SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
------------------------------------
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
-------------------- --------------------
Commission file number 000-25693
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FLORIDAFIRST BANCORP
---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
United States 59-3545582
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(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
205 East Orange Street, Lakeland, Florida 33801-4611
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (863) 688-6811
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N/A
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Former name, former address and former fiscal year,
if changed since last report.
Indicate by check |X| whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date August 10, 2000.
Class Outstanding
--------------------------- ----------------
$.10 par value common stock 5,347,297 shares
<PAGE>
FLORIDAFIRST BANCORP
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
INDEX
Page
Number
------
PART I - CONDENSED CONSOLIDATED FINANCIAL INFORMATION OF
FLORIDAFIRST BANCORP
Item 1. Financial Statements and Notes Thereto........................... 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 6
Item 3. Qualitative and Quantitative Disclosure About Market Risk........ 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................ 16
Item 2. Changes in Securities............................................ 16
Item 3. Defaults upon Senior Securities.................................. 16
Item 4. Submission of Matters to a Vote of Security Holders.............. 16
Item 5. Other Information................................................ 16
Item 6. Exhibits and Reports on Form 8-K................................. 16
SIGNATURES................................................................ 17
<PAGE>
FLORIDAFIRST BANCORP
Condensed Consolidated Statements of Financial Condition
(Unaudited)
<TABLE>
<CAPTION>
June 30, September 30,
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
(In thousands)
Cash and cash equivalents $ 5,473 $ 2,598
Investment securities available for sale, at fair value 93,951 68,152
Investment securities held to maturity, market value
$9,347 and $12,479 9,687 12,724
Loans receivable, net of allowance for loan losses of
$3,226 and $2,941 432,492 397,910
Premises and equipment, net 8,239 6,818
Federal Home Loan Bank stock, at cost 7,455 4,475
Other assets 11,672 5,681
--------- ---------
Total assets $ 568,969 $ 498,358
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 357,535 $ 339,224
Federal Home Loan Bank advances 144,025 87,600
Other borrowings 3,000 4,872
Other liabilities 5,046 5,325
--------- ---------
Total liabilities 509,606 437,021
--------- ---------
Commitments and contingencies - -
Stockholders' equity:
Common stock, $ .10 par value, 18,000,000 shares authorized,
5,752,875 outstanding 575 575
Additional paid-in capital 25,085 25,124
Retained earnings 41,586 39,037
Treasury stock, at cost, 405,578 and -0- shares (3,606) --
Unallocated shares held by the ESOP (1,838) (2,163)
Unallocated shares held by the RSP (414) --
Accumulated other comprehensive loss (2,025) (1,236)
--------- ---------
Total stockholders' equity 59,363 61,337
--------- ---------
Total liabilities and stockholders' equity $ 568,969 $ 498,358
========= =========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
1
<PAGE>
FLORIDAFIRST BANCORP
Condensed Consolidated Statements of Earnings
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
June 30, June 30,
2000 1999 2000 1999
------- ------- ------- -------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Interest income:
Loans $ 8,318 $ 7,157 $23,894 $21,055
Investments and other 1,907 1,056 5,188 2,947
------- ------- ------- -------
Total interest income 10,225 8,213 29,082 24,002
------- ------- ------- -------
Interest expense:
Deposits 3,949 3,578 11,352 11,167
Federal Home Loan Bank advances and other borrowings 2,217 521 5,388 1,431
------- ------- ------- -------
Total interest expense 6,166 4,099 16,740 12,598
------- ------- ------- -------
Net interest income 4,059 4,114 12,342 11,404
Provision for loan losses 180 120 450 420
------- ------- ------- -------
Net interest income after provision for loan losses 3,879 3,994 11,892 10,984
------- ------- ------- -------
Other income:
Fees and service charges 355 308 1,017 849
Gain on sale of assets - - 24 164
Other, net 168 43 432 123
------- ------- ------- -------
Total other income 523 351 1,473 1,136
------- ------- ------- -------
Other expenses:
Compensation and employee benefits 1,613 1,470 4,744 4,322
Occupancy and equipment costs 430 470 1,306 1,419
Marketing 76 175 382 432
Data processing costs 126 132 382 391
Federal insurance premiums 17 53 85 165
Other 642 639 2,095 1,781
------- ------- ------- -------
Total other expenses 2,904 2,939 8,994 8,510
------- ------- ------- -------
Income before income taxes 1,498 1,406 4,371 3,610
Income taxes 530 466 1,540 1,279
------- ------- ------- -------
NET INCOME $ 968 $ 940 $ 2,831 $ 2,331
======= ======= ======= =======
Basic and diluted earnings per share (1) $ 0.19 $ 0.17 $ 0.54 N/A
======= ======= =======
Weighted average number of shares outstanding (1) 5,178 5,544 5,280 N/A
======= ======= =======
</TABLE>
(1) FloridaFirst converted to a stock company on April 6, 1999. Earnings per
share and weighted average shares outstanding are not shown for the
nine-month period ended June 30, 1999.
See accompanying notes to unaudited condensed consolidated financial statements.
2
<PAGE>
FLORIDAFIRST BANCORP
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For The Nine Months
Ended June 30,
2000 1999
-------- --------
(In thousands)
<S> <C> <C>
Operating activities:
Net income $ 2,831 $ 2,331
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Provision for loan losses 450 420
Depreciation 554 558
Gain on sale of branches and related deposits - (164)
Increase in other assets (5,335) (906)
Increase (decrease) in other liabilities 42 (5,256)
-------- --------
Net cash used in operating activities (1,458) (3,017)
-------- --------
Investing activities:
Proceeds from calls, maturities and repayment of investment securities 16,860 23,191
Increase in loans, net (35,222) (38,939)
Purchase of investments available for sale (40,877) (31,518)
Purchase of FHLB stock (2,980) -
Purchases of premises and equipment (2,001) (490)
Proceeds from disposition of premises and equipment 26 343
-------- --------
Net cash used in investing activities (64,194) (47,413)
-------- --------
Financing activities:
Net increase (decrease) in deposits 18,311 (14,636)
Net increase in FHLB advances 56,425 39,000
Net decrease in other borrowings (1,872) -
Net proceeds from the issuance of common stock - 23,536
Payments to acquire treasury stock (3,606) -
Payments to acquire shares held by the RSP (449) -
Dividends paid (282) -
-------- --------
Net cash provided by financing activities 68,527 47,900
-------- --------
Net increase (decrease) in cash and cash equivalents 2,875 (2,530)
Cash and cash equivalents at beginning of period 2,598 5,217
-------- --------
Cash and cash equivalents at end of period $ 5,473 $ 2,687
======== ========
Supplemental disclosure of cash flow information -
Cash paid during the period for:
Interest $ 16,462 $ 12,404
======== ========
Taxes $ 1,071 $ 931
======== ========
Supplemental disclosure of non-cash information:
Additions to investment in real estate acquired through foreclosure $ 190 $ 76
======== ========
Change in unrealized gain (loss) on investments available for sale, net of
deferred tax benefit of $(466) and $(574) $ (789) $ (1,039)
======== ========
Allocation of shares held by the ESOP and RSP $ 360 -
======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
3
<PAGE>
FLORIDAFIRST BANCORP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and, therefore, do not include all
information necessary for a complete presentation of financial condition,
results of operations, and cash flows in conformity with generally accepted
accounting principles. However, all adjustments, consisting of normal recurring
accruals, which, in the opinion of management, are necessary for a fair
presentation of the financial statements have been included. The results of
operations for the three and nine-month periods ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the entire fiscal
year or any other future period. The condensed consolidated financial statements
as of and for the three and nine-month periods ended June 30, 2000 include the
accounts of FloridaFirst Bank (the "Bank") which became the wholly owned
subsidiary of FloridaFirst Bancorp (the "Company") on April 6, 1999. The
Company's business is conducted principally through the Bank.
These statements should be read in conjunction with the consolidated financial
statements and related notes, which are incorporated by reference in the
Company's Annual Report on Form 10-K for the year ended September 30, 1999.
Note 2 - COMPREHENSIVE INCOME
Comprehensive income for the periods presented was as follows:
Three Months Ended Nine Months Ended
June 30, June 30,
2000 1999 2000 1999
------- ------- ------- -------
Net income $ 968 $ 940 $ 2,831 $ 2,331
Other comprehensive loss (376) (776) (789) (1,039)
------- ------- ------- -------
Comprehensive income $ 592 $ 164 $ 2,042 $ 1,292
======= ======= ======= =======
Other comprehensive losses consisted entirely of unrealized losses, net of
deferred taxes, on available for sale securities.
Note 3 - STOCK REPURCHASE PROGRAM
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, or 405,578 shares, held by stockholders other
than FloridaFirst Bancorp MHC, the Company's mutual holding company. The Company
was authorized to make such repurchases 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. The Company
completed the acquisition of all 405,578 shares under the repurchase program, at
an average price of $8.89, on February 28, 2000. Therefore, the weighted average
number of shares outstanding for the quarter ended June 30, 2000 was reduced by
the entire 405,578 shares.
4
<PAGE>
On November 15, 1999 the Company received approval from the Office of Thrift
Supervision ("OTS") to proceed with its planned repurchase for the FloridaFirst
Bank Restricted Stock Plan ("RSP") of up to 4% of the common stock, or 108,154
shares, held by stockholders other than FloridaFirst Bancorp MHC, the Company's
mutual holding company. The Company is authorized to make such repurchases from
time to time in open market transactions as, in the opinion of management,
market conditions warrant. The repurchased shares will be held in trust for the
participants in the RSP. As of June 30, 2000 the Company had acquired 57,879
shares under the repurchase program at an average price of $7.76. Weighted
average shares outstanding were not reduced for shares acquired by the RSP since
they are still considered outstanding shares, not reacquired shares.
Note 4 - EARNINGS PER SHARE
Basic earnings per share of common stock for the quarter ended June 30, 2000 has
been computed by dividing net income for the period by the weighted average
number of shares outstanding, which includes 3,049,024 shares held by the
Company's mutual holding company, FloridaFirst Bancorp MHC. Shares of common
stock purchased by the Bank's Employee Stock Ownership Plan are only considered
outstanding when the shares are released or committed to be released for
allocation to participants. The Company has determined that 1,803 shares per
month will be added to the outstanding shares for the fiscal year ending
September 30, 2000. The common stock equivalents related to the Company's stock
options granted are not dilutive to earnings per share for all periods included
in this report. Therefore, basic and diluted earnings per share are the same.
Note 5 - SUBSEQUENT EVENT
On July 24, 2000, the Company announced that the Company, the Bank and
FloridaFirst Bancorp MHC had entered into plans of conversion and reorganization
from a mutual holding company form of organization to a full stock corporation.
The Company expects the transaction to be completed by December 31, 2000.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward-Looking Statements
The Company may from time to time make written or oral forward-looking
statements, including statements contained in the Company's filings with the
Securities and Exchange Commission (the "Commission") and its reports to
stockholders. Statements made in such documents, other than those concerning
historical information, should be considered forward-looking and subject to
various risks and uncertainties. Such forward-looking statements are made based
upon management's belief as well as assumptions made by, and information
currently available to management, pursuant to "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. The Company's actual results
may differ materially from the results anticipated in forward-looking statements
due to a variety of factors, including governmental monetary and fiscal
policies, deposit levels, loan demand, loan collateral values, securities
portfolio values, and interest rate risk management; the effects of competition
in the banking business from other commercial banks, savings and loan
associations, mortgage banking firms, consumer finance companies, credit unions,
securities brokerage firms, insurance companies, money market mutual funds and
other financial institutions operating in the Company's market area and
elsewhere, including institutions operating through the Internet; changes in
governmental regulation relating to the banking industry, including regulations
relating to branching and acquisitions; failure of assumptions underlying the
establishment of reserves for losses, including the value of collateral
underlying delinquent loans, Year 2000 issues 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.
Overview
On July 24, 2000, the Company announced that the Company, the Bank and
FloridaFirst Bancorp MHC had entered into plans of conversion and reorganization
from a mutual holding company form of organization to a full stock corporation.
The Company expects the transaction to be completed by December 31, 2000.
Comparison of Financial Condition at June 30, 2000 and September 30, 1999
Assets. Total assets increased $70.6 million, or 14.2%, to $569.0 million at
June 30, 2000 from $498.4 million at September 30, 1999. The increase in total
assets resulted primarily from a $34.6 million, or a 11.6% annualized increase
in the loan portfolio attributable to steady loan demand in our market areas,
funding of construction loans and a slow down in loan prepayments. In addition,
investment securities increased $22.8 million. Management plans to focus on loan
growth to effectively utilize the new capital raised in fiscal 1999. The capital
leveraging strategy will include the purchase of investment securities to
complement its loan origination efforts. Other assets increased primarily due to
the cash surrender value of bank owned life insurance policies that were
purchased in January 2000.
Liabilities. Total liabilities increased $72.6 million, or 16.6%, to $509.6
million at June 30, 2000 from $437.0 million at September 30, 1999. The increase
in total liabilities resulted primarily from a $56.4 million net increase in
FHLB advances utilized to fund the asset growth and a net deposit increase of
$18.3 million. The increase in deposits in recent months reflects renewed
consumer interest in competitively priced certificates of deposit due to the
increase in short-term interest rates. Checking and money market accounts
continue to grow through expansion of our customer base.
Management continues to evaluate the available funding sources. The attributes
of the alternative funding sources that management considers in its analysis
include the interest and other costs of such funding, the maturity
considerations and the nature and characteristics of assets being funded.
6
<PAGE>
Stockholders' Equity. The decrease in the Company's stockholders' equity
reflects:
> Net income for the nine months ended June 30, 2000 of $2.8 million
> repurchase of 405,578 shares of Company stock at a cost of $3.6 million
> repurchase of 57,879 shares of Company stock for the RSP at a cost of
$449,000 (less shares issued at a cost of approximately $35,000)
> change in accumulated other comprehensive loss of $789,000 (attributable to
the net unrealized loss on investments available for sale)
> repayment of $325,000 on the ESOP loan.
> dividends paid that totaled $282,000.
The net unrealized loss on investments available for sale relates primarily to
the increasing level of interest rates during the fiscal year. Increasing rates
reduce the value of certain investments held for sale that have longer average
lives. Because of interest rate volatility, accumulated other comprehensive loss
and stockholders' equity could materially fluctuate for each interim period and
year-end period. The decrease in market value of the investment securities
available for sale is considered temporary in nature and will not affect net
income until the securities are sold. We plan to hold these securities until
maturity or until the market values of these securities increase. Accordingly,
we do not expect, though there is no assurance, that our investment in these
securities will affect net income in future periods.
At June 30, 2000, the Company's stockholders' equity as a percentage of total
assets was 10.4%.
Comparison of Operating Results for the Three Months Ended June 30, 2000 and
June 30, 1999
Net Income. Net income for the three months ended June 30, 2000 increased 3.0%
to $968,000, compared to $940,000 for the same period in 1999.
Net interest income decreased $55,000, or 1.3%, for the three months ended June
30, 2000 compared to the same period in 1999. This decrease resulted primarily
from an increase in interest income of $2.0 million, offset by an increase in
interest expense of $2.1 million. Other expenses remained flat during both three
month periods at $2.9 million.
Interest Income. The following discussion highlights the major factors that
impacted the changes in interest income during the quarter when compared to the
prior year. Details are contained in the table at page 8.
> Loan growth reflects the strong loan demand over the past year and the
Company's increased emphasis on loan origination efforts.
> The yield on loans has increased slightly due to the steady rise in longer
term mortgage loan rates. The impact of this caused overall mortgage
portfolio yields to increase approximately 14 basis points. The increasing
rates were offset by the large refinancing activity that occurred through
the first half of 1999. In addition, the overall portfolio yield on
consumer loan and commercial loan portfolios decreased about 4 basis points
due to competitive pricing pressures.
> The average balances in the investment securities portfolio grew 62%
primarily due to the Company's strategy to leverage the higher capital
level that resulted from the stock offering in April 1999.
> The higher yield in the investment portfolio resulted from the leveraging
strategy (outside the loan portfolio) in the latter part of fiscal 1999 and
throughout fiscal 2000 when rates had risen significantly. In addition, the
growth occurred in securities that had slightly longer average lives with
higher yields.
7
<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. Average balances are
derived from average daily balances for fiscal 2000, but the fiscal 1999
averages 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>
Three months Three months
June 30, 2000 June 30, 1999 Changes in
---------------------------- ---------------------------- ------------------------------------
Average Yield/ Average Yield/ Yield/
Balance Interest Cost Balance Interest Cost Balances % Interest Cost
---------------------------- ---------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earnings assets (IEA):
Loans receivable $ 430,898 $ 8,318 7.72% $ 376,029 7,157 7.61% $ 54,869 15% $ 1,161 0.11%
Investments and other (1) 108,971 1,945 7.14% 67,473 1,076 6.38% 41,498 62% 869 0.76%
--------- ------- --------- ----- -------- -------
Total (1) 539,869 $10,263 7.60% 443,502 $ 8,233 7.43% $ 96,367 22% $ 2,030 0.18%
======= ======= ======== =======
Other assets 21,487 12,329
--------- ---------
Total assets $ 561,356 $ 455,831
========= =========
Interest-bearing liabilities (IBL):
Interest checking $ 32,870 $ 152 1.85% $ 27,738 $ 122 1.76% $ 5,132 19% $ 30 0.09%
Savings 30,738 154 2.00% 36,379 154 1.69% (5,641) -16% - 0.31%
Money market accounts 25,213 263 4.17% 21,619 210 3.89% 3,594 17% 53 0.29%
Certificate accounts 246,048 3,380 5.49% 241,302 3,092 5.13% 4,746 2% 288 0.37%
--------- ------- --------- ----- -------- -------
Total deposits 334,869 3,949 4.72% 327,038 3,578 4.38% 7,831 2% 371 0.34%
Advances and other borrowings 144,992 2,217 6.12% 49,000 521 4.25% 95,992 196% 1,696 1.86%
--------- ------- --------- ----- -------- -------
Total 479,861 $ 6,166 5.14% 376,038 $ 4,099 4.36% $103,823 28% $ 2,067 0.78%
======= ======= ======== =======
Other liabilities 22,134 18,561
Total liabilities 501,995 394,599
Stockholders' equity 59,361 61,232
--------- ---------
Total liabilities and equity $ 561,356 $ 455,831
========= =========
Net interest income (1) $ 4,097 $ 4,134
======= =======
Average IEA to IBL 113% 118%
Interest rate spread 2.46% 3.07%
Interest margin 3.04% 3.73%
</TABLE>
(1) Interest income and net interest income do not agree to the statement of
operations because the tax equivalent income on municipal bonds is included
in this schedule.
8
<PAGE>
Interest Expense. The following discussion highlights the major factors that
impacted the changes in Interest Expense during the quarter when compared to the
prior year. Detailed changes are contained in the table at page 8.
> The slight increase in average deposits is attributable mainly to a special
promotions for certificate accounts during fiscal 2000 while maintaining a
conservative deposit pricing strategy in the previous year. The
conservative pricing strategy in the 1999 quarter was followed due to:
o utilization of more cost effective funding alternatives that were
available for the terms the Company has considered appropriate to fit
its interest rate management strategies, and
o $23.5 million in net proceeds received in the stock offering.
> FHLB advances grew because the Company considered the advances to be a more
cost-effective funding alternative during the course of the year. Although
the costs of the advances exceed the cost of certificate accounts, funding
asset growth through certificate accounts was deemed to be more expensive
than wholesale funding.
> The higher cost of funds related to certain deposit accounts and the FHLB
advances is reflective of the significant rise in interest rates over the
past year.
Provision for Loan Losses. The provision for loan losses was $180,000 for the
three months ended June 30, 2000, and $120,000 for the same period in 1999. The
allowance for loan losses increased $360,000 to $3.2 million at June 30, 2000
from $2.9 million at June 30, 1999 reflecting a decrease in substandard loans
offset by the growth and changing composition in the loan portfolio. The current
allowance represents .74% of total loans outstanding at June 30, 2000. The
Company had net charge-offs of $38,000 for the three months ended June 30, 2000
compared to net charge-offs of $56,000 for the three months ended June 30, 1999.
Other Expense. Other expense decreased by $35,000 for the three months ended
June 30, 2000 as compared to the three months ended June 30, 1999.
> Compensation and employee benefits increased $143,000 due primarily to
having certain key positions filled this year compared to last year,
recognition of $100,000 related to the restricted stock plan and other
benefit plans and a small average merit adjustment.
> Marketing costs were reduced significantly for the comparable periods. The
main reasons relate to a marketing campaign that was staged in the 1999
time period and the elimination of an agency retainer agreement.
The Board of Directors and management has developed expansion plans for the
Company that includes three de novo branches within our existing market areas
and deployment of a strategic technology plan. The strategic technology plan
includes:
> installing a new customer delivery software to enhance the sales efforts,
> enhancing both our data and voice communications systems,
> upgrading our computer network for enhanced service and security features,
> implementing internal and external networks to improve communications and
productivity within the Company, and
> investigation of alternative delivery systems, including an Internet
banking solution and enhanced call center strategy.
9
<PAGE>
A summary of the estimated costs associated with the new projects follows:
Estimated Costs Estimated Costs
Category Fiscal 2001 Fiscal 2002
-------- ----------- ---------------
(In thousands)
New branches $ 650 $ 975
New computer hardware and software 240 240
Other costs related to strategic technology plan 240 240
------ ------
TOTAL $1,130 $1,455
====== ======
The Board of Directors and management analyzed the potential effect of each of
these expenditures prior to approval and believe that these expenditures will
have an overall positive effect on the Company's franchise and stockholder
value, but also realize that the expenditures will most likely depress
profitability ratios in the short-term. The Company also expects that both net
interest income and fee income will increase as a result of the new branches and
new technology enhancements. However, it is not possible to precisely estimate
such revenue increases, if any, at this time. The success of new projects is
dependent upon a number of factors, including, but not limited to, general
economic conditions, regulatory climate, interest rates and the success of the
Company's marketing efforts.
Comparison of Operating Results for the Nine Months Ended June 30, 2000 and June
30, 1999
Net Income. Net income for the nine months ended June 30, 2000 increased 21.5%
to $2.8 million, compared to $2.3 million for the same period in 1999. Net
income for the nine months ended June 30, 2000 benefited from the deployment of
$23.5 million in new capital (net proceeds of $25.7 million less the ESOP loan
of $2.2million) for the entire period.
Net interest income increased $938,000, or 8.2%, for the nine months ended June
30, 2000 compared to the same period in 1999. This increase resulted primarily
from an increase in interest income of $5.1 million, offset by an increase in
interest expense of $4.1 million. Other expenses increased to $9.0 million for
the nine months ended June 30, 2000 from $8.5 million for the nine months ended
June 30, 1999, due to an accumulation of several expense categories, as
discussed at Other Expense.
Interest Income. The following discussion highlights the major factors that
impacted the changes in interest income during the current nine-month period
when compared to the comparable period in 1999. Details are contained in the
table at page 11.
> Loan growth reflects the strong loan demand over the past year and the
Company's increased emphasis on loan origination efforts.
> The yield on loans decreased primarily due to an approximate 80 basis point
reduction in loan rates for new mortgage loan originations offset by
approximately $54 million in mortgage loans that paid off during fiscal
1999, causing average mortgage portfolio yields to decline approximately 10
basis points. In addition, the average portfolio yield on consumer loans
decreased approximately 12 basis points and yields in the commercial
portfolio decreased approximately 13 basis points due to competitive
pricing pressures.
> The average balances in the investment securities portfolio grew 51%
primarily due to the Company's strategy to leverage capital that was raised
in the stock offering.
> The higher yield in the investment portfolio resulted from the leveraging
strategy (outside the loan portfolio) in the latter part of fiscal 1999 and
throughout fiscal 2000 when rates had risen significantly over the prior
year. In addition, the investment growth occurred in securities that had
slightly longer average lives with higher yields.
10
<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. Average balances are
derived from average daily balances for fiscal 2000, but the fiscal 1999
averages 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>
Nine months Nine months
June 30, 2000 June 30, 1999 Changes in
----------------------------- ----------------------------- ---------------------------------------
Average Yield/ Average Yield/ Yield/
Balance Interest Cost Balance Interest Cost Balances % Interest Cost
----------------------------- ----------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earnings assets (IEA):
Loans receivable $ 418,269 $23,894 7.62% $ 362,815 21,055 7.74% $ 55,454 15% $ 2,839 -0.12%
Investments and other (1) 100,398 5,291 7.03% 66,601 2,999 6.00% 33,797 51% 2,292 1.02%
--------- ------- --------- ------ -------- ------- ----
Total (1) 518,667 $29,185 7.50% 429,416 $24,054 7.47% $ 89,251 21% $ 5,131 0.03%
======= ======= ======== =======
Other assets 18,478 11,516
--------- ---------
Total assets $ 537,145 $ 440,932
========= =========
Interest-bearing liabilities (IBL):
Interest checking $ 31,354 $ 437 1.86% $ 27,377 $ 352 1.71% $ 3,977 15% $ 85 0.15%
Savings 31,476 404 1.71% 38,338 484 1.68% (6,862) -18% (80) 0.03%
Money market accounts 25,222 788 4.17% 20,182 576 3.81% 5,040 25% 212 0.36%
Certificate accounts 243,418 9,723 5.33% 245,420 9,755 5.30% (2,002) -1% (32) 0.03%
--------- ------- --------- ------ -------- ------- ----
Total deposits 331,470 11,352 4.57% 331,317 11,167 4.49% 153 0% 185 0.08%
Advances and other borrowings 125,276 5,388 5.73% 39,373 1,431 4.85% 85,903 218% 3,957 0.88%
--------- ------- --------- ------ -------- ------- ----
Total 456,746 $16,740 4.89% 370,690 $12,598 4.53% $ 86,056 23% $ 4,142 0.36%
======= ======= ======== =======
Other liabilities 20,680 25,379
Total liabilities 477,426 396,069
Stockholders' equity 59,719 44,863
--------- ---------
Total liabilities and equity $ 537,145 $ 440,932
========= =========
Net interest income (1) $12,445 $11,456
======= =======
Average IEA to IBL 114% 116%
Interest rate spread 2.61% 2.94%
Interest margin 3.20% 3.56%
</TABLE>
(1) Interest income and net interest income do not agree to the statement of
operations because the tax equivalent income on municipal bonds is included
in this schedule.
11
<PAGE>
Interest Expense. The following discussion highlights the major factors that
impacted the changes in Interest Expense during the current nine-month period
when compared to the comparable period in 1999. Detailed changes are contained
in the table at page 11.
> Deposits remained fairly level primarily by maintaining a conservative
deposit pricing strategy, utilizing more cost effective funding
alternatives that are available for the terms the Company has considered
appropriate to fit its interest rate management strategies. This was offset
however, by special promotions to increase certificate accounts. The growth
in checking account average balances has helped offset the decline in
certificate accounts.
> FHLB advances grew because the Company considered the advances to be a more
cost-effective funding alternative during the course of the year. Although
the costs of the advances exceed the cost of certificate accounts, funding
asset growth through certificate accounts was deemed to be more expensive
than wholesale funding.
> The higher cost of funds related to the FHLB advances is reflective of the
significant rise in interest rates over the past year.
Provision for Loan Losses. The provision for loan losses was $450,000 for the
nine months ended June 30, 2000, compared to $420,000 for the nine months ended
June 30, 1999. The Company had net charge-offs of $165,000 for the nine months
ended June 30, 2000 compared to net charge-offs of only $119,000 for the nine
months ended June 30, 1999. See other discussion at the three month comparison
of operations.
Other Expense. Other expense increased by $484,000 to $9.0 million for the nine
months ended June 30, 2000 from $8.5 million for the nine months ended June 30,
1999.
> Compensation and employee benefits increased $422,000 due primarily to
having certain key positions filled this year compared to last year
(approximate 5% increase in staffing) and recognition of $145,000 related
to the restricted stock plan.
> Other expenses increased by $314,000 primarily due to the following:
o certain Year 2000 costs ($50,000),
o direct costs related to stockholder meetings, communications, legal
matters and new financial reporting requirements as a public company
($70,000),
o increased effort on charging off uncollected fees and overdrawn
accounts ($60,000),
o supplies and promotional materials primarily related to name change
($50,000), and
o accelerated vesting of restricted stock due to the death of a director
($30,000).
Liquidity and Capital Resources
The liquidity of a savings institution reflects its ability to provide funds to
meet loan requests, to accommodate possible outflows in deposits, and to take
advantage of interest rate market opportunities. Funding of loan requests,
providing for liability outflows, and management of interest rate fluctuations
require continuous analysis in order to match the maturities of specific
categories of short-term loans and investments with specific types of deposits
and borrowing. Savings institution liquidity is normally considered in terms of
the nature and mix of the savings institution's sources and uses of funds.
Asset liquidity is provided through loan repayments and the management of
maturity distributions for loans and securities. An important aspect of
liquidity lies in maintaining sufficient levels of loans and mortgage-backed
securities that generate monthly cash flows.
12
<PAGE>
Cash and cash equivalents increased $2.9 million to $5.5 million for the nine
months ended June 30, 2000. Significant cash flows or uses (amounts shown in
parentheses) were as follows:
(In millions)
-----------
Cash used by operations $ (1.5)
FHLB advances and other borrowings 54.6
Increase in net deposits 18.3
Maturities of and repayments on investment securities 16.9
Purchases of investment securities and FHLB stock (43.9)
Net increase in loans (35.2)
Payments to acquire treasury stock (3.6)
Other - net (2.7)
------
Net increase in cash and cash equivalents $ 2.9
======
See "Comparison of Financial Condition at June 30, 2000 and September 30, 1999"
for discussion of significant cash flows.
On June 30, 2000, the Bank was in compliance with its three regulatory capital
requirements as follows:
Amount Percent
------ -------
(Dollars in thousands)
Tangible capital...................... $ 52,204 9.17%
Tangible capital requirement.......... 8,536 1.50
Excess over requirement............... 43,668 7.67
Core capital.......................... $ 52,204 9.17%
Core capital requirement.............. 22,762 4.00
Excess over requirement............... 29,442 5.17
Risk based capital.................... $ 55,430 15.60%
Risk based capital requirement........ 28,423 8.00
Excess over requirement............... 27,007 7.60
Management believes that under current regulations, the Bank will continue to
meet its minimum capital requirements in the foreseeable future. Events beyond
the control of the Bank, such as increased interest rates or a downturn in the
economy in areas in which the Bank operates could adversely affect future
earnings and as a result, the ability of the Bank to meet its future minimum
capital requirements.
13
<PAGE>
ITEM 3. Qualitative and Quantitative Disclosure About Market Risk
Qualitative Analysis. There have been no material changes from the Qualitative
Analysis information regarding market risk disclosed under the heading
"Management of Interest Rate Risk and Market Risk" in the Company's Management's
Discussion and Analysis of Financial Condition and Results of Operations for the
year ended September 30, 1999. See discussion of significant changes in the
Quantitative Analysis below.
Quantitative Analysis. Exposure to interest rate risk is actively monitored by
management. The Company's objective is to maintain a consistent level of
profitability within acceptable risk tolerances across a broad range of
potential interest rate environments. The Company uses the OTS Net Portfolio
Value ("NPV") Model to monitor its exposure to interest rate risk, which
calculates changes in net portfolio value. Reports generated from assumptions
provided and modified by management are reviewed by the Asset/Liability
Management Committee and reported to the Board of Directors quarterly. The
Interest Rate Sensitivity of Net Portfolio Value Report shows the degree to
which balance sheet line items and net portfolio value are potentially affected
by a 100 to 300 basis point (1 basis point equals 1/100th of a percentage point)
upward and downward parallel shift (shock) in the Treasury yield curve.
Since the OTS Net Portfolio Value ("NPV") Model measures exposure to interest
rate risk of the Bank to assure capital adequacy for the protection of the
depositors, only the Bank's financial information is used for the model.
However, the Bank is the only subsidiary and significant asset of the Company,
therefore the OTS NPV model provides a reliable basis upon which to perform the
quantitative analysis. The following table presents the Company's NPV as of
March 31, 2000. The results of the NPV model are not yet available for June 30,
2000, but no significant changes are anticipated in the NPV as a Percentage of
Present Value of Assets. The NPV was calculated by the OTS, based on information
provided by the Company.
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C> <C> <C>
+300 bp 4,102 -42,791 -91% .84% -780 bp
+200 bp 18,100 -28,793 -61% 3.56% -507 bp
+100 bp 32,555 -14,338 -31% 6.20% -244 bp
0 bp 46,893 8.64%
-100 bp 59,888 +12,995 +28% 10.71% +207 bp
-200 bp 70,186 +23,293 +50% 12.26% +362 bp
-300 bp 79,181 +32,288 +69% 13.54% +490 bp
</TABLE>
The OTS defines the sensitivity measure as the change in NPV Ratio with a 200
basis point shock. The Bank's sensitivity measure reflects a 507 basis point
decline in NPV ratio as of March 31, 2000. This compares to a sensitivity
measure of 444 and 280 basis points as of December 31, 1999 and September 30,
1999, respectively. Without detailing all the assumptions included in the OTS
NPV model, the following comments are made to discuss what Bank actions or
strategies are addressing the sensitivity measure indicators.
> Reviewing the average lives and durations of its loans and investment
securities,
> Reviewing deposit offerings and alternative funding sources to better match
the durations of the assets,
> Considering an additional capital contribution from the Company to the Bank
(the Company currently has over $6 million in capital that could be
contributed),
14
<PAGE>
> Performing, on a quarterly basis, a dynamic business simulation that more
clearly reflects an on-going business assumption, rather than relying
solely on the OTS model which more closely approximates a liquidation value
model.
15
<PAGE>
FLORIDAFIRST BANCORP
PART II
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor the Bank was engaged in any legal proceeding
of a material nature at June 30, 2000. From time to time, the Company
is a party to routine legal proceedings in the ordinary course of
business, such as claims to enforce liens, condemnation proceedings on
properties in which the Company holds security interests, claims
involving the making and servicing of real property loans, and other
issues incident to the business of the Company. There were no lawsuits
pending or known to be contemplated against the Company at June 30,
2000 that would have a material effect on the operations or income of
the Company or the Bank, taken as a whole.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
On May 16, 2000 the Board of Directors of the Company declared a
dividend distribution of $0.04 per share for the quarter ended June
30, 2000, based upon the number of shares outstanding as of June 15,
2000 on the Company's outstanding common stock, payable on July 1,
2000, to stockholders of record as of June 15, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2 Plan of Conversion and Reorganization of FloridaFirst
Bancorp MHC and Plans of Merger Between FloridaFirst
Bancorp MHC, FloridaFirst Bancorp and FloridaFirst Bank*
27 Financial Data Schedule (electronic filing only)
------------------
* Incorporated by reference to Form 8-K (Items 5 and 7) filed with
the SEC on July 25, 2000.
(b) Reports on Form 8-K
The Company filed a current report on Form 8-K with the Securities and
Exchange Commission, dated July 24, 2000, announcing that the Company,
the Bank and FloridaFirst Bancorp MHC had entered into plans of
conversion and reorganization from a mutual holding company form of
organization to a full stock corporation.
16
<PAGE>
FLORIDAFIRST BANCORP
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FLORIDAFIRST BANCORP
Date: August 8, 2000 By: /s/ Gregory C. Wilkes
-------------------------------------
Gregory C. Wilkes
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 8, 2000 By: /s/ Kerry P. Charlet
-------------------------------------
Kerry P. Charlet
Chief Financial Officer
(Principal Accounting Officer)
17
