SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 1999
------------------
- or -
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission Number: 000-25693
FLORIDAFIRST BANCORP
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(Exact name of Registrant as specified in its Charter)
United States 59-3545582
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
205 East Orange Street 33801-4611
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (863) 688-6811
--------------
Securities Registered Pursuant to Section 12(b) of the Act:
None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $ .10 par value
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(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant, based on the closing price of the Registrant's Common Stock
as quoted on the Nasdaq National Market, on December 15, 1999, was $49.2
million. (The exclusion from such amount of the market value of the shares owned
by any person shall not be deemed an admission by the registrant that such
person is an affiliate of the registrant.)
As of December 15, 1999, there were issued and outstanding 5,506,875
shares of the Registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
1. Parts II and IV of Form 10-K - Portions of the Annual Report to
Stockholders for the Fiscal Year Ended September 30, 1999.
2. Part III of Form 10-K - Portions of the Proxy Statement for fiscal 1999
Annual Meeting of Stockholders.
<PAGE>
PART I
Item 1. Description of Business
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General
FloridaFirst Bancorp (the "Company") is a savings and loan holding
company formed in connection with the mutual holding company reorganization of
FloridaFirst Bank (the "Bank") completed on April 6, 1999. The Company owns 100%
of the outstanding shares of the Bank. In connection with the reorganization,
the Company sold 2,703,851 shares (or 47%) of its Common Stock to the public and
the Bank's employee stock ownership plan. The remaining 3,049,024 shares (or
53%) are held by FloridaFirst Bancorp MHC. The Company as used throughout this
document refers to the consolidated entity which includes the main operating
company - the Bank.
The Company provides retail banking services, with an emphasis on one-
to four-family residential mortgage loans, home equity loans and lines of credit
and consumer loans as well as certificates of deposit, checking accounts and
savings accounts. In addition, the Company originates commercial real estate
loans and offers checking accounts and other credit facilities to businesses
within its market area. At September 30, 1999, the Company had total assets,
deposits and equity of $498.4 million, $339.2 million, and $61.3 million,
respectively.
The Company attracts deposits from the general public and uses these
deposits primarily to originate loans and to purchase investment,
mortgage-backed and other securities. The principal sources of funds for the
Company's lending and investing activities are deposits, FHLB advances, the
repayment and maturity of loans and sale, maturity, and call of securities. The
principal source of income is interest on loans and investment and
mortgage-backed securities. The principal expense is interest paid on deposits
and FHLB advances.
Market Area and Competition
The Company operates seven offices (including its main office) in Polk
County and two offices in Manatee County. Polk County is in central Florida and
Manatee County is located in west central Florida. There are approximately
680,000 residents and 268,000 households within the Company's primary market
areas. Polk County had an estimated 1997 population of 445,000 and includes
Lakeland and Winter Haven among its most populous cities. The Company operates
primarily in those two cities. Polk County is positioned for continued growth as
it is located between the rapidly developing counties of Orange (Orlando) and
Hillsborough (Tampa). Manatee County had an estimated 1997 population of 235,000
and includes Bradenton and Palmetto as its most populous cities. The Company
operates five offices in Lakeland, two in Winter Haven and two in Bradenton.
The Polk County economy has depended on the citrus and phosphate mining
industries for a long time. These industries remain strong and are continuing to
grow through capital investment. The citrus industry however, remains vulnerable
to severe weather conditions and increased competition, both domestic and
international. In addition, the economy has diversified and has strengthened the
area's business development. Polk County is home to the largest privately owned
employer in the state, a grocery chain that operates over 575 stores in four
states. Because of Polk County's location in central Florida between Orlando and
Tampa and its accessibility to major interstate highways, Polk County is
considered a major distribution location and has become a home for large
transportation and distribution companies and related warehousing and supplies
operations. The weather conditions, affordable labor pool and lifestyle
amenities have attracted other major employers in the insurance servicing area
and a variety of other industries.
2
<PAGE>
Manatee County is situated southwest of Polk County and just south of
Tampa and St. Petersburg, Florida. Manatee and neighboring Sarasota County have
experienced growth rates among the highest in the nation over the past several
years. Local economies have been supported primarily by the services industry
(which includes tourism). However, recent efforts have resulted in
diversification into light manufacturing operations.
Based on deposits at June 30, 1999, the Company ranked sixth among FDIC
insured financial institutions operating in Polk County. The Company is the only
remaining thrift institution based in Polk County and had a deposit market share
of 7.3%. The Company ranked tenth in Manatee County among 22 FDIC insured
financial institutions and had a deposit market share of 2.1%. The deposit
markets in both of these counties are dominated by large regional banks that are
headquartered outside of Florida.
The Company's market area can be characterized as a market with
moderate incomes, increasing wealth, and strong population growth, representing
an attractive market that can be served by a community financial institution
such as the Company.
The Company faces strong competition in its attraction of deposits,
which are its primary source of funds for lending, and in the origination of
real estate, commercial and consumer loans. The Company's competition for
deposits and loans historically has come from local and regional commercial
banks and credit unions located in the Company's market area. The Company also
competes with mortgage banking companies for real estate loans, and commercial
banks and savings institutions for consumer loans; and faces competition for
investor funds from mutual fund accounts, short-term money funds and corporate
and government securities.
The Company competes for loans by charging competitive interest rates
and loan fees, and emphasizing outstanding service for its customers. The
Company offers consumer banking services such as checking and savings accounts,
certificates of deposit, retirement accounts, overdraft protection, and consumer
and mortgage loans. The Company also provides drive-up facilities and offers a
debit card program. The Company has installed automated teller machines at all
branches during the past year. The emphasis on outstanding service
differentiates the Company in its competition for deposits. The Company offers
overall market rates on deposits. Although the Company is the largest locally
based financial institution in terms of deposit share in its primary market
area, many of the regional commercial banking competitors of the Company offer a
much broader array of services and products.
Lending Activities
General. The Company primarily originates one- to four-family
residential real estate loans, commercial real estate loans, consumer loans and
other loans. Consumer loans consist primarily of direct and indirect automobile
loans, home equity loans and lines of credit, and other consumer purpose loans.
The Company's commercial real estate loans consist primarily of mortgage loans
secured by small commercial office/retail space, warehouses and small and medium
sized apartment buildings.
3
<PAGE>
Loan Portfolio Composition. The following table analyzes the composition of the
Company's loan portfolio by loan category at the dates indicated.
<TABLE>
<CAPTION>
At September 30,
-------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------------- ------------- ------------- ------------- ---------------
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ ------- ------ ------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Type of Loans:
-------------
Mortgage loans:
Residential:
Permanent................. $276,115 65.6% $244,667 68.3% $256,742 69.3% $247,609 73.7% $206,415 77.1%
Construction.............. 32,974 7.8 27,311 7.6 22,350 6.0 19,778 5.9 9,729 3.6
Multi-family................ 5,787 1.4 4,464 1.2 4,154 1.1 4,564 1.4 5,510 2.1
Commercial real estate (1).. 21,157 5.0 17,217 4.8 12,282 3.3 8,562 2.5 4,260 1.6
Land........................ 9,548 2.3 6,796 1.9 6,153 1.7 779 .2 629 .2
Consumer Loans:
Home equity loans (2)..... 22,545 5.4 13,137 3.7 18,310 4.9 18,361 5.5 18,396 6.9
Auto loans................ 42,181 10.0 34,795 9.7 43,504 11.7 30,911 9.2 19,307 7.2
Other..................... 10,318 2.5 9,959 2.8 7,415 2.0 5,311 1.6 3,586 1.3
------- ----- ------ ----- ------- ----- ------- ----- ------- -----
Total loans................. 420,625 100.0% 358,346 100.0% 370,910 100.0% 335,875 100.0% 267,832 100.0%
===== ===== ===== ===== =====
Less:
Loans in process (3)...... 19,774 17,013 12,589 12,072 5,060
Deferred loan fees and
unearned interest....... -- 159 137 91 195
Allowance for loan losses. 2,941 2,564 2,633 2,385 1,902
------- ------- ------- ------- -------
Total loans, net............ $397,910 $338,610 $355,551 $321,327 $260,675
======= ======= ======= ======= =======
--------------------
</TABLE>
(1) Includes commercial loans of $1,374 in 1999, $1,083 in 1998 and $218
in 1997 which were not secured by real estate.
(2) Includes home equity lines of credit.
(3) Relates to construction loans.
4
<PAGE>
Loan Maturity Schedule. The following table sets forth the maturity or
repricing of the Company's loan portfolio at September 30, 1999. Demand loans,
loans having no stated maturity, and overdrafts are shown as due in one year or
less.
<TABLE>
<CAPTION>
Commercial Home Auto and
Multi- real estate equity other
Residential(1) family and land loans consumer Total
-------------- -------- --------------- --------- ------------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Amounts Due:
Within 1 Year....... $ 64,668 $ 1,440 $6,916 $6,826 $3,576 $ 83,426
------ ----- ----- ----- ------ -------
After 1 year:
1 to 3 years...... 14,708 930 3,173 1,336 12,892 33,039
3 to 5 years...... 19,528 1,048 5,713 2,843 26,194 55,326
5 to 10 years..... 11,787 305 8,375 2,459 9,837 32,763
10 to 20 years.... 73,376 1,454 6,338 9,079 -- 90,247
Over 20 years..... 125,022 610 190 2 -- 125,824
------- ----- ------ ------ ------ -------
Total due after one year 244,421 4,347 23,789 15,719 48,923 337,199
------- ----- ------ ------ ------ -------
Total amount due.... $ 309,089 $ 5,787 $ 30,705 $ 22,545 $ 52,499 $ 420,625
======= ===== ====== ====== ====== =======
</TABLE>
-----------------------
(1) Includes $32,974 in construction loans.
The following table sets forth the dollar amount of all loans due after
September 30, 2000, which have pre-determined interest rates and which have
floating or adjustable interest rates.
<TABLE>
<CAPTION>
Floating or
Fixed Rates adjustable rates Total
-------------- -------------------- -----------
(In thousands)
<S> <C> <C> <C>
Residential.............................. $ 212,756 $ 31,665 $ 244,421
Multi-family............................. 3,602 745 4,347
Commercial real estate and land.......... 23,541 248 23,789
Home equity loans........................ 15,719 -- 15,719
Auto and other consumer.................. 48,923 -- 48,923
-------- ------- --------
Total.................................. $ 304,541 $ 32,658 $ 337,199
======== ======= ========
</TABLE>
Residential Lending. The Company's primary lending activity consists of
the origination of one- to four-family residential mortgage loans secured by
property located in the Company's market area. The Company generally originates
one- to four-family residential mortgage loans in amounts up to 80% of the
lesser of the appraised value or selling price of the mortgaged property without
requiring private mortgage insurance. The Company will originate a mortgage loan
in an amount up to 95% of the lesser of the appraised value or selling price of
a mortgaged property, however, private mortgage insurance for the borrower is
required on the amount financed in excess of 80%. The Company originates fixed
rate and adjustable rate loans for retention in its portfolio. A mortgage loan
originated by the Company, whether fixed rate or adjustable rate, can have a
term of up to 30 years. Adjustable rate loans limit the periodic interest rate
adjustment and the minimum and maximum rates that may be charged over the term
of the loan.
5
<PAGE>
The majority of the Company's one- to four-family residential loans
(both fixed rate and adjustable rate) are underwritten in accordance with
Federal National Mortgage Association ("FNMA") guidelines, regardless of whether
they will be sold in the secondary market. Substantially all of the Company's
residential mortgages include "due on sale" clauses, which give the Company the
right to declare a loan immediately payable if the borrower sells or otherwise
transfers an interest in the property to a third party.
Property appraisals on real estate securing the Company's single-family
residential loans are made by state certified and licensed independent
appraisers approved by the Board of Directors. Appraisals are performed in
accordance with applicable regulations and policies. The Company obtains title
insurance policies on all first mortgage real estate loans originated. Borrowers
generally advance funds, with each monthly payment of principal and interest, to
a loan escrow account from which the Company makes disbursements for such items
as real estate taxes and hazard insurance premiums and mortgage insurance
premiums as they become due.
Construction Lending. The Company is an active lender in the
construction of one- to four-family homes. The residential construction loans
are made both to individual homeowners for the construction of their primary
residence and to local builders for the construction of pre-sold houses or
houses that are being built for speculative purposes.
As of September 30, 1999, 82% of all the Company's residential
construction loans were made to individual homeowners. After the house is
constructed, the loan terms are modified to terms that apply to permanent
residential loans. The underwriting guidelines for the construction to permanent
loans are the same as the permanent loans, but additional construction
administration procedures and inspections are followed during the construction
process to assure that satisfactory progress is being made prior to funding the
construction draw requests.
Construction lending is generally considered to involve a higher degree
of credit risk than long term financing of residential properties. The Company's
risk of loss on a construction loan depends largely on the accuracy of the
initial estimate of the property's value at completion of construction and the
estimated cost of construction. If the estimate of construction cost and the
marketability of the property after the project is completed prove to be
inaccurate, we may be compelled to advance additional funds to complete the
construction. Furthermore, if the final value of the completed property is less
than the estimated amount, the value of the property might not be sufficient to
assure the repayment of the loan.
The Company limits its exposure for construction loans made to local
builders through periodic credit analysis on the individual builder and a series
of inspections throughout the construction phase. In addition, the Company
limits the amount and number of loans made to an individual builder for the
construction of pre-sold and speculative houses based on the financial strength
of the builder.
Commercial Real Estate and Other Loans. The Company originates
commercial real estate mortgage loans and loans on multi-family dwellings and
developed and undeveloped land. The Company's commercial real estate mortgage
loans are primarily permanent loans secured by improved property such as office
buildings, retail stores, commercial warehouses and apartment buildings. The
terms and conditions of each loan are tailored to the needs of the borrower and
based on the financial strength of the project and any guarantors. The average
loan size is approximately $146,000 and typically are made with fixed rates of
interest with five to ten year maturities, at which point the loan is repaid or
the terms and conditions are renegotiated. Essentially all originated commercial
real estate loans are within the Company's market area and all are within the
State of Florida. The Company's largest commercial real estate loan had a
balance of $1.6 million on September 30, 1999 and was secured by a professional
office building. See also "Loans to
6
<PAGE>
One Borrower." Typically, commercial real estate loans are originated in amounts
up to 80% of the appraised value of the mortgaged property.
Commercial real estate, multi-family and land loans generally have a
significantly greater risk than that which is involved with single family real
estate lending. The repayment of these loans typically depends on the successful
operations and income stream of the commercial real estate and the borrower.
Such risks can be significantly affected by economic conditions. In addition,
commercial real estate lending generally requires substantially greater
oversight efforts compared to residential real estate lending.
Commercial Banking. To accomplish its mission to become a full service
community bank, the Company has expanded its products and services offerings to
the small to medium size businesses within its market area. Experienced
personnel have been added within the past year and the Company's plans call for
the hiring of additional personnel over the next few years to assist in reaching
its objectives. New sales call programs, credit analysis guidelines, loan
grading systems, technology upgrades and new products and services either have
been implemented or are in the process of implementation. The Company plans to
satisfy not only the borrowing needs of new prospective business customers, but
plans to have the full complement of deposit services and customer services
related to the checking, savings, and cash management needs of these businesses.
Unlike residential mortgage loans, which generally are made on the
basis of the borrower's ability to make repayment from his or her employment and
other income and which are secured by real property with a value that tends to
be more easily ascertainable, commercial business loans typically are made on
the basis of the borrower's ability to make repayment from the cash flow of the
borrower's business. As a result, the availability of funds for the repayment of
commercial business loans may be substantially dependent on the success of the
business itself (which is likely to be dependent upon the general economic
environment). The Company's commercial business loans are sometimes, but not
always, secured by business assets, such as accounts receivable, equipment and
inventory, as well as real estate. However, the collateral securing the loans
may depreciate over time, may be difficult to appraise, and may fluctuate in
value based on the success of the business.
The Company recognizes the generally increased risks associated with
commercial business lending. The Company's commercial business lending policy
emphasizes (1) credit file documentation, (2) analysis of the borrower's
character, (3) analysis of the borrower's capacity to repay the loan, (4)
adequacy of the borrower's capital and collateral, and (5) evaluation of the
industry conditions affecting the borrower. Analysis of the borrower's past,
present and future cash flows is also an important aspect of the Company's
credit analysis. The Company plans to expand its commercial business lending,
subject to market conditions.
The Company generally obtains annual financial statements from
borrowers for commercial business loans. These statements are analyzed to
monitor the quality of the loan. As of September 30, 1999, the commercial
business loans ranged from $5,000 to $345,000, with an average committed balance
outstanding of $50,000. All such loans are current and have performed in
accordance with their terms.
Consumer Loans. Consumer loans consist primarily of direct and indirect
auto loans and home equity loans and credit lines. To a lesser extent, the
Company originates unsecured lines of credit, loans secured by savings accounts
and other consumer loans. Consumer loans are originated in the Company's market
area and generally have maturities of up to 10 years. For savings account loans,
the Company will lend up to 90% of the account balance.
Consumer loans have a shorter term and generally provide higher
interest rates than residential loans. The consumer loan market can be helpful
in improving the spread between average loan yield and costs of funds and at the
same time improve the matching of the rate sensitive assets and liabilities.
7
<PAGE>
Consumer loans entail greater risks than one- to four-family
residential mortgage loans, particularly consumer loans secured by rapidly
depreciable assets such as automobiles or loans that are unsecured. In such
cases, any repossessed collateral for a defaulted loan may not provide an
adequate source of repayment of the outstanding loan balance, since there is a
greater likelihood of damage, loss or depreciation of the underlying collateral.
Further, consumer loan collections depend on the borrower's continuing financial
stability, and therefore are more likely to be adversely affected by job loss,
divorce, illness or personal bankruptcy. Even for consumer loans secured by real
estate the risk to the Company is greater than that inherent in the single
family loan portfolio in that the security for consumer loans is generally not
the first lien on the property and ultimate collection of amounts due may depend
on whether any value remains after collection by a holder with a higher priority
than the Company. Finally, the application of various federal laws, including
federal and state bankruptcy and insolvency laws, may limit the amount which can
be recovered on such loans after a default.
At September 30, 1999, 76% of the Company's automobile loans
outstanding were loans originated through local automobile dealerships. Although
this type of lending generally carries a greater risk factor, the Company has
experienced personnel to handle this type of lending. The dealer arrangements
are limited primarily to a few local dealers where long term relationships have
been established and the loans acquired typically are those made to higher
credit quality borrowers.
The underwriting standards employed by the Company for consumer loans
include a determination of the applicant's credit history and an assessment of
the applicant's ability to meet existing obligations and payments on the
proposed loan. The stability of the applicant's monthly income may be determined
by verification of gross monthly income from primary employment, and
additionally from any verifiable secondary income. Creditworthiness of the
applicant is of primary consideration; however, the underwriting process also
includes a comparison of the value of the collateral in relation to the proposed
loan amount.
Loans to One Borrower. Under federal law, savings institutions have,
subject to certain exemptions, lending limits to one borrower in an amount equal
to the greater of $500,000 or 15% of the institution's unimpaired capital and
surplus. As of September 30, 1999, the Company's largest aggregation of loans to
one borrower was $5.3 million, consisting of fifteen loans secured primarily by
commercial warehouses, in the Lakeland, Florida area, which was within the
Company's legal lending limit to one borrower of $7.3 million at such date. At
September 30, 1999, the loans were current.
Loan Solicitation and Processing. The Company's customary sources of
mortgage loan applications include repeat customers, walk-ins, and referrals
from home builders and real estate brokers. Commercial customer relationships
are developed through the officer call program and from referrals developed
through the branch network.
After receiving a loan application from a prospective borrower, a
credit report and verifications are ordered to confirm specific information
relating to the loan applicant's employment, income and credit standing. An
appraisal of the real estate intended to secure the proposed loan is undertaken
by an independent fee appraiser. In connection with the loan approval process,
the Company's staff analyze the loan applications and the property involved.
Officers and lenders are granted lending authority based on the loan types that
they work with and their level of experience. An officers' loan committee
approves loans exceeding individual authorities, with the Executive Committee
approving loans between $500,000 and $1 million, and the full Board of Directors
approving loans in excess of $1 million.
Loan applicants are promptly notified of the decision of the Company by
a letter setting forth the terms and conditions of the decision. If approved,
these terms and conditions include the amount of the loan, interest
8
<PAGE>
rate basis, amortization term, a brief description of real estate to be
mortgaged to the Company, tax escrow and the notice of requirement of insurance
coverage to be maintained to protect the Company's interest. The Company
requires title insurance on first mortgage loans and fire and casualty insurance
on all properties securing loans, which insurance must be maintained during the
entire term of the loan.
Loan Commitments. The Company generally grants commitments to fund
fixed and adjustable-rate single family mortgage loans for periods of 60 days at
a specified term and interest rate. The total amount of the Company's
commitments to extend credit as of September 30, 1999, 1998 and 1997 were $2.3
million, $2.7 million and $3.7 million, respectively.
Loan Origination and Other Fees. In addition to interest earned on
loans, the Company may charge loan origination and commitment fees for
originating or purchasing certain loans. Since most loans are originated without
points being charged, the Company has assessed customers certain fees related to
underwriting and document preparation. The Company believes these fees are just
slightly above the costs to originate the loans. Therefore, the net deferred
fees are minimal and deferrals have an immaterial effect on operating results.
The Company also receives other fees and charges relating to existing
loans, which include late charges, and fees collected in connection with a
change in borrower or other loan modifications. These fees and charges have not
constituted a material source of income.
Non-performing Loans and Problem Assets
Collection Procedures. The Company's collection procedures provide that
when a loan is 15 days delinquent, the borrower is notified. If the loan becomes
30 days delinquent, the borrower is sent a written delinquent notice requiring
payment. If the delinquency continues, subsequent efforts are made to contact
the delinquent borrower. In certain instances, the Company may modify the loan
or grant a limited moratorium on loan payments to enable the borrower to
reorganize his financial affairs and the Company attempts to work with the
borrower to establish a repayment schedule to cure the delinquency. As to
mortgage loans, if the borrower is unable to cure the delinquency or reach a
payment agreement with the Company within 90 days, the Company will institute
foreclosure actions. If a foreclosure action is taken and the loan is not
reinstated, paid in full or refinanced, the property is sold at judicial sale at
which the Company may be the buyer if there are no adequate offers to satisfy
the debt. Any property acquired as the result of foreclosure or by deed in lieu
of foreclosure is classified as real estate owned ("REO") until such time as it
is sold or otherwise disposed of by the Company. When REO is acquired, it is
recorded at the lower of the unpaid principal balance of the related loan or its
fair market value less estimated selling costs. The initial writedown of the
property is charged to the allowance for loan losses.
As to commercial related loans, the main thrust of the Company's
collection efforts is through telephone contact and a sequence of collection
letters. If the Company is unable to resolve the delinquency within 90 days or
in some situations shorter time periods, the Company will pursue all available
legal remedies. The Company's commercial lenders are required to evaluate each
assigned account on a case-by-case basis, within the parameters of the Company's
policies.
Loans are reviewed on a regular basis and are placed on a non-accrual
status when they are more than 90 days delinquent. Loans may be placed on a
non-accrual status at any time if, in the opinion of management, the collection
of additional interest is doubtful. Interest accrued and unpaid at the time a
loan is placed on non-accrual status is charged against interest income.
Subsequent payments are either applied to the outstanding principal balance or
recorded as interest income, depending on the assessment of the ultimate
collectibility of the loan. At September 30, 1999, the Company had $830,000 of
loans that were held
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<PAGE>
on a non-accrual basis; held three residential properties as REO with a net book
balance of $15,000; and $188,000 in other non-performing assets consisting
primarily of repossessed vehicles.
Non-Performing Assets. The following table provides information
regarding the Company's non-performing loans and other non-performing assets as
of the end of each of the last five fiscal years. As of each of the dates
indicated, the Company did not have any troubled debt restructurings within the
meaning of Statement of Financial Accounting Standards No. 114.
<TABLE>
<CAPTION>
At September 30,
-----------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(Dollars in thousands)
Loans accounted for on a non-accrual basis:
Mortgage loans:
<S> <C> <C> <C> <C> <C>
Residential................................. $ 581 $ 445 $ 1,624 $ 654 $ 605
Multi-family................................ -- -- -- -- --
All other mortgage loans.................... 103 -- 491 491 584
Consumer loans:
Home equity loans........................... -- -- -- -- --
Other consumer.............................. 391 199 39 17
--- --- ----- ----- -----
146
--- --- ----- ----- -----
Total......................................... $ 830 $ 836 $ 2,314 $ 1,184 $ 1,206
=== === ===== ===== =====
Accruing loans which are contractually past
Due 90 days or more:
Mortgage loans:
Residential ................................ $ -- $ -- $ -- $ -- $ --
Multi-family................................ -- -- -- -- --
All other mortgage loans.................... -- -- -- -- --
Consumer loans:
Home equity and second mortgages............ -- -- -- -- --
Other consumer.............................. -- -- --
----- ---- ------ ------ ------
Total......................................... $ -- $ -- $ -- $ -- $ --
===== ==== ====== ====== ======
Total non-performing loans.................... $ 830 $ 836 $ 2,314 $ 1,184 $ 1,206
===== ==== ====== ====== ======
Real estate owned............................. $ 15 $ 403 $ 67 $ 8 $ 337
===== ==== ====== ====== ======
Other non-performing assets................... $ 188 $ 91 $ 104 $ 42 $ 11
====== ===== ====== ====== ======
Total non-performing assets................... $ 1,033 $ 1,330 $2,485 $ 1,234 $ 1,554
====== ===== ====== ====== ======
Total non-performing loans to net loans....... .21% .25% .65% .37% .46%
=== === === === ===
Total non-performing loans to total assets.... .17% .20% .49% .27% .28%
=== === === === ===
Total non-performing assets to total assets... .21% .32% .53% .28% .36%
=== === === === ===
</TABLE>
The increase in non-accrual loans during the year ended September 30,
1997 was attributable primarily to $698,000 in residential construction loans
which were placed in non-accrual status after the builder declared bankruptcy.
During the year ended September 30, 1998, the Company foreclosed on and sold the
properties securing the loans which consisted of six individual houses. During
fiscal year 1998, the Company also resolved foreclosure and counterclaim
litigation relating to a $491,000 loan secured by a retail strip shopping
center. In connection with the settlement of this litigation, the Company
received payments totaling $348,000 from the borrower and charged off the
remainder of its investment. As a result of these events, total non-performing
assets declined to $1.3 million at September 30, 1998 from $2.5 million at
September 30, 1997. There were no unusual or significant items that existed as
of September 30, 1999 or occurred during fiscal 1999.
10
<PAGE>
During the year ended September 30, 1999 and 1998, approximately
$57,000 and $71,000 of interest would have been recorded on loans accounted for
on a non-accrual basis if such loans had been current according to the original
loan agreements for the entire period. These amounts were not included in the
Company's interest income for the respective periods.
Classified Assets. Management, in compliance with regulatory
guidelines, has instituted an internal loan review program whereby loans are
classified as special mention, substandard, doubtful or loss. When a loan is
classified as substandard or doubtful, management is required to establish a
valuation reserve for loan losses in an amount that is deemed prudent. When
management classifies a loan as a loss asset, a reserve equal to 100% of the
loan balance is required to be established or the loan is to be charged-off.
This allowance for loan losses is composed of an allowance for both inherent
risk associated with lending activities and particular problem assets.
An asset is considered "substandard" if it is inadequately protected by
the paying capacity and net worth of the obligor or the collateral pledged, if
any. Substandard assets include those characterized by the distinct possibility
that the insured institution will sustain some loss if the deficiencies are not
corrected. Assets classified as doubtful have all of the weaknesses inherent in
those classified substandard, with the added characteristic that the weaknesses
present make collection or liquidation in full, highly questionable and
improbable, on the basis of currently existing facts, conditions, and values.
Assets classified as loss are those considered uncollectible and of such little
value that their continuance as assets without the establishment of a loss
reserve is not warranted. Assets which do not currently expose the insured
institution to a sufficient degree of risk to warrant classification in one of
the aforementioned categories but possess credit deficiencies or potential
weaknesses are required to be designated special mention by management. In
addition, each loan that exceeds $500,000 and each group of loans to one
borrower that exceeds $500,000 is monitored more closely due to the potentially
greater losses from such loans.
Management's evaluation of the classification of assets and the
adequacy of the allowance for loan losses is reviewed by the Board on a regular
basis and by the regulatory agencies as part of their examination process. At
September 30, 1999 the classified assets were (in thousands):
Special mention................ $ 1,012
Substandard.................... 1,033
Doubtful....................... --
-----
Total..................... $ 2,045
=====
Allowance for Loan Losses and REO. The Company segregates the loan
portfolio for loan losses into the following categories: residential real
estate, multi-family real estate, commercial real estate, commercial loans, land
loans, home equity loans and lines of credit, automobile loans (including both
direct and dealer originated loans) and other consumer loans. The Company
provides for a general allowance for losses inherent in the portfolio by the
above categories, which consists of two components. General loss percentages are
calculated based on historical analyses and other factors. A portion of the
allowance is calculated for inherent losses which 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 that do not lend themselves to
exact mathematical calculations such as:
11
<PAGE>
o trends in delinquencies and nonaccruals;
o trends in volume, terms and portfolio mix;
o new credit products;
o changes in lending policies and procedures;
o changes in the outlook for the local, regional and national economy; and
o peer group comparisons.
At least quarterly, the Company's management evaluates the need to
establish reserves against losses on loans and other assets based on estimated
losses on specific loans and on any real estate held for sale or investment when
a finding is made that a loss is estimable and probable. Such evaluation
includes a review of all loans for which full collectibility may not be
reasonably assured and considers, among other matters:
o the estimated market value of the underlying collateral of problem loans;
o prior loss experience;
o economic conditions; and
o overall portfolio quality.
Provisions for losses are charged against earnings in the period they
are established. The Company had $2.9 million in allowances for loan losses at
September 30, 1999.
While the Company believes it has established its existing allowance
for loan losses in accordance with generally accepted accounting principles,
there can be no assurance that regulators, in reviewing the Company's loan
portfolio, will not request the Company to significantly adjust its allowance
for loan losses, or that general economic conditions, a deteriorating real
estate market, or other factors will not cause the Company to significantly
increase its allowance for loans losses, therefore negatively affecting the
Company's financial condition and earnings.
In making loans, the Company recognizes that credit losses will be
experienced and that the risk of loss will vary with, among other things, the
type of loan being made, the creditworthiness of the borrower over the term of
the loan and, in the case of a secured loan, the quality of the security for the
loan.
During 1999, the Company's net charge-offs decreased to $163,000 from
$474,000 in 1998. The higher level of charge-offs in 1998 related primarily to
loans to two borrowers. One loan was secured by a small shopping center that the
Company had been litigating for several years. Final resolution and repayment of
the loan occurred in 1998 with the Company incurring a loss approximating
$140,000. Another large charge-off involved loans made to a local builder for
the construction of single family houses. The Company foreclosed on the
properties and recognized a charge-off of $64,000 in 1998. See further
discussion of these loans under "Non-Performing Assets."
It is the Company's policy to review its loan portfolio, in accordance
with regulatory classification procedures, on at least a quarterly basis.
Additionally, the Company maintains a program of reviewing loan applications
prior to making the loan and immediately after loans are made in an effort to
maintain loan quality.
12
<PAGE>
The following table sets forth information with respect to the
Company's allowance for loan losses at the dates indicated:
<TABLE>
<CAPTION>
At September 30,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Allowance balance, beginning of period........ $ 2,564 $ 2,633 $ 2,385 $ 1,902 $ 1,902
------- ------- ------- ------- -------
Provision for loan losses..................... 540 405 317 600 75
------- ------- ------- ------- -------
Charge-offs:
Residential................................. (37) (218) (19) (70) (55)
Commercial real estate...................... -- (146) (12) -- --
Consumer.................................... (214) (110) (38) (49) (20)
------- ------- ------- ------- -------
Total charge-offs............................. (251) (474) (69) (119) (75)
Recoveries.................................... 88 -- -- 2 --
------- ------- ------- ------- -------
Net (charge-offs) recoveries.................. (163) (474) (69) (117) (75)
------- ------- -- --- --
Allowance balance, end of period.............. $ 2,941 $ 2,564 $ 2,633 $ 2,385 $ 1,902
======= ======= ======= ======= =======
Total loans outstanding....................... $397,910 $338,610 $355,551 $321,327 $260,675
======= ======= ======= ======= =======
Average loans outstanding..................... $368,513 $339,218 $339,992 $288,901 $261,259
======= ======= ======= ======= =======
Allowance for loan losses as a percent of
total loans outstanding................... .74% .76% .74% .74% .73%
Net loans charged off as a percent of average
loans outstanding......................... .04% .14% .02% .04% .03%
</TABLE>
Allocation of Allowance for Loan Losses. The following table sets forth
the allocation of the Company's allowance for loan losses by loan category and
the percent of loans in each category to total loans receivable, net, at the
dates indicated. The portion of the allowance for loan losses allocated to each
loan category does not represent the total available for future losses which may
occur within the loan category since the total allowance for loan losses is a
valuation allowance applicable to the entire loan portfolio.
13
<PAGE>
<TABLE>
<CAPTION>
At September 30,
---------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------- -------- -------- ------- --------
Percent of Percent of Percent of Percent of Percent of
loans to loans to loans to loans to loans to
Amount total loans Amount total loans Amount total loans Amount total loans Amount total loans
------ ----------- ------ ----------- ------ ----------- ------ ----------- ------ -----------
(Dollars in thousands)
At end of period
allocated to:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential ............. $1,689 73.4% $1,564 75.9% $1,523 75.3% $1,491 79.6% $1,301 71.2%
Multi-family ............ 37 1.4 33 1.2 31 1.1 34 1.4 41 3.4
Commercial real
estate and land ......... 289 7.3 206 6.7 251 5.0 234 2.7 56 3.8
Consumer ................ 926 17.9 761 16.2 828 18.6 626 16.3 504 21.6
----- ------ ----- ------ ----- ------ ----- ------ ----- ------
Total allowance ......... $2,941 100.00% $2,564 100.00% $2,633 100.00% $2,385 100.00% $1,902 100.00%
===== ====== ===== ====== ===== ====== ===== ====== ===== ======
</TABLE>
<PAGE>
Investment Activities
General. Federally chartered savings banks have the authority to invest
in various types of liquid assets, including United States Treasury obligations,
securities of various Federal agencies (including securities collateralized by
mortgages), certain certificates of deposits of insured banks and savings
institutions, municipal securities, corporate debt securities and loans to other
banking institutions.
The Company maintains liquid assets which may be invested in specified
short-term securities and certain other investments. Liquidity levels may be
increased or decreased depending on the yields on investment alternatives and
upon management's judgment as to the attractiveness of the yields then available
in relation to other opportunities and its expectation of future yield levels,
as well as management's projections as to the short-term demand for funds to be
used in the Company's loan origination and other activities. At September 30,
1999, the Company had an investment securities portfolio of $80.9 million (16.2%
of total assets).
Investment Policies. The investment policy of the Company, which is
established by the Board of Directors, is designed to foster earnings and
liquidity within prudent interest rate risk guidelines, while complementing the
Company's lending activities. The policy provides for available for sale, held
to maturity and trading classifications. However, the Company does not currently
use a trading classification and does not anticipate doing so in the future. The
policy permits investments in high credit quality instruments with diversified
cash flows while permitting the Company to maximize total return within the
guidelines set forth in the Company's interest rate risk and liquidity
management policy. Permitted investments include but are not limited to U. S.
government obligations, government agency or government-sponsored agency
obligations, state, county and municipal obligations, mortgage-backed securities
and collateralized mortgage obligations guaranteed by government or
government-sponsored agencies, investment grade corporate debt securities, and
commercial paper. The Company also invests in FHLB overnight deposits and
federal funds, but these instruments are not considered part of the investment
portfolio.
The policy also includes several specific guidelines and restrictions
to insure adherence with safe and sound activities. The policy prohibits
investments in high risk mortgage derivative products (as defined within its
policy) without prior approval from the Board of Directors. Management must
demonstrate the business advantage of such investments. In addition, the policy
limits the maximum amount of the investment in a specific investment category.
The Company does not participate in hedging programs, interest rate swaps, or
other activities involving the use of off-balance sheet derivative financial
instruments. Further, the Company does not invest in securities which are not
rated investment grade.
The Board through its Investment and Asset Liability Committee ("ALCO")
has charged the Chief Financial Officer to implement the policy. All
transactions are reported to the Board of Directors monthly, with the entire
portfolio reported quarterly, including market values and unrealized gains
(losses).
Investment Securities. The Company maintains a portfolio of investment
securities, classified as either available for sale or held to maturity, to
enhance total return on investments. At September 30, 1999, the Company's
investment securities included U.S. government agency obligations with varying
characteristics as to rate, maturity and call provisions, corporate bonds, and
municipal bonds. Callable agency securities, representing 76% of the Company's
U.S. government agency obligations at September 30, 1999, could reduce the
Company's investment yield if these securities are called prior to maturity.
15
<PAGE>
Mortgage-backed Securities. The Company invests in mortgage-backed
securities to provide earnings, liquidity, cash flows, and diversification to
the Company's overall balance sheet. These mortgage-backed securities are
classified as either available for sale or held to maturity. These securities
are participation certificates issued and guaranteed by the Government National
Mortgage Association ("GNMA"), the FNMA and the Federal Home Loan Mortgage
Corporation ("FHLMC") and secured by interest in pools of mortgages.
Mortgage-backed securities typically represent a participation interest in a
pool of single-family or multi-family mortgages, although the Company focuses
its investments on mortgage-backed securities secured by single-family
mortgages.
Expected maturities will differ from contractual maturities due to
scheduled repayments and because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.
Mortgage-backed securities typically are issued with stated principal
amounts. The securities are backed by pools of mortgages that have loans with
interest rates that are within a set range and have varying maturities. The
underlying pool of mortgages can be composed of either fixed-rate or adjustable
rate mortgage loans. The interest rate risk characteristics of the underlying
pool of mortgages (i.e., fixed-rate or adjustable-rate) and the prepayment risk,
are passed on to the security holder. The life of a mortgage-backed pass-through
security is equal to the life of the underlying mortgages.
Collateralized Mortgage Obligations ("CMOs"). The Company also invests
in CMOs, issued or sponsored by FNMA, FHLMC or private issuers. CMOs are a type
of debt security that aggregates pools of mortgages and mortgage-backed
securities and creates different classes of CMO securities with varying
maturities and amortization schedules as well as a residual interest with each
class having different risk characteristics. The cash flows from the underlying
collateral are usually divided into "tranches" or classes whereby tranches have
descending priorities with respect to the distribution of principal and interest
repayment of the underlying mortgages and mortgage-backed securities as opposed
to mortgage-backed securities where cash flows are distributed pro rata to all
security holders. Unlike mortgage-backed securities from which cash flow is
received and prepayment risk is shared pro rata by all securities holders, cash
flows from the mortgages and mortgage-backed securities underlying CMOs are paid
in accordance with a predetermined priority to investors holding various
tranches of such securities or obligations. A particular tranche or class may
carry prepayment risk which may be different from that of the underlying
collateral and other tranches. Investing in CMOs allows the Company to moderate
reinvestment risk resulting from unexpected prepayment activity associated with
conventional mortgage-backed securities. Management believes these securities
represent attractive alternatives relative to other investments due to the wide
variety of maturity, repayment and interest rate options available.
Corporate Bonds. Corporate bonds (including capital trust securities)
generally have long-term maturities, but include call provisions at earlier
dates (generally after seven to ten years). The call provisions usually contain
a premium price to exercise the call feature. The Company has invested in these
longer maturity bonds and securities with fixed rates of interest to provide
higher yields to protect part of its assets from the possible decline in
interest rates over the life of the bond. Although interest rates may rise over
the life of these securities, management believes these securities provide a
good complement to those assets (loans and investments) which are subject to
periodic principal repayments and payoffs before contractual maturities.
Municipal Bonds. Municipal bonds have maturities from 12 to 20 years
with premium call provisions after seven to ten years. These bonds are exempt
from federal income taxes, therefore, have lower stated interest rates. All
municipal bonds owned by the bank have fixed rates of interest. The yields
included in the investment tables reflect the tax equivalent yields for the
municipal bonds.
16
<PAGE>
Other Securities. Other securities owned by the Company, but not necessarily
included in the investment portfolio, consist of equity securities,
interest-bearing deposits and federal funds sold. Equity securities owned
consist of a $4.5 million investment in FHLB of Atlanta common stock (this
amount is not shown in the securities portfolio). As a member of the FHLB of
Atlanta, ownership of FHLB of Atlanta common shares is required. The remaining
securities provide diversification and complement the Company's overall
investment strategy.
The following table sets forth the carrying value of the Company's
securities portfolio at the dates indicated.
<TABLE>
<CAPTION>
At September 30,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
(In thousands)
<S> <C> <C> <C>
Securities held to maturity:
----------------------------
U.S. government agency securities............... $ 4,000 $ 8,998 $27,993
Collateralized mortgage obligations............. 8,724 9,738 9,819
------- ------ ------
Total securities held to maturity............... 12,724 18,736 37,812
------- ------ ------
Securities available for sale (at fair value):
----------------------------------------------
U.S. government agency securities ............... 20,513 24,711 31,126
Collateralized mortgage obligations.............. 7,420 3,229 --
Mortgage-backed securities....................... 28,316 14,285 5,635
Corporate bonds.................................. 6,718 -- --
Municipal bonds 5,185 -- --
------ ------ ------
Total securities available for sale.............. 68,152 42,225 36,761
------ ------ ------
Total .......................................... $80,876 $60,961 $74,573
====== ======= ======
</TABLE>
<PAGE>
The following table sets forth certain information regarding the
carrying values, weighted average yields and maturities of the Company's
investment securities portfolio at September 30, 1999.
<TABLE>
<CAPTION>
At September 30, 1999
---------------------------------------------------------------------------------------------------
One Year or Less One to Five Years Five to Ten Years More than Ten Years Total Investment Securities
---------------- ----------------- ----------------- ------------------- ---------------------------
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average Market
value yield value yield value yield value yield value yield value
-------- ------ -------- ------- -------- ------- -------- ------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. government agency
securities.................. $4,000 4.85% $ 8,247 6.15% $12,266 7.60% -- -- $24,513 6.67% $24,470
Collateralized mortgage
obligations................. 8,000 5.55 724 5.80 2,353 6.81 $5,067 5.87% 16,144 5.84 15,942
Mortgage-backed securities ... 3,754 5.57 5,468 6.19 19,094 7.13 28,316 6.75 28,316
Corporate bonds............... - - 1,987 6.56 954 6.68 3,777 7.29 6,718 7.00 6,718
Municipal bonds............... - - - - - - 5,185 6.21 5,185 6.21 5,185
------ ---- ------ ------ ------ ------ -----
Total....................... $15,754 5.38% $10,958 6.20% $21,041 7.10% $33,123 6.81% $80,876 6.53% $80,631
====== ==== ====== ==== ====== ==== ====== ==== ====== ===== ======
</TABLE>
18
<PAGE>
Sources of Funds
General. Deposits are the major source of the Company's funds for
lending and other investment purposes. Borrowings (principally from the FHLB)
are used to compensate for reductions in the availability of funds from other
sources. In addition to deposits and borrowing, the Company derives funds from
loan and mortgage-backed securities principal repayments, and proceeds from the
maturity, call and sale of mortgage-backed securities and investment securities.
Loan and mortgage-backed securities payments are a relatively stable source of
funds, while deposit inflows are significantly influenced by general interest
rates and money market conditions.
Deposits. The Company offers a variety of deposit accounts, although a
majority of deposits are in fixed-term, market-rate certificate accounts.
Deposit account terms vary, primarily as to the required minimum balance amount,
the amount of time that the funds must remain on deposit and the applicable
interest rate.
The Company's current deposit products include certificate accounts
ranging in terms from 90 days to five years as well as checking, savings and
money market accounts. Individual retirement accounts (IRAs) are included in
these accounts, depending on the customers investment preference.
Deposits are obtained primarily from residents of Polk and Manatee
Counties. The Company attracts deposit accounts by offering outstanding service,
competitive interest rates, and convenient locations and service hours. The
Company uses traditional methods of advertising to attract new customers and
deposits, including radio, cable television, direct mail and print media
advertising. The Company does not utilize the services of deposit brokers and
management believes that an insignificant number of deposit accounts are held by
non-residents of Florida.
The Company pays interest on its deposits which are competitive in its
market. Interest rates on deposits are set weekly by senior management, based on
a number of factors, including:
o projected cash flow;
o a current survey of a selected group of competitors' rates for similar
products;
o external data which may influence interest rates;
o investmentopportunities and loan demand; and
o scheduled certificate maturities and loan and investment repayments.
Because of the large percentage of certificate accounts in the deposit
portfolio (71.3% at September 30, 1999), the Company's liquidity could be
reduced if a significant amount of these accounts, maturing within a short
period of time, were not renewed. A significant portion of the certificate
accounts remain with the Company after they mature and the Company believes that
this will continue. However, the need to retain these accounts could result in
an increase in the Company's cost of funds.
19
<PAGE>
Deposits in the Company as of September 30, 1999, were represented by
various deposit programs described below.
<TABLE>
<CAPTION>
Minimum Balance at Percentage of
Category Term Interest Rate(1) Balance Amount September 30, 1999 Total Deposits
- -------- ---- ---------------- -------------- ------------------ --------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Checking accounts None 0-2.05% $40,583 12.0%
Savings accounts None 1.66% 32,826 9.7
Money market accounts 4. 50%(2) 23,997 7.0
Certificate accounts:
All other CD's Various $ 500 7,200 2.1
Fixed term, fixed rate 4 - 6 months 4.85% $ 500 25,811 7.6
Fixed term, fixed rate 7 - 12 months 5.15% $ 500 53,840 15.9
Fixed term, fixed rate 13 - 24 months 5.40% $ 500 37,032 10.9
Fixed term, fixed rate 25 - 36 months 5.40% $ 500 16,889 5.0
Fixed term, fixed rate 37 - 60 months 5.40% $ 500 49,113 14.5
Jumbo certificates Same as above $100,000 51,933 15.3
Total $339,224 100.0%
======== =====
</TABLE>
- ---------------
(1) Interest rate offerings as of September 30, 1999.
(2) Tiered-rate shown is for highest tier.
The following table sets forth the certificate accounts in the Company
classified by interest rate as of the dates indicated.
<TABLE>
<CAPTION>
At September 30,
----------------------------------------
1999 1998 1997
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Interest Rate
4.00-4.99%..................................... $112,560 $ 31,676 $ 9,293
5.00-5.99%..................................... 79,323 166,610 228,331
6.00-6.99%..................................... 47,903 60,964 92,676
7.00-7.99%..................................... 2,032 2,132 2,696
-------- -------- --------
Total........................................ $241,818 $261,382 $332,996
======== ======== ========
</TABLE>
20
<PAGE>
The following table sets forth the amount and maturities of time
deposits at September 30, 1999.
<TABLE>
<CAPTION>
Amount Due
------------------------------------------------------------------------------------
After
September 30, September 30, September 30, September 30,
Interest Rate 2000 2001 2002 2003 Total
- ----------------- ------------- ------------- ------------- -------------
(In thousands)
<S> <C> <C> <C> <C> <C>
4.00-4.99%.............. $ 89,733 $19,973 $1,059 $1,795 $112,560
5.00-5.99%.............. 48,023 15,756 7,426 8,118 79,323
6.00-6.99%.............. 23,214 2,606 21,087 996 47,903
7.00-7.99%.............. 2,032 -- -- -- 2,032
-------- ------- ------- ------- --------
Total $163,002 $38,335 $29,572 $10,909 $241,818
======== ======= ======= ======= ========
</TABLE>
The following table shows the amount (in thousands) of the Company's
certificate accounts of $100,000 or more by time remaining until maturity as of
September 30, 1999.
Certificate
Maturity Period accounts
- --------------- --------
Within three months................................ $6,753
Three through six months........................... 7,690
Six through twelve months.......................... 17,193
Over twelve months................................. 24,182
-------
$55,818
=======
The following table sets forth the deposit activities of the Company
for the periods indicated:
<TABLE>
<CAPTION>
Years ended September 30,
---------------------------------------------
1999 1998 1997
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Net increase (decrease) before interest credited....... $ (26,121) $(34,967) $11,843
Deposits sold in January 1998.......................... -- (55,498) --
Interest credited...................................... 13,165 12,931 13,687
--------- -------- -------
Net increase (decrease) deposits....................... $ (12,956) $(77,534) $25,530
========= ======== =======
</TABLE>
After reviewing its funding alternatives and related costs in 1998, the
Company decided to reduce its premium pricing on certain certificate accounts
and began pricing other deposit accounts more competitively to reduce the
Company's overall cost of funds. Accordingly, the Company experienced a
significant reduction in deposit balances, primarily in certificate accounts,
for 1998.
21
<PAGE>
Borrowings. Deposits are the primary source of funds of the Company's
lending and investment activities and for its general business purposes. The
Company, as the need arises or in order to take advantage of funding
opportunities, may borrow funds in the form of advances from the FHLB to
supplement its supply of lendable funds and to meet deposit withdrawal
requirements. Advances from the FHLB are typically secured by the Company's
stock in the FHLB and a portion of the Company's residential mortgage loans and
may be secured by other assets (principally securities which are obligations of
or guaranteed by the U.S. Government). The Company typically has funded loan
demand and investment opportunities out of current loan and mortgage-backed
securities repayments, investment maturities and new deposits. However, the
Company in recent years has utilized FHLB advances to supplement these sources
and as a match against certain assets in order to better manage interest rate
risk. See Note 7 to Notes to Financial Statements.
Subsidiary Activity
The Company is permitted to invest its assets in the capital stock of,
or originate secured or unsecured loans to, subsidiary corporations. Other than
the Bank, the Company does not have any subsidiaries.
Personnel
As of September 30, 1999 the Company had 155 full-time employees and 18
part-time employees. The employees are not represented by a collective
bargaining unit. The Company believes its relationship with its employees to be
satisfactory.
Legal Proceedings
The Company, from time to time, is a party to routine litigation, which
arises in the normal course of business, such as claims to enforce liens,
condemnation proceedings on properties in which the Company holds security
interests, claims involving the making and servicing of real property loans, and
other issues incident to the business of the Company. There were no lawsuits
pending or known to be contemplated against the Company at September 30, 1999
that would have a material effect on our operations or income.
Regulation
Set forth below is a brief description of certain laws which relate to
the regulation of the Bank and the Company. The description does not purport to
be complete and is qualified in its entirety by reference to applicable laws and
regulations.
Regulation of the Bank
General. As a federally chartered, SAIF-insured savings association,
the Bank is subject to extensive regulation by the OTS and the FDIC. Lending
activities and other investments must comply with federal statutory and
regulatory requirements. The Bank is also subject to reserve requirements of the
Federal Reserve System. Federal regulation and supervision establishes a
comprehensive framework of activities in which an institution can engage and is
intended primarily for the protection of the SAIF and depositors. This
regulatory structure gives the regulatory authorities extensive discretion in
connection with their supervisory and enforcement activities and examination
policies, including policies regarding the classification of assets and the
establishment of adequate allowance for loan losses.
22
<PAGE>
The OTS regularly examines the Bank and prepares reports to the Bank's
board of directors on deficiencies, if any, found in the Bank's operations. The
Bank's relationship with its depositors and borrowers is also regulated by
federal law, especially in such matters as the ownership of savings accounts and
the form and content of the Bank's mortgage documents.
The Bank must file reports with the OTS and the FDIC concerning its
activities and financial condition, and must obtain regulatory approvals prior
to entering into certain transactions such as mergers with or acquisitions of
other financial institutions. Any change in such regulations, whether by the
OTS, the FDIC or the United States Congress, could have a material adverse
impact on the Company and the Bank, and their operations.
Insurance of Deposit Accounts. The FDIC administers two separate
deposit insurance funds. Generally, the Bank Insurance Fund (the "BIF") insures
the deposits of commercial banks and the SAIF ("SAIF") insures the deposits of
savings institutions. The FDIC is authorized to increase deposit insurance
premiums if it determines such increases are appropriate to maintain the
reserves of either the SAIF or BIF or to fund the administration of the FDIC. In
addition, the FDIC is authorized to levy emergency special assessments on BIF
and SAIF members.
Regulatory Capital Requirements. OTS capital regulations require
savings institutions to meet three capital standards: (1) tangible capital equal
to 1.5% of total adjusted assets, (2) core capital equal to at least 3% of total
adjusted assets, and (3) risk-based capital equal to 8% of total risk-weighted
assets. The Bank's capital ratios are set forth in Footnote 10 to the
consolidated financial statements.
Tangible capital is defined as core capital less all intangible assets,
less certain mortgage servicing rights and less certain investments. Core
capital is defined as common stockholders' equity, noncumulative perpetual
preferred stock and minority interests in the equity accounts of consolidated
subsidiaries, certain nonwithdrawable accounts and pledged deposits of mutual
savings associations and qualifying supervisory goodwill, less nonqualifying
intangible assets, certain mortgage servicing rights and certain investments.
The risk-based capital standard for savings institutions requires the
maintenance of total risk-based capital of 8% of risk-weighted assets.
Risk-based capital is comprised of core and supplementary capital. The
components of supplementary capital include, among other items, cumulative
perpetual preferred stock, perpetual subordinated debt, mandatory convertible
subordinated debt, intermediate-term preferred stock, and the portion of the
allowance for loan losses not designated for specific loan losses. The portion
of the allowance for loan and lease losses includable in supplementary capital
is limited to a maximum of 1.25% of risk-weighted assets. Overall, supplementary
capital is limited to 100% of core capital. A savings association must calculate
its risk-weighted assets by multiplying each asset and off-balance sheet item by
various risk factors as determined by the OTS, which range from 0% for cash to
100% for delinquent loans, property acquired through foreclosure, commercial
loans, and other assets.
OTS rules require a deduction from capital for institutions with
certain levels of interest rate risk. The OTS calculates the sensitivity of an
institution's net portfolio value based on data submitted by the institution in
a schedule to its quarterly Thrift Financial Report and using the interest rate
risk measurement model adopted by the OTS. The amount of the interest rate risk
component, if any, deducted from an institution's total capital is based on the
institution's Thrift Financial Report filed two quarters earlier. Federal
savings institutions with less than $300 million in assets and a risk-based
capital ratio above 12% are generally exempt from filing the interest rate risk
schedule. However, the OTS may require any exempt institution that it determines
may have a high level of interest rate risk exposure to file such schedule on a
quarterly basis and may be subject to an additional capital requirement based on
its level of interest rate risk as compared to its peers.
23
<PAGE>
Dividend and Other Capital Distribution Limitations. The OTS imposes
various restrictions or requirements on the ability of savings institutions to
make capital distributions, including cash dividends.
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.
In addition, the OTS could prohibit a proposed capital distribution by
any institution, which would otherwise be permitted by the regulation, if the
OTS determines that the distribution would constitute an unsafe or unsound
practice.
A federal savings institution is prohibited from making a capital
distribution if, after making the distribution, the savings institution would be
unable to meet any one of its minimum regulatory capital requirements. Further,
a federal savings institution cannot distribute regulatory capital that is
needed for its liquidation account.
Qualified Thrift Lender Test. Federal savings institutions must meet a
qualified thrift lender ("QTL") test or they become subject to certain operating
restrictions. If we maintain an appropriate level of investments consisting
primarily of residential mortgages, mortgage-backed securities and other
mortgage-related investment, and otherwise qualify as a QTL, we will have full
borrowing privileges from the FHLB of Atlanta. The required percentage these
mortgage-related investments is 65% of portfolio assets. Portfolio assets are
all assets minus intangible assets, property used by the institution in
conducting its business and liquid assets equal to 10% of total assets. Certain
assets are subject to a percentage limitation of 20% of portfolio assets.
Compliance with the QTL test is determined on a monthly basis in nine out of
every twelve months.
Transactions With Affiliates. Generally, federal banking law requires
that transactions between a savings institution or its subsidiaries and its
affiliates must be on terms as favorable to the savings institution as
comparable transactions with non-affiliates. In addition, certain types of these
transactions are restricted to an aggregate percentage of the savings
institution's capital. Collateral in specified amounts must usually be provided
by affiliates in order to receive loans from the savings institution. In
addition, a savings institution may not extend credit to any affiliate engaged
in activities not permissible for a bank holding company or acquire the
securities of any affiliate that is not a subsidiary. The OTS has the discretion
to treat subsidiaries of savings institution as affiliates on a case-by-case
basis.
Liquidity Requirements. All federal savings institutions are required
to maintain an average daily balance of liquid assets equal to a certain
percentage of the sum of its average daily balance of net withdrawable deposit
accounts and borrowing payable in one year or less. Depending on economic
conditions and savings flows of all savings institutions, the OTS can vary the
liquidity requirement from time to time between 4% and 10%. Monetary penalties
may be imposed on institutions for liquidity requirement violations.
Federal Home Loan Bank System. We are a member of the FHLB of Atlanta,
which is one of 12 regional FHLBs. Each FHLB serves as a reserve or central bank
for its members within its assigned region. It is funded primarily from funds
deposited by financial institutions and proceeds derived from the sale of
24
<PAGE>
consolidated obligations of the FHLB System. It makes loans to members pursuant
to policies and procedures established by the board of directors of the FHLB.
As a member, we are required to purchase and maintain stock in the FHLB
of Atlanta in an amount equal to the greater of 1% of our aggregate unpaid
residential mortgage loans, home purchase contracts or similar obligations at
the beginning of each year or 5% of FHLB advances. We are in compliance with
this requirement. The FHLB imposes various limitations on advances such as
limiting the amount of certain types of real estate related collateral to 30% of
a member's capital and limiting total advances to a member.
The FHLBs are required to provide funds for the resolution of troubled
savings institutions and to contribute to affordable housing programs through
direct loans or interest subsidies on advances targeted for community investment
and low- and moderate-income housing projects. These contributions have
adversely affected the level of FHLB dividends paid and could continue to do so
in the future.
Federal Reserve System. The Federal Reserve System requires all
depository institutions to maintain non-interest-bearing reserves at specified
levels against their checking accounts and non-personal certificate accounts.
The balances maintained to meet the reserve requirements imposed by the Federal
Reserve System may be used to satisfy the OTS liquidity requirements.
Savings institutions have authority to borrow from the Federal Reserve
System "discount window," but Federal Reserve System policy generally requires
savings institutions to exhaust all other sources before borrowing from the
Federal Reserve System.
Regulation of the Company
General. The Company is a federal mutual holding company within the
meaning of Section 10(o) of the Home Owners' Loan Act ("HOLA"). The Company is
required to register and file reports with the OTS and will be subject to
regulation and examination by the OTS. In addition, the OTS has enforcement
authority over the Company and any non-savings institution subsidiaries. The OTS
can restrict or prohibit activities that it determines to be a serious risk to
the Company. This regulation is intended primarily for the protection of the
depositors and not for the benefit of you, as stockholders of the Company.
Restrictions on Acquisitions. The Company must obtain approval from the
OTS before acquiring control of any other SAIF-insured savings institution. No
person may acquire control of a federally insured savings institution without
providing at least 60 days written notice to the OTS and giving the OTS an
opportunity to disapprove the proposed acquisition.
Recent Developments - Financial Modernization. On November 12, 1999,
President Clinton signed into law the Gramm-Leach-Bliley Act (the "Act") which
will, effective March 11, 2000, permit qualifying bank holding companies to
become financial holding companies and thereby affiliate with securities firms
and insurance companies and engage in other activities that are financial in
nature. The Act defines "financial in nature" to include securities
underwriting, dealing and market making; sponsoring mutual funds and investment
companies; insurance underwriting and agency; merchant banking activities, and
activities that the Board has determined to be closely related to banking. A
qualifying national bank also may engage, subject to limitations on investment,
in activities that are financial in nature, other than insurance underwriting,
insurance company portfolio investment, real estate development, and real estate
investment, through a financial subsidiary of the bank.
25
<PAGE>
Item 2. Description of Property
- --------------------------------
The Company's executive offices are located at 205 East Orange Street in
Lakeland, Florida. The Company conducts its business through nine offices, which
are located in Polk and Manatee Counties in Florida. The following table sets
forth the location of each of the Company's offices, the year the office was
opened and the net book value 9in thousands) of each office and its related
equipment.
<TABLE>
<CAPTION>
Net book
Year facility value at
opened or Leased or September 30,
Building/Office Location acquired owned 1999
- ------------------------ -------- ----- ----
<S> <C> <C> <C>
Main Office/Corporate Headquarters 1957 Owned $ 2,463
Branch Offices:
Grove Park 1961 Owned 215
Highlands 1972 Owned 619
Interstate 1985 Owned 473
Winter Haven North 1978 Owned 556
Winter Haven South 1995 Owned 818
West Bradenton 1989 Owned 709
Cortez (Bradenton) 1972 Leased(1) 95
Scott Lake 1997 Owned 606
Operations Center 1964 Owned 281
</TABLE>
- -----------------
(1) This is a five-year lease that terminates December 31, 2003, but has two
three-year renewal options.
As of September 30, 1999, the net book value of land, buildings,
furniture and equipment owned by the Company, less accumulated depreciation,
totaled $6.8 million.
Item 3. Legal Proceedings
- --------------------------
From time to time the Company and the Bank are involved as plaintiff or
defendant in various legal actions arising in the normal course of business.
Presently, neither the Company nor the Bank are a party to any material pending
legal proceeding.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not applicable.
26
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
- --------------------------------------------------------------------------------
Matters
-------
Page 3 of the 1999 Annual Report to Stockholders ("Annual Report") is
herein incorporated by reference.
Item 6. Selected Financial Data
- --------------------------------
Pages 4 and 5 of the Annual Report to Stockholders are herein
incorporated by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
- --------------------------------------------------------------------------------
Results of Operations
---------------------
Pages 6 through 18 of the Annual Report to Stockholders are herein
incorporated by reference.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
- --------------------------------------------------------------------
Pages 6 through 8 of the Annual Report to Stockholders are herein
incorporated by reference.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
Pages 19 through 44 of the Annual Report to Stockholders are herein
incorporated by reference.
Item 9. Changes in and Disagreements With Accountants on Accounting and
- --------------------------------------------------------------------------------
Financial Disclosure
--------------------
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
Information concerning Directors of the Registrant is incorporated
herein by reference from the Company's definitive Proxy Statement for the Annual
Meeting of Stockholders scheduled to be held on January 28, 2000, except for
information contained under the heading "Compensation Committee Report on
Executive Compensation" and "Stockholder Return Performance Presentation," a
copy of which will be filed not later than 120 days after the close of the
fiscal year.
Item 11. Executive Compensation
- --------------------------------
Information concerning executive compensation is incorporated herein by
reference from the Company's definitive Proxy Statement for the Annual Meeting
of Stockholders scheduled to be held on January 28, 2000, except for information
contained under the heading "Compensation Committee Report on Executive
Compensation" and "Stockholder Return Performance Presentation", a copy of which
will be filed not later than 120 days after the close of the fiscal year.
27
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
Information concerning security ownership of certain beneficial owners
and management is incorporated herein by reference from the Company's definitive
Proxy Statement for the Annual Meeting of Stockholders scheduled to be held on
January 28, 2000, except for information contained under the heading
"Compensation Committee Report on Executive Compensation" and "Stockholder
Return Performance Presentation", a copy of which will be filed not later than
120 days after the close of the fiscal year.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
No information was required to be reported by the Company under Item 404
of Regulation S-K for the fiscal year ended September 30, 1999.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- --------------------------------------------------------------------------
(a) (1) Financial Statements:
The following information appearing in the Registrant's Annual Report
to Stockholders for the year ended September 30, 1999, is incorporated by
reference in this Form 10-K Annual Report as Exhibit 13.
<TABLE>
<CAPTION>
Pages in annual
report section
--------------
<S> <C>
Consolidated Statements of Financial Condition at September 30, 1999 and 1998.................... 20
Consolidated Statements of Earnings for the years ended
September 30, 1999, 1998 and 1997............................................................. 21
Consolidated Statement of Changes in Stockholders' Equity and Comprehensive Income
for the years ended September 30, 1999, 1998 and 1997......................................... 22
Consolidated Statements of Cash Flows for the years ended
September 30, 1999, 1998 and 1997............................................................. 23
Notes to Consolidated Financial Statements....................................................... 24
Report of Independent Auditors................................................................... 45
</TABLE>
(a) (2) Financial Statement Schedules:
All financial statement schedules have been omitted as the information
is not required under the related instructions or is inapplicable.
28
<PAGE>
(a) (3) Exhibits:
<TABLE>
Exhibit
Number Document
------ --------
<S> <C>
3(i) Charter of FloridaFirst Bancorp*
3(ii) Bylaws of FloridaFirst Bancorp*
4 Specimen Stock Certificate of FloridaFirst Bancorp*
10.1 Employment Agreement with Gregory C. Wilkes*
10.2 Form of Employment Agreement with Four Employees of the Bank*
10.3 1999 Stock Option Plan
10.4 Restricted Stock Plan
13 Annual Report to Security Holders
21 Subsidiaries of Registrant (See Item 1 - Description of the Business - Subsidiary
Activity)
27 Financial Data Schedule (in electronic filing only)
</TABLE>
* Incorporated by reference to the Registrant's Registration Statement on
Form S-1 initially filed with the Commission on December 18, 1998 (File No.
333-69239)
(b) Reports on Form 8-K:
The following reports on Form 8-K were filed by the Company during the
period covered by this report.
Date of Report Subject
-------------- -------
October 25, 1999 Stock Repurchase Plan - OTS approval
29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FLORIDAFIRST BANCORP
Date: December 28, 1999 By: /s/Gregory C. Wilkes
-------------------------------------
Gregory C. Wilkes
President and Chief Executive Officer
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
/s/Gregory C. Wilkes /s/Kerry P. Charlet
- ------------------------------------- --------------------------------------------
Gregory C. Wilkes Kerry P. Charlet
President and Chief Executive Officer Senior Vice President and Chief
Financial Officer
(Principal Financial and Accounting Officer)
/s/Charles W. Bovay /s/Nis H. Nissen, III
- ------------------------------------- --------------------------------------------
Charles W. Bovay Nis H. Nissen, III
Chairman of the Board Director
/s/Robert H. Artman /s/Rudy H. Thornberry
- ------------------------------------- --------------------------------------------
Robert H. Artman Rudy H. Thornberry
Director Director
/s/Llewellyn N. Belcourt /s/G. F. Zimmermann, III
- ------------------------------------- --------------------------------------------
Llewellyn N. Belcourt G. F. Zimmermann, III
Director Director
/s/Stephen A. Moore, Jr.
- -------------------------------------
Stephen A. Moore, Jr.
Director
</TABLE>
EXHIBIT 10.3
<PAGE>
FLORIDAFIRST BANCORP
1999 STOCK OPTION PLAN
1. Purpose of the Plan. The Plan shall be known as the FLORIDAFIRST
BANCORP ("Company") 1999 Stock Option Plan (the "Plan"). The purpose of the Plan
is to attract and retain qualified personnel for positions of substantial
responsibility and to provide additional incentive to officers, directors,
employees and other persons providing services to the Company, or any present or
future parent or subsidiary of the Company to promote the success of the
business. The Plan is intended to provide for the grant of "Incentive Stock
Options," within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") and Non-Incentive Stock Options, options that do
not so qualify. The provisions of the Plan relating to Incentive Stock Options
shall be interpreted to conform to the requirements of Section 422 of the Code.
2. Definitions. The following words and phrases when used in this Plan
with an initial capital letter, unless the context clearly indicates otherwise,
shall have the meaning as set forth below. Wherever appropriate, the masculine
pronoun shall include the feminine pronoun and the singular shall include the
plural.
"Award" means the grant by the Committee of an Incentive Stock
Option or a Non-Incentive Stock Option, or any combination thereof, as provided
in the Plan.
"Board" shall mean the Board of Directors of the Company, or
any successor or parent corporation thereto.
"Change in Control" shall mean: (i) the sale of all, or a
material portion, of the assets of the Company; (ii) the merger or
recapitalization of the Company whereby the Company is not the surviving entity;
(iii) a change in control of the Company, as otherwise defined or determined by
the Office of Thrift Supervision or regulations promulgated by it; or (iv) the
acquisition, directly or indirectly, of the beneficial ownership (within the
meaning of that term as it is used in Section 13(d) of the Securities Exchange
Act of 1934 and the rules and regulations promulgated thereunder) of twenty-five
percent (25%) or more of the outstanding voting securities of the Company by any
person, trust, entity or group. This limitation shall not apply to the purchase
of shares by underwriters in connection with a public offering of Company stock,
or the purchase of shares of up to 25% of any class of securities of the Company
by a tax-qualified employee stock benefit plan which is exempt from the approval
requirements, set forth under 12 C.F.R. ss.574.3(c)(1)(vi) as now in effect or
as may hereafter be amended. The term "person" refers to an individual or a
corporation, partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Committee as to whether a Change
in Control has occurred shall be conclusive and binding. A Change in Control
shall not include a transaction whereby FloridaFirst Bancorp, MHC shall merge
into the Company or the Bank and a new Parent of the Company or the Bank is
formed.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and regulations promulgated thereunder.
-1-
<PAGE>
"Committee" shall mean the Board or the Stock Option Committee
appointed by the Board in accordance with Section 5(a) of the Plan.
"Common Stock" shall mean common stock of the Company, or any
successor or parent corporation thereto.
"Company" shall mean the FloridaFirst Bancorp, the parent
corporation of the Savings Bank, or any successor or Parent thereof.
"Continuous Employment" or "Continuous Status as an Employee"
shall mean the absence of any interruption or termination of employment with the
Company or any present or future Parent or Subsidiary of the Company. Employment
shall not be considered interrupted in the case of sick leave, military leave or
any other leave of absence approved by the Company or in the case of transfers
between payroll locations, of the Company or between the Company, its Parent,
its Subsidiaries or a successor.
"Director" shall mean a member of the Board of the Company, or
any successor or parent corporation thereto.
"Director Emeritus" shall mean a person serving as a director
emeritus, advisory director, consulting director or other similar position as
may be appointed by the Board of Directors of the Savings Bank or the Company
from time to time.
"Disability" means (a) with respect to Incentive Stock
Options, the "permanent and total disability" of the Employee as such term is
defined at Section 22(e)(3) of the Code; and (b) with respect to Non-Incentive
Stock Options, any physical or mental impairment which renders the Participant
incapable of continuing in the employment or service of the Savings Bank or the
Parent in his then current capacity as determined by the Committee.
"Effective Date" shall mean the date specified in Section 15
hereof.
"Employee" shall mean any person employed by the Company or
any present or future Parent or Subsidiary of the Company.
"Fair Market Value" shall mean: (i) if the Common Stock is
traded otherwise than on a national securities exchange, then the Fair Market
Value per Share shall be equal to the mean between the last bid and ask price of
such Common Stock on such date or, if there is no bid and ask price on said
date, then on the immediately prior business day on which there was a bid and
ask price. If no such bid and ask price is available, then the Fair Market Value
shall be determined by the Committee in good faith; or (ii) if the Common Stock
is listed on a national securities exchange, then the Fair Market Value per
Share shall be not less than the average of the highest and lowest selling price
of such Common Stock on such exchange on such date, or if there were no sales on
said date, then the Fair Market Value shall be not less than the mean between
the last bid and ask price on such date.
"Incentive Stock Option" or "ISO" shall mean an option to
purchase Shares granted by the Committee pursuant to Section 8 hereof which is
subject to the limitations and restrictions of Section 8 hereof and is intended
to qualify as an incentive stock option under Section 422 of the Code.
-2-
<PAGE>
"Non-Incentive Stock Option" or "Non-ISO" shall mean an option
to purchase Shares granted pursuant to Section 9 hereof, which option is not
intended to qualify under Section 422 of the Code.
"Option" shall mean an Incentive Stock Option or Non-Incentive
Stock Option granted pursuant to this Plan providing the holder of such Option
with the right to purchase Common Stock.
"Optioned Stock" shall mean stock subject to an Option granted
pursuant to the Plan.
"Optionee" shall mean any person who receives an Option or
Award pursuant to the Plan.
"Parent" shall mean any present or future corporation which
would be a "parent corporation" of the Bank or the Company as defined in
Sections 424(e) and (g) of the Code.
"Participant" means any Director, Director Emeritus, officer
or employee of the Company or any Parent or Subsidiary of the Company or any
other person providing a service to the Company who is selected by the Committee
to receive an Award, or who by the express terms of the Plan is granted an
Award.
"Plan" shall mean the FloridaFirst Bancorp 1999 Stock Option
Plan.
"Savings Bank" or "Bank" shall mean FloridaFirst Bank, or any
successor corporation thereto.
"Share" shall mean one share of the Common Stock.
"Subsidiary" shall mean any present or future corporation
which constitutes a "subsidiary corporation" as defined in Sections 424(f) and
(g) of the Code.
3. Shares Subject to the Plan. Except as otherwise required by the
provisions of Section 13 hereof, the aggregate number of Shares with respect to
which Awards may be made pursuant to the Plan shall not exceed 270,385 Shares.
Such Shares may either be from authorized but unissued shares, treasury shares
or shares purchased in the market for Plan purposes. If an Award shall expire,
become unexercisable, or be forfeited for any reason prior to its exercise, new
Awards may be granted under the Plan with respect to the number of Shares as to
which such expiration has occurred.
4. Six Month Holding Period.
Subject to vesting requirements, if applicable, except in the
event of death or disability of the Optionee, a minimum of six months must
elapse between the date of the grant of an Option and the date of the sale of
the Common Stock received through the exercise of such Option.
5. Administration of the Plan.
(a) Composition of the Committee. The Plan shall be
administered by the Board of Directors of the Company or a Committee which shall
consist of not less than two Directors of the
-3-
<PAGE>
Company appointed by the Board and serving at the pleasure of the Board. All
persons designated as members of the Committee shall meet the requirements of a
"Non-Employee Director" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, as found at 17 CFR ss.240.16b-3.
(b) Powers of the Committee. The Committee is authorized (but
only to the extent not contrary to the express provisions of the Plan or to
resolutions adopted by the Board) to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the form and
content of Awards to be issued under the Plan and to make other determinations
necessary or advisable for the administration of the Plan, and shall have and
may exercise such other power and authority as may be delegated to it by the
Board from time to time. A majority of the entire Committee shall constitute a
quorum and the action of a majority of the members present at any meeting at
which a quorum is present shall be deemed the action of the Committee. In no
event may the Committee revoke outstanding Awards without the consent of the
Participant.
The President of the Company and such other officers
as shall be designated by the Committee are hereby authorized to execute written
agreements evidencing Awards on behalf of the Company and to cause them to be
delivered to the Participants. Such agreements shall set forth the Option
exercise price, the number of shares of Common Stock subject to such Option, the
expiration date of such Options, and such other terms and restrictions
applicable to such Award as are determined in accordance with the Plan or the
actions of the Committee.
(c) Effect of Committee's Decision. All decisions,
determinations and interpretations of the Committee shall be final and
conclusive on all persons affected thereby.
6. Eligibility for Awards and Limitations.
(a) The Committee shall from time to time determine the
officers, Directors, Directors Emeritus, employees and other persons who shall
be granted Awards under the Plan, the number of Awards to be granted to each
such persons, and whether Awards granted to each such Participant under the Plan
shall be Incentive and/or Non-Incentive Stock Options. In selecting Participants
and in determining the number of Shares of Common Stock to be granted to each
such Participant, the Committee may consider the nature of the prior and
anticipated future services rendered by each such Participant, each such
Participant's current and potential contribution to the Company and such other
factors as the Committee may, in its sole discretion, deem relevant.
Participants who have been granted an Award may, if otherwise eligible, be
granted additional Awards.
(b) The aggregate Fair Market Value (determined as of the date
the Option is granted) of the Shares with respect to which Incentive Stock
Options are exercisable for the first time by each Employee during any calendar
year (under all Incentive Stock Option plans, as defined in Section 422 of the
Code, of the Company or any present or future Parent or Subsidiary of the
Company) shall not exceed $100,000. Notwithstanding the prior provisions of this
Section 6, the Committee may grant Options in excess of the foregoing
limitations, provided said Options shall be clearly and specifically designated
as not being Incentive Stock Options.
(c) In no event shall Shares subject to Options granted to
non-employee Directors in the aggregate under this Plan exceed more than 30% of
the total number of Shares authorized for delivery
-4-
<PAGE>
under this Plan pursuant to Section 3 herein or more than 5% to any individual
non-employee Director. In no event shall Shares subject to Options granted to
any Employee exceed more than 25% of the total number of Shares authorized for
delivery under the Plan.
7. Term of the Plan. The Plan shall continue in effect for a term of
ten (10) years from the Effective Date, unless sooner terminated pursuant to
Section 18 hereof. No Option shall be granted under the Plan after ten (10)
years from the Effective Date.
8. Terms and Conditions of Incentive Stock Options. Incentive Stock
Options may be granted only to Participants who are Employees. Each Incentive
Stock Option granted pursuant to the Plan shall be evidenced by an instrument in
such form as the Committee shall from time to time approve. Each Incentive Stock
Option granted pursuant to the Plan shall comply with, and be subject to, the
following terms and conditions:
(a) Option Price.
(i) The price per Share at which each Incentive
Stock Option granted by the Committee under the Plan may be exercised shall not,
as to any particular Incentive Stock Option, be less than the Fair Market Value
of the Common Stock on the date that such Incentive Stock Option is granted.
(ii) In the case of an Employee who owns Common Stock representing more than ten
percent (10%) of the outstanding Common Stock at the time the Incentive Stock
Option is granted, the Incentive Stock Option exercise price shall not be less
than one hundred and ten percent (110%) of the Fair Market Value of the Common
Stock on the date that the Incentive Stock Option is granted.
(b) Payment. Full payment for each Share of Common Stock
purchased upon the exercise of any Incentive Stock Option granted under the Plan
shall be made at the time of exercise of each such Incentive Stock Option and
shall be paid in cash (in United States Dollars), Common Stock or a combination
of cash and Common Stock. Common Stock utilized in full or partial payment of
the exercise price shall be valued at the Fair Market Value at the date of
exercise. The Company shall accept full or partial payment in Common Stock only
to the extent permitted by applicable law. No Shares of Common Stock shall be
issued until full payment has been received by the Company, and no Optionee
shall have any of the rights of a stockholder of the Company until Shares of
Common Stock are issued to the Optionee.
(c) Term of Incentive Stock Option. The term of exercisability
of each Incentive Stock Option granted pursuant to the Plan shall be not more
than ten (10) years from the date each such Incentive Stock Option is granted,
provided that in the case of an Employee who owns stock representing more than
ten percent (10%) of the Common Stock outstanding at the time the Incentive
Stock Option is granted, the term of exercisability of the Incentive Stock
Option shall not exceed five (5) years.
(d) Exercise Generally. Except as otherwise provided in
Section 10 hereof, no Incentive Stock Option may be exercised unless the
Optionee shall have been in the employ of the Company at all times during the
period beginning with the date of grant of any such Incentive Stock Option and
ending on the date three (3) months prior to the date of exercise of any such
Incentive Stock Option. The Committee may impose additional conditions upon the
right of an Optionee to exercise any Incentive Stock Option granted hereunder
which are not inconsistent with the terms of the Plan or the requirements for
qualification as an Incentive Stock Option. Except as otherwise provided by the
terms of the Plan or
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<PAGE>
by action of the Committee at the time of the grant of the Options, the Options
will be first exercisable at the rate of 20% on the one year anniversary of the
date of grant and 20% annually thereafter during such periods of service as an
Employee, Director or Director Emeritus.
(e) Cashless Exercise. Subject to vesting requirements, if
applicable, an Optionee who has held an Incentive Stock Option for at least six
months may engage in the "cashless exercise" of the Option. Upon a cashless
exercise, an Optionee gives the Company written notice of the exercise of the
Option together with an order to a registered broker-dealer or equivalent third
party, to sell part or all of the Optioned Stock and to deliver enough of the
proceeds to the Company to pay the Option exercise price and any applicable
withholding taxes. If the Optionee does not sell the Optioned Stock through a
registered broker-dealer or equivalent third party, the Optionee can give the
Company written notice of the exercise of the Option and the third party
purchaser of the Optioned Stock shall pay the Option exercise price plus any
applicable withholding taxes to the Company.
(f) Transferability. An Incentive Stock Option granted
pursuant to the Plan shall be exercised during an Optionee's lifetime only by
the Optionee to whom it was granted and shall not be assignable or transferable
otherwise than by will or by the laws of descent and distribution.
9. Terms and Conditions of Non-Incentive Stock Options. Each
Non-Incentive Stock Option granted pursuant to the Plan shall be evidenced by an
instrument in such form as the Committee shall from time to time approve. Each
Non-Incentive Stock Option granted pursuant to the Plan shall comply with and be
subject to the following terms and conditions.
(a) Options Granted to Directors. Subject to the limitations
of Section 6(c), Non-Incentive Stock Options to purchase 10,800 shares of Common
Stock will be granted to each Director who is not an Employee as of the
Effective Date, at an exercise price equal to the Fair Market Value of the
Common Stock on such date of grant. The Options will be first exercisable at the
rate of 20% on the one year anniversary of the Effective Date and 20% annually
thereafter during such periods of service as a Director or Director Emeritus.
Upon the death or Disability of the Director or Director Emeritus, such Option
shall be deemed immediately 100% exercisable. Such Options shall continue to be
exercisable for a period of ten years following the date of grant without regard
to the continued services of such Director as a Director or Director Emeritus.
In the event of the Optionee's death, such Options may be exercised by the
personal representative of his estate or person or persons to whom his rights
under such Option shall have passed by will or by the laws of descent and
distribution. Options may be granted to newly appointed or elected non-employee
Directors within the sole discretion of the Committee. The exercise price per
Share of such Options granted shall be equal to the Fair Market Value of the
Common Stock at the time such Options are granted. Provided that such Plan is
approved by a vote of the stockholders of the Company (excluding stock held by
Florida First Bancorp MHC) at a stockholder's meeting held more than one year
from the Savings Bank's conversion to stock form, all outstanding Awards shall
become immediately exercisable in the event of a Change in Control of the
Savings Bank or the Company. Unless otherwise inapplicable, or inconsistent with
the provisions of this paragraph, the Options to be granted to Directors
hereunder shall be subject to all other provisions of this Plan.
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<PAGE>
(b) Option Price. The exercise price per Share of Common Stock
for each Non-Incentive Stock Option granted pursuant to the Plan shall be at
such price as the Committee may determine in its sole discretion, but in no
event less than the Fair Market Value of such Common Stock on the date of grant
as determined by the Committee in good faith.
(c) Payment. Full payment for each Share of Common Stock
purchased upon the exercise of any Non-Incentive Stock Option granted under the
Plan shall be made at the time of exercise of each such Non-Incentive Stock
Option and shall be paid in cash (in United States Dollars), Common Stock or a
combination of cash and Common Stock. Common Stock utilized in full or partial
payment of the exercise price shall be valued at its Fair Market Value at the
date of exercise. The Company shall accept full or partial payment in Common
Stock only to the extent permitted by applicable law. No Shares of Common Stock
shall be issued until full payment has been received by the Company and no
Optionee shall have any of the rights of a stockholder of the Company until the
Shares of Common Stock are issued to the Optionee.
(d) Term. The term of exercisability of each Non-Incentive
Stock Option granted pursuant to the Plan shall be not more than ten (10) years
from the date each such Non-Incentive Stock Option is granted.
(e) Exercise Generally. The Committee may impose additional
conditions upon the right of any Participant to exercise any Non-Incentive Stock
Option granted hereunder which is not inconsistent with the terms of the Plan.
Except as otherwise provided by the terms of the Plan or by action of the
Committee at the time of the grant of the Options, the Options will be first
exercisable at the rate of 20% on the one year anniversary of the date of grant
and 20% annually thereafter during such periods of service as an Employee,
Director or Director Emeritus.
(f) Cashless Exercise. Subject to vesting requirements, if
applicable, an Optionee who has held a Non-Incentive Stock Option for at least
six months may engage in the "cashless exercise" of the Option. Upon a cashless
exercise, an Optionee gives the Company written notice of the exercise of the
Option together with an order to a registered broker-dealer or equivalent third
party, to sell part or all of the Optioned Stock and to deliver enough of the
proceeds to the Company to pay the Option exercise price and any applicable
withholding taxes. If the Optionee does not sell the Optioned Stock through a
registered broker-dealer or equivalent third party, the Optionee can give the
Company written notice of the exercise of the Option and the third party
purchaser of the Optioned Stock shall pay the Option exercise price plus any
applicable withholding taxes to the Company.
(g) Transferability. Any Non-Incentive Stock Option granted
pursuant to the Plan shall be exercised during an Optionee's lifetime only by
the Optionee to whom it was granted and shall not be assignable or transferable
otherwise than by will or by the laws of descent and distribution.
10. Effect of Termination of Employment, Disability or Death on
Incentive Stock Options.
(a) Termination of Employment. In the event that any
Optionee's employment with the Company shall terminate for any reason, other
than Disability or death, all of any such Optionee's
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<PAGE>
Incentive Stock Options, and all of any such Optionee's rights to purchase or
receive Shares of Common Stock pursuant thereto, shall automatically terminate
on (A) the earlier of (i) or (ii): (i) the respective expiration dates of any
such Incentive Stock Options, or (ii) the expiration of not more than three (3)
months after the date of such termination of employment; or (B) at such later
date as is determined by the Committee at the time of the grant of such Award
based upon the Optionee's continuing status as a Director or Director Emeritus
of the Savings Bank or the Company, but only if, and to the extent that, the
Optionee was entitled to exercise any such Incentive Stock Options at the date
of such termination of employment, and further that such Award shall thereafter
be deemed a Non-Incentive Stock Option. In the event that a Subsidiary ceases to
be a Subsidiary of the Company, the employment of all of its employees who are
not immediately thereafter employees of the Company shall be deemed to terminate
upon the date such Subsidiary so ceases to be a Subsidiary of the Company.
(b) Disability. In the event that any Optionee's employment
with the Company shall terminate as the result of the Disability of such
Optionee, such Optionee may exercise any Incentive Stock Options granted to the
Optionee pursuant to the Plan at any time prior to the earlier of (i) the
respective expiration dates of any such Incentive Stock Options or (ii) the date
which is one (1) year after the date of such termination of employment, but only
if, and to the extent that, the Optionee was entitled to exercise any such
Incentive Stock Options at the date of such termination of employment.
(c) Death. In the event of the death of an Optionee, any
Incentive Stock Options granted to such Optionee may be exercised by the person
or persons to whom the Optionee's rights under any such Incentive Stock Options
pass by will or by the laws of descent and distribution (including the
Optionee's estate during the period of administration) at any time prior to the
earlier of (i) the respective expiration dates of any such Incentive Stock
Options or (ii) the date which is two (2) years after the date of death of such
Optionee but only if, and to the extent that, the Optionee was entitled to
exercise any such Incentive Stock Options at the date of death. For purposes of
this Section 10(c), any Incentive Stock Option held by an Optionee shall be
considered exercisable at the date of his death if the only unsatisfied
condition precedent to the exercisability of such Incentive Stock Option at the
date of death is the passage of a specified period of time. At the discretion of
the Committee, upon exercise of such Options the Optionee may receive Shares or
cash or a combination thereof. If cash shall be paid in lieu of Shares, such
cash shall be equal to the difference between the Fair Market Value of such
Shares and the exercise price of such Options on the exercise date.
(d) Incentive Stock Options Deemed Exercisable. For purposes
of Sections 10(a), 10(b) and 10(c) above, any Incentive Stock Option held by any
Optionee shall be considered exercisable at the date of termination of
employment if any such Incentive Stock Option would have been exercisable at
such date of termination of employment without regard to the Disability or death
of the Participant.
(e) Termination of Incentive Stock Options. Except as may be
specified by the Committee at the time of grant of an Option, to the extent that
any Incentive Stock Option granted under the Plan to any Optionee whose
employment with the Company terminates shall not have been exercised within the
applicable period set forth in this Section 10, any such Incentive Stock Option,
and all rights to purchase or receive Shares of Common Stock pursuant thereto,
as the case may be, shall terminate on the last day of the applicable period.
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<PAGE>
11. Effect of Termination of Employment, Disability or Death on
Non-Incentive Stock Options. The terms and conditions of Non-Incentive Stock
Options relating to the effect of the termination of an Optionee's employment or
service, Disability of an Optionee or his death shall be such terms and
conditions as the Committee shall, in its sole discretion, determine at the time
of termination of service, unless specifically provided for by the terms of the
Agreement at the time of grant of the award, and provided further that any such
terms and conditions may not be inconsistent with applicable regulations of the
Office of Thrift Supervision or other appropriate banking regulatory agency.
12. Withholding Tax. The Company shall have the right to deduct from
all amounts paid in cash with respect to the cashless exercise of Options any
taxes required by law to be withheld with respect to such cash payments. Where a
Participant or other person is entitled to receive Shares pursuant to the
exercise of an Option, the Company shall have the right to require the
Participant or such other person to pay the Company the amount of any taxes
which the Company is required to withhold with respect to such Shares, or, in
lieu thereof, to retain, or to sell without notice, a number of such Shares
sufficient to cover the amount required to be withheld.
13. Recapitalization, Merger, Consolidation, Change in Control and
Other Transactions.
(a) Adjustment. Subject to any required action by the
stockholders of the Company, within the sole discretion of the Committee, the
aggregate number of Shares of Common Stock for which Options may be granted
hereunder, the number of Shares of Common Stock covered by each outstanding
Option, and the exercise price per Share of Common Stock of each such Option,
shall all be proportionately adjusted for any increase or decrease in the number
of issued and outstanding Shares of Common Stock resulting from a subdivision or
consolidation of Shares (whether by reason of merger, consolidation,
recapitalization, reclassification, split-up, combination of shares, or
otherwise) or the payment of a stock dividend (but only on the Common Stock) or
any other increase or decrease in the number of such Shares of Common Stock
effected without the receipt or payment of consideration by the Company (other
than Shares held by dissenting stockholders).
(b) Change in Control. Provided that such Plan is approved by
a vote of the stockholders of the Company (excluding stock held by Florida First
Bancorp MHC) at a stockholder's meeting held more than one year from the Savings
Bank's conversion to stock form, all outstanding Awards shall become immediately
exercisable in the event of a Change in Control of the Company, as determined by
the Committee. In the event of such a Change in Control, the Committee and the
Board of Directors will take one or more of the following actions to be
effective as of the date of such Change in Control:
(i) provide that such Options shall be assumed,
or equivalent options shall be substituted, ("Substitute Options") by the
acquiring or succeeding corporation (or an affiliate thereof), provided that:
(A) any such Substitute Options exchanged for Incentive Stock Options shall meet
the requirements of Section 424(a) of the Code, and (B) the shares of stock
issuable upon the exercise of such Substitute Options shall constitute
securities registered in accordance with the Securities Act of 1933, as amended,
("1933 Act") or such securities shall be exempt from such registration in
accordance with Sections 3(a)(2) or 3(a)(5) of the 1933 Act, (collectively,
"Registered Securities"), or in the alternative, if the securities issuable upon
the exercise of such Substitute Options shall not constitute Registered
Securities, then the Optionee will receive upon the exercise of the Substitute
Options a cash payment for each Option surrendered equal to the difference
between (1) the Fair Market Value of the consideration
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<PAGE>
to be received for each share of Common Stock in the Change in Control
transaction times the number of shares of Common Stock subject to such
surrendered Options, and (2) the aggregate exercise price of all such
surrendered Options, or
(ii) in the event of a transaction under the terms
of which the holders of the Common Stock of the Company will receive upon
consummation thereof a cash payment (the "Merger Price") for each share of
Common Stock exchanged in the Change in Control transaction, to make or to
provide for a cash payment to the Optionees equal to the difference between (A)
the Merger Price times the number of shares of Common Stock subject to such
Options held by each Optionee (to the extent then exercisable at prices not in
excess of the Merger Price) and (B) the aggregate exercise price of all such
surrendered Options in exchange for such surrendered Options.
(c) Extraordinary Corporate Action. Notwithstanding any
provisions of the Plan to the contrary, subject to any required action by the
stockholders of the Company, in the event of any Change in Control,
recapitalization, merger, consolidation, exchange of Shares, spin-off,
reorganization, tender offer, partial or complete liquidation or other
extraordinary corporate action or event, the Committee, in its sole discretion,
shall have the power, prior or subsequent to such action or event to:
(i) appropriately adjust the number of Shares of
Common Stock subject to each Option, the Option exercise price per Share of
Common Stock, and the consideration to be given or received by the Company upon
the exercise of any outstanding Option;
(ii) cancel any or all previously granted Options,
provided that appropriate consideration is paid to the Optionee in connection
therewith; and/or
(iii) make such other adjustments in connection with
the Plan as the Committee, in
its sole discretion, deems necessary, desirable, appropriate or advisable;
provided, however, that no action shall be taken by the Committee which would
cause Incentive Stock Options granted pursuant to the Plan to fail to meet the
requirements of Section 422 of the Code without the consent of the Optionee.
(d) Acceleration. The Committee shall at all times have the
power to accelerate the exercise date of Options previously granted under the
Plan; provided that such action is not contrary to regulations of the OTS or
other appropriate banking regulatory agency then in effect.
Except as expressly provided in Sections 13(a) and 13(b),
no Optionee shall have any rights by reason of the occurrence of any of the
events described in this Section 13.
14. Time of Granting Options. The date of grant of an Option under the
Plan shall, for all purposes, be the date on which the Committee makes the
determination of granting such Option. Notice of the grant of an Option shall be
given to each individual to whom an Option is so granted within a reasonable
time after the date of such grant in a form determined by the Committee.
15. Effective Date. The Plan shall become effective upon the date of
approval of the Plan by the stockholders of the Company, subject to approval or
non-objection by the Office of Thrift Supervision, if applicable. The Committee
may make a determination related to Awards prior to the Effective Date with such
Awards to be effective upon the date of stockholder approval of the Plan.
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<PAGE>
16. Approval by Stockholders. The Plan shall be approved by
stockholders of the Company within twelve (12) months before or after the date
the Plan is approved by the Board.
17. Modification of Options. At any time and from time to time, the
Board may authorize the Committee to direct the execution of an instrument
providing for the modification of any outstanding Option, provided no such
modification, extension or renewal shall confer on the holder of said Option any
right or benefit which could not be conferred on the Optionee by the grant of a
new Option at such time, or shall not materially decrease the Optionee's
benefits under the Option without the consent of the holder of the Option,
except as otherwise permitted under Section 18 hereof.
18. Amendment and Termination of the Plan.
(a) Action by the Board. The Board may alter, suspend or
discontinue the Plan, except that no action of the Board may increase (other
than as provided in Section 13 hereof) the maximum number of Shares permitted to
be optioned under the Plan, materially increase the benefits accruing to
Participants under the Plan or materially modify the requirements for
eligibility for participation in the Plan unless such action of the Board shall
be subject to approval or ratification by the stockholders of the Company.
(b) Change in Applicable Law. Notwithstanding any other
provision contained in the Plan, in the event of a change in any federal or
state law, rule, regulation or policy which would make the exercise of all or
part of any previously granted Option unlawful or subject the Company to any
penalty, the Committee may restrict any such exercise without the consent of the
Optionee or other holder thereof in order to comply with any such law, rule or
regulation or to avoid any such penalty.
19. Conditions Upon Issuance of Shares; Limitations on Option Exercise;
Cancellation of Option Rights.
(a) Shares shall not be issued with respect to any Option
granted under the Plan unless the issuance and delivery of such Shares shall
comply with all relevant provisions of applicable law, including, without
limitation, the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities laws and the
requirements of any stock exchange upon which the Shares may then be listed.
(b) The inability of the Company to obtain any necessary
authorizations, approvals or letters of non-objection from any regulatory body
or authority deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares issuable hereunder shall relieve the Company of
any liability with respect to the non-issuance or sale of such Shares.
(c) As a condition to the exercise of an Option, the Company
may require the person exercising the Option to make such representations and
warranties as may be necessary to assure the availability of an exemption from
the registration requirements of federal or state securities law.
(d) Notwithstanding anything herein to the contrary, upon the
termination of employment or service of an Optionee by the Company or its
Subsidiaries for "cause" as defined at 12 C.F.R. 563.39(b)(1) as determined by
the Board of Directors, all Options held by such Participant shall cease to be
exercisable as of the date of such termination of employment or service.
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<PAGE>
(e) Upon the exercise of an Option by an Optionee (or the
Optionee's personal representative), the Committee, in its sole and absolute
discretion, may make a cash payment to the Optionee, in whole or in part, in
lieu of the delivery of shares of Common Stock. Such cash payment to be paid in
lieu of delivery of Common Stock shall be equal to the difference between the
Fair Market Value of the Common Stock on the date of the Option exercise and the
exercise price per share of the Option. Such cash payment shall be in exchange
for the cancellation of such Option. Such cash payment shall not be made in the
event that such transaction would result in liability to the Optionee or the
Company under Section 16(b) of the Securities Exchange Act of 1934, as amended,
and regulations promulgated thereunder.
20. Reservation of Shares. During the term of the Plan, the Company
will reserve and keep available a number of Shares sufficient to satisfy the
requirements of the Plan.
21. Unsecured Obligation. No Participant under the Plan shall have any
interest in any fund or special asset of the Company by reason of the Plan or
the grant of any Option under the Plan. No trust fund shall be created in
connection with the Plan or any grant of any Option hereunder and there shall be
no required funding of amounts which may become payable to any Participant.
22. No Employment Rights. No Director, Employee or other person shall
have a right to be selected as a Participant under the Plan. Neither the Plan
nor any action taken by the Committee in administration of the Plan shall be
construed as giving any person any rights of employment or retention as an
Employee, Director or in any other capacity with the Company, the Savings Bank
or other Subsidiaries.
23. Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of Florida, except to the extent that
federal law shall be deemed to apply.
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FloridaFirst Bank
Restricted Stock Plan
and Trust Agreement
Article I
---------
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 FloridaFirst Bank ("Savings Bank") hereby establishes the
Restricted Stock Plan (the "Plan") and Trust (the "Trust") upon the terms and
conditions hereinafter stated in this Restricted Stock Plan and Trust Agreement
(the "Agreement").
1.02 The Trustee hereby accepts this Trust and agrees to hold the Trust
assets existing on the date of this Agreement and all additions and accretions
thereto upon the terms and conditions hereinafter stated.
Article II
----------
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to reward and to retain personnel of
experience and ability in key positions of responsibility with the Savings Bank
and its subsidiaries, by providing such personnel of the Savings Bank and its
subsidiaries with an equity interest in the parent corporation of the Savings
Bank, FloridaFirst Bancorp ("Parent"), as compensation for their prior and
anticipated future professional contributions and service to the Savings Bank
and its subsidiaries.
Article III
-----------
DEFINITIONS
The following words and phrases when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meaning as set forth below. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
"Beneficiary" means the person or persons designated by the Participant
to receive any benefits payable under the Plan in the event of such
Participant's death. Such person or persons shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time to
time by similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Participant's surviving spouse, if
any, or if none, the Participant's estate.
"Board" means the Board of Directors of the Savings Bank, or any
successor corporation thereto.
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<PAGE>
"Cause" means the personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profits, intentional
failure to perform stated duties, willful violation of a material provision of
any law, rule or regulation (other than traffic violations and similar offense),
or a material violation of a final cease-and-desist order or any other action
which results in a substantial financial loss to the Parent, Savings Bank or its
Subsidiaries.
"Change in Control" shall mean: (i) the sale of all, or a material
portion, of the assets of the Parent or Savings Bank; (ii) the merger or
recapitalization of the Parent or the Savings Bank whereby the Parent or Savings
Bank is not the surviving entity; (iii) a change in control of the Parent or
Savings Bank, as otherwise defined or determined by the Office of Thrift
Supervision ("OTS") or regulations promulgated by it; or (iv) the acquisition,
directly or indirectly, of the beneficial ownership (within the meaning of that
term as it is used in Section 13(d) of the 1934 Act and the rules and
regulations promulgated thereunder) of twenty-five percent (25%) or more of the
outstanding voting securities of the Parent or Savings Bank by any person,
trust, entity or group. This limitation shall not apply to the purchase of
shares of up to 25% of any class of securities of the Parent or Savings Bank by
a tax-qualified employee stock benefit plan which is exempt from the approval
requirements, set forth under 12 C.F.R. ss.574.3(c)(1)(vi) as now in effect or
as may hereafter be amended. The term "person" refers to an individual or a
corporation, partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Committee as to whether a Change
in Control has occurred shall be conclusive and binding. A Change in Control
shall not include a transaction whereby FloridaFirst Bancorp, MHC shall merge
into the Parent or the Bank and a new parent corporation of the Parent or the
Bank is formed.
"Committee" means the Board of Directors of the Parent or the
Restricted Stock Plan Committee appointed by the Board of Directors of the
Parent pursuant to Article IV hereof.
"Common Stock" means shares of the common stock of the Parent, or any
successor corporation or parent thereto.
"Conversion" means the effective date of the stock charter of the
Savings Bank and simultaneous acquisition of all of the outstanding stock of the
Savings Bank by the Parent.
"Director" means a member of the Board of the Savings Bank.
"Director Emeritus" means a person serving as a director emeritus,
advisory director, consulting director, or other similar position as may be
appointed by the Board of Directors of the Savings Bank or the Parent from time
to time.
"Disability" means any physical or mental impairment which renders the
Participant incapable of continuing in the employment or service of the Savings
Bank or the Parent in his current capacity as determined by the Committee.
"Employee" means any person who is employed by the Savings Bank or a
Subsidiary.
"Effective Date" shall mean the date of stockholder approval of the
Plan by the Parent's stockholders.
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<PAGE>
"Parent" shall mean FloridaFirst Bancorp, the parent corporation of the
Savings Bank.
"Participant" means an Employee, Director or Director Emeritus who
receives a Plan Share Award under the Plan.
"Plan Shares" means shares of Common Stock held in the Trust which are
awarded or issuable to a Participant pursuant to the Plan.
"Plan Share Award" or "Award" means a right granted to a Participant
under this Plan to earn or to receive Plan Shares.
"Plan Share Reserve" means the shares of Common Stock held by the Trust
pursuant to Sections 5.03 and 5.04.
"Savings Bank" means FloridaFirst Bank, and any successor corporation
thereto.
"Subsidiary" means those subsidiaries of the Savings Bank which, with
the consent of the Board, agree to participate in this Plan.
"Trustee" or "Trustee Committee" means that person(s) or entity
nominated by the Committee and approved by the Board pursuant to Sections 4.01
and 4.02 to hold legal title to the Plan assets for the purposes set forth
herein.
Article IV
----------
ADMINISTRATION OF THE PLAN
4.01 Role of the Committee. The Plan shall be administered and
interpreted by the Board of Directors of the Parent or a Committee appointed by
said Board, which shall consist of not less than two non-employee members of the
Board, which shall have all of the powers allocated to it in this and other
sections of the Plan. All persons designated as members of the Committee shall
be "Non-Employee Directors" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended ("1934 Act"). The interpretation and
construction by the Committee of any provisions of the Plan or of any Plan Share
Award granted hereunder shall be final and binding. The Committee shall act by
vote or written consent of a majority of its members. Subject to the express
provisions and limitations of the Plan, the Committee may adopt such rules,
regulations and procedures as it deems appropriate for the conduct of its
affairs. The Committee shall report its actions and decisions with respect to
the Plan to the Board at appropriate times, but in no event less than one time
per calendar year. The Committee shall recommend to the Board one or more
persons or entity to act as Trustee in accordance with the provision of this
Plan and Trust and the terms of Article VIII hereof.
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<PAGE>
4.02 Role of the Board. The members of the Committee and the Trustee
shall be appointed or approved by, and will serve at the pleasure of the Board.
The Board may in its discretion from time to time remove members from, or add
members to, the Committee, and may remove, replace or add Trustees. The Board
shall have all of the powers allocated to it in this and other sections of the
Plan, may take any action under or with respect to the Plan which the Committee
is authorized to take, and may reverse or override any action taken or decision
made by the Committee under or with respect to the Plan, provided, however, that
the Board may not revoke any Plan Share Award already made except as provided in
Section 7.01(b) herein.
4.03 Limitation on Liability. No member of the Board, the Committee or
the Trustee shall be liable for any determination made in good faith with
respect to the Plan or any Plan Share Awards granted. If a member of the Board,
Committee or any Trustee is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by any reason of anything done or not
done by him in such capacity under or with respect to the Plan, the Parent and
the Savings Bank shall indemnify such member against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or she reasonably
believed to be in the best interests of the Parent, the Savings Bank and its
Subsidiaries and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Notwithstanding anything
herein to the contrary, in no event shall the Savings Bank take any actions with
respect to this Section 4.03 which is not in compliance with the limitations or
requirements set forth at 12 CFR 545.121, as may be amended from time to time.
Article V
---------
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 Amount and Timing of Contributions. The Board of Directors of the
Savings Bank shall determine the amounts (or the method of computing the
amounts) to be contributed by the Savings Bank to the Trust established under
this Plan. Such amounts shall be paid to the Trustee at the time of
contribution. No contributions to the Trust by Participants shall be permitted
except with respect to amounts necessary to meet tax withholding obligations.
5.02 Initial Investment. Any funds held by the Trust prior to
investment in the Common Stock shall be invested by the Trustee in such
interest-bearing account or accounts at the Savings Bank as the Trustee shall
determine to be appropriate.
5.03 Investment of Trust Assets. Following approval of the Plan by
stockholders of the Parent and receipt of any other necessary regulatory
approvals, the Trust shall purchase Common Stock of the Parent in an amount
equal to up to 100% of the Trust's assets, after providing for any required
withholding as needed for tax purposes, provided, however, that the Trust shall
not purchase more than 108,154 shares of Common Stock, representing 4% of the
aggregate shares of Common Stock issued by the Parent in the Conversion to
parties other than FloridaFirst Bancorp. The Trustee may purchase shares of
Common Stock in the open market or, in the alternative, may purchase authorized
but unissued shares of the Common Stock or treasury shares from the Parent
sufficient to fund the Plan Share Reserve.
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5.04 Effect of Allocations, Returns and Forfeitures Upon Plan Share
Reserves. Upon the allocation of Plan Share Awards under Sections 6.02 and 6.05,
or the decision of the Committee to return Plan Shares to the Parent, the Plan
Share Reserve shall be reduced by the number of Shares subject to the Awards so
allocated or returned. Any Shares subject to an Award which are not earned
because of forfeiture by the Participant pursuant to Section 7.01 shall be added
to the Plan Share Reserve.
Article VI
----------
ELIGIBILITY; ALLOCATIONS
6.01 Eligibility. Employees are eligible to receive Plan Share Awards
within the sole discretion of the Committee. Directors who are not otherwise
Employees shall receive Plan Share Awards pursuant to Section 6.05.
6.02 Allocations. The Committee will determine which of the Employees
will be granted Plan Share Awards and the number of Shares covered by each
Award, provided, however, that in no event shall any Awards be made which will
violate the Charter or Bylaws of the Savings Bank or its Parent or Subsidiaries
or any applicable federal or state law or regulation. In the event Shares are
forfeited for any reason or additional Shares are purchased by the Trustee, the
Committee may, from time to time, determine which of the Employees will be
granted Plan Share Awards to be awarded from forfeited Shares. In selecting
those Employees and Directors Emeritus to whom Plan Share Awards will be granted
and the number of shares covered by such Awards, the Committee shall consider
the prior and anticipated future position, duties and responsibilities of the
Employees, the value of their prior and anticipated future services to the
Savings Bank and its Subsidiaries, and any other factors the Committee may deem
relevant. All actions by the Committee shall be deemed final, except to the
extent that such actions are revoked by the Board. Notwithstanding anything
herein to the contrary, in no event shall any Participant receive Plan Share
Awards in excess of 25% of the aggregate Plan Shares authorized under the Plan.
6.03 Form of Allocation. As promptly as practicable after a
determination is made pursuant to Section 6.02 or Section 6.05 that a Plan Share
Award is to be made, the Committee shall notify the Participant in writing of
the grant of the Award, the number of Plan Shares covered by the Award, and the
terms upon which the Plan Shares subject to the award may be earned. The date on
which the Committee makes its award determination or the date the Committee so
notifies the Participant shall be considered the date of grant of the Plan Share
Awards as determined by the Committee. The Committee shall maintain records as
to all grants of Plan Share Awards under the Plan.
6.04 Allocations Not Required. Notwithstanding anything to the contrary
at Sections 6.01, 6.02 or 6.05, no Employee shall have any right or entitlement
to receive a Plan Share Award hereunder, such Awards being at the sole
discretion of the Committee and the Board, nor shall the Employees as a group
have such a right. The Committee may, with the approval of the Board (or, if so
directed by the Board) return all Common Stock in the Plan Share Reserve to the
Savings Bank at any time, and cease issuing Plan Share Awards.
6.05 Awards to Directors. Notwithstanding anything herein to the
contrary, upon the Effective Date, a Plan Share Award consisting of 4,635 Plan
Shares shall be awarded to each Director of the Savings Bank that is not
otherwise an Employee. Such Plan Share Award shall be earned and non-forfeitable
at the rate of one-fifth as of the one-year anniversary of the Effective Date
and an additional one-fifth
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following each of the next four successive years during such periods of service
as a Director or Director Emeritus. Such Plan Share Award shall be immediately
100% earned and non-forfeitable in the event of the death or Disability of such
Director or Director Emeritus. Further, provided that such Plan is approved by a
vote of the stockholders of the Parent (excluding stock held by Florida First
Bancorp MHC) at a stockholder's meeting held more than one year from the Savings
Bank's conversion to stock form, such Plan Share Award shall be immediately 100%
earned and non-forfeitable upon a Change in Control of the Savings Bank or
Parent. Subsequent to the Effective Date, Plan Share Awards may be awarded to
newly elected or appointed Directors of the Savings Bank by the Committee,
provided that total Plan Share Awards granted to non-employee Directors of the
Savings Bank shall not exceed 30% of the total Plan Share Reserve in the
aggregate under the Plan or 5% of the total Plan Share Reserve to any individual
non-employee Director.
Article VII
-----------
EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earnings Plan Shares; Forfeitures.
(a) General Rules. Unless the Committee shall specifically state to the
contrary at the time a Plan Share Award is granted, Plan Shares subject to an
Award shall be earned and non-forfeitable by a Participant at the rate of
one-fifth of such Award following one year after the granting of such Award, and
an additional one-fifth following each of the next four successive years;
provided that such Participant remains an Employee, Director, or Director
Emeritus during such period. Notwithstanding anything herein to the contrary, in
no event shall a Plan Share Award granted hereunder be earned and
non-forfeitable by a Participant more rapidly than at the rate of one-fifth of
such Award as of the one year anniversary of the date of grant and an additional
one-fifth following each of the next four successive years.
(b) Revocation for Misconduct. Notwithstanding anything herein to the
contrary, the Board shall, by resolution, immediately revoke, rescind and
terminate any Plan Share Award, or portion thereof, previously awarded under
this Plan, to the extent Plan Shares have not been delivered thereunder to the
Participant, whether or not yet earned, in the case of a Participant who is
discharged from the employ or service of the Parent, Savings Bank or a
Subsidiary for Cause, or who is discovered after termination of employment or
service to have engaged in conduct that would have justified termination for
Cause. A determination of Cause shall be made by the Board within its sole
discretion.
(c) Exception for Terminations Due to Death or Disability.
Notwithstanding the general rule contained in Section 7.01(a) above, all Plan
Shares subject to a Plan Share Award held by a Participant whose employment or
service with the Parent, Savings Bank or a Subsidiary terminates due to death or
Disability, shall be deemed earned and nonforfeitable as of the Participant's
last date of employment or service with the Parent, Savings Bank or Subsidiary
and shall be distributed as soon as practicable thereafter.
(d) Exception for Termination after a Change in Control.
Notwithstanding the general rule contained in Section 7.01 above, provided that
such Plan is approved by a vote of the stockholders of the Parent (excluding
stock held by Florida First Bancorp MHC) at a stockholder's meeting held more
than one year from the Savings Bank's conversion to stock form, all Plan Shares
subject to a Plan Share Award held by a Participant shall be deemed to be
immediately 100% earned and non-forfeitable in the event of
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a Change in Control of the Parent or Savings Bank and shall be distributed as
soon as practicable thereafter.
7.02 Accrual and Payment of Dividends. A holder of a Plan Share Award,
whether or not earned, shall also be entitled to receive an amount equal to any
cash dividends declared and paid with respect to shares of Common Stock
represented by such Plan Share Award between the date the relevant Plan Share
Award was granted to such Participant and the date the Plan Shares are
distributed. Such cash dividend amounts shall be held in arrears under the Trust
and distributed upon the earning of the applicable Plan Share Award. Such
payment shall also include an appropriate amount of earnings, if any, of the
Trust assets with respect to any cash dividends so distributed.
7.03 Distribution of Plan Shares.
(a) Timing of Distributions: General Rule. Except as provided in
Subsections (d) and (e) below, Plan Shares shall be distributed to the
Participant or his Beneficiary, as the case may be, as soon as practicable after
they have been earned. No fractional shares shall be distributed.
Notwithstanding anything herein to the contrary, at the discretion of the
Committee, Plan Shares may be distributed prior to such Shares being 100%
earned, provided that such Plan Shares shall contain a restrictive legend
detailing the applicable limitations of such shares with respect to transfer and
forfeiture.
(b) Form of Distribution. All Plan Shares, together with any shares
representing stock dividends, shall be distributed in the form of Common Stock.
One share of Common Stock shall be given for each Plan Share earned. Payments
representing cash dividends (and earnings thereon) shall be made in cash.
Notwithstanding anything within the Plan to the contrary, upon a Change in
Control whereby substantially all of the Common Stock of the Parent shall be
acquired for cash, all earned Plan Shares associated with Plan Share Awards,
together with any shares representing stock dividends associated with earned
Plan Share Awards, shall be, at the sole discretion of the Committee,
distributed as of the effective date of such Change in Control, or as soon as
administratively feasible thereafter, in the form of cash equal to the
consideration received in exchange for such Common Stock represented by such
Plan Shares.
(c) Withholding. The Trustee may withhold from any payment or
distribution made under this Plan sufficient amounts of cash or shares of Common
Stock necessary to cover any applicable withholding and employment taxes, and if
the amount of such payment or distribution is not sufficient, the Trustee may
require the Participant or Beneficiary to pay to the Trustee the amount required
to be withheld in taxes as a condition of delivering the Plan Shares. The
Trustee shall pay over to the Parent, Savings Bank or Subsidiary which employs
or employed such Participant any such amount withheld from or paid by the
Participant or Beneficiary.
(d) Timing: Exception for 10% Shareholders. Notwithstanding Subsection
(a) above, no Plan Shares may be distributed prior to the date which is five
years from the effective date of the Conversion to the extent the Participant or
Beneficiary, as the case may be, would after receipt of such Shares own in
excess of ten percent (10%) of the issued and outstanding shares of Common Stock
held by parties other than Parent, unless such action is approved in advance by
a majority vote of disinterested directors of the Board of the Parent. Any Plan
Shares remaining undistributed solely by reason of the operation of this
Subsection (d) shall be distributed to the Participant or his Beneficiary on the
date which is five years from the effective date of the Conversion.
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(e) Regulatory Exceptions. No Plan Shares shall be distributed,
however, unless and until all of the requirements of all applicable law and
regulation shall have been fully complied with, including the receipt of
approval of the Plan by the stockholders of the Parent by such vote, if any, as
may be required by applicable law and regulations.
7.04 Voting of Plan Shares. After a Plan Share Award has become earned
and non-forfeitable, the Participant shall be entitled to direct the Trustee as
to the voting of the Plan Shares which are associated with the Plan Share Award
and which have not yet been distributed pursuant to Section 7.03, subject to
rules and procedures adopted by the Committee for this purpose. All shares of
Common Stock held by the Trust as to which Participants have not yet earned and
are not entitled to direct, or have not directed, the voting of such Shares,
shall be voted by the Trustee as directed by the Committee.
Article VIII
------------
TRUST
8.01 Trust. The Trustee shall receive, hold, administer, invest and
make distributions and disbursements from the Trust in accordance with the
provisions of the Plan and Trust and the applicable directions, rules,
regulations, procedures and policies established by the Committee pursuant to
the Plan.
8.02 Management of Trust. It is the intention of this Plan and Trust
that the Trustee shall have complete authority and discretion with respect to
the management, control and investment of the Trust, and that the Trustee shall
invest all assets of the Trust, except those attributable to cash dividends paid
with respect to Plan Shares not held in the Plan Share Reserve, in Common Stock
to the fullest extent practicable, except to the extent that the Trustee
determines that the holding of monies in cash or cash equivalents is necessary
to meet the obligations of the Trust. In performing their duties, the Trustees
shall have the power to do all things and execute such instruments as may be
deemed necessary or proper, including the following powers:
(a) To invest up to one hundred percent (100%) of all Trust assets in
the Common Stock without regard to any law now or hereafter in force
limiting investments for Trustees or other fiduciaries. The investment
authorized herein may constitute the only investment of the Trust, and
in making such investment, the Trustee is authorized to purchase Common
Stock from the Parent or from any other source, and such Common Stock
so purchased may be outstanding, newly issued, or treasury shares.
(b) To invest any Trust assets not otherwise invested in accordance
with (a) above in such deposit accounts, and certificates of deposit
(including those issued by the Savings Bank), obligations of the United
States government or its agencies or such other investments as shall be
considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at any time
held or acquired by the Trust.
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(d) To cause stocks, bonds or other securities to be registered in the
name of a nominee, without the addition of words indicating that such
security is an asset of the Trust (but accurate records shall be
maintained showing that such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may be in the
opinion of the Trustee reasonable for the proper operation of the Plan
and Trust.
(f) To employ brokers, agents, custodians, consultants and accountants.
(g) To hire counsel to render advice with respect to their rights,
duties and obligations hereunder, and such other legal services or
representation as they may deem desirable.
(h) To hold funds and securities representing the amounts to be
distributed to a Participant or his Beneficiary as a consequence of a
dispute as to the disposition thereof, whether in a segregated account
or held in common with other assets.
(i) As may be directed by the Committee or the Board from time to time,
the Trustee shall pay to the Saving Bank earnings of the Trust
attributable to the Plan Share Reserve.
Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of a court for the exercise of any power
herein contained, or to maintain bond.
8.03 Records and Accounts. The Trustee shall maintain accurate and
detailed records and accounts of all transactions of the Trust, which shall be
available at all reasonable times for inspection by any legally entitled person
or entity to the extent required by applicable law, or any other person
determined by the Committee.
8.04 Earnings. All earnings, gains and losses with respect to Trust
assets shall be allocated in accordance with a reasonable procedure adopted by
the Committee, to bookkeeping accounts for Participants or to the general
account of the Trust, depending on the nature and allocation of the assets
generating such earnings, gains and losses. In particular, any earnings on cash
dividends received with respect to shares of Common Stock shall be allocated to
accounts for Participants, except to the extent that such cash dividends are
distributed to Participants, if such shares are the subject of outstanding Plan
Share Awards, or, otherwise to the Plan Share Reserve.
8.05 Expenses. All costs and expenses incurred in the operation and
administration of this Plan, including those incurred by the Trustee, shall be
paid by the Savings Bank.
8.06 Indemnification. Subject to the requirements and limitations of
applicable laws and regulations, the Parent and the Savings Bank shall
indemnify, defend and hold the Trustee harmless against all claims, expenses and
liabilities arising out of or related to the exercise of the Trustee's powers
and the discharge of their duties hereunder, unless the same shall be due to
their gross negligence or willful misconduct.
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Article IX
----------
MISCELLANEOUS
9.01 Adjustments for Capital Changes. The aggregate number of Plan
Shares available for issuance pursuant to the Plan Share Awards and the number
of Shares to which any Plan Share Award relates shall be proportionately
adjusted for any increase or decrease in the total number of outstanding shares
of Common Stock issued subsequent to the effective date of the Plan resulting
from any split, subdivision or consolidation of the Common Stock or other
capital adjustment, change or exchange of the Common Stock, or other increase or
decrease in the number or kind of shares effected without receipt or payment of
consideration by the Parent.
9.02 Amendment and Termination of the Plan. The Board may, by
resolution, at any time, amend or terminate the Plan. The power to amend or
terminate the Plan shall include the power to direct the Trustee to return to
the Parent all or any part of the assets of the Trust, including shares of
Common Stock held in the Plan Share Reserve, as well as shares of Common Stock
and other assets subject to Plan Share Awards which have not yet been earned by
the Participants to whom they have been awarded. However, the termination of the
Trust shall not affect a Participant's right to earn Plan Share Awards and to
the distribution of Common Stock relating thereto, including earnings thereon,
in accordance with the terms of this Plan and the grant by the Committee or the
Board. Notwithstanding the foregoing, no action of the Board may increase (other
than as provided in Section 9.01 hereof) the maximum number of Plan Shares
permitted to be awarded under the Plan as specified at Section 5.03, materially
increase the benefits accruing to Participants under the Plan or materially
modify the requirements for eligibility for participation in the Plan unless
such action of the Board shall be subject to ratification by the stockholders of
the Parent.
9.03 Nontransferable. Plan Share Awards and rights to Plan Shares shall
not be transferable by a Participant, and during the lifetime of the
Participant, Plan Shares may only be earned by and paid to the Participant who
was notified in writing of the Award by the Committee pursuant to Section 6.03.
No Participant or Beneficiary shall have any right in or claim to any assets of
the Plan or Trust, nor shall the Parent, Savings Bank, or any Subsidiary be
subject to any claim for benefits hereunder.
9.04 No Employment Rights. Neither the Plan nor any grant of a Plan
Share Award or Plan Shares hereunder nor any action taken by the Trustee, the
Committee or the Board in connection with the Plan shall create any right,
either express or implied, on the part of any Participant to continue in the
employ or service of the Parent, Savings Bank, or a Subsidiary thereof.
9.05 Voting and Dividend Rights. No Participant shall have any voting
or dividend rights of a stockholder with respect to any Plan Shares covered by a
Plan Share Award, except as expressly provided in Sections 7.02 and 7.04 above,
prior to the time said Plan Shares are actually distributed to such Participant.
9.06 Governing Law. The Plan and Trust shall be governed by and
construed under the laws of the State of Florida, except to the extent that
Federal Law shall be deemed applicable.
9.07 Effective Date. The Plan shall be effective as of the date of
approval of the Plan by stockholders of the Parent, subject to the receipt of
approval or non-objection by the OTS or other applicable banking regulator, if
applicable.
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9.08 Term of Plan. This Plan shall remain in effect until the earlier
of (i) termination by the Board, (ii) the distribution of all assets of the
Trust, or (iii) 21 years from the Effective Date. Termination of the Plan shall
not effect any Plan Share Awards previously granted, and such Plan Share Awards
shall remain valid and in effect until they have been earned and paid, or by
their terms expire or are forfeited.
9.09 Tax Status of Trust. It is intended that the Trust established
hereby shall be treated as a grantor trust of the Savings Bank under the
provisions of Section 671 et seq. of the Internal Revenue Code of 1986, as
amended, as the same may be amended from time to time.
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EXHIBIT 13
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Table of Contents
Page
<S> <C>
Message to Stockholders.................................................................1
Corporate Profile.......................................................................3
Selected Financial Highlights...........................................................4
Management's Discussion of Financial Condition and Results of Operations................6
Year 2000 Readiness Disclosure.........................................................15
Consolidated Financial Statements......................................................19
Notes to Consolidated Financial Statements.............................................24
Independent Auditors' Report...........................................................45
Directors and Officers.................................................................46
Company Offices and Corporate Information...............................Inside back cover
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MESSAGE TO STOCKHOLDERS
It is a distinct honor to greet our fellow stockholders and present our first
annual report for FloridaFirst Bancorp. FloridaFirst is the holding company for
FloridaFirst Bank. Although the name may be new in financial services in central
Florida, FloridaFirst Bank has been an important part of the banking scene in
Polk and Manatee Counties for over 65 years. Under the banner of FloridaFirst
Bank, we will carry out our goal of transitioning to a full service banking
business. Our markets along the Interstate 4 corridor between Orlando and Tampa,
and on the Gulf Coast in Bradenton, are growing rapidly. Not only do we plan to
serve these markets more effectively by offering a full line of loan and deposit
services to our traditional construction and mortgage customers, but also to
aggressively expand our growing account relationships with individual consumers
and small businesses. Our efforts in this direction thus far have been
rewarding.
Financial Overview
I am pleased to report that FloridaFirst Bancorp achieved its highest level of
earnings during our fiscal year ended September 30, 1999. Net income for 1999
was $3,257,000, up 37% from $2,385,000 in fiscal year 1998. The increase in
earnings was due primarily to growth in total assets of 20%, from $414 million
at the beginning of the year to $498 million at September 30, 1999. Net loans
grew over 17% from $339 million at the beginning of the year to $398 million at
year-end. Loan originations for the 1999 fiscal year totaled $158 million across
all our lines of business mortgage, consumer, and commercial.
We are also proud that, while we had another great year in loan growth, our
asset quality remains outstanding. Nonperforming loans, real estate owned
properties and other repossessed assets were just over $1 million at September
30, 1999, or just .21% of total assets, well below industry average.
Strategic Initiatives
Transitioning to a full service banking business strategy requires new
technological capacity. Our goal, consistent with the underlying motive for our
conversion and public offering in April 1999, is to invest in training and
technological enhancements to improve efficiency at every level of the
organization. We have worked with various consultants during the past few years
to identify areas where improvements are needed and to focus on appropriate
solutions.
In an effort to increase our market presence and provide the proper service to
our customers, we are developing plans to build three new full service branch
facilities in the year 2000:
>> North Lakeland - north of Interstate 4 where we currently do not have a
physical presence
>> Southeastern Winter Haven - in the rapidly developing area around Cypress
Gardens, and
>> Lakewood Ranch - in the highly attractive area of Lakewood Ranch just east
of Interstate 75 in Bradenton
All three facilities represent extensions of existing markets where our
reputation is already established.
Management Team
While attracting good people has and will continue to be a major business
challenge, the new Senior Management group that has been assembled at
FloridaFirst Bank is an outstanding group with the skills to effect the changes
necessary to accomplish our goals. Their collective vision and talents will
enable the group to lead our employees through the changes required in pursuing
a different business strategy.
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Share Repurchase Program
FloridaFirst Bancorp is currently in the process of repurchasing up to 15% of
its outstanding stock for which approval was obtained from the Office of Thrift
Supervision on October 18, 1999. Continued market fluctuations and weakness in
financial institutions stocks has created an opportunity to execute this
repurchase plan, thus far, at levels that are accretive to both earnings and
book value per share. We are actively managing our capital with the focus on
improving the company's return on average stockholders' equity.
Supporting Stockholders
Recognizing that investing in financial institution stocks is subject to some
uncertainty, the FloridaFirst directors and management are fully committed to
supporting the strategic initiatives which are necessary to build value in our
company and take advantage of the opportunities that present themselves in our
marketplace. We believe that, over the long term, stockholders will benefit from
the plans we have developed and are currently implementing.
The 21st Century
As we move into year 2000, we will have many new events to report. Significant
among these is the retirement of current Chairman of the Board, Charles W.
Bovay, and the recent election of the new Chairman, Nis H. Nissen, III.
Chuck Bovay, during his four years as Chairman, has presided over the mapping of
a new future for FloridaFirst. His dedicated leadership and focused loyalty to
the best interest of our company will continue to be major cornerstones of our
success for years to come.
Sincerely,
/s/Gregory C. Wilkes
Gregory C. Wilkes
President and Chief Executive Officer
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FLORIDAFIRST BANCORP
Corporate Profile
FloridaFirst Bancorp 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 nine offices
located in Florida's Polk and Manatee Counties.
Mutual Holding Company Reorganization
On April 6, 1999, the Bank completed its mutual to stock conversion including
the formation of mutual and stock holding companies ("Reorganization"). In
conjunction with the Reorganization, FloridaFirst Bancorp, a federally chartered
corporation, issued a total of 5,752,875 shares of its common stock - 2,703,851
shares (47% of the total shares) were sold in a subscription offering to the
Bank's depositors at $10.00 per share, and the remaining 3,049,024 shares (53%
of the total shares) were issued to FloridaFirst Bancorp MHC, a mutual holding
company. Upon completion of these transactions, the Bank became the wholly owned
subsidiary of FloridaFirst Bancorp (the "Bancorp").
Gross proceeds from the stock issuance of $27.0 million were reduced by $1.2
million in subscription related expenses and $100,000 initial capital for
FloridaFirst Bancorp MHC, leaving net proceeds of the offering of $25.7 million.
Stock Market Information and Dividends
Since its issuance on April 6, 1999, the Bancorp's common stock has traded on
the Nasdaq National Market under the 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. See Note 17 of the consolidated financial statements for a summary of
quarterly financial data.
Quarter Ended: High Low
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June 30, 1999 $ 9.50 $ 7.88
September 30, 1999 $ 9.50 $ 8.38
The Company declared a $ .04 per share dividend during the quarter ended
September 30, 1999. In accordance with current OTS policy, FloridaFirst Bancorp
MHC waived the receipt of dividends on its 3,049,024 shares for the cash
dividend declared. There can be no assurance that the OTS will permit future
waivers. As of December 15, 1999, the Company had 1,015 holders of record of
common stock.
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Selected Financial Highlights
(In thousands except per share data)
<TABLE>
<CAPTION>
At September 30:
1999 (1) 1998 (2) 1997 1996 (3) 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Assets................................... $ 498,358 $ 414,472 $ 466,765 $ 440,294 $ 431,414
Loans receivable, net.................... 397,910 338,610 355,551 321,327 260,675
Investment securities.................... 80,876 60,961 74,573 99,841 138,234
Cash and cash equivalents................ 2,598 647 21,842 3,885 18,222
Deposits................................. 339,224 352,180 429,714 404,184 397,594
FHLB advances and other borrowings....... 92,472 21,000 -- -- --
Stockholders' equity..................... 61,337 36,107 33,588 30,569 30,774
Actual number (not in thousands):
Real estate loans outstanding............ 4,696 4,433 5,149 5,461 5,187
Deposit accounts......................... 36,856 38,409 46,012 43,002 40,083
Full service offices..................... 9 9 14 13 14
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For the year ended September 30:
Interest income............. $ 32,648 $ 32,141 $ 33,865 $ 31,694 $ 29,820
Interest expense............ 17,128 18,966 19,702 18,961 17,689
-------- ------- ------- -------- -------
Net interest income......... 15,520 13,175 14,163 12,733 12,131
Provision for loan losses... 540 405 317 600 75
-------- ------- ------- -------- -------
Net interest income after provision
for loan losses........... 14,980 12,770 13,846 12,133 12,056
Other income................ 1,473 4,347 1,189 1,546 1,064
Other expenses.............. 11,448 13,581 11,209 13,382 10,081
-------- ------- ------- -------- -------
Income before income taxes.. 5,005 3,536 3,826 297 3,039
Income taxes................ 1,748 1,151 1,299 44 1,057
-------- ------- ------- -------- -------
Net income.................. $ 3,257 $ 2,385 $ 2,527 $ 253 $ 1,982
======== ======= ======= ======== =======
Basic earnings per share (4) $ .34 -- -- -- --
=====
Weighted shares outstanding (4) 5,549 -- -- -- --
=====
</TABLE>
- ------------
(1) Includes $25.7 million in net proceeds from the Reorganization. Prior
to April 6, 1999, the Bank was a mutual institution. Therefore,
earnings per share and weighted average shares outstanding are for the
six months ended September 30, 1999 (period subsequent to the
Reorganization.)
(2) During fiscal year 1998, FloridaFirst 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, FloridaFirst transferred $44.6 million in loans. In
addition, other expenses includes special benefit plan adjustments of
$2.2 million.
(3) 1996 includes a $2.5 million one-time special assessment to
recapitalize the Savings Association Insurance Fund.
(4) FloridaFirst converted to a stock company on April 6, 1999. Earnings
per share and weighted average shares outstanding are for the six
months ended September 30, 1999 (period subsequent to the conversion.)
4
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<PAGE>
================================================================================
Selected Financial Ratios
<TABLE>
<CAPTION>
At or For the Year Ended September 30,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Performance Ratios:
Return on average assets (net income
Divided by average total assets)........... .72% .55% .56% .06% .48%
Return on average equity (net income
Divided by average equity)................. 6.65 6.55 7.71 .79 6.58
Net interest rate spread....................... 2.91 2.65 2.87 2.68 2.38
Net interest margin on average
Interest-earnings assets................... 3.53 3.10 3.23 3.03 2.99
Average interest-earning assets to
Average interest-bearing liabilities....... 116 110 108 108 107
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)........................ 67 78 74 76 76
Asset Quality Ratios:
Non-performing loans to total loans, net....... .21 .25 .65 .37 .46
Non-performing assets to total assets.......... .21 .32 .53 .28 .36
Net charge-offs to average loans
Outstanding...............................
.04 .14 .02 .04 .03
Allowance for loan losses to total loans....... .74 .76 .74 .74 .73
Capital Ratios:
Average equity to average assets
(average equity divided by average
total assets)............................ 10.84 8.31 7.25 7.41 7.22
Equity to assets at period end................. 12.31 8.62 7.20 6.94 7.13
</TABLE>
5
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<PAGE>
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Management's Discussion and Analysis of Financial Condition and Results of
Operations
General
Management's discussion and analysis of FloridaFirst Bancorp and its
subsidiary's, FloridaFirst Bank, (hereinafter referred to as the "Company")
financial condition and results of operations is intended as assistance in
understanding the Company's financial condition and results of operations. The
information in this section should be read with the consolidated financial
statements and the notes to consolidated financial statements beginning at page
19.
The Company's results of operations depend primarily on its net interest income.
Net interest income is a function of loans and investments outstanding in any
one period, the interest yield earned on such loans and investments and the
interest paid on deposits and borrowed funds that were outstanding during that
same period. Company's noninterest income consists primarily of fees and service
charges. The results of operations are significantly impacted by the provision
for loan losses which, in turn, depend on, among other things, the size and
makeup of the loan portfolio, loan quality and trends. The noninterest expenses
consist primarily of employee compensation and benefits, occupancy and equipment
expenses, marketing and other general and administrative costs. The Company's
results of operations are affected by general economic and competitive
conditions, including changes in prevailing interest rates and the policies of
regulatory agencies.
Forward - Looking Statements
The Company may from time to time make written or oral forward-looking
statements, including statements contained in the Company's filings with the
Securities and Exchange Commission (the "Commission") and its reports to
stockholders. Statements made in such documents, other than those concerning
historical information, should be considered forward-looking and subject to
various risks and uncertainties. Such forward-looking statements are made based
upon management's belief as well as assumptions made by, and information
currently available to, management pursuant to "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. The Company's actual results
may differ materially from the results anticipated in forward-looking statements
due to a variety of factors, including governmental monetary and fiscal
policies, deposit levels, loan demand, loan collateral values, securities
portfolio values, and interest rate risk management; the effects of competition
in the banking business from other commercial banks, savings and loan
associations, mortgage banking firms, consumer finance companies, credit unions,
securities brokerage firms, insurance companies, money market mutual funds and
other financial institutions operating in the Company's market area and
elsewhere, including institutions operating through the Internet; changes in
governmental regulation relating to the banking industry, including regulations
relating to branching and acquisitions; failure of assumptions underlying the
establishment of reserves for losses, including the value of collateral
underlying delinquent loans, and other factors. The Company cautions that such
factors are not exclusive. The Company does not undertake to update any
forward-looking statements that may be made from time to time by, or on behalf
of, the Company.
Management of Interest Rate Risk and Market Risk
Qualitative Analysis. Because the majority of the Company's assets and
liabilities are sensitive to changes in interest rates, the Company's 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. The lending activities of the Company 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.
6
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<PAGE>
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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 assets 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: (a) the Company seeks to originate commercial and
consumer loans with adjustable rate features or fixed rate loans with short
maturities; (b) the Company seeks to lengthen the maturities of liabilities when
deemed cost effective through the pricing and promotion of certificates of
deposit and utilization of FHLB advances; (c) the Company seeks to attract low
cost checking and transaction accounts which tend to be less sensitive to rising
rates; and (d) the Company seeks, when market conditions permit, to originate
and hold in its portfolio adjustable rate mortgage loans which have annual
interest rate adjustments. The Company also maintains an investment 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, 1999, the
Company had 28.7% of its deposits in passbook, 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.
Quantitative Analysis. Exposure to interest rate risk is actively monitored by
management. The Company's objective is to maintain a consistent level of
profitability within acceptable risk tolerances across a broad range of
potential interest rate environments. The Company uses the OTS Net Portfolio
Value ("NPV") Model to monitor its exposure to interest rate risk, which
calculates changes in net portfolio value. Reports generated from assumptions
provided and modified by management are reviewed by the Asset/Liability
Management Committee and reported to the Board of Directors quarterly. The
Interest Rate Sensitivity of Net Portfolio Value Report shows the degree to
which balance sheet line items and net portfolio value are potentially affected
by a 100 to 300 basis point (1 basis point equals 1/100th of a percentage point)
upward and downward parallel shift (shock) in the Treasury yield curve.
The following table presents the Company's NPV as of September 30, 1999. The NPV
was calculated by the OTS, based on information provided by the Company.
Net Portfolio Value ("NPV") NPV as % of Present Value of Assets
--------------------------- -----------------------------------
Change Basis Point
in Rates $ Amount $ Change % Change NPV Ratio Change
-------- -------- -------- -------- --------- ------
(Dollars in thousands)
+300 bp 30.990 -24.793 -44% 6.60% -448 bp
+200 bp 39.819 -15,963 -29% 8.27% -280 bp
+100 bp 48,295 -7,488 -13% 9.80% -128 bp
0 bp 55,783 11.08%
-100 bp 60,711 +4,929 +9% 11.86% +79 bp
-200 bp 63,530 +7,747 +14% 12.26% +119 bp
-300 bp 66,207 +10,424 +19% 12.63% +155 bp
7
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<PAGE>
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Future interest rates and their effects on NPV and net interest income are not
predictable. Nevertheless, the Company's management does not believe its NPV or
net interest income will suffer material adverse effects in the near future as a
result of current trends in interest rates. 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.
Comparison of Financial Condition at September 30, 1999 and 1998
Assets. Total assets increased $83.9 million, or 20.2%, to $498.4 million at
September 30, 1999 from $414.5 million at September 30, 1998. The increase in
total assets resulted primarily from: a $59.3 million increase in net loans
outstanding from new originations; an increase in investments available for sale
portfolio of $26.0 million due to a financial leveraging strategy implemented
after the issuance of stock; a reduction in investments held to maturity of $6.0
million due to the maturity and calls of securities; and an increase in Federal
Home Loan Bank stock of $1.6 million.
Liabilities. Total liabilities increased $58.6 million, or 15.5%, to $437.0
million at September 30, 1999 from $378.4 million at September 30, 1998. The
increase in total liabilities resulted primarily from: a $66.6 million increase
in FHLB advances; a $4.9 million increase in other borrowings; and a $13.0
million net outflow in deposits. The increase in the FHLB advances and other
borrowings utilized to fund the loan and investment growth was attributable to:
>> the Company's decision to not offer premium pricing on deposits to
customers without other banking relationships, and
>> disintermediation of customer funds due to alternative investment
opportunities
>> management's decision to financially leverage the higher level of capital
of the Company to increase earnings.
Deposits, excluding the $19.6 million decrease in certificate of account
balances, grew $6.6 million, or 7.3%, during the year.
Stockholders' Equity. The $25.2 million increase in the Company's stockholders'
equity reflects the $23.5 million in net proceeds from the issuance of common
stock ($25.7 million in net offering proceeds reduced by the $2.2 million in
stock held by the employee stock ownership plan that has not been allocated to
the participants), $3.3 million in net income for the year ended September 30,
1999 and a net reduction in equity of $1.4 million resulting from the decline in
value of the Company's investment available for sale portfolio. The decline in
value of the investments is directly attributable to the significant rise in
interest rates during the second half of the fiscal year.
8
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<PAGE>
================================================================================
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.
Assets providing liquidity are generated through loan repayments 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.
In addition to the $3.9 million in cash provided by operations, other
significant sources (uses) of cash in 1999 were as follows (amounts in millions
of dollars):
Cash provided by operations $ 3.9
FHLB advances and other borrowings 71.5
Decrease in net deposits (13.0)
Sales, maturities and repayments on investment securities 30.1
Purchases of investment securities (52.4)
Net increase in loans (59.8)
Funds from issuance of common stock 23.5
Other, net (1.8)
------
Net increase in cash $ 2.0
======
The Company is subject to federal regulations that impose certain minimum
capital requirements. For a discussion on such capital levels, see footnote 10
of the notes to 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 loans and
investments ("interest-earning assets") and interest paid on deposits and any
borrowed funds ("interest-bearing liabilities"). Net interest income is affected
by (a) the difference between rates of interest earned on the Company's
interest-earning assets and rates paid on its interest-bearing liabilities
("interest rate spread") and (b) the aggregate amounts of its interest-earnings
assets and interest-bearing liabilities.
9
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<PAGE>
================================================================================
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, 1999. Average balances are derived from month-end
balances. Management does not believe that the use of month-end balances instead
of average daily balances has caused any material differences in the information
presented.
<TABLE>
<CAPTION>
Year ended September 30,
----------------------------------------------------------------------------
September 30, 1999 1999 1998 1997
------------------ -------------------------- ------------------------ -----------------------
Average Average Average
Average Yield/ Average Yield/ Average Yield/
Balance Rate Balance Interest Cost Balance Interest Cost Balance Interest Cost
------- ---- ------- -------- ---- ------- -------- ---- ------- -------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1) $ 400,851 7.56% $368,513 $28,482 7.73% $339,218 $ 27,241 8.03% $339,992 $ 27,730 8.16%
Investment securities and other (2) 85,481 6.66 71,557 4,166 5.82 85,594 4,900 5.72 98,836 6,135 6.21
--------- -------- ------- -------- -------- -------- --------
Total interest-earning assets 486,332 7.39 440,070 32,648 7.42 424,812 32,141 7.57 438,828 33,865 7.72
------ ------ ------
Noninterest-earning assets 12,026 11,606 12,557 13,640
--------- -------- -------- --------
Total assets $ 498,358 $451,676 $437,369 $452,468
========= ======== ======== ========
Interest-bearing liabilities:
Checking accounts $ 27,098 1.77 $ 27,193 486 1.79 $ 25,177 469 1.86 $ 24,343 607 2.49
Savings accounts 32,826 1.67 36,469 612 1.68 41,456 859 2.07 48,155 1,204 2.50
Money market accounts 23,997 3.87 20,740 796 3.84 15,356 582 3.79 11,767 351 2.98
Certificates of deposit 241,818 5.12 245,915 12,833 5.22 301,093 16,921 5.62 321,938 17,540 5.45
FHLB advances and other borrowings 92,472 5.22 49,884 2,401 4.81 2,647 135 5.10 -- -- --
--------- -------- ------- -------- ------- -------- ------
Total interest-bearing liabilities 418,211 4.58 380,201 17,128 4.50 385,729 18,966 4.92 406,203 19,702 4.85
Noninterest-bearing liabilities (3) 18,810 22,491 ------- 15,246 ------- 13,478 ------
--------- -------- -------- --------
Total liabilities 437,021 402,692 400,975 419,681
Stockholders' equity 61,337 48,984 36,394 32,787
--------- -------- -------- --------
Total liabilities and stockholders $ 498,358 $451,676 $437,369 $452,468
========= ======== ======== ========
Net interest income $15,520 $ 13,175 $ 14,163
======= ======== ========
Interest rate spread (4) 2.81% 2.92% 2.65% 2.87%
== ==== ==== ==== ====
Net margin on interest-earning assets (5) 3.45% 3.53% 3.10% 3.23%
== ==== ==== ==== ====
Ratio of average interest-earning assets
to average interest-bearing liabilities 116% 116% 110% 108%
=== === === ===
</TABLE>
- ----------------------------------------------------------
(1) Average balances include non-accrual loans.
(2) Investment 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.
10
<PAGE>
================================================================================
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.
<TABLE>
<CAPTION>
Year Ended September 30, Year Ended September 30,
------------------------------- ---------------------------------
1999 vs. 1998 1998 vs. 1997
------------------------------- ---------------------------------
Increase (Decrease) Due to Increase (Decrease) Due to
------------------------------- ---------------------------------
Volume Rate Net Volume Rate Net
------ ---- --- ------ ---- ---
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Loans receivable .............. $ 2,196 $ (955) $ 1,241 $ (75) $ (414) $ (489)
Investment securities and other (819) 85 (734) (739) (496) (1,235)
------- ------- ------- ------- ------- -------
Total interest-earning assets $ 1,377 $ (870) $ 507 $ (814) $ (910) $(1,724)
======= ======= ======= ======= ======= =======
Interest expense:
Checking accounts .............. $ 34 $ (17) $ 17 $ 24 $ (162) $ (138)
Savings accounts ............... (96) (151) (247) (156) (189) (345)
Money market accounts .......... 207 7 214 122 109 231
Certificates of deposit ........ (2,941) (1,147) (4,088) (1,156) 537 (619)
Other liabilities ............. 2,273 (7) 2,266 135 -- 135
------- ------- ------- ------- ------- -------
Total interest-bearing
liabilities ............ $ (523) $(1,315) $(1,838) $(1,031) $ 295 $ (736)
======= ======= ======= ======= ======= =======
Change in net interest income .. $ 1,900 $ 445 $ 2,345 $ 217 $(1,205) $ (988)
======= ======= ======= ======= ======= =======
</TABLE>
11
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<PAGE>
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Comparison of Operating Results for Years Ended September 30, 1999
and September 30, 1998
Net Income. Net income for the year ended September 30, 1999 increased 37.5% to
$3.3 million, compared to $2.4 million for September 30, 1998.
>> Net interest income increased 17.4% to $15.5 million for the year ended
September 30, 1999 compared to $13.2 million for the year ended September
30, 1998. This increase resulted from an increase in interest income of $
507,000 and a decrease in interest expense of $1.8 million.
>> Other income decreased to $1.5 million for the year ended September 30,
1999 from $4.3 million for the year ended September 30, 1998, resulting
primarily from a $3.0 million gain from the sale of certain deposits and
branch buildings (hereinafter referred as "Branch Sale"), as further
discussed in the notes to consolidated financial statements.
>> Other expenses decreased to $11.4 million for the year ended September 30,
1999 from $13.6 million for the year ended September 30, 1998. This
decrease is due primarily to $2.2 million in charges resulting from the
freezing of benefits under the defined benefit pension plan - $1.7 million,
and the adoption of a directors' retirement plan - $410,000 (hereinafter
referred to as "Benefit Adjustments"), as further discussed in the notes to
the consolidated financial statements.
Interest Income. Total interest income increased to $32.6 million for the year
ended September 30, 1999 from $32.1 million for the year ended September 30,
1998, as a result of an increase in average interest-earning assets offset to
some extent by a decrease in the average interest rates earned. Average
interest-earning assets increased to $440.1 million for the year ended September
30, 1999 from $424.8 million for the year ended September 30, 1998, an increase
resulting from strong loan growth throughout the year. The average rate earned
on interest-earning assets decreased to 7.42% for the year ended September 30,
1999 from 7.57% for the year ended September 30, 1998, a decrease of 15 basis
points.
Interest income on loans increased $1.2 million to $28.5 million for the year
ended September 30, 1999 from $27.2 million for the year ended September 30,
1999. This increase reflects the strong loan growth in all areas mortgage,
consumer and commercial loans. Total loan originations were $158.9 million in
1999 compared to $119.6 million in 1998, a 33% increase in origination volume.
The strong originations were offset by substantial repayments and refinance
activity. Also, the Branch Sale at the end of January 1998 reduced the loan
portfolio by $44.6 million, meaning that 1998 results had income on these loans
for four months of the year. In addition, the average yield on loans decreased
by 30 basis points during the year, reflecting the general downward trend in
interest rates for the first half of the fiscal year. Mortgage loan rates began
to increase late in the year, but the competitive pressures in the consumer and
commercial markets kept rates lower for the entire year in 1999 when compared to
1998.
Interest income on investment securities and other investments decreased
$734,000 to $4.2 million for the year ended September 30, 1999 from $4.9 million
for the year ended September 30, 1998. This decrease was primarily the result of
a $14.0 million decrease in the average balance to $71.6 million in 1999 from
$85.6 million in 1998. The decrease in the average balance of investment
securities was due primarily to the maturities and calls of certain securities
and the redeployment of these funds into loans. The decrease in average balances
was partially offset by an increase in the average yield by 10 basis points
through the diversification of the portfolio, extension of maturities, reduction
in interest-earning deposit accounts and a rising interest rate environment
during the last half of the year.
12
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<PAGE>
================================================================================
Interest Expense. Total interest expense decreased by $1.8 million to $17.1
million for the year ended September 30, 1999 from $18.9 million for the year
ended September 30, 1998, as a result of a 42 basis point decrease in average
cost of funds and a $5.5 million decrease in the average interest-bearing
liabilities. Average interest-bearing liabilities decreased to $380.2 million
for the year ended September 30, 1999 from $385.7 millionfor the year ended
September 30, 1998. The average cost for interest-bearing liabilities was 4.50%
for the year ended September 30, 1999 compared to 4.92.% for the year ended
September 30, 1998, a decrease of 42 basis points. The decrease in rates paid on
to interest-bearing liabilities reflects market rates as well as the replacement
of higher cost certificates of deposit with FHLB advances and lower cost
checking and money market accounts.
Interest expense on deposits decreased $4.1 million to $14.7 million for the
year ended September 30, 1999 from $18.8 million for the year ended September
30, 1998. This decrease was a result of a decrease of $52.8 million in the
average balance of interest-bearing deposits to $330.3 million in 1999 from
$383.1 million in 1999 and a decrease of 46 basis points in the average cost of
deposits to 4.46% in 1999 from 4.92% in 1998.
The Company began using FHLB advances in June 1998 to control its cost of funds
and lengthen the maturity of its liabilities. The Company manages the maturity
(or conversion dates for certain convertible advances) of its advances based on
the assets being funded and based on projections of interest rate trends. The
Company has used the FHLB advances as a major funding source due to the ability
to manage the maturities, the cost effectiveness in executing the transactions
and the level of interest rates offered compared to alternative funding sources.
The average costs of advances in 1999 was 4.81% which compares favorably with
the average cost for certificates of deposit which averaged 5.22%.
Provision for Loan Losses. The provision for loan losses is charged to
operations to bring the total allowance for loan losses to a level considered
appropriate by management based on historical experience, volume and type of
lending conducted by the Company, industry standards, the level and status of
past due and non-performing loans, the general economic conditions in the
Company's lending area and other factors affecting the collectibility of the
loans in the Company's portfolio.
The provision for loan losses was $540,000 for the year ended September 30, 1999
compared to $405,000 for the year ended September 30, 1998. The allowance for
loan losses increased to $2.9 million for the year ended September 30, 1999 from
$2.6 million for the year ended September 30, 1998, due primarily to the
increase in net loans outstanding. The current allowance represents .74% of
loans outstanding at September 30, 1999. The Company had net charge-offs of
$163,000 for the year ended September 30, 1999 compared to net charge-offs of
$474,000 for the year ended September 30, 1998. See the comparison of operating
results of 1998 to 1997 for a discussion of the 1998 charge-offs.
The Company monitors its loan portfolio on a continuing basis and intends to
continue to provide for loan losses based on its ongoing review of the loan
portfolio and general market conditions.
Other Income. Substantially the entire decrease in Other income for the year
ending September 30, 1999 compared to September 30, 1998 is attributable to the
$3.0 million gain from the Branch Sale.
Other Expenses. Other expense decreased by $2.1 million to $11.4 million for the
year ended September 30, 1999 from $13.5 million for the year ended September
30, 1998, due primarily to the Benefit Adjustments. In addition, compensation
and employee benefits increased slightly due to the hiring of additional sales
personnel and an average 4% increase in salary adjustments. These costs were
offset by certain vacancies in staff positions during the year and savings
related to compensation and employee benefits for personnel at the branches
involved in the Branch Sale. Occupancy and equipment costs increased due to
costs associated with the installation and operation of automated teller
machines at all branch locations in 1999.
13
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<PAGE>
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Comparison of Operating Results for Years Ended September 30, 1998 and September
30, 1997
Net Income. Net income for the year ended September 30, 1998 decreased 4.0% to
$2.4 million, compared to $2.5 million for the same period last year.
>> Net interest income decreased 7.0% to $13.2 million for the year ended
September 30, 1998 compared to $14.2 million for the year ended September
30, 1997. This decrease resulted from a decrease in interest income of $1.7
million which was partially offset by a decrease in interest expense of
$736,000.
>> Other income increased to $4.3 million for the year ended September 30,
1998 from $1.2 million for the year ended September 30, 1997, resulting
primarily from the Branch Sale.
>> Other expenses increased to $13.6 million for the year ended September 30,
1998 from $11.2 million for the year ended September 30, 1997, due
primarily to Benefit Adjustments.
Interest Income. Total interest income decreased to $32.1 million for the year
ended September 30, 1998 from $33.9 million for the year ended September 30,
1997, as a result of a decrease in average interest-earning assets and a
decrease in the average interest rates earned. Average interest-earning assets
decreased to $424.8 million for the year ended September 30, 1998 from $438.8
million for the year ended September 30, 1997. This decrease resulted from the
transfer of $44.6 million in interest-earning assets in January 1998 in
connection with the Branch Sale, partially offset by strong loan growth
throughout the year. The average rate earned on interest-earning assets
decreased to 7.57% for the year ended September 30, 1998 from 7.72% for the year
ended September 30, 1997, a decrease of 15 basis points.
Interest income on loans decreased $489,000 to $27.2 million for the year ended
September 30, 1998 from $27.7 million for the year ended September 30, 1997.
This slight decrease reflects the strong loan growth, particularly refinancings,
that offset the sale of loans noted above. In addition, the average yield on
loans decreased by 13 basis points during the year, reflecting the general
downward trend in interest rates.
Interest income on investment securities and other investments decreased $1.2
million to $4.9 million for the year ended September 30, 1998 from $6.1 million
for the year ended September 30, 1997. This decrease was primarily the result of
a $13.2 million decrease in the average balance to $85.6 million in 1998 from
$98.8 million in 1997. The decrease in the average balance of investment
securities was primarily due to the maturities and calls of certain securities
and the redeployment of these funds into loans. Also the average yield on
investment securities and other investments decreased by 49 basis points since
yields on the reinvestment of available assets have decreased with the general
downward trend in interest rates.
Interest Expense. Total interest expense decreased by $736,000 for the year
ended September 30, 1998 from $19.7 million for the year ended September 30,
1997, as a result of a decrease in average interest-bearing liabilities, offset
by a slight 7 basis point increase in the average cost of funds. Average
interest-bearing liabilities decreased to $385.7 million for the year ended
September 30, 1998 from $406.2 million for the year ended September 30, 1997.
The decrease is attributable to the sale of $55.5 million in deposits in January
1998 when the Company sold the deposits of five branches, partially offset by
new deposits and borrowing to fund the asset growth. The average interest rate
paid on interest-bearing liabilities was 4.92% for the year ended September 30,
1998 compared to 4.85% for the year ended September 30, 1997, an increase of 7
basis points. The increase in rates paid on interest-bearing liabilities
reflects market rates as well as the transfer of lower yielding certificates of
deposit in connection with the Branch Sale.
Interest expense on deposits decreased $871,000 to $18.8 million for the year
ended September 30, 1998 from $19.7 million for the year ended September 30,
1997. This decrease was a result of a decrease of $23.1 million in the average
balance of interest-bearing deposits to $383.1 million in 1998 from $406.2
million in 1997 partially offset by an increase of 7 basis points in the average
rate to 4.92% in 1998 from 4.85% in 1997.
The Company began using FHLB advances in June 1998 to control its cost of funds
and lengthen the maturity of its liabilities.
14
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<PAGE>
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Provision for Loan Losses. The provision for loan losses is charged to
operations to bring the total allowance for loan losses to a level considered
appropriate by management based on historical experience, volume and type of
lending conducted by the Company, industry standards, the level and status of
past due and non-performing loans, the general economic conditions in the
Company's lending area and other factors affecting the collectibility of the
loans in the Company's portfolio. The provision for loan losses was $405,000 for
the year ended September 30, 1998 compared to $317,000 for the year ended
September 30, 1997. The increase in the provision for loan losses relates
primarily to large charge-offs during fiscal 1998 that reduced the allowance for
loan losses below the Company's policy guidelines. The allowance for loan losses
declined from September 30, 1997 to September 30, 1998, primarily due to a
reduction in net loans outstanding resulting from the Branch Sale. The allowance
for loan losses was $2.6 million at September 30, 1998 and 1997. The current
allowance represents .76% of total loans outstanding at September 30, 1998. The
Company had net charge-offs of $474,000 for the year ended September 30, 1998
compared to net charge-offs of $69,000 for the year ended September 30, 1997.
The larger charge-offs in 1998 resulted primarily from two borrowers as follows:
>> Final resolution of a foreclosure and counterclaim litigation relating to a
$491,000 loan secured by a retail strip shopping center resulted in a
charge-off of $140,000, and
>> Foreclosure on loans made to a local builder for the construction of single
family houses resulted in a $64,000 charge-off.
The Company monitors its loan portfolio on a continuing basis and intends to
continue to provide for loan losses based on its ongoing review of the loan
portfolio and general market conditions.
Other Income. Substantially the entire increase in Other Income for the year
ending September 30, 1998 compared to September 30, 1997 is attributable to the
$3.0 million gain from the Branch Sale.
Other Expenses. Other expense increased by $2.4 million to $13.6 million for the
year ended September 30, 1998 from $11.2 million for the year ended September
30, 1997. In addition to the Benefits Adjustment in 1998, compensation and
employee benefits increased due to the hiring of additional commercial lending
staff personnel, an average 5% increase in salary adjustments, a full year of
staff cost associated with the Company's newest branch that opened in September
1997, partially offset by the staff costs savings realized through the Branch
Sale. Occupancy and equipment costs increased due to expenses related to a data
processing conversion in 1998 as well as a full year's cost related to the new
customer service platform system installed in May 1997.
Year 2000 Readiness Disclosure
Rapid and accurate data processing is essential to the Company's operations.
Many computer programs that can only distinguish the final two digits of the
year entered (a common programming practice in prior years) are expected to read
entries for the year 2000 as the year 1900 or as zero and incorrectly attempt to
compute payment, interest, delinquency and other data.
The following discussion of the implications of the Year 2000 problem for the
Company, contains numerous forward looking statements based on inherently
uncertain information. The cost of the project and the date on which the Company
plans to complete the internal year 2000 modifications are based on management's
best estimates, which are derived utilizing a number of assumptions of future
events including the continued availability of internal and external resources,
third party modifications and other factors. However, there can be no guarantee
that these statements will be achieved and actual results could differ.
Moreover, although management believes it will be able to make the necessary
modifications in advance, there can be no guarantee that failure to modify the
systems would not have a material adverse effect on the Company.
15
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<PAGE>
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Year 2000 issues expose the Company to a number of risks, any one of which, if
realized, could have a material adverse effect of the Company's business,
results of operations or financial condition. These risks include the
possibility that, to the extent certain vendors fail to adequately address Year
2000 issues, the Company may suffer disruptions in important services on which
the Company depends, such as telecommunications, electrical power, and data
processing. Year 2000 issues could affect the Company's liquidity if customer
withdrawals in anticipation of the Year 2000 are greater than expected or if the
Company's lenders are unable to provide the Company with funds when and as
needed by the Company. Year 2000 issues also create additional credit risk to
the Company insofar as the failure of the Company's customers and the
counterparties to adequately address Year 2000 issues could increase the
likelihood that these customers and counterparties become delinquent or default
on the obligations to the Company. In addition to increasing the Company's risk
exposure to problem loans, credit losses and liquidity problems, Year 2000
issues expose the Company to increased risk of litigation losses and expenses
relating to the foregoing. There are other Year 2000 risks besides those
described above that may impact the Company's business, results of operations
and financial condition.
The Company places a high degree of reliance on computer systems of third
parties, such as customers, suppliers, and other financial and governmental
institutions. Although the Company has assessed the readiness of these third
parties and has prepared contingency plans, there can be no guarantee that the
failure of these third parties to maintain their systems, as modified, in
advance of December 31, 1999 would not have a material adverse affect on the
Company.
The Company's Year 2000 Plan (the "Plan") was presented to the Board of
Directors in September 1997. The Plan was developed using the guidelines
outlined in the Federal Financial Institutions Examination Council's "The Effect
of Year 2000 on Computer Systems." The Year 2000 Committee is responsible for
the Plan with the Board of Directors receiving Year 2000 progress reports on a
quarterly basis. Our primary operating systems are provided by a third party
service bureau ("External Provider"). The Company has performed significant
testing of the software utilized by the External Provider with successful
results. The External Provider has represented that the software currently being
utilized for the Company's current operations is Year 2000 compliant. The main
hardware and software used to serve our customer base and maintain the customer
transaction histories and company accounting records are currently operating on
Year 2000 compliant systems.
The latest OTS on-site examination was conducted in July 1999, and based on the
examination results, the Company was progressing satisfactorily towards
completing the Plan requirements. The business resumption plan, including plans
for cash and liquidity needs, was approved by the Board on June 29, 1999. Actual
testing of those plans was satisfactorily completed in September and October
1999.
The Company has contacted all other material vendors and suppliers regarding
their Year 2000 readiness. Each of these third parties has delivered written
assurance to the Company that they are or expect to be Year 2000 compliant prior
to the Year 2000. The Company is maintaining contact with all significant
customers and non-information technology suppliers (i.e. utility systems,
telephone systems, etc.), regarding their year 2000 state of readiness. We are
unable to test the Year 2000 readiness of our significant suppliers of
utilities. We are relying on the utility companies' internal testing and
representations to provide the required services that drive our data systems.
Any failure of the utilities to adequately address the Year 2000 issues could
result in the Company being unable to service its customers on a timely basis.
All non-information technology providers have assured us that the Year 2000 will
not be an issue or that the issue will be satisfactorily resolved prior to the
end of 1999. No contracts, written assurances, or oral assurances with the
Company's material vendors, systems providers, and suppliers include any type of
remedy or penalty for breach of contract in the event that any of these parties
are not Year 2000 compliant.
16
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<PAGE>
================================================================================
The Company has identified 15 vendors and systems as mission critical and, based
upon testing or assurances from such vendors, 100% of the Company's mission
critical vendors and systems are Year 2000 compliant. Testing has been completed
on all significant vendor applications. Vendors and systems deemed important or
minor (not "mission critical") are services that are performed by outside
vendors. We have received communication from these vendors indicating they are
or will be in compliance for Year 2000 without any disruption in service.
Appropriate testing, as necessary, and related contingency plans were completed
in the third and fourth quarters of 1999.
Software provided by our External Provider is supported by a contractual
agreement that states the software will be Year 2000 compliant prior to January
1, 2000. This software has been thoroughly tested and has been declared by our
External Provider, as compliant. The contracts for our other systems and
services do not contain similar statements since they have longer terms and were
not subject to specific contract negotiation in the past few years.
Major commercial loan customers (loan balances in excess of $500,000) have been
contacted in writing. In addition, the commercial loan relationship managers
conducted a telephone and personal contact program with all these customers to
determine any potential exposure that might be present due to the customer's
failure to prepare adequately for the Year 2000. This contact program was
completed as of June 30, 1999. No unusual or significant risk exposure was
identified. Any new commercial loan applicant is required to answer a brief
series of questions concerning Year 2000 preparedness in the loan approval and
closing process.
As a practical matter, individual mortgage loan, consumer loan and smaller
commercial loan customers were not contacted regarding their Year 2000
readiness. It was deemed to be beyond the scope of our testing parameters to
contact these borrowers. Further, most of these are individuals with adequate
collateral for their loans.
If the Plan fails to significantly address the Year 2000 issues of the Company,
the following, among other things, could negatively affect the Company:
(a) utility service companies may be unable to provide the necessary service to
drive our data systems or provide sufficient sanitary conditions for our
offices;
(b) our primary software provider could have a major malfunction in its system
or their service could be disrupted due to its utility providers, or some
combination of the two; or
(c) the Company may have to transact its business manually.
The Company will attempt to monitor these uncertainties by continuing to request
an update on all critical and important vendors throughout the remainder of
1999. If the Company identifies any concern related to any critical or important
vendor, the contingency plans will be implemented immediately to assure
continued service to the Company's customers.
Costs have and will be incurred to replace certain non-compliant software and
hardware. The Company does not anticipate that direct costs for renovating or
replacing non-compliant hardware and software will exceed $325,000, of which
approximately $250,000 had been expended as of September 30, 1999. No assurance
can be given that the Year 2000 Plan will be completed successfully by the Year
2000, in which event the Company could incur significant costs. If the External
Provider fails to maintain its system in compliant state or incurs other
obstacles prior to Year 2000, the Company would likely experience significant
data processing delays, mistakes or failures. These delays, mistakes or failures
could have a significant negative affect on our earnings.
17
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<PAGE>
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Successful and timely completion of the Year 2000 project is based on
management's best estimates derived from various assumptions of future events,
which are inherently uncertain, including continued compliance of the External
Provider, testing plans, and all vendors, suppliers and customer readiness.
Despite the best efforts of management to address this issue, the vast number of
external entities that have direct and indirect business relationships with the
Company, such as customers, public utilities, vendors, payment system providers
and other financial institutions, makes it impossible to assure that a failure
to achieve compliance by one or more of these entities would not have material
adverse impact on the financial condition or operations of the Company.
Impact of Inflation and Changing Prices
The consolidated financial statements and accompanying notes presented elsewhere
in this Prospectus have been prepared in accordance with GAAP 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.
18
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<PAGE>
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FLORIDAFIRST BANCORP
CONSOLIDATED FINANCIAL STATEMENTS
For the Three Years Ended
SEPTEMBER 30, 1999
19
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<PAGE>
FLORIDAFIRST BANCORP
Consolidated Statements of Financial Condition
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
September 30,
1999 1998
--------------- ---------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 2,598 $ 647
Investments available for sale, at fair value 68,152 42,225
Investment securities held to maturity,
market value of $12,479 and $18,524 12,724 18,736
Loans receivable, net of allowance for loan losses
of $2,941 and $2,564 397,910 338,610
Premises and equipment, net 6,818 6,845
Federal Home Loan Bank stock, at cost 4,475 2,864
Accrued interest receivable 2,764 2,398
Other assets 2,917 2,147
=============== ===============
TOTAL ASSETS $498,358 $414,472
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $339,224 $352,180
Federal Home Loan Bank advances 87,600 21,000
Other borrowings 4,872 --
Advance payments by borrowers for taxes and insurance 2,200 1,971
Other liabilities 3,125 3,214
--------------- ---------------
Total liabilities 437,021 378,365
--------------- ---------------
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock, $ .10 par value,
2,000,000 shares authorized, none outstanding -- --
Common stock, $ .10 par value,
18,000,000 shares authorized, 5,752,875 outstanding 575 --
Additional paid-in capital 25,124 --
Retained earnings 39,037 35,887
Unallocated shares held by the employee stock ownership plan (2,163) --
Accumulated other comprehensive income (loss) (1,236) 220
--------------- ---------------
Total stockholders' equity 61,337 36,107
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $498,358 $414,472
=============== ===============
</TABLE>
See notes to consolidated financial statements.
20
<PAGE>
FLORIDAFIRST BANCORP
Consolidated Statements of Earnings
(Dollars in thousands, except per share data)
Year ended September 30,
<TABLE>
<CAPTION>
1999 1998 1997
-------------- -------------- ---------------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 28,482 $ 27,241 $ 27,730
Interest and dividends on investment securities 3,671 3,906 5,513
Other interest income 495 994 622
-------------- -------------- ---------------
Total interest income 32,648 32,141 33,865
-------------- -------------- ---------------
Interest expense:
Deposits 14,727 18,831 19,702
Federal Home Loan Bank advances and other borrowings 2,401 135 --
-------------- -------------- ---------------
Total interest expense 17,128 18,966 19,702
-------------- -------------- ---------------
Net interest income 15,520 13,175 14,163
Provision for loan losses 540 405 317
-------------- -------------- ---------------
Net interest income after provision for loan losses 14,980 12,770 13,846
-------------- -------------- ---------------
Other income:
Fees and service charges 991 996 1,069
Gain (loss) on sale of loans and investments available for sale (22) 117 114
Gain on sale of branches 165 3,016 --
Other, net 339 218 6
-------------- -------------- ---------------
Total other income 1,473 4,347 1,189
-------------- -------------- ---------------
Other expenses:
Compensation and employee benefits 5,820 5,632 5,552
Other compensation and employee benefits -- 2,085 --
Occupancy and equipment costs 1,881 1,818 1,646
Marketing 534 495 488
Data processing costs 521 558 479
Federal insurance premiums 214 338 456
Other 2,478 2,655 2,588
-------------- -------------- ---------------
Total other expenses 11,448 13,581 11,209
-------------- -------------- ---------------
Income before income taxes 5,005 3,536 3,826
Income taxes 1,748 1,151 1,299
============== ============== ===============
NET INCOME $ 3,257 $ 2,385 $ 2,527
============== ============== ===============
Basic earnings per share (1) $ 0.34 -- --
============== ============== ===============
Weighted average shares outstanding (1) 5,549,185 -- --
============== ============== ===============
</TABLE>
(1) FloridaFirst converted to a stock company on April 6, 1999. Earnings per
share and weighted average shares outstanding are for the six months
ended September 30, 1999 (period subsequent to the conversion.)
See notes to consolidated financial statements.
21
<PAGE>
FLORIDAFIRST BANCORP
Consolidated Statements of Stockholders' Equity and Comprehensive Income
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Additional
other
compre- Unallocated
Additional hensive Compre- shares Total
Common paid-in Retained income hensive held stockholders'
stock capital earnings (loss) income by the ESOP equity
--------- ------------ ---------- ----------- ----------------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1996 $ 30,975 $ (406) $ 30,569
Comprehensive income:
Net income 2,527 $ 2,527 2,527
Change in unrealized gain on investments
available for sale, net 492 492 492
=========
Total comprehensive income $ 3,019
------------ ----------- ========= ---------------
Balance at September 30, 1997 33,502 86 33,588
Comprehensive income:
Net income 2,385 $ 2,385 2,385
Change in unrealized gain on investments
available for sale, net 134 134 134
=========
Total comprehensive income $ 2,519
------------ ----------- ========= ---------------
Balance at September 30, 1998 35,887 220 36,107
Stock issuance, net of issuance costs of $1,239 $ 575 $ 25,124 $ (2,163) 23,536
Comprehensive income:
Net income 3,257 $ 3,257 3,257
Change in unrealized loss on investments
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 $ 575 $ 25,124 $ 39,037 $ (1,236) $ (2,163) $ 61,337
======== ========== ============ ============ ========== ==============
</TABLE>
<TABLE>
<CAPTION>
Year ended September 30,
--------------------------------
Disclosure of reclassification amount: 1999 1998 1997
- -------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Unrealized gain (loss) on investments available for sale arising during year, net of taxes $ (1,470) $ 210 $ 469
---------- -------- ----------
Less reclassification adjustment for gain (loss) included in net income (22) 117 (35)
Income taxes (benefit) (8) 41 (12)
---------- -------- ----------
Reclassification adjustment for gain (loss), net of taxes (14) 76 (23)
---------- -------- ----------
Unrealized gain (loss) on investments available for sale, net of taxes $ (1,456) $ 134 $ 492
========== ======== ==========
</TABLE>
See notes to consolidated financial statements.
22
<PAGE>
FLORIDAFIRST BANCORP
Consolidated Statements of Cash Flows
(Dollars in thousands)
Year ended September 30,
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,257 $ 2,385 $ 2,527
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 540 405 317
Deferred income taxes (benefit) (39) (864) 588
Depreciation 759 632 478
(Gain) loss on sale of investments available for sale 22 (117) 35
Gain on sale of loans available for sale -- -- (149)
Gain on sale of branches (165) (3,016) --
Decrease (increase) in accrued interest receivable (366) 295 (44)
Decrease (increase) in other assets (660) 592 (93)
Decrease (increase) in federal income tax receivable 755 (426) 406
Increase (decrease) in other liabilities (402) 2,118 (2,631)
Increase (decrease) in advance payments by borrowers for taxes and insurance 229 (33) 189
-------- -------- --------
Net cash provided by operating activities 3,930 1,971 1,623
-------- -------- --------
Cash flows from investing activities:
Sale (purchase) of FHLB stock, net (1,611) -- 1,123
Proceeds from sale of loans available for sale -- -- 9,927
Proceeds from sales, maturity and repayments of investments available for sale 24,069 28,930 20,019
Proceeds from maturity and repayments of investment securities held to maturity 6,012 19,000 7,000
Proceeds from sale of assets 520 1,824 313
Net increase in loans (59,782) (30,299) (44,726)
Purchases of premises and equipment (883) (434) (1,862)
Purchases of investments available for sale (52,358) (33,981) (990)
Cash transferred in connection with sale of branches, net -- (10,186) --
-------- -------- --------
Net cash used in investing activities (84,033) (25,146) (9,196)
-------- -------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits (12,956) (19,020) 25,530
Net increase in FHLB advances 66,600 21,000 --
Net increase (decrease) in other borrowings 4,874 -- --
Net proceeds received from issuance of common stock 23,536 -- --
-------- -------- --------
Net cash provided by financing activities 82,054 1,980 25,530
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 1,951 (21,195) 17,957
Cash and cash equivalents at beginning of period 647 21,842 3,885
-------- -------- --------
Cash and cash equivalents at end of period $ 2,598 $ 647 $ 21,842
======== ======== ========
Supplemental disclosure of cash flow information Cash paid during the year for:
Interest $ 15,963 $ 18,971 $ 19,677
======== ======== ========
Taxes $ 1,406 $ 2,557 $ 270
======== ======== ========
Supplemental disclosure of non-cash information:
Additions to investment in real estate acquired through foreclosure $ 76 $ 2,238 $ 456
======== ======== ========
Change in unrealized gain (loss) on investments available for sale,
net of deferred taxes (benefit) of $(852), $79 and $(289), respectively $ (1,456) $ 134 $ 492
======== ======== ========
Dividends declared $ 107
========
Net assets transferred in connection with branch sale:
Loans receivable $ 44,607
Premises and equipment 705
Deposits 55,498
========
</TABLE>
See notes to consolidated financial statements.
23
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FLORIDAFIRST BANCORP
Notes to Consolidated Financial Statements
September 30, 1999, 1998 and 1997
(1) Reorganization
On April 6, 1999, FloridaFirst Bank (the "Bank") completed its mutual to
stock conversion including the formation of mutual and stock holding
companies ("Reorganization"). In connection with the Reorganization,
FloridaFirst Bancorp, a federally chartered corporation, sold 2,703,851
shares (or 47%) of its common stock in a subscription offering at $10.00
per share and issued the remaining 53% to FloridaFirst Bancorp MHC. A
total of 5,752,875 shares of common stock of FloridaFirst Bancorp were
issued in connection with the Reorganization. Upon completion of these
transactions, the Bank became the wholly owned subsidiary of FloridaFirst
Bancorp (the "Bancorp"). The Reorganization was accounted for in a manner
similar to a pooling of interests.
Gross proceeds from the stock issuance of $27.0 million were reduced by
$1.2 million in subscription related expenses and $100,000 initial
capital for FloridaFirst Bancorp MHC ("MHC"), leaving net proceeds of the
offering of $25.7 million. The Bancorp recorded $575,288 as capital stock
based on the 5,752,875 shares issued (3,049,024 were issued to the MHC)
at a $.10 par value, with the remaining $25.1 million recorded as
additional paid-in capital. Of the net proceeds, the Bancorp contributed
$12.9 million to the Bank in exchange for all of its outstanding shares
of stock.
Upon a complete liquidation of the Bank after the Reorganization, the
Bancorp, as holder of the Bank's common stock, would be entitled to any
assets remaining upon a liquidation or dissolution of the Bank. Each
depositor would not have a claim in the assets of the Bank. However, upon
a complete liquidation of the MHC after the Reorganization, each
depositor would have a claim up to the pro rata value of his or her
accounts, in the assets of the MHC remaining after the claims of the
creditors of the MHC are satisfied. Depositors who have liquidation
rights in the Bank immediately prior to the Reorganization will continue
to have such rights in the MHC after the Reorganization for so long as
they maintain qualifying deposits in the Bank after the Reorganization.
The Office of Thrift Supervision imposes various restrictions on the
ability of savings institutions to make capital distributions, including
dividend payments. A federal savings institution is prohibited from
making a capital distribution if, after making the distribution, the
savings institution would be undercapitalized. Further, a federal savings
institution cannot distribute regulatory capital that is needed for its
liquidation account.
(2) Nature of Business and Summary of Significant Accounting Policies
The following is a description of business of FloridaFirst Bancorp and
its subsidiary (the "Company") and the significant accounting and
reporting policies which the Company follows in preparing and presenting
its financial statements.
The Company conducts its business principally through the Bank. The Bank
is a community-oriented savings institution that delivers retail and
commercial banking services through nine 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 Office of Thrift Supervision.
24
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(a) Principles of Consolidation
The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and
include the accounts of the Bancorp and the Bank that, as
discussed in Note 1, became the wholly owned subsidiary of the
Bancorp on April 6, 1999. The Company's business is conducted
principally through the Bank. All intercompany transactions and
balances have been eliminated in consolidation.
(b) 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.
(c) Investment Securities
Investments available for sale are stated at fair value.
Unrealized gains and losses on investments available for sale, net
of taxes, are included as other comprehensive income in the
consolidated statements of financial condition until these gains
or losses are realized. Investments 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.
Investment securities held to maturity are investments 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.
The Bank is required to maintain, in cash and U.S. Government and
other approved securities, an amount equal to 4% of deposits (net
of loans on deposits) plus short-term borrowings. The Bank's
liquidity ratio was 17.6% and 16.7% at September 30, 1999 and
1998, respectively.
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.
(d) 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. No loans were held for
sale at September 30, 1999 and 1998.
(e) 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.
25
================================================================================
<PAGE>
================================================================================
(f) 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.
(g) Loans and Provisions for Losses
Loans are stated at unpaid principal balances, less loans in
process, the allowance for loan losses, unearned interest, and net
deferred loan origination fees.
The Company follows a consistent procedural discipline and
accounts for loan loss contingencies in accordance with Statement
of Financial Accounting Standards No. 5, Accounting for
Contingencies (SFAS No. 5). 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 inherent 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 loss 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 loans; 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.
26
================================================================================
<PAGE>
================================================================================
(h) Premises and Equipment
Depreciation of office properties and equipment is accumulated on
a straight-line basis over the estimated useful lives of the
related assets. Estimated lives are 10 to 35 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.
(i) Real Estate Owned
Real estate owned represents real estate acquired through
foreclosure or deed in lieu of foreclosure. Real estate so
acquired is 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 $16,000 and $403,000 at September 30, 1999 and 1998
and is included in Other Assets in the consolidated statements of
financial condition. The Company charged net costs related to real
estate owned activities of $10,000, $144,000 and $22,000 against
operations in fiscal years ended September 30, 1999, 1998 and
1997.
(j) 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 included the enactment
date.
(k) 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.
27
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<PAGE>
================================================================================
(l) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the
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.
(m) 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, 1998, 1997 and 1996, claims paid,
net of amounts received under the reinsurance contract and
premiums received from dependent and COBRA coverage, were
$460,000, $356,000 and $380,000, respectively. The plan covers
only active employees as defined in the plan.
(n) 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.
(o) Earnings Per Share
Basic net income per share of common stock for the periods
subsequent to the Reorganization has been computed by dividing net
income for the period by the weighted average number of shares
outstanding. Earnings per share information for all other periods
presented in these financial statements is not comparative and
therefore not presented.
(p) Comprehensive Income
On October 1, 1998 the Company adopted SFAS No. 130, Reporting
Comprehensive Income which requires an entity to present, as a
component of comprehensive income, the amounts from transactions
and other events which currently are excluded from the
consolidated statements of earnings and are recorded directly to
stockholders' equity. The Company's other comprehensive income is
the unrealized gain (loss) on investments available for sale.
28
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<PAGE>
================================================================================
(q) Segment Information
On October 1, 1998 the Company adopted SFAS No. 131, Disclosures
About Segments of an Enterprise and Related Information, which
requires public companies to report information about segments of
their business and requires them to report selected segment
information in their quarterly reports issued to stockholders. No
specific segment disclosure is required since the Company views
its operations as a single segment.
(r) Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133
establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for
hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value.
FASB has delayed the effective date of SFAS No. 133 until fiscal
quarters beginning after June 15, 2000 by issuing SFAS No. 137,
Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133. SFAS No.
133 is not expected to have a material impact on the Company's
financial statement presentations.
(s) Reclassifications
Certain amounts in the 1998 and 1997 consolidated financial
statements have been reclassified to conform to the 1999
presentation.
(2) Investments Available for Sale
The amortized cost and estimated fair values of investments available for
sale are as follows:
<TABLE>
<CAPTION>
September 30, 1999
--------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
-------------- ------------ ------------- --------------
(In thousands)
<S> <C> <C> <C> <C>
Obligations of U.S. government
agencies $ 20,855 -- $ (342) $ 20,513
Collateralized mortgage
obligations 7,569 $ 3 (152) 7,420
Mortgage-backed securities 28,711 69 (464) 28,316
Corporate bonds 7,147 -- (429) 6,718
Municipal bonds 5,831 -- (646) 5,185
============== ============ ============= ==============
Total $ 70,113 $ 72 $ (2,033) $ 68,152
============== ============ ============= ==============
</TABLE>
29
================================================================================
<PAGE>
================================================================================
<TABLE>
<CAPTION>
September 30, 1998
--------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
-------------- ------------ ------------- --------------
(In thousands)
<S> <C> <C> <C> <C>
Obligations of U.S.
government agencies $ 24,426 $ 285 -- $ 24,711
Collateralized mortgage
obligations 3,185 44 -- 3,229
Mortgage-backed securities 14,265 31 $ (11) 14,285
============== ============ ============= ==============
Total $ 41,876 $ 360 $ (11) $ 42,225
============== ============ ============= ==============
</TABLE>
Approximately 95% of the collateralized mortgage obligations ("CMOs") and
mortgage-backed securities ("MBS") as of September 30, 1999 were issues
of GNMA, FNMA or FHLMC. All CMOs and MBS as of September 30, 1998 were
issues of GNMA, FNMA or FHLMC.
The maturity distribution for the portfolio of investments available for
sale at September 30, 1999 is as follows:
<TABLE>
<CAPTION>
Amortized Fair
cost Value
-------------- ------------
(In thousands)
<S> <C> <C>
Due after one year through five years $ 10,371 $ 10,234
Due after five years through ten years 15,851 15,573
Due after ten years 15,180 14,029
-------------- ------------
41,402 39,836
Mortgage-backed securities 28,711 28,316
-------------- ------------
Total $ 70,113 $ 68,152
============== ============
</TABLE>
Proceeds from sales of investments available for sale during the year
ended September 30, 1999, 1998 and 1997 were $6.0 million, $3.4 million
and $11.0 million, respectively. Gross gains of $8,000 and gross losses
of $30,000 were realized on those sales during 1999. Gross gains of
$149,000 and gross losses of $32,000 were realized on those sales during
1998. Gross losses of $35,000 were realized on those sales during 1997.
Investments available for sale with a fair value of $10.9 million and
$1.0 million were pledged as collateral to secure public funds at
September 30, 1999 and 1998, respectively.
30
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<PAGE>
================================================================================
(3) Investment Securities Held to Maturity
The amortized cost and estimated fair values of investment securities
held to maturity are as follows:
<TABLE>
<CAPTION>
September 30, 1999
--------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
-------------- ------------ ------------- --------------
(In thousands)
<S> <C> <C> <C> <C>
Obligations of U.S. government
agencies $ 4,000 -- $ (43) $ 3,957
Collateralized mortgage
obligations 8,724 $ 40 (242) 8,522
============== ============ ============= ==============
Total $ 12,724 $ 40 $ (285) $ 12,479
============== ============ ============= ==============
</TABLE>
<TABLE>
<CAPTION>
September 30, 1998
--------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
-------------- ------------ ------------- --------------
(In thousands)
<S> <C> <C> <C> <C>
Obligations of U.S. government
agencies $ 8,998 $ 11 $ (40) $ 8,969
Collateralized mortgage
obligations 9,738 40 (223) 9,555
============== ============ ============= ==============
Total $ 18,736 $ 51 $ (263) $ 18,524
============== ============ ============= ==============
</TABLE>
The CMOs have principal and interest components and have predominantly
variable rates of return. The weighted average rates at September 30,
1999, 1998 and 1997 were 5.57%, 5.80% and 5.94%, respectively. All CMOs
as of September 30, 1999 and 1998 were issues of FNMA or FHLMC.
The Company's investment in obligations of U.S. government agencies
include floating interest rate bonds that are reflected in the
consolidated financial statements at $4.0 million and $5.0 million at
September 30, 1999 and 1998, respectively. These bonds pay variable rates
of interest depending on relevant market rates and have an estimated fair
value of approximately $3.9 million and $5.0 million at September 30,
1999 and 1998, respectively. At September 30, 1998 the Company had
step-up bonds with a carrying value and estimated fair value of $4.0
million and paid interest on a predetermined schedule of escalating
rates. All step-up bonds matured during the year ended September 30,
1999. The floating interest rate and step-up bonds were purchased to
offset the risk related to the Company's portfolio of adjustable and
fixed rate mortgages; however, these bonds expose the Company to a
certain degree of market risk as their rates change with prevailing
market rates.
The amortized cost and estimated fair value of investment securities held
to maturity at September 30, 1999, by contractual maturity, are shown
below. Expected maturities may differ from contractual maturities because
borrowers have the right to call or prepay obligations without penalty.
<PAGE>
<TABLE>
<CAPTION>
Amortized Fair
cost value
-------------- --------------
(In thousands)
<S> <C> <C>
Due in one year or less $ 3,000 $ 2,973
Due after one year through five years 1,000 985
Due after five year through ten years 5,729 5,568
Due after ten years 2,995 2,953
-------------- --------------
Total $ 12,724 $ 12,479
============== ==============
</TABLE>
31
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<PAGE>
================================================================================
(4) Loans Receivable, Net
Loans receivable consist of the following:
<TABLE>
<CAPTION>
September 30,
--------------------------------
1999 1998
-------------- -------------
(In thousands)
<S> <C> <C>
Loans secured by first mortgages on real estate: Residential 1-4:
Permanent $ 276,115 $ 244,667
Construction 32,974 27,311
Multi-family 5,787 4,464
Commercial real estate 19,783 16,132
Land 9,548 6,796
-------------- -------------
Total first mortgage loans 344,207 299,370
-------------- -------------
Other loans:
Consumer loans 75,044 57,891
Other loans 1,374 1,085
-------------- -------------
Total other loans 76,418 58,976
-------------- -------------
Total loans 420,625 358,346
Net deferred loan origination fees -- (18)
Unearned interest on installment loans -- (141)
Allowance for loan losses (2,941) (2,564)
Loans in process (19,774) (17,013)
-------------- -------------
Loans receivable, net $ 397,910 $ 338,610
============== =============
Weighted average yield on loans at year end 7.56% 7.91%
============== =============
</TABLE>
The activity in the allowance for loan losses was as follows (in
thousands):
Balance at September 30, 1996 $ 2,385
Provision for loan losses 317
Charge offs (69)
Recoveries --
-----------
Balance at September 30, 1997 2,633
Provision for loan losses 405
Charge offs (474)
Recoveries --
-----------
Balance at September 30, 1998 2,564
Provision for loan losses 540
Charge offs (251)
Recoveries 88
-----------
Balance at September 30, 1999 $ 2,941
===========
Outstanding mortgage loan commitments, generally with terms of 30 days, were
approximately $2.0 million and $2.1 million for fixed rate loans, and $300,000
and $540,000 for variable rate loans at September 30, 1999 and 1998,
respectively. There were no letters of credit outstanding at September 30, 1999
and 1998. Furthermore, the Company was servicing approximately $16.7 million,
$23.3 million and $16.1 million in loans for the benefit of others in 1999, 1998
and 1997, respectively. The
32
================================================================================
<PAGE>
================================================================================
Company holds custodial escrow deposits for these serviced loans totaling
approximately $10,000 and $57,000 at September 30, 1999 and 1998,
respectively. The range of interest rates on the fixed rate loan
commitments as of September 30, 1999 was 7.50% to 8.38%.
Loan customers of the Company include certain executive officers and
directors and their related interests and associates. All loans to this
group were made in the ordinary course of business at prevailing terms
and conditions. As of September 30, 1999, these loans amounted to
approximately
$197,000.
Impaired loans have been recognized in conformity with FASB Statement
No. 114, as amended by FASB Statement No. 118. Impaired loans and
related information are as follows:
September 30,
-------------------------
1999 1998 1997
---- ---- ----
(In thousands)
Impaired loans at year end $ 830 $ 836 $2,314
Average balance of impaired loans for the year 957 1,697 1,919
Allowance for loan losses for impaired loans 166 167 463
Interest income recognized during the year 72 130 146
(5) Premises and Equipment
Premises and equipment consists of the following:
<TABLE>
<CAPTION>
September 30,
--------------------------------
1999 1998
---------- -----------
(In thousands)
<S> <C> <C>
Land $ 1,819 $ 1,887
Buildings and leasehold improvements 6,646 7,054
Furniture, fixtures and equipment 3,691 3,703
---------- -----------
Total 12,156 12,644
Less accumulated depreciation and amortization (5,338) (5,799)
---------- -----------
Premises and equipment, net $ 6,818 $ 6,845
========== ===========
</TABLE>
The Company conducts a portion of its operations from leased facilities
and leases certain equipment under operating leases. As of September 30,
1999, the Company was committed to noncancelable operating leases with
annual minimum lease payments approximating $92,000 through September 30,
2003.
Rent expense under all operating leases was approximately $136,000,
$139,000 and $152,000 for the years ended September 30, 1999, 1998 and
1997, respectively.
33
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<PAGE>
================================================================================
(6) Deposits
Deposits and weighted average interest rates are as follows:
<TABLE>
<CAPTION>
September 30, 1999 September 30, 1998
------------------------------- -------------------------------
Amount Rate Amount Rate
--------------- ----------- -------------- ------------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Noninterest-bearing checking $ 13,485 -- $ 10,492 --
Interest-bearing checking 27,098 1.77% 24,456 1.94%
Savings accounts 32,826 1.67% 37,758 1.77%
Money market accounts 23,997 3.87% 18,092 3.99%
Certificate accounts:
4.00% - 4.99% 112,560 31,676
5.00% - 5.99% 79,323 166,610
6.00% - 6.99% 47,903 60,964
7.00% - 7.99% 2,032 2,132
--------------- --------------
Total certificates 241,818 5.12% 261,382 5.52%
--------------- --------------
Total deposits $ 339,224 4.23% $ 352,180 4.63%
=============== ==============
</TABLE>
Certificate accounts in amounts of $100,000 or more totaled approximately
$55.8 million and $45.7 million at September 30, 1999 and 1998,
respectively. Deposits in excess of $100,000 are not federally insured.
The Company had certificate accounts totaling $17.2 million under the
State of Florida public deposits program at September 30, 1999; however,
there were no such deposits at September 30, 1998. Deposits under this
program are collateralized with investment securities in accordance with
applicable regulations.
Interest expense on deposits is summarized as follows:
<TABLE>
<CAPTION>
Year ended September 30,
--------------------------------------------
1999 1998 1997
----------- ----------- ------------
(In thousands)
<S> <C> <C> <C>
Interest on interest-bearing
checking and money market accounts $ 1,257 $ 1,051 $ 958
Interest on savings and certificate accounts 13,550 17,868 18,841
Less early withdrawal penalties
(80) (88) (97)
----------- ----------- ------------
Total interest expense $14,727 $18,831 $ 19,702
=========== =========== ============
</TABLE>
Certificate accounts by year of scheduled maturity are as follows:
September 30,
---------------------------------
Fiscal Year 1999 1998
------------- -------------
(In thousands)
1999 -- $ 165,547
2000 $ 163,002 54,045
2001 38,335 11,715
2002 29,572 21,527
2003 and after 10,909 8,548
============= =============
Total $ 241,818 $ 261,382
============= =============
34
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<PAGE>
================================================================================
(7) Advances From Federal Home Loan Bank and Other Borrowings
The Company had $87.6 million and $21.0 million in FHLB advances with
weighted average interest rates of 5.18% and 5.12% at September 30, 1999
and 1998, respectively. The advances as of September 30, 1999 include
$55.0 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 secured with a blanket floating lien which
includes a security interest in the FHLB stock held by the Company and
the Company's mortgage loan portfolio.
The Company's borrowings from the FHLB at September 30, 1999 are as
follows:
<TABLE>
<CAPTION>
Conversion
Year option Rate Maturity Rate
---------------- ------------ ---------------- -----------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
2000 $25,000 4.91% $32,600 5.55%
2001 25,000 4.98 --
2003 5,000 5.02 --
2004 15,000 4.91
2008 20,000 5.08
2009 20,000 4.86
---------------- ----------------
Total and weighted average rate $55,000 4.95% $87,600 5.18%
================ ================
</TABLE>
As of September 30, 1999 the Company's $4.9 million in other borrowings
are short-term borrowings bearing interest at 5.43% per annum. These
borrowings mature on December 8, 1999 and are collateralized by
securities of U. S. government agencies having a fair value of $5.0
million.
(8) Income Taxes
Income taxes for 1999, 1998 and 1997 consists of the following:
<TABLE>
<CAPTION>
Current Deferred Total
------------ ------------ ------------
(In thousands)
<S> <C> <C> <C>
Year ended September 30, 1999:
Federal $ 1,606 $ (33) $ 1,573
State 181 (6) 175
============ =========== ===========
$ 1,787 $ (39) $ 1,748
============ =========== ===========
Year ended September 30, 1998
Federal $ 1,825 $ (782) $ 1,043
State 190 (82) 108
============ =========== ===========
$ 2,015 $ (864) $ 1,151
============ =========== ===========
Year ended September 30, 1997:
Federal $ 681 $ 531 $ 1,212
State 30 57 87
============ =========== ===========
$ 711 $ 588 $ 1,299
============ =========== ===========
</TABLE>
35
================================================================================
<PAGE>
================================================================================
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are as
follows:
<TABLE>
<CAPTION>
September 30,
-------------------------
1999 1998
-------- ---------
(In thousands)
<S> <C> <C>
Deferred tax assets:
Loans receivable, due to allowance for loan losses, net $ 992 $ 827
Pension asset 202 379
Unrealized loss on investments available for sale 725 --
Self-insurance reserve 322 339
Other 85 21
--------- ---------
Total deferred tax assets 2,326 1,566
Less valuation allowance -- --
--------- ---------
Net deferred tax assets 2,326 1,566
--------- ---------
Deferred tax liabilities:
FHLB stock (433) $ (457)
Unrealized gain on investments available for sale -- (129)
Other (64) (44)
--------- ---------
Total deferred tax liabilities (497) (630)
--------- ---------
Net deferred tax assets $ 1,829 $ 936
========= =========
</TABLE>
Net deferred tax assets are included in other assets in the consolidated
statements of financial condition.
The Company's effective rate on pretax income differs from the statutory
Federal income tax rate as follows (dollars in thousand):
<TABLE>
<CAPTION>
Year ended September 30,
---------------------------------------------------------------------
1999 % 1998 % 1997 %
--------- --------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Tax provision at statutory rate $1,702 34% $1,202 34% $1,301 34%
Increase (decrease) in tax
resulting from:
Tax-exempt interest, net of scaleback (70) (1)% (17) (1%) (22) (1%)
State income taxes, net of Federal
income tax benefit 116 2% 65 2% 78 2%
Other, net (99) (2%) (58) (1%)
--------- --------- ---------- ---------- ---------- ---------
Total $1,748 35% $1,151 33% $1,299 34%
========= ========= ========== ========== ========== =========
</TABLE>
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 methods of
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 deduction by the percentage of taxable income method
was 8% before such deduction. The experience method was calculated using
actual loss experience of the Company.
36
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<PAGE>
================================================================================
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, 1999 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 $2.0 million at
September 30, 1999. 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 of, and 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.
(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 June 1999, the most recent notification from the Office of Thrift
Supervision 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.
37
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<PAGE>
================================================================================
The Bank's actual capital amounts and ratios are as follows:
<TABLE>
<CAPTION>
September 30, 1999
-------------------------------------------------------------------
"Well capitalized"
For capital under prompt
adequacy Corrective action
Actual purpose provisions
------------------- --------------------- ----------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Risk-based capital
(to risk-weighted $ 52,713 17.2% $ 24,471 8.0% $ 30,589 10.0%
assets)
Tier I capital (to risk-
weighted assets) $ 49,772 16.3% $ 4.0% $ 18,353 6.0%
12,236
Tier I capital
(to average assets) $ 49,772 11.1% $ 18,000 4.0% $ 22,500 5.0%
</TABLE>
<TABLE>
<CAPTION>
September 30, 1998
------------------------------------------------------------------
"Well capitalized"
For capital under prompt
adequacy Corrective action
Actual purpose provisions
------------------- --------------------- ----------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Risk-based capital
(to risk-weighted assets) $38,451 15.5% $19,795 8.0% $24,744 10.0%
Tier I capital (to risk-
weighted assets) 35,887 14.5% 9,898 4.0% 14,846 6.0%
Tier I capital
(to average assets) 35,887 8.7% 16,599 4.0% 20,748 5.0%
</TABLE>
Capital at September 30, 1999 for consolidated financial statement
purposes differs from the Tier I capital amount by $(1.2) million
representing the exclusion of unrealized losses on investments available
for sale and $12.8 million of capital maintained by the Bancorp. Total
risk-based capital differs from Tier I capital by the allowance for loan
losses.
Capital at September 30, 1998 for consolidated financial statement
purposes differs from the Tier I capital amount by $220,000 representing
the exclusion of unrealized gain on investments available for sale. In
addition, regulatory capital differed by $(119,000) for certain amounts
that were reflected for consolidated financial reporting purposes but
were not recognized in regulatory reports filed. Total risk-based capital
differs from Tier I capital by the allowance for loan losses.
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.
38
================================================================================
<PAGE>
================================================================================
(11) Sale of Branches
On October 29, 1997, the Company entered into an agreement to sell
substantially all of the loans, with a majority of the loans sold on a
servicing-released basis, and certain liabilities (primarily deposit
liabilities) of the branches located in north Florida. The sale included
loans at 80% of the deposit liability. The remaining 20% of the sale was
funded with cash. The transaction was completed January 30, 1998. Assets
of approximately $52.5 million, including loans of $44.6 million,
property and equipment of $705,000, cash of $10.1 million, and
liabilities consisting primarily of deposit accounts of $55.5 million,
were sold for a gain of approximately $3.0 million. The assets sold
included the branches, except for two branches that were closed by the
Company because the Company is precluded from conducting any further
business at those locations. The two branches were subsequently sold to
third parties during the year ended September 30, 1999.
(12) Benefit Plans
Director Retirement Plan. On September 28, 1998, the Board of Directors
approved 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, $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, 1999 and 1998, the Company recognized
$37,000 and $410,000 related to this Retirement Plan. The amounts were
determined by discounting the anticipated cash flow required, based on
the services rendered by each covered director. The weighted-average
discount rate used to measure the expense was 5.50%. The 1998 expense is
a component of other compensation and employee benefits expense in the
consolidated statements of earnings.
Pension Plan. The Company had a noncontributory defined benefit pension
plan ("Plan") that covered substantially all employees who met minimum
service requirements. The benefit formula of the Plan generally based
payments to retired employees upon their length of service and a
percentage of qualifying compensation during the final years of
employment.
On September 28, 1998, the Board of Directors froze benefit accruals for
the Plan effective November 3, 1998 and directed the Company to allocate
to each eligible participant the full present value of accrued benefits
based on the Plan liquidation guidelines, as prescribed by the Internal
Revenue Code. The present value of benefit obligations at September 30,
1998 was approximately $5.7 million and the plan assets at fair value
were approximately $4.0 million. As a result, the Company recognized
other compensation and employee benefits expense of $1.7 million for
1998 as an actuarial estimate of benefits payable upon liquidation, and
the related liability is a component of other liabilities on the
statement of financial condition.
The Company terminated the Plan on April 14, 1999 by distributing the
participants their full present value of accrued benefits based on the
Plan liquidation guidelines, as prescribed by the Internal Revenue Code.
The Company funded $1.3 million to the Plan, which when combined with
other Plan assets, provided sufficient assets to distribute to or
purchase annuities for Plan participants to satisfy the present value of
the calculated benefit obligations.
Pension cost for the year ended September 30, 1997 consisted of the
following (in thousands):
Service cost - benefits earned during the period $ 207
Interest cost 304
Actual return on assets held in plan (580)
Net amortization and deferral 335
----------
Net periodic pension cost $ 266
==========
39
================================================================================
<PAGE>
================================================================================
The weighted-average discount rate used to measure projected benefit
obligations was approximately 6.0% and 8.0% at September 30, 1998 and
1997; the rate of increase in future compensation levels was 5.0% at
September 30, 1997; and the expected long-term rate of return on assets
was approximately 6.5% and 8.3% for September 30, 1998 and 1997.
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 216,308 shares of the common stock
of 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 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, 1999, 32,445 shares had been
committed for release and the Company recorded compensation and employee
benefit expense of $285,000 for the year ended September 30, 1999
relating to the ESOP.
401(K) Retirement Plan. Effective January 1, 1999, the Company adopted a
qualified defined contribution plan with 401(k) provisions 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. During 1999 the Company approved a maximum Company match of
50% on eligible contributions for the first 6% of participant
compensation. The 1999 consolidated financial statements reflect $65,000
of employee benefits expense for the Company's matching contribution
under the plan.
(13) Subsequent Events
At a special meeting on October 19, 1999, the Company's stockholders
approved two stock benefit plans. Under the 1999 Stock Option Plan,
certain directors, officers and employees were granted options to
purchase in aggregate 270,385 shares of the Company's stock over the next
five years. Options vest 20% each year beginning one year after the date
of grant. The exercise price of the options has been established at $8.50
per share, the average price of the shares traded on the Nasdaq National
Market on October 19, 1999. Since the option price was established as the
then current market value of the Company's stock, the Company will not
record an expense when the options are granted or the stock is issued
upon the exercise of the option. When shares are issued upon the exercise
of any options, the Company may choose to issue stock from shares
authorized but not yet issued or to utilize stock held in treasury. Under
the Restricted Stock Plan, directors and officers of the Company may earn
108,154 shares of the Company's stock over the next five years.
Restricted shares are earned at a rate of 20% each year of continued
service to the Company. The fair value of these shares, using the $8.50
per share noted above, is $919,000 and this amount will be amortized over
a five-year period to compensation and employee benefit expense
commencing October 1, 1999. 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 plans to acquire the necessary shares
through open market purchases.
40
================================================================================
<PAGE>
================================================================================
On October 19, 1999 the Company announced that it had received approval
from the Office of Thrift Supervision ("OTS") to proceed with its planned
repurchase of up to 15% of the common stock held by stockholders other
than FloridaFirst Bancorp MHC, or 405,578 shares. Such repurchases are
authorized to be made by the Company from time to time in open market
transactions as, in the opinion of management, market conditions warrant.
The repurchased shares will be held in treasury stock and will be
available for general corporate purposes, including the exercise of stock
options.
(14) Fair Values of Financial Instruments
Fair value estimates, methods and assumptions are set forth below for the
Company's financial instruments at September 30, 1999 and 1998.
Cash and cash equivalents: The carrying amount of cash and cash
equivalents (demand deposits maintained at various financial
institutions) represents fair value.
Investments: The Company's investment securities represent investments in
U.S. government agency obligations, CMOs, MBS, corporate bonds and
municipal bonds. The fair value of these investments 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 amount
was 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 certificates of deposit 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 loan on the commitment
date and origination or delivery date is seldom materially different.
41
================================================================================
<PAGE>
================================================================================
The estimated fair values of the Company's financial instruments are as
follows:
September 30, 1999
-----------------------
Carrying Estimated
amount fair value
---------- ----------
(In thousands)
Financial assets:
Cash and cash equivalents $ 2,598 $ 2,598
Investments available for sale 68,152 68,152
Investment securities held to maturity 12,724 12,479
Federal Home Loan Bank stock 4,475 4,475
Loans (carrying amount net of
allowance for loan loss of $2,941) 397,910 399,914
======== ========
Financial liabilities:
Deposits:
Without stated maturities $ 97,406 $ 97,406
With stated maturities 241,818 241,475
Federal Home Loan Bank advances 87,600 86,873
Other borrowings 4,872 4,872
======== ========
Commitments:
Loan commitments -- $ 2,300
======== ========
September 30, 1998
----------------------
Carrying Estimated
Amount fair value
---------- ----------
(In thousands)
Financial assets:
Cash and cash equivalents $ 647 $ 647
Investments available for sale 42,225 42,225
Investment securities held to maturity 18,736 18,524
Federal Home Loan Bank stock 2,864 2,864
Loans (carrying amount net of allowance
for loan loss of $2,564) 338,610 341,013
======== ========
Financial liabilities:
Deposits:
Without stated maturities $ 90,798 $ 90,798
With stated maturities 261,382 258,744
Federal Home Loan Bank advances 21,000 19,149
======== ========
Commitments:
Loan commitments -- $ 2,640
======== ========
42
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<PAGE>
================================================================================
(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 of the
Company.
(16) Parent Company Only Financial Statements
Condensed financial statements of FloridaFirst Bancorp are as follows (in
thousands):
<TABLE>
<CAPTION>
Condensed Statement of Financial Condition
------------------------------------------
Assets September 30, 1999
------------------
<S> <C>
Cash and cash equivalents $ 50
Loan receivable from subsidiary 10,756
Investment in subsidiary 48,535
ESOP loan receivable 2,163
-------
Total assets $61,504
=======
Liabilities and Stockholders' Equity
Dividends payable $ 107
Accrued income taxes 60
-------
Total liabilities 167
-------
Stockholders' equity 61,337
-------
Total liabilities and stockholders' equity $61,504
=======
</TABLE>
<TABLE>
<CAPTION>
Year ended
Condensed Statement of Earnings September 30, 1999
------------------------------- ------------------
<S> <C>
Interest income:
Loan to ESOP $ 57
Loan to subsidiary 169
------
Total income 226
------
Operating expenses 57
------
Income before income taxes and equity
in undistributed earnings of subsidiary 169
Income taxes 60
------
Income before equity in undistributed earnings of subsidiary 109
Equity in undistributed earnings of subsidiary 3,148
------
Net income $3,257
======
</TABLE>
43
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<PAGE>
================================================================================
<TABLE>
<CAPTION>
Year ended
Condensed Statement of Cash Flows September 30, 1999
- --------------------------------- ------------------
<S> <C>
Cash flows from operating activities:
Net income $ 3,257
Adjustments to reconcile net income to
net cash provided by operating
activities:
Equity in undistributed earnings of subsidiary (3,148)
Increase in accrued income taxes 60
--------
Net cash provided by operating activities 169
--------
Cash flows from investing activities:
Increase in ESOP loan receivable (2,163)
Increase in loan receivable from subsidiary (10,756)
--------
Net cash used in investing activities (12,919)
--------
Cash flows from financing activities:
Net proceeds from stock offering 25,700
Capital contribution to subsidiary (12,900)
--------
Net cash provided by financing activities 12,800
--------
Increase in cash 50
Cash at beginning of year --
--------
Cash at end of year $ 50
========
Supplemental disclosure of non-cash information:
Transfer of investment in subsidiary upon creation of holding company $ 36,107
========
Declaration of dividends payable $ 107
========
</TABLE>
(17) Quarterly Financial Data (Unaudited)
Unaudited quarterly financial data (in thousands except per share data)
is as follows:
<TABLE>
<CAPTION>
Year ended September 30, 1999 Year ended September 30, 1998
--------------------------------------- ---------------------------------------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $ 7,834 $ 7,955 $ 8,213 $ 8,646 $ 8,970 $ 8,164 $ 7,688 $ 7,319
Interest expense 4,283 4,216 4,099 4,530 5,367 4,867 4,492 4,240
------- ------- ------- ------- ------- ------- ------- -------
Net interest income 3,551 3,739 4,114 4,116 3,603 3,297 3,196 3,079
Provision for losses 150 150 120 120 105 100 100 100
------- ------- ------- ------- ------- ------- ------- -------
Net interest income after
provision for losses 3,401 3,589 3,994 3,996 3,498 3,197 3,096 2,979
------- ------- ------- ------- ------- ------- ------- -------
Non-interest income 321 464 351 337 325 3,384 370 268
Non-interest expense 2,700 2,871 2,939 2,938 2,967 3,114 2,600 4,900
------- ------- ------- ------- ------- ------- ------- -------
Income before taxes 1,022 1,182 1,406 1,395 856 3,467 866 (1,653)
Provision for income taxes 379 434 466 469 300 1,109 272 (530)
------- ------- ------- ------- ------- ------- ------- -------
Net income $ 643 $ 748 $ 940 $ 926 $ 556 $ 2,358 $ 594 $(1,123)
======= ======= ======= ======= ======= ======= ======= =======
Basic earnings per share $ .17 $ .17
----- -----
Weighted average shares outstanding 5,555 5,544
===== =====
</TABLE>
44
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<PAGE>
================================================================================
INDEPENDENT AUDITORS' REPORT
The Board of Directors
FloridaFirst Bancorp:
We have audited the accompanying consolidated statements of financial condition
of FloridaFirst Bancorp and subsidiary (the Company) as of September 30, 1999
and 1998, 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, 1999. 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 generally accepted auditing
standards. 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 FloridaFirst Bancorp
and subsidiary at September 30, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended September 30, 1999 in conformity with generally accepted accounting
principles.
/s/KPMG LLP
Tampa, Florida
October 28, 1999
45
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<PAGE>
================================================================================
Directors and Officers - FloridaFirst Bancorp
<TABLE>
<CAPTION>
<S> <C>
Board of Directors Officers
------------------ --------
Charles W. Bovay, Chairman Gregory C. Wilkes
President and Chief Executive Officer
Gregory C. Wilkes
Kerry P. Charlet
Robert H. Artman Chief Financial Officer
Llewellyn N. Belcourt Sonja T. Hughey
Corporate Secretary
Stephen A. Moore, Jr.
Nis H. Nissen, III
Rudy H. Thornberry
G. F. Zimmermann, III
Directors and Officers - FloridaFirst Bank
Gregory C. Wilkes Directors
President and Chief Executive Officer ---------
Same as FloridaFirst Bancorp
Senior Vice Presidents Vice Presidents
---------------------- ---------------
Donald A. Burdett Joyce F. Brock
Retail Banking
Kathleen R. Davis
Kerry P. Charlet
Chief Financial Officer Sharon S. Freeman
William H. Cloyd Kenneth D. Hawthorne
Chief Lending Officer
M. Terry Jameson
Marion L. Moore
Deposit Operations Carolyn G. Keller
Corporate Secretary W. Harlan McCall
-------------------
Sonja T. Hughey LaVerne S. Scott
Mark W. Thompson
</TABLE>
46
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<PAGE>
================================================================================
Company Offices
<TABLE>
<CAPTION>
<S> <C> <C>
Downtown Interstate Highlands
205 East Orange Street 4012 Lakeland Hills Boulevard 4400 South Florida Avenue
Lakeland, Florida 33801 Lakeland, Florida 33809 Lakeland, Florida 33813
(863) 688-6811 (863) 688-6811 (863) 688-6811
Grove Park Scott Lake Winter Haven North
1817 N. Crystal Lake Drive 1011 East County Road 540-A 1483 6th Street NW
Lakeland, Florida 33801 Lakeland, Florida 33813 Winter Haven, Florida 33881
(863) 688-6811 (863) 688-6811 (863) 294-8861
Winter Haven South West Bradenton Cortez Road
448 Cypress Gardens Boulevard 4601 Manatee Avenue West 497 Cortez Road West
Winter Haven, Florida 33880 Bradenton, Florida 34209 Bradenton, Florida 34207
(863) 293-0708 (941) 747-1479 (941) 758-1483
Winter Haven Lending Office Corporate Offices
Olde Towne Square FloridaFirst Bancorp
301 3rd Street NW, Suite 208 205 East Orange Street
Winter Haven, Florida 33880 Lakeland, Florida 33801
(863) 298-8331 (863) 688-6811
</TABLE>
Corporate Information
<TABLE>
<CAPTION>
<S> <C>
Annual Stockholders' Meeting Transfer Agent and Registrar
FloridaFirst Bancorp's annual stockholders Registrar and Transfer Company
meeting will be held on Friday, January 28, 2000 10 Commerce Drive
at 8:30 a.m. in the Corporate Office located at Cranford, New Jersey 07016
205 East Orange Street, Lakeland, Florida.
Form 10-K Independent Auditors
A copy of FloridaFirst Bancorp's Annual Report KPMG LLP
on Form 10-K, without exhibits, are available 100 North Tampa Street, Suite 2400
without charge by writing: Tampa, Florida 33602
Kerry P. Charlet, CFO
FloridaFirst Bancorp
205 East Orange Street Special Counsel
Lakeland, Florida 33801 Malizia Spidi & Fisch, PC
Suite 700 East
1301 K Street, N.W.
Stock Listing Washington, DC 20005
Shares of FloridaFirst Bancorp's common stock
are traded on Nasdaq National Market system
under the symbol FFBK.
</TABLE>
================================================================================
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,467
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 131
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 68,152
<INVESTMENTS-CARRYING> 12,724
<INVESTMENTS-MARKET> 12,479
<LOANS> 400,851
<ALLOWANCE> 2,941
<TOTAL-ASSETS> 498,358
<DEPOSITS> 339,224
<SHORT-TERM> 37,472
<LIABILITIES-OTHER> 5,325
<LONG-TERM> 55,000
0
0
<COMMON> 23,536
<OTHER-SE> 37,801
<TOTAL-LIABILITIES-AND-EQUITY> 498,358
<INTEREST-LOAN> 28,482
<INTEREST-INVEST> 4,166
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 32,648
<INTEREST-DEPOSIT> 14,727
<INTEREST-EXPENSE> 17,128
<INTEREST-INCOME-NET> 15,520
<LOAN-LOSSES> 540
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 11,448
<INCOME-PRETAX> 5,005
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,257
<EPS-BASIC> .34
<EPS-DILUTED> .34
<YIELD-ACTUAL> 3.53
<LOANS-NON> 830
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,564
<CHARGE-OFFS> 251
<RECOVERIES> 88
<ALLOWANCE-CLOSE> 2,941
<ALLOWANCE-DOMESTIC> 2,941
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
