====
Weighted-average shares for basic earnings per share 5,293,112 5,424,351 5,727,314
Additional dilutive shares using the average market value for the period
utilizing the treasury stock method regarding stock options and
outstanding restricted stock shares 136,046 92,209 0
--------- --------- ---------
Weighted-average common shares and equivalents
outstanding for diluted earnings per share 5,429,158 5,516,560 5,727,314
========= ========= =========
Diluted earnings per share $ .90 $ .70 $ .33
===== ===== =====
26
Comprehensive Income. Accounting principles generally require that
recognized revenue, expenses, gains and losses be included in net income.
Although certain changes in assets and liabilities, such as unrealized
gains and losses on available-for-sale securities, are reported as a
separate component of the equity section of the statements of financial
condition, such items, along with net income are components of
comprehensive income. The components of other comprehensive income and
related tax effects are as follows (in thousands):
2001 2000 1999
---- ---- ----
Unrealized gain (loss) on securities available for sale arising
during year, net of taxes $2,710 $ 8 $(1,470)
Less reclassification adjustment for gain (loss) included in
net income (234) 5 (22)
Income taxes (benefit) (87) 2 (8)
------ ----- -------
Reclassification adjustment for gain (loss), net of taxes (147) 3 (14)
------ ----- -------
Unrealized gain (loss) on securities available for sale, net of taxes $2,857 $ 5 $(1,456)
====== ===== =======
Reclassifications. Certain amounts in the 2000 and 1999 consolidated
financial statements have been reclassified to conform to the 2001
presentation.
(2) Securities Available for Sale
The amortized cost and estimated fair values of securities available for
sale are as follows:
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses Value
-------------- ------------ ------------- ---------
(In thousands)
September 30, 2001:
Obligations of U.S. government
agencies $ 8,504 $ 346 $ 0 $ 8,850
Collateralized mortgage
obligations 43,429 653 (37) 44,045
Mortgage-backed securities 28,644 907 0 29,551
Corporate bonds 28,962 999 (406) 29,555
Municipal bonds 17,415 262 (144) 17,533
--------- ------ ------- --------
Total $ 126,954 $3,167 $ (587) $129,534
========= ====== ======= ========
September 30, 2000:
Obligations of U.S. government
agencies $ 19,861 $ (504) $ 19,357
Collateralized mortgage
obligations 18,172 $ 76 (176) 18,072
Mortgage-backed securities 29,928 61 (339) 29,650
Corporate bonds 20,930 160 (904) 20,186
Municipal bonds 9,725 138 (467) 9,396
---------- ------ --------- --------
Total $ 98,616 $ 435 $ (2,390) $ 96,661
========= ======= ========= ========
Approximately 88% and 70% of the collateralized mortgage obligations
("CMOs") and mortgage-backed securities ("MBS") as of September 30, 2001
and 2000, respectively, were issues of Ginnie Mae, Fannie Mae or Freddie
Mac.
27
The maturity distribution for the portfolio of securities available for
sale at September 30, 2001 is as follows:
Amortized Fair
cost Value
--------- --------
(In thousands)
Due in one year or less $ 997 $ 1,026
Due after one year through five years 12,668 13,105
Due after five years through ten years 9,390 9,951
Due after ten years 75,255 75,901
-------- --------
98,310 99,983
Mortgage-backed securities 28,644 29,551
-------- --------
Total $126,954 $129,534
======== ========
Proceeds from sales of securities available for sale during the years
ended September 30, 2001, 2000 and 1999 were $10.3 million, $5.7 million
and $6.0 million, respectively. Gross gains of $51,000 and gross losses
of $16,000 were realized on those sales during 2001. In addition, a
$257,000 loss on the impairment of a security was recorded since
the decline in value was determined to be other than temporary.Gross
gains of $5,000 were realized on those sales during 2000. Gross gains
of $8,000 and gross losses of $30,000 were realized on those sales
during 1999.
Securities available for sale with a fair value of $33.3 million and
$10.4 million were pledged as collateral to secure public funds, Treasury
Investment Program funds and Federal Reserve discount window advances at
September 30, 2001 and 2000, respectively.
(3) Securities Held to Maturity
The amortized cost and estimated fair values of securities held to
maturity are as follows:
September 30, 2000
-------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses Value
----------- ---------- ---------- --------
(In thousands)
Obligations of U.S. government
agencies $ 1,000 -- -- $ 1,000
Collateralized mortgage
obligations 8,687 $ 33 $ (329) 8,391
-------- ------- -------- --------
Total $ 9,687 $ 33 $ (329) $ 9,391
======= ======= ======== =======
In August 2001 the entire securities held to maturity portfolio was sold.
The decision to sell the entire portfolio was based on a variety of
reasons including price compression due to balance decline, a lagging
index, which is unpopular in today's falling rate environment, and
recently increased values, resulting from the recent falling rate
environment. As a result of the sale of the held to maturity portfolio,
SEC regulations prohibit further classification of securities as held to
maturity for a period of two years.
Proceeds from sales of securities held to maturity for the years ended
September 30, 2001, 2000 and 1999 were $8.6 million, $-0-, and $-0-
respectively. Gross gains of $34,000 and gross losses of $46,000 were
realized on those sales during 2001.
28
(4) Loans
Loans consist of the following:
September 30,
---------------------
2001 2000
--------- --------
(Dollars in thousands)
Loans secured by first mortgages on real estate:
Residential 1-4:
Permanent $ 312,309 $ 304,419
Construction 35,516 27,996
Multi-family 2,306 3,610
Commercial real estate 56,065 28,176
Land 8,907 12,886
--------- ---------
Total first mortgage loans 415,103 377,087
--------- ---------
Other loans:
Consumer loans 85,932 81,039
Other loans 5,061 2,533
--------- ---------
Total other loans 90,993 83,572
--------- ---------
Total loans 506,096 460,659
Allowance for loan losses (3,652) (3,321)
Loans in process (28,289) (16,952)
--------- ---------
Loans, net $ 474,155 $ 440,386
========= =========
Weighted-average yield on loans at year end 7.66% 7.83%
===== =====
The activity in the allowance for loan losses was as follows (in
thousands):
Balance at September 30, 1998 $ 2,564
Provision for loan losses 540
Charge-offs (251)
Recoveries 88
-------
Balance at September 30, 1999 2,941
Provision for loan losses 630
Charge-offs (288)
Recoveries 38
-------
Balance at September 30, 2000 3,321
Provision for loan losses 615
Charge-offs (386)
Recoveries 102
-------
Balance at September 30, 2001 $ 3,652
=======
29
Outstanding mortgage loan commitments, generally with terms of 30 days,
were approximately $1.7 million and $672,000 for fixed-rate loans, and
$203,000 and $214,000 for variable rate loans at September 30, 2001 and
2000, respectively. There was a $2,000 letter of credit outstanding at
September 30, 2001 and September 30, 2000. Furthermore, the Company was
servicing approximately $11.2 million, $14.1 million and $16.7 million in
loans for the benefit of others in 2001, 2000 and 1999, respectively. The
Company holds custodial escrow deposits for these serviced loans totaling
approximately $127,000 and $149,000 at September 30, 2001 and 2000,
respectively. The range of interest rates on the fixed rate loan
commitments as of September 30, 2001 was 6.13% to 8.50%.
The Company makes loans to certain executive officers and directors and
their related interests and associates. These loans were made in the
ordinary course of business at prevailing terms and conditions. As of
September 30, 2001, these loans amounted to approximately $317,000.
Impaired loans have been recognized in conformity with SFAS No. 114,
as amended by SFAS No. 118. Impaired loans and related information are
as follows:
September 30,
---------------------
2001 2000 1999
---- ---- ----
(In thousands)
Impaired loans at year end $ 960 $ 762 $ 830
Average balance of impaired loans for the year 1,028 454 957
Allowance for loan losses for impaired loans 192 189 166
Interest income recognized during the year 14 43 72
(5) Premises and Equipment
Premises and equipment consists of the following:
September 30,
-------------------
2001 2000
------- -------
(In thousands)
Land $ 3,629 $ 2,992
Buildings and leasehold improvements 8,167 6,571
Furniture, fixtures and equipment 5,205 4,562
Other projects in progress 589 905
------- -------
Total 17,590 15,030
Less accumulated depreciation and amortization (6,646) (6,095)
------- -------
Premises and equipment, net $10,944 $ 8,935
======= =======
The Company conducts a portion of its operations from leased facilities
and leases certain equipment under operating leases. As of September 30,
2001, the Company was committed to noncancelable operating leases with
annual minimum lease payments approximating $174,000 through September
30, 2009 and approximately $75,000 per year thereafter through fiscal
year 2020. Rent expense under all operating leases was approximately
$159,000, $106,000 and $136,000 for the years ended September 30, 2001,
2000 and 1999, respectively.
30
(6) Deposits
Deposits and weighted-average interest rates are as follows:
September 30, 2001 September 30, 2000
--------------------- ------------------
Weighted Weighted
Average Average
Amount Rate Amount Rate
------ ---- ------ ----
(In thousands) (In thousands)
Noninterest-bearing checking $ 20,306 -- $ 16,292 --
Interest-bearing checking 34,705 1.67% 31,460 1.86%
Savings accounts 27,547 1.51% 29,167 2.08%
Money-market accounts 33,768 3.19% 24,325 5.10%
Certificate accounts:
4.00% - 4.99% 98,731 19,999
5.00% - 5.99% 73,605 81,625
6.00% - 6.99% 104,345 144,575
7.00% - 7.99% 6,530 7,111
--------- ---------
Total certificates 283,211 5.64% 253,310 5.89%
--------- ---------
Total deposits $ 399,537 4.33% $ 354,554 4.90%
========= =========
Certificate accounts in amounts of $100,000 or more totaled approximately
$85.7 million and $57.3 million at September 30, 2001 and 2000,
respectively. Deposits in excess of $100,000 are not federally insured.
The Company had certificate accounts totaling $35.5 million and $17.1
million under the State of Florida public deposits program at September
30, 2001 and September 30, 2000, respectively. Deposits under this
program are collateralized with securities with a carrying value of $18.3
million and $9.9 million at September 30, 2001 and 2000, respectively, in
accordance with applicable regulations.
Interest expense on deposits is summarized as follows:
Year ended September 30,
---------------------------
2001 2000 1999
------- ------- -------
(In thousands)
Interest on interest-bearing
checking and money-market accounts $ 1,795 $ 1,648 $ 1,257
Interest on savings and certificate accounts 16,086 14,173 13,550
Less early withdrawal penalties (81) (77) (80)
------- ------- -------
Total interest expense $17,800 $15,744 $14,727
======= ======= =======
Certificate accounts by year of scheduled maturity are as follows:
September 30,
---------------------------
Fiscal Year 2001 2000
----------- -------- --------
(In thousands)
2001 -- $164,802
2002 $191,523 62,280
2003 54,409 11,477
2004 20,012 14,751
2005 and after 17,267 --
-------- --------
Total $283,211 $253,310
======== ========
31
(7) Advances From Federal Home Loan Bank and Other Borrowings
The Company had $149.5 million and $158.0 million in FHLB advances with
weighted-average interest rates of 5.22% and 6.27% at September 30, 2001
and 2000, respectively. The advances as of September 30, 2001 include
$94.5 million in convertible advances whereby the FHLB has the option at
a predetermined time to convert the fixed interest rate to an adjustable
rate tied to LIBOR (London interbank offering rate). The Company then has
the option to prepay the advances without penalty if the FHLB converts
the interest rate. Should the Company elect to otherwise prepay these
borrowings prior to maturity, prepayment penalties may be incurred.
Advances from the FHLB are collateralized with a blanket floating lien on
qualifying first mortgage loans and all the Company's FHLB stock.
The Company's borrowings from the FHLB are as follows:
Conversion
Year Option Rate Maturity Rate
---- ---------- ---- -------- ----
(In thousands) (In thousands)
At September 30, 2001:
2002 $ 56,000 5.86% $ 40,000 4.54%
2003 15,000 5.29 10,000 5.67
2004 5,000 5.13 5,000 5.72
2005 5,000 6.10 10,000 6.49
2006 13,500 4.94 15,000 5.33
2008 -- 15,000 5.07
2009 -- 5,000 3.15
2010 -- 26,000 6.11
2011 -- 23,500 5.06
-------- --------
Total and weighted-average rate $ 94,500 5.61% $149,500 5.22%
======== ========
At September 30, 2000:
2001 $ 61,000 5.74% $ 72,000 6.75%
2003 5,000 5.02 5,000 6.41
2004 -- 15,000 4.91
2005 5,000 6.10 10,000 6.49
2008 -- 15,000 5.07
2009 -- 15,000 6.67
2010 -- 26,000 6.11
-------- --------
Total and weighted-average rate $ 71,000 5.71% $158,000 6.27%
======== ========
As of September 30, 2001 the Company's $11.0 million in other borrowings
are overnight borrowings utilizing the Treasury Investment Program (TIP)
bearing interest at 2.50% per annum. These borrowings are collateralized
by various types of securities, such as municipal bonds, CMOs and
corporate bonds, with a carrying value of $11.0 million at September 30,
2001.
32
(8) Income Taxes
Income taxes consists of the following:
Current Deferred Total
-------- --------- -------
(In thousands)
Year ended September 30, 2001:
Federal $ 2,074 $ (234) $ 1,840
State 382 (44) 338
-------- --------- -------
$ 2,456 $ (278) $ 2,178
======= ======== =======
Year ended September 30, 2000:
Federal $ 1,943 $ (160) $ 1,783
State 338 (27) 311
------- ------- -------
$ 2,281 $ (187) $ 2,094
======= ======== =======
Year ended September 30, 1999
Federal $ 1,606 $ (33) $ 1,573
State 181 (6) 175
------- -------- -------
$ 1,787 $ (39) $ 1,748
======= ======== =======
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are as follows:
September 30,
------------------
2001 2000
------- -------
(In thousands)
Deferred tax assets:
Allowance for loan losses, net $ 1,305 $ 1,252
Pension asset -- 202
Unrealized loss on securities available for sale -- 735
Self-insurance reserve 132 299
Deferred compensation plans 354 --
Other 101 46
-------- -------
Total deferred tax assets 1,892 2,534
-------- -------
Deferred tax liabilities:
FHLB stock (365) (432)
Unrealized gain on securities available for sale (859) --
Depreciation (53) (76)
------- -------
Total deferred tax liabilities (1,277) (508)
------- -------
Net deferred tax assets $ 615 $ 2,026
======= =======
Net deferred tax assets are included in other assets in the consolidated
statements of financial condition.
33
The Company's effective rate on pretax income differs from the statutory
Federal income tax rate as follows (dollars in thousands):
Year ended September 30,
-------------------------------------------------------
2001 % 2000 % 1999 %
------- ------ ------ ----- ------ -----
Tax provision at statutory rate $2,396 34% $2,018 34% $1,702 34%
Increase (decrease) in tax
resulting from:
Tax-exempt income, net (356) (5) (148) (2) (70) (1)
State income taxes, net of Federal income
tax benefit 234 3 205 3 116 2
Other, net (96) (1) 19 -- -- --
------ ------- ------ ----- ------ -----
Total $2,178 31% $2,094 35% $1,748 35%
====== ======= ====== ===== ====== =====
Until 1997, the Internal Revenue Code (the "Code") allowed the Company a
special bad debt deduction for additions to bad debt reserves for tax
purposes. Provisions in the Code permitted the Company to determine its
bad debt deduction by either the experience method or the percentage of
taxable income method. The statutory percentage used to calculate bad
debt deductions by the percentage of taxable income method was 8% before
such deduction. The experience method was calculated using actual loss
experience of the Company.
The Small Business Job Protection Act of 1996 repealed the percentage of
taxable income method of accounting for bad debts for tax years beginning
after 1995. The Company switched to the experience method above to
compute its bad debt deduction in 1997 and future years. As a result of
the change in the Code, the Company is required to recapture into taxable
income the portion of its bad debt reserves that exceeds its bad debt
reserves calculated under the experience method since 1987; a recapture
of approximately $366,000 ratably over six years beginning in 1999.
Retained earnings at September 30, 2001 includes approximately $5.8
million base year, tax basis bad debt reserve for which no deferred
Federal and state income tax liability has been accrued. These amounts
represent an allocation of income to bad debt deductions for tax purposes
only. Reduction of amounts so allocated for purposes other than tax bad
debt losses or adjustments arising from carryback of net operating losses
would create income for tax purposes only, which would be subject to the
then current corporate income tax rate. The unrecorded deferred income
tax liability on the above amounts was approximately $2.2 million at
September 30, 2001. Certain events, as defined, will still trigger the
recapture of the base year reserve. The base year reserves also remain
subject to income tax penalty provisions which, in general, require
recapture upon certain stock redemptions or excess distributions to
stockholders.
(9) Concentration of Credit Risk
The Company originates real estate, consumer, and commercial loans
primarily in its Central Florida market area. Although the Company has a
diversified loan portfolio, a substantial portion of its borrowers'
ability to honor their contracts depends on the economic conditions of
Central Florida. The Company does not have a significant exposure to any
individual customer or counterparty.
The Company manages its credit risk by limiting the total amount of
arrangements outstanding with individual customers, by monitoring the
size and maturity structure of the loan portfolio, by obtaining
collateral based on management's credit assessment of the customers, and
by applying a uniform credit process for all credit exposures.
34
(10) Regulatory Matters
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory - and possibly
additional discretionary - actions by regulators that, if undertaken,
could have a direct material effect on the Bank's financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that
involve quantitative measures of the Bank's assets, liabilities, and
certain off-balance sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios (set
forth in the table below) of risk-based and Tier I capital (as defined in
the regulations) to risk-weighted assets (as defined).
As of September 30, 2001, the most recent notification from the OTS
categorized the Bank as "well capitalized" under the regulatory framework
for prompt corrective action. To be categorized as "well capitalized,"
the Bank must maintain minimum total risk-based, Tier I risk-based, and
Tier I leverage ratios as set forth in the table. There are no conditions
or events since that notification that management believes have changed
the Bank's category.
The Bank's actual capital amounts and percentages are as follows:
"Well capitalized"
For capital under prompt
adequacy corrective action
Actual purpose provisions
------------------- --------------------- ----------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollars in thousands)
September 30, 2001:
Risk-based capital
(to risk-weighted assets) $ 72,867 16.9% $ 34,432 8.0% $ 43,040 10.0%
Tier I capital (to risk-
weighted assets) $ 69,215 16.1% $ 17,216 4.0% $ 25,824 6.0%
Tier I capital
(to average assets) $ 69,215 11.3% $ 24,496 4.0% $ 30,620 5.0%
September 30, 2000:
Risk-based capital
(to risk-weighted assets) $ 56,470 15.5% $ 29,158 8.0% $ 36,448 10.0%
Tier I capital (to risk-
weighted assets) $ 53,149 14.6% $ 14,579 4.0% $ 21,869 6.0%
Tier I capital
(to average assets) $ 53,149 9.7% $ 21,844 4.0% $ 27,305 5.0%
35
The payment of dividends by the Bank to the Company are restricted. OTS
regulations impose limitations on all capital distributions by savings
institutions. Capital distributions include cash dividends, payments to
repurchase or otherwise acquire the institution's capital stock, payments
to stockholders of another institution in a cash-out merger and other
distributions charged against capital. A savings institution that is a
subsidiary of a savings and loan holding company, such as the Bank, must
file an application or a notice with the OTS at least 30 days before
making a capital distribution. Savings institutions are not required to
file an application for permission to make a capital distribution and
need only file a notice if the following conditions are met: (1) they are
eligible for expedited treatment under OTS regulations, (2) they would
remain adequately capitalized after the distribution, (3) the annual
amount of capital distribution does not exceed net income for that year
to date added to retained net income for the two preceding years, and (4)
the capital distribution would not violate any agreements between the OTS
and the savings institution or any OTS regulations. Any other situation
would require an application to the OTS.
(11) Benefit Plans
Director Retirement Plan. The Company sponsors a non-qualified Director
Retirement Plan ("Retirement Plan"). The Retirement Plan will pay all
Directors that have served on the board at least ten years, an amount
equal to the regular board fee as of the date of the directors'
retirement (currently $1,000 per month) for 120 months beginning at the
end of their final three-year term. If a Director dies prior to
retirement or prior to receipt of all monthly payments under the plan,
the Company has no further financial obligations to the Director or his
or her estate. For the years ended September 30, 2001 and 1999, the
Company recognized costs of $25,000 and $37,000 related to this
Retirement Plan. For the year ended September 30, 2000 the Company
recognized a net reduction in expense of $34,000 related to adjusting the
remaining liability after the death of a director. The amounts were
determined by discounting the anticipated cash flow required, based on
the years of service rendered by each covered director. The
weighted-average discount rate used to measure the expense was 5.50%.
Employee Stock Ownership Plan. The Company sponsors an employee stock
ownership plan ("ESOP"). The ESOP covers eligible employees who have
completed twelve months of continuous employment with the Company during
which they worked at least 1,000 hours and who have attained the age of
21. As part of the Reorganization in April 1999, the ESOP borrowed $2.2
million from the Company to purchase 223,250 shares of the common stock
of the Company. After the Conversion in December 2000, the ESOP acquired
an additional 251,836 shares at a total cost of $3.9 million. The funds
were obtained through a loan from the Company. Since the ESOP is
internally leveraged, the Company does not report the loan receivable
from the ESOP as an asset and does not report the loan payable from the
ESOP as a liability. The Company's accounting for its ESOP is in
accordance with AICPA Statement of Position 93-6, Employers Accounting
for Employee Stock Ownership Plans, which requires the Company to
recognize compensation expense equal to the fair value of the ESOP shares
during the periods in which they became committed to be released. As
shares are committed to be released, the shares become outstanding for
earnings per share computations. To the extent that the fair value of the
ESOP shares differs from the cost of such shares, this differential will
be charged or credited to equity as additional paid-in capital.
Management expects the recorded amount of expense to fluctuate as
continuing adjustments are made to reflect changes in the fair value of
the ESOP shares. As of September 30, 2001 and 2000, 32,481 and 33,440
shares were committed for release and the Company recorded compensation
and employee benefit expense of $480,000, $284,000 and $286,000 for the
years ended September 30, 2001, 2000 and 1999, respectively, relating to
the ESOP.
Dividends paid by the Company that relate to unallocated shares of the
ESOP are used to make payments on the ESOP loan. As of September 30,
2001, the fair value of the 408,654 unallocated shares held by the ESOP
was $6.8 million.
36
401(k) Retirement Plan. Effective January 1, 1999, the Company adopted a
401(k) plan for eligible employees. Subject to certain restrictions,
eligible employees may voluntarily contribute up to 15% of their annual
compensation and the Company may authorize discretionary contributions to
eligible participants. For the years ended September 30, 2001, 2000 and
1999 the Company recognized $117,900, $94,000 and $65,000 respectively,
of employee benefits expense for the Company's matching contribution
under the plan.
Supplemental Executive Retirement Plan ("SERP"). Effective January 1,
1999, the Company adopted a nonqualified defined contribution plan to
provide supplemental retirement benefits for certain executive officers.
For the years ended September 30, 2001, 2000 and 1999 the Company
recognized $144,000, $130,000 and $94,000 respectively, of employee
benefits expense related to the SERP.
(12) Stock-Based Compensation Plans
Restricted Stock Plan ("RSP"). On October 19, 1999 the Company adopted,
and the stockholders approved, a RSP for directors and officers to enable
the Bank to attract and retain experienced and qualified personnel. Under
the RSP, directors and officers of the Bank were awarded 111,625 shares
of the Company's stock. Restricted shares are earned at a rate of 20%
each year of continued service to the Company. In the event of death or
disability of a participant, all shares awarded to that participant
become immediately vested. The fair value of the shares awarded was
$919,000, using the market closing price of $8.24 on the date of grant.
This amount is being amortized over a five-year period to compensation
and employee benefits expense, commencing October 1, 1999. All shares
awarded under the RSP are considered as shares outstanding for purposes
of calculating earnings per share.
The shares earned under this plan are entitled to all voting and other
stockholder rights, except that, while restricted, the shares must be
held in escrow and cannot be sold, pledged or otherwise conveyed. The
Company acquired the shares for the plan through open market purchases.
During 2001, the RSP purchased 51,889 shares at an average price of
$14.13 per share. At September 30, 2001 the plan held 85,509 shares at an
average price of $11.53 per share
Stock Option Plan. The Company has a Stock Option Plan ("Option Plan")
under which 279,053 common shares are authorized to be granted to
directors, officers and employees of the Bank. Shares granted under the
Option Plan are exercisable at the market price at the date of the grant.
The stock options granted to directors, officers and employees upon
approval of the plan by stockholders on October 19, 1999 vest 20% per
year, with the first installment becoming exercisable one year after the
date of grant. Incentive options expire at the earlier of ten years from
the date of grant or three months following the date an officer or
employee terminates the employment relationship for reasons other than
disability (options expire in one year after disability) or death
(options expire in two year after death). Non-incentive options expire
ten years from the date of grant. All non-incentive options are
immediately vested in the event of death or disability.
During the year ended September 30, 2001, no options were granted under
the Option Plan. SFAS No. 123 requires pro forma fair value disclosures
if the intrinsic value method is being utilized. In order to calculate
the fair value of the options, it was assumed that the risk-free interest
rate was 6.0% for each period, an annualized dividend of approximately
2.75% would apply over the exercise period, an estimated volatility of
65% and the expected life of the options would be the entire exercise
period. For purposes of pro forma disclosures, the estimated fair value
was included in expense in the period vesting occurs, using September 30,
2000 as the first vesting period. The pro forma information has been
determined as if the Company had accounted for its stock options under
the fair value method of SFAS No. 123 and is as follows (in thousands,
except per share amounts):
37
Year ended September 30,
----------------------------
2001 2000 1999
---- ---- ----
Weighted-average grant-date fair value of options issued
during the year -- $ 16.07 --
Proforma net income $4,620 $ 3,399 --
Pro forma basic earnings per share $ 0.87 $ 0.63 --
The following is a summary of option transactions:
Range of Per Weighted
Number of Share Option Average Per
Shares Price Share Price
------- ----- -----------
Initial shares granted on October 19, 1999 279,053 $7.63-$10.23 $8.23
Forfeited (516) 8.24 8.24
-------
Outstanding, September 30, 2000 278,537 8.23 8.23
Exercised (2,229) 8.24 8.24
Forfeited (2,683) 8.24 8.24
-------
Outstanding, September 30, 2001 273,625 $7.63-$10.23 8.23
=======
The weighted average remaining contractual life of the outstanding
options at September 30, 2001 was 6.8 years. The outstanding options at
September 30, 2001 were exercisable as follows:
Number Weighted Average Weighted Average Remaining
Year Ending Shares Exercise Price Contractual Life
----------- ------ -------------- ----------------
2002 114,505 $ 8.23 8.0
2003 53,040 $ 8.23 7.0
2004 53,040 $ 8.23 6.0
2005 53,040 $ 8.23 5.0
-------
Total 273,625 $ 8.23
=======
(13) (13) Subsequent Event, Deposit and Branch Acquisition
On December 6, 2001, the Bank signed a definitive agreement with SunTrust
Bank ("SunTrust") to purchase seven Florida branches from SunTrust
coincident with SunTrust's acquisition of such branches from Huntington
National Bank ("Huntington"). Four of the Huntington branches are located
in Lakeland, Florida, and one each in Avon Park and Sebring in Highlands
County, and one branch in Wildwood, Florida. The transaction will include
assumption of approximately $165 million in deposits and the purchase of
approximately $25 million in loans related to the seven branches.
38
(14) Fair Values of Financial Instruments
Fair value estimates, methods and assumptions are set forth below.
Cash and Cash Equivalents: The carrying amounts of cash and cash
equivalents (demand deposits maintained at various financial
institutions) represent fair value.
Securities: The Company's securities represent investments in U.S.
government agency obligations, CMOs, MBS, corporate bonds and municipal
bonds. The fair value of these securities was estimated based on quoted
market prices or bid quotations received from securities dealers.
FHLB Stock: The FHLB stock is not publicly traded and the carrying
amounts were used to estimate the fair value.
Loans: Fair values are estimated for the Company's portfolio of loans by
grouping loans with similar financial characteristics. The loans have
been segregated by type, such as fixed and variable rate first mortgage
loans and other loans. The fair value of loans is estimated by
discounting the future cash flows using current rates at which similar
loans would be made to borrowers with similar credit ratings and for
similar maturities.
Deposit Liabilities: The fair value of deposits with no stated maturity
(i.e., interest and noninterest-bearing checking accounts and savings
accounts) is equal to the amount payable as of year end. The fair value
of certificate accounts is based on the discounted value of contractual
cash flows. The discount rate is estimated using the rates currently
offered by the Company for deposits of similar remaining maturities.
FHLB Advances and Other Borrowings: The fair value of FHLB advances and
other borrowings are based on the discounted value of contractual cash
flows. The discount rate is estimated using the rates currently offered
by creditors for advances of similar remaining maturities.
Commitments: The Company makes commitments in the normal course of
business to originate loans. All such commitments are for relatively
short periods of time, so the market value of the loans on the commitment
date and origination or delivery date is seldom materially different.
The estimated fair values of the Company's financial instruments are as
follows:
Carrying Estimated
Amount Fair value
--------- ----------
(In thousands)
September 30, 2001:
Financial assets:
Cash and cash equivalents $ 21,676 $ 21,676
Securities available for sale 129,534 129,534
Federal Home Loan Bank stock 7,670 7,670
Loans 474,155 485,300
========= ========
Financial liabilities:
Deposits:
Without stated maturities $116,326 $116,326
With stated maturities 283,211 289,854
Federal Home Loan Bank advances 149,500 157,076
Other borrowings 11,048 11,048
========== =======
Commitments:
Loan commitments and letters of credit -- $ 1,969
========== =======
39
September 30, 2000:
Financial assets:
Cash and cash equivalents $ 6,734 $ 6,734
Securities available for sale 96,661 96,661
Securities held to maturity 9,687 9,391
Federal Home Loan Bank stock 7,925 7,925
Loans 440,386 433,631
Financial liabilities:
Deposits:
Without stated maturities $101,244 $101,244
With stated maturities 253,310 251,196
Federal Home Loan Bank advances 158,000 157,537
Other borrowings 2,937 2,937
======== ========
Commitments:
Loan commitments and letters of credit -- $ 888
======== ========
(15) Commitments and Contingencies
In the ordinary course of business, the Company has various outstanding
commitments and contingent liabilities that are not reflected in the
accompanying financial statements. In addition, the Company is a
defendant in certain claims and legal actions arising in the ordinary
course of business. In the opinion of management, after consultation with
legal counsel, the ultimate disposition of these matters is not expected
to have a material adverse effect on the financial condition or results
of operations of the Company.
(16) Parent Company Only Financial Statements
Condensed financial statements of FloridaFirst Bancorp, Inc. are as
follows (in thousands):
Condensed Statements of Financial Condition
-------------------------------------------
At September 30,
-------------------------
Assets 2001 2000
---- ----
Cash and cash equivalents $ 86 $ 50
Loans to subsidiary 20,547 6,786
Securities available for sale 2,402 2,263
Investment in subsidiary 70,769 51,918
Other assets 52 64
-------- --------
Total assets $ 93,856 $ 61,081
======== ========
Liabilities and Stockholders' Equity
Other liabilities 42 --
-------- --------
Stockholders' equity 93,814 61,081
-------- --------
Total liabilities and stockholders' equity $ 93,856 $ 61,081
======== ========
40
Year ended September 30,
------------------------
Condensed Statements of Earnings 2001 2000
-------------------------------- ---- ----
Interest income:
Securities available for sale $ 209 $ 135
Loans to subsidiary 976 500
------- -------
Total income 1,185 635
------- -------
Operating expenses 212 102
------- -------
Income before income taxes and equity
in undistributed earnings of subsidiary 973 533
Income taxes 340 191
------- -------
Income before equity in undistributed earnings of subsidiary 633 342
Equity in undistributed earnings of subsidiary 4,236 3,500
------- -------
Net income $ 4,869 $ 3,842
======= =======
Year ended September 30,
------------------------
Condensed Statements of Cash Flows 2001 2000
---------------------------------- ----- ----
Cash flows from operating activities:
Net income $ 4,869 $ 3,842
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in undistributed earnings of subsidiary (4,236) (3,500)
Increase in other - net (12) (126)
--------- -------
Net cash provided by operating activities 621 216
--------- -------
Cash flows from investing activities:
Capital contribution to subsidiary (16,000) --
Purchase of investment securities -- (2,263)
Repayment (issuance) of loans to subsidiary (13,761) 6,133
--------- -------
Net cash provided by (used in) investing activities (29,761) 3,870
--------- -------
Cash flows from financing activities:
Payments to acquire treasury stock (481) (3,606)
Dividends paid (921) (480)
Net proceeds from stock issuances 30,578 --
--------- -------
Net cash provided by (used in) financing activities 29,176 (4,086)
--------- -------
Increase in cash 36 --
Cash at beginning of year 50 50
--------- -------
Cash at end of year $ 86 $ 50
========= =======
41
(17) Quarterly Financial Data (Unaudited)
Unaudited quarterly financial data (in thousands except share data) is as
follows:
Year ended September 30, 2001 Year ended September 30, 2000
-------------------------------------- --------------------------------------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- ------- ------- ------- -------
As Restated
Interest income $10,947 $11,025 $11,385 $11,489 $ 9,151 $ 9,741 $10,271 $10,677
Interest expense 6,761 6,334 6,431 6,369 5,034 5,574 6,212 6,755
------- ------- ------- ------- ------- ------- ------- -------
Net interest income 4,186 4,691 4,954 5,120 4,117 4,167 4,059 3,922
Provision for loan losses 180 135 150 150 120 150 180 180
------- ------- ------- ------- ------- ------- ------- -------
Net interest income after
provision for loan
losses 4,006 4,556 4,804 4,970 3,997 4,017 3,879 3,742
------- ------- ------- ------- ------- ------- ------- -------
Non-interest income 573 677 729 508 446 504 523 641
Non-interest expense 3,124 3,535 3,459 3,658 3,039 3,052 2,904 2,818
------- ------- ------- ------- ------- ------- ------- -------
Income before taxes 1,455 1,698 2,074 1,820 1,404 1,469 1,498 1,565
Provision for income taxes 483 520 640 535 494 517 530 553
------- ------- ------- ------- ------- ------- ------- -------
Net income $ 972 $ 1,178 $ 1,434 $ 1,285 $ 910 $ 952 $ 968 $ 1,012
======= ======= ======= ======= ======= ======= ======= =======
Basic earnings per share $ 0.18 $ 0.22 $ 0.27 $ 0.25 $ 0.16 $ 0.18 $ 0.18 $ 0.19
======= ======= ======= ======= ======= ======= ======= =======
Diluted earnings per share $ 0.18 $ 0.21 $ 0.26 $ 0.25 $ 0.16 $ 0.17 $ 0.18 $ 0.19
======= ======= ======= ======= ======= ======= ======= =======
(18) Restatement of Financial Statements - September 30, 2001
Subsequent to the issuance of the Company's financial statements,
management determined that the decline in value of a security classified as
available for sale was other than temporary, resulting in an impairment
loss of $257,000 which was not included in the September 30, 2001 financial
statements. The inclusion of this loss in the revised financial statements
has the effect of decreasing net income for fiscal 2001 by $162,000 or $.03
per basic and diluted share.
42
[LOGO] HACKER, JOHNSON & SMITH PA
========================================================================
Fort Lauderdale Certified Public Accountants
Orlando
Tampa
Independent Auditors' Report
Board of Directors
FloridaFirst Bancorp, Inc.
Lakeland, Florida:
We have audited the accompanying consolidated statements of financial
condition of FloridaFirst Bancorp, Inc. (the "Company") at September 30, 2001
and 2000, and the related consolidated statements of earnings, stockholders'
equity and comprehensive income and cash flows for each of the years in the
three-year period ended September 30, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
at September 30, 2001 and 2000, and the results of its operations, and its cash
flows for each of the years in the three-year period ended September 30, 2001 in
conformity with accounting principles generally accepted in the United States of
America.
As more fully described in Note 18, subsequent to the issuance of the
Company's September 30, 2001 consolidated financial statements and our report
thereon, we became aware the consolidated financial statements did not reflect
an impairment loss on an individual security classified as available for sale.
In our original report, we expressed an unqualified opinion on the 2001
consolidated financial statements, and our opinion on the revised consolidated
financial statements as expressed herein, remains unqualified.
/s/HACKER, JOHNSON & SMITH PA
HACKER, JOHNSON & SMITH PA
Tampa, Florida
November 2, 2001, except for Note 13 which is December 6, 2001 and Note 18 which
is March 5, 2002
500 North Westshore Boulevard, Post Office Box 20368, Tampa, Florida 33622-0368, (813) 286-2424
Member of American Institute of Certified Public Accountants SEC Practice Section
43