10-Q 1 f10q_123102-0248.txt 10Q -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended December 31, 2002 [ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to --------- --------- Commission file number 0-32139 -------- FLORIDAFIRST BANCORP, INC. ------------------------------------------------------ (Exact Name of Registrant as Specified in Its Charter) Florida 59-3662010 -------------------------------- ----------------- (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.) 205 East Orange Street Lakeland, Florida 33801-4611 --------------------------------------- (Address of Principal Executive Offices) (863) 688-6811 ------------------------------------------------- (Registrant's Telephone Number, Including Area Code) N/A ----------------------------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) 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 ---- ---- State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: Common stock, par value $.10 per share 5,379,157 shares -------------------------------------- -------------------------------- (Class) Outstanding at January 31, 2003 --------------------------------------------------------------------------------

1 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets ($ in thousands, except per share amounts)

See Accompanying Notes to Condensed Consolidated Financial Statements. 2 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY Condensed Consolidated Statements of Earnings (Unaudited) (In thousands, except per share amounts)

See Accompanying Notes to Condensed Consolidated Financial Statements. 3 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY Condensed Consolidated Statement of Stockholders' Equity (Unaudited) For the Three Months Ended December 31, 2002 (In thousands, except share amounts)

See Accompanying Notes to Condensed Consolidated Financial Statements. 4 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)

5 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY Condensed Consolidated Statements of Cash Flows (Unaudited), Continued (In thousands)

See Accompanying Notes to Condensed Consolidated Financial Statements. 6 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY Notes to Condensed Consolidated Financial Statements (unaudited) (1) Basis of Presentation General. FloridaFirst Bancorp, Inc. (the "Company") is the parent of and conducts its business principally through FloridaFirst Bank (the "Bank"). The Bank, a federally-chartered savings bank headquartered in Lakeland, Florida, is a community-oriented savings institution that delivers retail and commercial banking services through nineteen full-service locations. The Company purchased seven branches during February 2002 (see Footnote 3). Principal sources of income are derived through interest earned on loans and securities. 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 ("OTS"). 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 accounting principles generally accepted in the United States of America. However, all adjustments, consisting of normal recurring accruals, which, in the opinion of management, are necessary for a fair presentation of the condensed consolidated financial statements have been included. The results of operations for the three-month periods ended December 31, 2002 and 2001 are not necessarily indicative of the results that may be expected for the entire fiscal year or any other period. These statements should be read in conjunction with the consolidated financial statements and related notes, which are included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2002. (2) Loans Loans consist of the following (in thousands):

7 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY Loans held for sale, included in the totals above, were approximately $8.0 million and $3.0 million at December 31, 2002 and September 30, 2002, respectively. The activity in the allowance for loan losses is as follows (in thousands): Three Months Ended December 31, -------------------- 2002 2001 ---- ---- Balance at beginning of period.......... $4,519 3,652 Provision for loan losses............... 180 150 Net loan charge-offs.................... (224) (56) ------ ----- Balance at end of period................ $4,475 3,746 ====== ===== No loans were identified as impaired at or during the three months ended December 31, 2002 or 2001. (3) Branch Acquisition On February 15, 2002, the Company finalized the purchase of seven Florida retail sales offices ("Branch Acquisition") from SunTrust Bank coincident with SunTrust Bank's acquisition of such offices from Huntington National Bank ("Huntington"). Four of these Huntington offices are located in Lakeland, Florida, and one each in Avon Park and Sebring in Highlands County, and one office in Wildwood, Florida. The transaction resulted in the Company receiving approximately $120.9 million in cash, $162.1 million in deposits, $26.1 million in loans and $2.4 million in premises and equipment related to these seven offices. The Company paid a premium of approximately 7.6%. This premium, along with additional acquisition costs, resulted in a core deposit intangible asset of $12.7 million being recorded. This intangible asset is being amortized using an accelerated method over twelve years. (4) Other Events On October 2, 2002, the Company entered into a definitive agreement with BB&T Corporation ("BB&T") whereby BB&T would acquire 100% of the outstanding common stock of the Company. However, pursuant to discussions with regulatory officials, BB&T and the Company terminated the agreement on October 31, 2002 so that BB&T could submit the proper application to acquire control of the Company pursuant to regulatory guidelines. This application was filed on November 4, 2002. The Company has capitalized approximately $725,000 in costs related to the acquisition through December 31, 2002. 8 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY (5) Earnings Per Share of Common Stock The Company follows the provisions of SFAS No. 128, "Earnings Per Share." SFAS No. 128 provides accounting and reporting standards for calculating earnings per share. Basic earnings per share of common stock has been computed by dividing the net income for the period by the weighted-average number of shares outstanding. Shares of common stock purchased by the Employee Stock Ownership Plan ("ESOP") are only considered outstanding when the shares are released or committed to be released for allocation to participants. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares outstanding including the dilutive effect of stock options and shares needed to satisfy the requirements of the Restricted Stock Plan, if any, computed using the treasury stock method prescribed by SFAS No. 128. The following table presents the calculation of basic and diluted earnings per share of common stock (in thousands, except per share amounts):

9 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY (6) Stock Compensation Plans SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation Transition and Disclosure (collectively, "SFAS No. 123") encourages all entities to adopt a fair value based method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB No. 25"), whereby compensation cost is the excess, if any, of the quoted market price of the stock at the grant date over the amount an employee must pay to acquire the stock. Stock options issued under the Company's Stock Option Plans ("Option Plans") have no intrinsic value at the grant date as the stock options had an exercise price equal to the then current market value of the underlying common stock, and under APB No. 25 no compensation cost is recognized for them. The Company has elected to continue with the accounting methodology in APB No. 25 and, as a result, has provided pro forma disclosures of net income and earnings per share and other disclosures, as if the fair value based method of accounting had been applied. Stock awards granted under the Company's Restricted Stock Plan ("RSP Plan") are expensed into current earnings over the vesting period based on the market value of the common stock on the award date. There were no stock options granted during the three-month period ended December 31, 2002. During the three-month period ended December 31, 2001, 308,750 stock options were granted under the Option Plans. SFAS No. 123 requires pro forma fair value disclosures if the intrinsic value method is being utilized. For purposes of pro forma disclosures, the estimated fair value was included in expense over the period vesting occurs. The pro forma information has been determined as if the Company had accounted for its stock options under the fair value method of SFAS No. 123. The Company accounts for their Option Plans and RSP Plan under the recognition and measurement principles of APB No. 25. The proforma information and assumptions used in calculating the fair values of stock options granted and the related effects on net income and basic and diluted earnings per share as if the Company had applied the fair value recognition provision of SFAS No. 123 is as follows ($ in thousands, except per share amounts):

10 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY

Both net income, as reported and proforma net income include approximately $143,000 and $65,000, net of tax, in salaries and employee benefits expense for the three-month periods ended December 31, 2002 and 2001, respectively relating to shares awarded under the RSP Plan. (8) Reclassifications Certain amounts in the 2001 condensed consolidated financial statements have been reclassified to conform to the presentation for 2002. 11 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General FloridaFirst Bancorp, Inc. (the "Company") is the parent of, and conducts its business principally through, FloridaFirst Bank (the "Bank"). The Bank, a federally-chartered savings bank headquartered in Lakeland, Florida, is a community-oriented savings institution that delivers retail and commercial banking services through nineteen full-service locations. The Company purchased seven retail sales offices during February 2002, see "Overview" below. Principal sources of income are derived through interest earned on loans and securities. The primary sources of funds are customer deposits and Federal Home Loan Bank ("FHLB") 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 ("OTS"). 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. Recent Legislation to Curtail Corporate Accounting Irregularities On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002 (the "Act"). The Securities and Exchange Commission (the "SEC") has promulgated certain regulations pursuant to the Act and will continue to propose additional implementing or clarifying regulations as necessary in furtherance of the Act. The passage of the Act and the regulations implemented by the SEC subject publicly-traded companies to additional and more cumbersome reporting regulations and disclosure. Compliance with the Act and corresponding regulations may increase the Company's expenses. 12 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY Overview On February 15, 2002, the Company finalized the purchase of seven Florida retail sales offices ("Branch Acquisition") from SunTrust Bank coincident with SunTrust Bank's acquisition of such offices from Huntington National Bank ("Huntington"). The transaction resulted in the Company receiving $120.9 million in cash, and included $162.1 million in deposits and $26.1 million in loans related to those seven offices. The Company paid a premium of approximately 7.6%. This premium, along with additional acquisition costs, resulted in a core deposit intangible asset of $12.7 million being recorded which is subject to periodic amortization over a period of twelve years. The cash received from the purchase was primarily used to reduce $30.0 million in short-term fixed-rate and adjustable-rate FHLB advances and fund the purchase of approximately $85.0 million in securities. The securities were primarily mortgage-backed securities with average lives less than five years and which provide cash flow from the time of purchase. This strategy allows the Company to immediately earn an acceptable yield on the invested funds and utilize the cash flow from the securities to fund new loan originations. Liquidity and Capital Resources The liquidity of a savings institution reflects its ability to provide funds to meet loan requests, to accommodate possible outflows in deposits, and to take advantage of interest rate market opportunities. Funding of loan requests, providing for liability outflows, and management of interest rate fluctuations require continuous analysis in order to match the maturities of specific categories of short-term loans and investments with specific types of deposits and borrowing. Savings institution liquidity is normally considered in terms of the nature and mix of the savings institution's sources and uses of funds. Asset liquidity is provided through loan repayments and the management of maturity distributions for loans and securities. An important aspect of liquidity lies in maintaining sufficient levels of loans and mortgage-backed securities that generate monthly cash flows. Cash and cash equivalents increased $7.0 million for the three months ended December 31, 2002 to $37.6 million. Significant cash flows or uses (amounts shown in parentheses) were as follows:

See "Comparison of Financial Condition at December 31, 2002 and September 30, 2002" for discussion of significant cash flows. 13 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY On December 31, 2002, the Bank was in compliance with its three minimum regulatory capital requirements as follows: Amount Percent ------ ------- (In thousands) Tangible capital....................... $ 64,451 7.80% Tangible capital requirement........... 12,401 1.50 Excess over requirement................ 52,050 6.30 Core capital........................... 64,451 7.80 Core capital requirement............... 33,069 4.00 Excess over requirement................ 31,382 3.80 Risk based capital..................... 68,926 13.68 Risk based capital requirement......... 40,318 8.00 Excess over requirement................ 28,608 5.68 Management believes that under current regulations, the Bank will continue to exceed its minimum capital requirements for the foreseeable future. Events beyond the control of the Bank, such as increased interest rates or a downturn in the economy in areas in which the Bank operates could adversely affect future earnings and as a result, the ability of the Bank to meet its future minimum capital requirements. 14 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY Comparison of Financial Condition at December 31, 2002 and September 30, 2002 Assets. Total assets decreased $11.4 million, or 1.3%, to $848.0 million at December 31, 2002 from $859.4 million at September 30, 2002. The decrease in total assets resulted primarily from: >> a $13.2 million decrease in securities available for sale. Strong mortgage refinancing activities, resulting from the continued decline in longer-term interest rates, has accelerated the repayments on many mortgage-related securities. The Company elected not to reinvest most of the funds to provide the liquidity to repay certain FHLB advances in early January. >> a $4.9 million net decrease in the loan portfolio. The decrease in loans resulted from the Company's residential mortgage loan origination strategy during the quarter to originate and sell, on a servicing- released basis, fixed-rate loans due to the low interest-rate environment. This strategy has caused residential loan balances to decline, while increasing gains from selling the loans and related servicing rights. An increase in refinance activity has resulted in increased repayment activity as longer-term interest rates continued to decline. The reduction in the residential mortgage loan portfolio was offset partially by continued growth in the consumer and commercial loans outstanding. Management continues to focus on commercial and consumer loan originations, which totaled $20.3 million for the three months ended December 31, 2002, and >> a $7.0 million increase in cash and cash equivalents, resulting from excess funds received with the loan and securities sales and repayments. As noted above, these excess funds were utilized to reduce the FHLB advances in early January 2003. Liabilities. Total liabilities decreased $13.6 million, or 1.8%, to $746.9 million at December 31, 2002 from $760.5 million at September 30, 2002. The decrease in total liabilities resulted from: >> a $7.5 million decrease in deposits. The decrease in deposits was primarily attributable to a $10.4 million decrease in certificates of deposit, partially offset by a $2.9 million increase in transaction accounts. The decrease in deposits in recent months appears to have been caused by certain retail customers moving maturing certificates into the more liquid checking and money-market accounts due to the low interest-rate environment, or seeking higher yielding alternative investments or higher rates with our competitors. >> a $2.6 million decrease in other borrowings, primarily due to lower funds invested with the Company under the Treasury Investment Program, and >> a $3.4 decrease in other liabilities. This decrease is primarily attributable to payment of mortgage customers annual real estate taxes held in escrow, as well as the vesting of the accrued contribution to the employee stock ownership plan for the plan year ended December 31, 2002. Stockholders' Equity. The increase of $2.1 million in the Company's stockholders' equity reflects: >> net income for the three months ended December 31, 2002 of $1.5 million >> repurchase of shares of Company stock for the Restricted Stock Plan ("RSP") at a cost $121,000 >> repayment of $541,000 on the Employee Stock Ownership Plan ("ESOP") loan and allocation of the released shares >> increase in accumulated other comprehensive income of $254,000 >> dividends paid that totaled $323,000. The increased value in accumulated other comprehensive income resulted from the fluctuation in market value of the Company's securities available for sale. Because of continued interest rate volatility, accumulated other comprehensive income and stockholders' equity could materially fluctuate for each interim and year-end period. 15 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY Results of Operations The following tables set forth, for the periods indicated, information regarding (i) the total dollar amount of interest income of the Company from interest-earning assets and the resultant average yields based on various interest methods; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii) net interest income; (iv) interest-rate spread; and (v) net interest margin.

(1) Interest income and net interest income do not agree to the condensed consolidated statements of earnings because the tax equivalent income on municipal bonds is included in this schedule. (2) Includes noninterest-bearing checking accounts. 16 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY Comparison of Operating Results for the Three Months Ended December 31, 2002 and 2001 Net Income. Net income for the three months ended December 31, 2002 increased 12.1% to $1.5 million, compared to $1.3 million for the same period in 2001, as a result of increases in net interest income and noninterest income, offset by an increase in noninterest expenses. Net interest income increased $1.5 million, or 28.5%, for the three months ended December 31, 2002 compared to the same period in 2001. This increase resulted from an increase in interest income of $1.2 million and a decrease in interest expense of $213,000. See the following discussions for these items as well as discussions of noninterest income and noninterest expenses. Interest Income. The following discussion highlights the major factors that impacted the changes in interest income during the quarter when compared to the prior year. Details are contained in the Average Balance Sheet table at page 16. >> While the amount of residential loans outstanding decreased slightly, consumer and commercial loan growth remained steady. The Company continues its increased emphasis on commercial and consumer loan growth in an effort to restructure its loan portfolio to shorten the loan maturities. Excluding the loans acquired from the Branch Acquisition, average commercial loan balances outstanding increased by approximately 7% (total increase of 20% including loans acquired) and average consumer loan balances outstanding increased 7% (total increase of 27% including loans acquired) during the quarter from the same quarter in the preceding year. Average commercial and consumer loans represent approximately 38% of the loan portfolio, compared to 32% last year. >> The average yield on loans decreased 38 basis points to 7.26%, for the three months ended December 31, 2002 compared to the same period in 2001. The decrease in loan yields is directly attributable to the continued decline in market rates of interest for loans that we retain in our portfolio. The high level of refinancings not only impact the residential mortgage loan yields, it also creates pricing pressure on new and existing loans in the commercial area. Consumer loans have relatively short average lives historically, therefore, the lower interest rate environment has caused the yield on the consumer loan portfolio to decline from last year as new loans are generated in this lower interest environment to replace the loans being paid off. >> The average balances in the securities and other portfolio grew 80% as the Company invested approximately $85 million from the funds that were received in the Branch Acquisition, and to a lesser extent, continued to leverage the capital raised in recent years through strategic purchases of securities. >> The lower yield in the securities portfolio resulted from a shift to shorter duration and adjustable rate investments in fiscal year 2002 to manage the interest rate risk profile of the Company, as well as the overall reduction in interest rates as previously discussed. Interest Expense. The following discussion highlights the major factors that impacted the changes in Interest Expense during the quarter when compared to the prior year. Detailed changes are contained in the Average Balance Sheet table at page 16. >> The increase in average deposits is mainly attributable to $162 million in deposits assumed in the Branch Acquisition. However the increased sales effort to attract and retain new deposits, as well as customer concerns about equity investments, provided additional deposit growth. The growth in average balances in interest checking and money-market accounts, together with certificates of deposit maturing and renewing at lower rates in the current interest rate environment, helped to reduce the overall cost of interest-bearing deposits by 136 basis points. 17 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY >> Average FHLB advances and other borrowings outstanding increased only slightly this quarter compared to the same quarter last year. Certain FHLB fixed-rate advances were repaid at maturity, causing the advance balances to decline. However, a leveraging transaction involving U.S. agency securities were funded with borrowings through lower-cost reverse repurchase agreements. >> Actions by the Federal Reserve to decrease short-term interest rates over the past two years has provided an immediate reduction in the cost of deposits, as well as advances and other borrowings. Provision for Loan Losses. The provision for loan losses is charged to earnings to bring the total allowance for loan losses to an amount that represents management's best estimate of the losses inherent in the loan portfolio, based on historical experience, volume and type of lending conducted by the Company, industry standards, the level and status of past due and nonperforming loans, the general economic conditions in the Company's lending area and other factors affecting the ability to collect on the loans in its portfolio. The allowance for loan losses is maintained at a level that represents management's best estimates of losses in the loan portfolio at the balance sheet date. However, there can be no assurance that the allowance for losses will be adequate to cover losses, which may be realized in the future, and that additional provisions for losses will not be required. The provision for loan losses was $180,000 for the three months ended December 31, 2002 compared to $150,000 for the three months ended December 31, 2001. The provision for loan losses increased for the current three-month period primarily as a result of increased consumer and commercial loan growth. The allowance for loan losses increased to $4.5 million at December 31, 2002 from $3.7 million at December 31, 2001. An additional $1.0 million was added to the allowance for loan losses related to loans acquired in the Branch Acquisition due to the loans being underwritten on a different basis than the Company's guidelines. A higher charge-off percentage is anticipated on the loans acquired. The current allowance represents .90% of loans outstanding at December 31, 2002. The Company had net charge-offs of $224,000 for the three months ended December 31, 2002 compared to net charge-offs of $56,000 for the same period in 2001. The Company intends to maintain its allowance for loan losses commensurate with its loan portfolio, especially its commercial real estate and consumer loan portfolios. Noninterest Income. Noninterest income increased $728,000 to $1.6 million for the three months ended December 31, 2002 from $834,000 for the three months ended December 31, 2001. The major changes were: >> An increase of $249,000 in service charges on loans and deposit accounts compared to the prior period, primarily related to the overall increase in accounts from the Branch Acquisition. >> An increase of $144,000 in net gain on sale of loans held for sale, as the majority of the residential mortgage loan production during the current period was sold in the secondary market due to current interest rates being below the Company's threshold for retaining the loans in its portfolio. >> An increase of $190,000 in net gains on the sale of securities available for sale; >> An increase of $75,000 in earnings on bank-owned life insurance policies, primarily due to earnings on premiums of $4.5 million for additional policies purchased in March and April 2002; and >> An increase of $70,000 in other income primarily due to commission income received from the Company's annuity sales program that began in September 2002. 18 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY Noninterest Expense. Noninterest expense increased by $1.9 million to $5.8 million for the three months ended December 31, 2002 from $3.9 million for the three months ended December 31, 2001. >> Salaries and employee benefits increased $740,000 primarily due to: * $266,000 for seven retail sales offices acquired in the Branch Acquisition (56 staff members), and $11,000 for one new full-service branch opened during the quarter. * 5% average salary increases due to merit and cost of living adjustments, an $80,000 increase due to ten additional staff positions, including two management positions. * commissions increased $150,000 as residential mortgage loan origination production increased over 50%, the retail sales effort resulted in increased sales of products and services, and annuity sales incentives were initiated during the quarter. * a $15,000 increase in ESOP costs due to the increased price of Company stock, and * an increase of $118,000 for health insurance costs due to the growth in our employee base as well as increased claims experience. >> Occupancy expense increased $241,000, primarily due to the addition of seven new offices in the Branch Acquisition and the opening of one new retail sales office in November 2002. >> Postage and office supplies increased $77,000 primarily due to the Branch Acquisition and the conversion to a proof of deposit ("POD") balancing environment. >> A core deposit intangible amortization expense of $405,000 resulting from the Branch Acquisition. >> Marketing, data processing and other noninterest expenses increased $439,000, including a $79,000 increase in telecommunication expenses related to the expanded branch network and communication channel upgrades, and $91,000 in security guard expense for increased protection of customers and employees deemed necessary after the Company experienced a series of robberies during fiscal 2002. The actual dollar losses from the robberies were not significant. The other increases are attributable to correspondent bank service charges, data processing expenses, item processing costs, debit card expenses related to the overall growth of the Company and consumer loan expenses related to a no-closing-cost home equity loan program ran during the last half of 2002. 19 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY Item 3. Quantitative and Qualitative Disclosures 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 included in the annual report on Form 10-K for the year ended September 30, 2002. 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 September 30, 2002. Although the results of the NPV model are not yet available for December 31, 2002, it is anticipated that the NPV Ratio for all rate scenarios will not be materially different than those below. The NPV was calculated by the OTS, based on information provided by the Company ($ in thousands). NPV as % of Net Portfolio Value ("NPV") Present Value of Assets ---------------------------- ----------------------- Change Basis Point In Rates $ Amount $ Change % Change NPV Ratio Change -------- -------- -------- -------- --------- ------- +300 bp 55,378 (35,541) (39)% 6.66% (351) +200 bp 70,073 (20,846) (23)% 8.20% (197) +100 bp 83,494 (7,425) (8)% 9.52% (65) 0 bp 90,919 - - % 10.17% - -100 bp 91,271 352 .4% 10.08% (9) Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures. The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed within 90 days of the filing date of this report, the chief executive and chief financial officers of the Company concluded that the Company's disclosure controls and procedures were adequate. Changes in Internal Controls. The Company made no significant changes in its internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation of those controls by the Chief Executive and Chief Financial officers. 20 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not Applicable. 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 Not Applicable. 21 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY PART II. OTHER INFORMATION, CONTINUED

* Incorporated by reference to the Registrant's Registration Statement on Form S-1 initially filed with the Commission on September 5, 2000 (File No. 333-45150). ** Incorporated by reference to the identically numbered exhibits to the Form 10-K filed by FloridaFirst Bancorp on December 29, 1999 (File No. 0-25693). *** Incorporated by reference to the Proxy Statement filed by the Registrant on December 21, 2001. (b) Reports on Form 8-K: (i) A report on Form 8-K was filed on October 3, 2002 under items 5 and 7 announcing that the Registrant entered into a definitive Agreement and Plan of Reorganization with BB&T Corporation. (ii) An amended Form 8-K was filed on October 10, 2002 under Item 5 announcing a revision to the Agreement and Plan of Reorganization filed with the 8-K on October 3, 2002. (iii)A Form 8-K was filed on November 1, 2002 under Items 5 and 7 announcing the termination of the Agreement and Plan of Reorganization with BB&T Corporation. 22 FLORIDAFIRST BANCORP, INC. AND SUBSIDIARY 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.

23 CERTIFICATIONS -------------- I, Gregory C. Wilkes, certify, that: 1. I have reviewed this quarterly report on Form 10-Q of FloridaFirst Bancorp, Inc.; 2. Based on my knowledge, the quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of the internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect the internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 11, 2003 By: /s/ Gregory C. Wilkes ------------------- -------------------------------------- Gregory C. Wilkes, President and Chief Executive Officer 24 I, Kerry P. Charlet, certify, that: 1. I have reviewed this quarterly report on Form 10-Q of FloridaFirst Bancorp, Inc.; 2. Based on my knowledge, the quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of the internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect the internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 11, 2003 By:/s/ Kerry P. Charlet ------------------ ---------------------------------------- Kerry P. Charlet, Chief Financial Officer 25

FLORIDAFIRST BANCORP INC 10-Q