EXHIBIT 99.3
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FloridaFirst
Bancorp, Inc.
Conversion
Valuation
Appraisal
Date Issued: September 5, 2000
Date of Market Prices: August 25, 2000
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Table of Contents
FloridaFirst Bancorp, Inc.
Lakeland, Florida
Introduction 1
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1. Overview and Financial Analysis 4
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GENERAL OVERVIEW 4
HISTORY 5
STRATEGIC DIRECTION 6
BALANCE SHEET TRENDS 8*
LOAN PORTFOLIO 10*
SECURITIES 13*
INVESTMENTS AND MORTGAGE-BACKED SECURITIES 14*
ASSET QUALITY 15*
FUNDING COMPOSITION 18*
ASSET/LIABILITY MANAGEMENT 20*
NET WORTH AND CAPITAL 21*
INCOME AND EXPENSE TRENDS 22*
SUBSIDIARIES 27*
LEGAL PROCEEDINGS 27*
2. Market Area Analysis 28*
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MARKET AREA DEMOGRAPHICS 28*
MARKET AREA DEPOSIT CHARACTERISTICS 34*
3. Comparisons with Publicly Traded Thrifts 41*
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INTRODUCTION 41*
SELECTION SCREENS 41*
SELECTION CRITERIA 43*
COMPARABLE GROUP PROFILES 44*
4. Market Value Determination 50*
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INTRODUCTION 50*
BALANCE SHEET STRENGTH 51*
ASSET QUALITY 54*
EARNINGS QUALITY, PREDICTABILITY AND GROWTH 55*
MARKET AREA 59*
* Filed in accordance with Rule 202 of Regulation S-T.
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MANAGEMENT 60*
DIVIDENDS 61*
LIQUIDITY OF THE ISSUE 63*
RECENT REGULATORY MATTERS 64*
MARKET FOR SEASONED THRIFT STOCKS 65*
ACQUISITION MARKET 70*
ADJUSTMENTS TO VALUE 72*
5. Other Adjustments 73*
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INTEREST RATE RISK 73*
SECOND STEP CONVERSIONS 74*
SUBSCRIPTION INTEREST 77*
OFFERING SIZE 81*
FLORIDA MARKET 82*
6. Valuation 83
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VALUATION APPROACH 83
VALUATION CONCLUSION 88
* Filed in accordance with Rule 202 of Regulation S-T.
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List of Figures**
FloridaFirst Bancorp, Inc.
Lakeland, Florida
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Figure 1 - Current Branch List 4
Figure 2 - Asset and Retained Earnings Chart 8
Figure 3 - Key Balance Sheet Data 9
Figure 4 - Key Ratios 9
Figure 5 - Net Loans Receivable Chart 10
Figure 6 - Loan Mix as of June 30, 2000 Chart 11
Figure 7 - Loan Mix 12
Figure 8 - Securities Chart 13
Figure 9 - Investment Mix 14
Figure 10 - Non-Performing Assets Chart 15
Figure 11 - Non-Performing Assets 16
Figure 12 - Allowance for Possible Loan and Lease Losses Chart 17
Figure 13 - Deposit and Borrowing Trend Chart 18
Figure 14 - Deposit Mix 19
Figure 15 - Net Portfolio Value 20
Figure 16 - Regulatory Capital Adequacy 21
Figure 17 - Net Income Chart 22
Figure 18 - Average Yields and Costs 23
Figure 19 - Spread and Margin Chart 24
Figure 20 - Income Statement Trends 25
Figure 21 - Profitability Trend Chart 26
Figure 22 - Population Demographics 28
Figure 23 - Population Demographics 29
Figure 24 - Population Demographics 30
Figure 25 - Household Characteristics 31
Figure 26 - Household Characteristics 32
Figure 27 - Household Characteristics 33
Figure 28 - Cortez Market Area 34
Figure 29 - Downtown Lakeland Market Area 35
Figure 30 - Grove Park Market Area 35
Figure 31 - Highlands Market Area 36
Figure 32 - Interstate Market Area 36
Figure 33 - Scott Lake Market Area 37
Figure 34 - West Bradenton Market Area 37
Figure 35 - Winter Haven North Market Area 38
Figure 36 - Winter Haven South Market Area 38
Figure 37 - Bradenton Palmbrush Trail Market Area 39
Figure 38 - Lakeland Griffin Road Market Area 39
Figure 39 - Winter Haven Cypress Gardens Blvd Market Area 40
Figure 40 - Screening Results 42
Figure 41 - Comparable Group 42
Figure 42 - Key Financial Indicators 48
Figure 43 - Key Balance Sheet Data 51
Figure 44 - Balance Sheet Growth Data 52
Figure 45 - Capital Data 53
Figure 46 - Asset Quality Table 54
Figure 47 - Net Income Chart 56
** Filed in accordance with Rule 202 of Regulation S-T.
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List of Figures**
FloridaFirst Bancorp, Inc.
Lakeland, Florida
Figure 48 - Profitability Data 57
Figure 49 - Income Statement Data 58
Figure 50 - Dividends Data 62
Figure 51 - Market Capitalization Data 63
Figure 52 - SNL Thrift Index Chart 65
Figure 53 - Historical SNL Index 66
Figure 54 - Equity Indices 68
Figure 55 - Historical Market Indices 68
Figure 56 - Historical Rates 69
Figure 57 - Deals for Last Twenty Two Quarters 70
Figure 58 - Deal Multiples 71
Figure 59 - Interest Rate Risk Guidelines for OTS Thrifts 73
Figure 60 - Second Step Trading Multiples 74
Figure 61 - Recent Second Step Conversions 75
Figure 62 - Recent Standard Conversion Performance 78
Figure 63 - Standard Conversion Pro Forma Pricing Multiples 80
Figure 64 - Industry Multiples By Market Capitalization 81
Figure 65 - Florida relative to the Industry 82
Figure 66 - Value Range Offering Data 85
Figure 67 - Value Range Offering Data 85
Figure 68 - Comparable Pricing Multiples to the Bank's Pro forma Midpoint 86
Figure 69 - comparable pricing Multiples to the Bank's Pro Forma SuperMaximum 86
Figure 70 - Recent Second Step Conversion Trading Multiples to the Bank's Pro forma Midpoint 86
Figure 71 - National Trading Multiples to the Bank's Pro forma Midpoint 87
Figure 72 - Florida Trading Multiples to the Bank's Pro forma Midpoint 87
Figure 73 - Details on the Estimated Valuation Range 88
** Filed in accordance with Rule 202 of Regulation S-T.
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List of Exhibits***
FloridaFirst Bancorp, Inc.
Lakeland, Florida
Exhibit
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1 Profile of FinPro, Inc.
2 Consolidated Statements of Financial Condition
3 Consolidated Statements of Operations
4 Reconciliation of TFR Statement of Operations to Consolidated Statements of Operations
5 Consolidated Statements of Changes in Shareholder's Net Worth
6 Consolidated Statements of Cash Flows
7 Selected Data on All Public Thrifts
8 Industry Multiples
9 Recent Standard Conversions 1998 to Date
10 Second Step Conversions 1998 to Date
11 Appraisal Pro Forma June 30, 2000 - 12 Months Data
12 Offering Circular Stub Pro Forma June 30, 2000 - 9 Months Data
13 Offering Circular Pro Forma December 31, 1999 - 12 Months Data
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*** Filed in accordance with Rule 202 of Regulation S-T.
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Conversion Valuation Appraisal Report Page: 1
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Introduction
This report represents FinPro, Inc.'s ("FinPro") independent appraisal of the
estimated pro forma market value of the common stock (the "Common Stock") in
connection with the conversion and reorganization of FloridaFirst Bank (the
"Bank") from the two-tier mutual holding company structure to the stock holding
company structure (the "Conversion"). The Bank is currently a wholly owned
subsidiary of FloridaFirst Bancorp, a federal corporation (the "Mid-Tier"),
which is the wholly owned subsidiary of FloridaFirst Bancorp MHC (the "MHC"),
both of which will be merged out of existence, and the Bank will become a wholly
owned subsidiary of the FloridaFirst Bancorp, Inc (the "Company"). The Bank is
headquartered in Lakeland, Florida and at June 30, 2000 had $569.0 million in
assets, $357.5 million in deposits and $59.4 million in stockholders' equity.
The Bank is a federally chartered savings bank whose principal regulator is the
Office of Thrift Supervision ("OTS"). All of the Bank's deposit accounts, up to
the regulatory limits, are insured by the Savings Bank Insurance Fund ("SAIF")
of the Federal Deposit Insurance Corporation ("FDIC"). As of June 30, 2000, the
Bank maintained eight branch offices located in Polk and Manatee Counties, all
of which are located in Florida.
This appraisal has been prepared in accordance with Regulation 563b.7 and with
the "Guidelines for Appraisal Reports for the Valuation of Savings and Loan
Banks Converting from Mutual to Stock Form of Organization" of the OTS which
have been adopted in practice by the FDIC, including the most recent revisions
as of October 21, 1994, and applicable regulatory interpretations thereof.
In the course of preparing our report, we reviewed the unaudited financial
statements of the Bank's and the Mid-Tier's (hereinafter, collectively referred
to as the "Bank") operations for the nine month period ended June 30, 2000 and
the Bank's audited financial statements for the twelve month period ended
September 30, 1999. We have conducted due diligence analysis of the Bank and the
Company and held due diligence related discussions with the Bank's management
and board, KPMG LLP (the Bank's independent audit firm), Malizia Spidi & Fisch,
PC (the Bank's special counsel), Sandler O'Neill & Partners, L.P. (the Bank's
financial and marketing advisor). The valuation parameters set forth in the
appraisal were predicated on these discussions but all conclusions related to
the valuation were reached and made independent of such discussions.
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Conversion Valuation Appraisal Report Page: 2
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The Company is offering a minimum of 2,326,877 shares and a maximum of 3,147,952
shares of common stock (the "Conversion Stock") at $10.00 per share to persons
with priority subscription rights in a subscription offering and to other
members of the public in a community offering (the "Offerings"). These shares
represent the MHC's ownership interest in the Mid-Tier Holding Company based on
an independent appraisal, which may be increased by up to 15% without
resolicitation. The table below sets forth information regarding the sale of
Conversion Stock in the Offerings.
The Company will issue a minimum of 1,753,123 shares and a maximum of 2,372,048
shares of common stock (the "Exchange Shares") to the shareholders of the
Mid-Tier Holding Company (other than the MHC) in exchange for their Mid-Tier
Holding Company common stock (the "Exchange"). The Company will not pay or
receive any cash in the Exchange, except that cash will be paid in lieu of
fractional shares. The number of Exchange Shares to be issued is dependent upon
the amount of Conversion Stock sold, with an exchange ratio designed to provide
the Mid-Tier Holding Company's shareholders (other than the MHC) with
approximately the same percentage ownership interest in the Company that they
have in the Mid-Tier holding Company.
The sum of the Conversion Stock and the Exchange Shares represents the total
amount of Common Stock to be issued in the Conversion, which sum is a minimum of
4,080,000 shares and a maximum of 5,520,000 shares. If the independent appraisal
were increased by 15%, the adjusted maximum amount of Conversion Stock, Exchange
Shares and total shares would be increased to 3,620,179 shares and 2,727,821
shares 6,348,000 shares, respectively.
The Mid-Tier Holding Company common stock is currently quoted on the NASDAQ
Stock Market under the symbol "FFBK." The Company has applied to the NASDAQ
Stock Market under the same symbol upon completion of the Conversion.
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Conversion Valuation Appraisal Report Page: 3
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In preparing our valuation, we relied upon and assumed the accuracy and
completeness of financial and other information provided to us by the Bank and
its independent accountants. We did not independently verify the financial
statements and other information provided by the Bank and its independent
accountants, nor did we independently value any of the Bank's assets or
liabilities. This estimated valuation considers the Bank only as a going concern
and should not be considered as an indication of its liquidation value.
Where appropriate, we considered information based upon other publicly available
sources, which we believe to be reliable; however, we cannot guarantee the
accuracy or completeness of such information. We visited the Bank's primary
market area and reviewed the market area economic condition. We also reviewed
the competitive environment in which the Bank operates and its relative
strengths and weaknesses. We compared the Bank's performance with selected
publicly traded thrift institutions. We reviewed conditions in the securities
markets in general and in the market for savings institutions in particular. Our
analysis included a review of the estimated effects of the Reorganization on the
Bank, operation and expected financial performance as they related to the Bank's
estimated pro forma value.
Our valuation is not intended, and must not be construed, to be a recommendation
of any kind as the advisability of purchasing shares of Common Stock in the
Conversion and Reorganization. Moreover, because such valuation is necessarily
based upon estimates and projections of a number of matters, all of which are
subject to change from time to time, no assurance can be given that persons who
purchase shares of Common Stock in the Conversion and Reorganization will
thereafter be able to sell such shares at prices related to the foregoing
valuation of the pro forma market value thereof. FinPro is not a seller of
securities within the meaning of any federal or state securities laws and any
report prepared by FinPro shall not be used as an offer or solicitation with
respect to the purchase or sale of any securities.
The estimated valuation herein will be updated as appropriate. These updates
will consider, among other factors, any developments or changes in the Bank's
financial condition, operating performance, management policies and procedures,
and current conditions in the securities market for thrift institution common
stock. Should any such developments or changes, in our opinion, be material to
the estimated pro forma market value of the Bank, appropriate adjustments to the
estimated pro forma market value will be made. The reasons for any such
adjustments will be explained at that time.
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Conversion Valuation Appraisal Report Page: 4
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1. Overview and Financial Analysis
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GENERAL OVERVIEW
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As of June 30, 2000, the Mid-Tier had $569.0 million in total assets, $357.5
million in deposits, $432.5 million in net loans and $59.4 million in equity.
The following table shows the Bank's branch network as of June 30, 2000.
FIGURE 1 - CURRENT BRANCH LIST
Location Address Owned/Lease
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Corporate 205 East Orange Street, Lakeland Owned
Downtown 205 East Orange Street, Lakeland Owned
Interstate 4012 Lakeland Hills Boulevard, Lakeland Owned
Highlands 4400 South Florida Avenue, Lakeland Owned
Grove Park 1817 Crystal Lake Drive, Lakeland Owned
Scott Lake 1011 East County Road 540-A, Lakeland Owned
Winter Haven North 1483 6th Street NW, Winter Haven Owned
Winter Haven South 448 Cypress Gardens Boulevard, Winter Haven Owned
West Bradenton 4601 Manatee Avenue, Bradenton Owned
Cortez 497 Cortez Road West, Bradenton Leased(1)
Residential Lending 301 3rd Street NW, Suite 208, Winter Haven Leased(2)
Office
Check Servicing 814 E. Parker Street, Lakeland Owned
Center
(1) This is a 5 year lease that terminates December 31, 2003, but has two
three-year renewal options
(2) This is a yearly renewable lease
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Conversion Valuation Appraisal Report Page: 5
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HISTORY
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1934 First Federal Savings and Loan Association of Lakeland is chartered and
joined the FHLB system
1957 Re-located Downtown and Corporate offices to 205 East Orange Street in
Lakeland
1961 Opened Grove Park retail office at 1817 Crystal Lake Drive in Lakeland
1972 Opened Highlands retail office at 4400 South Florida Avenue in Lakeland
1972 Opened Cortez retail office in Bradenton
1978 Opened Winter Haven North retail office at 1483 6th Street Northwest in
Winter Haven
1985 Opened Interstate retail office at 4012 Lakeland Hills Boulevard in
Lakeland
1989 Opened West Bradenton retail office at 4601 Manatee Avenue in Bradenton
1995 Opened Winter Haven South retail office at 448 Cypress Gardens Boulevard in
Winter Haven
1997 Opened Scott Lake retail office at 1011 East County Road 540-A in Lakeland
1998 Re-located Cortez retail office to 497 Cortez Road West in Bradenton
1999 Reorganized from a federally chartered mutual savings institution to a
federally chartered stock savings institution. First Federal becomes a
wholly owned subsidiary of FloridaFirst Bancorp, the majority of whose
shares are owned by the Mutual Holding Company. FloridaFirst Bancorp sells
a minority percentage of its common stock in the offering to First
Federal's members and the general public.
1999 Changed Bank name to FloridaFirst Bank in August 1999
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Conversion Valuation Appraisal Report Page: 6
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STRATEGIC DIRECTION
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The Board of Directors and management have developed expansion plans that
includes three de novo branches within its existing market area and deployment
of a strategic plan. By seeking to broaden the range of its products and
services offered, the Bank believes such strategy will offset the declining
margins in the competitive market for one to four family residential mortgage
loans. The strategic plan includes:
o Increasing the percentage of higher yielding and more interest
sensitive assets,
o Increasing the percentage of commercial and consumer loans and
commercial deposit accounts, among other products,
o Increasing alternative sources of cash at reasonable rates,
o Increasing sources of noninterest income,
o Installing a new customer delivery software to enhance the sales
efforts,
o Enhancing both our data and voice communications systems,
o Upgrading the computer network for enhance the sales efforts,
o Implementing internal and external networks to improve communications
and productivity, and
o Investigation of alternative delivery systems, including an Internet
banking solution and enhanced call center strategy.
Highlights of the business strategy are as follows:
Community-Oriented Institution. Based on total assets, FloridaFirst Bank is the
largest independent financial institution in Polk County, Florida. FloridaFirst
Bank is committed to meeting the financial needs of the communities in which it
operates. Management believes that FloridaFirst is large enough to provide a
full range of personal and business financial services, and yet is small enough
to provide such services in a personalized and efficient manner. FloridaFirst
Bank has recently added several convenience services to enhance its capabilities
as a full service community bank, including the issuance of debit cards and
placing automated teller machines at five of its branches and at the end of
1999, all of the branches were equipped with automated teller machines. It is
FloridaFirst Bank's current plan to deliver the products and services that meet
the needs of its customer, including internet banking and telephone banking
services.
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Conversion Valuation Appraisal Report Page: 7
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Market Focus. FloridaFirst Bank continues to review all opportunities that may
benefit its business in its current market area. In 2001 and 2002, FloridaFirst
Bank will open a total of 3 de novo branches in Polk and Manatee Counties,
Florida.
Commercial Banking. FloridaFirst Bank continues to expand its lending programs
for commercial business and commercial real estate loans in an effort to satisfy
a perceived need within its market area and increase its loan portfolio.
FloridaFirst Bank continues to realize a positive impact on it net interest
margin since commercial customers generally provide a higher loan yield and a
source of lower cost funds. The risks of commercial lending relate to the source
of repayment of the loan, which is weighted toward the ability to repay versus
being primarily collateral dependent.
In 1998, FloridaFirst Bank hired a senior commercial loan officer to head up the
lending credit activities and two additional commercial loan staff members were
added to support its increased activities in the area. To further enhance its
transition to a full service community bank, FloridaFirst Bank expects to hire
additional personnel experienced in commercial lending and will increase its
marketing efforts on smaller businesses operating in its market areas.
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Conversion Valuation Appraisal Report Page: 83
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6. Valuation
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VALUATION APPROACH
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In appraising the pro forma market value of the Bank, FinPro began by applying
the accepted valuation methodology promulgated by the regulators, i.e., the pro
forma market value approach, four key pricing multiples were considered. The
four multiples include:
o Price to earnings ("P/E")
o Price to tangible book value ("P/TB")
o Price to book value ("P/B")
o Price to assets ("P/A")
All of the approaches were calculated on a pro forma basis including the effects
of the conversion proceeds. FinPro targeted the pricing multiple of the
Comparable Group and adjusted for the fundamentals discussed in section four.
The Comparables do not have all of the characteristics of the Bank in this
transaction. These other characteristics of the Bank can reasonably be expected
to impact the valuation of the Bank in the marketplace. As such, FinPro adjusted
for these other characteristics in section five. These characteristics included:
o Interest Rate Risk
o Second Steps
o Subscription Interest
o Offering Size
o Florida Market
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Conversion Valuation Appraisal Report Page: 84
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Based upon the OTS proposed ruling for thrift conversions, a greater emphasis
was placed on earnings rather than the other factors. Specifically, the OTS has
required the business plan filed as part of the conversion ". . . should
demonstrate the ability to realize a reasonable return on equity." The proposed
ruling also states that the "OTS recognizes that investor requirements vary with
time and market conditions . . ." The proposed rule goes on the say: "Generally,
returns should be considered in relation to trends for publicly-traded thrift
and bank stocks, broader equity market returns, and the general level of
interest rates. At a minimum, the projected return on equity should exceed, by a
margin reflecting relative investment risk, the institution's rates on long term
certificates of deposits." These statements suggest that the OTS is attempting
to prevent institutions from raising too much capital and that they understand
the importance of earnings going forward.
In a second step, the appraisal must equally weigh the fairness of the value to
both the existing minority shareholders, as well as new equity investors. These
interests are at odds as the existing shareholders desire a higher value and
thus a higher exchange ratio, while the new equity investors desire a lower
value. This valuation gave equal weight to both the existing minority
shareholders and the new investors.
FinPro's estimated value range was designed to provide standard conversion
pricing toward the low end of the range, while accounting for the exchange of
the minority shareholders at the high end of the range.
FloridaFirst Bancorp (MHC) closed at $11.50 per share on August 25, 2000. This
would equal an exchange ratio of 1.1500, which is between the maximum and the
supermaximum of the estimated value range. If the offering were to close with an
exchange ratio below 1.1500, existing shareholders could see their value
diluted. However, the second step would benefit the minority shareholders in the
form of increased liquidity, the addition of an exit strategy and book value
accretion.
With this estimated value range, FinPro will let the market decide whether the
Bank should be priced closer to standard conversions at the low end of the range
or closer to the exchange value at the high end of the range.
Based upon the premiums and discounts defined in the section above, the Bank
pricing at the midpoint is estimated to be $48,000,000. Based upon a range below
and above the midpoint value, the relative values are $40,800,000 at the minimum
and $55,200,000 at the maximum respectively. At the supermaximum of the range,
the offering value would be $63,480,000.
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Conversion Valuation Appraisal Report Page: 85
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This equates to exchange ratios of 0.7628, 0.8975, 1.0321, and 1.1869 at the
minimum, midpoint, maximum and supermaximum, respectively. As such, the Bank
would raise gross proceeds of $23,268,770, $27,372,990, $31,479,520 and
$36,201,790 at the minimum, midpoint, maximum and supermaximum of the EVR,
respectively.
At the various levels of the estimated value range, the offering would result in
the following offering data:
FIGURE 66 - VALUE RANGE OFFERING DATA*
* Filed in accordance with Rule 202 of Regulation S-T.
Source: FinPro Inc. Pro forma Model
FIGURE 67 - VALUE RANGE OFFERING DATA*
* Filed in accordance with Rule 202 of Regulation S-T.
Source: FinPro Inc. Pro forma Model and SNL Securities, Inc.
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Conversion Valuation Appraisal Report Page: 88
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Valuation Conclusion
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It is, therefore, our opinion that as of August 25, 2000, the estimated pro
forma market value of the Bank in a full offering was $48,000,000 at the
midpoint of a range with a minimum of $40,800,000 to a maximum of $55,200,000 at
15% below and 15% above the midpoint of the range respectively. Assuming an
adjusted maximum value of 15% above the maximum value, the adjusted maximum
value or supermaximum value in a full offering is $63,480,000. The stock will be
issued at $10.00 per share. At the midpoint of the EVR, 2,062,701 shares will be
exchanged and 2,737,299 conversion shares will be issued based on an exchange
ratio of 0.8975.
Figure 73 - Details of The Estimated Valuation Range*
* Filed in accordance with Rule 202 of Regulation S-T.
Pro forma comparisons of the Bank's value range with the Comparable Group, all
public thrifts, Florida public thrifts and second step conversions are shown in
Exhibit 11.
