HARB Harbor Florida Bancshares

Harbor Florida Bancshares, Inc. Announces Third Quarter Earnings Increase FORT PIERCE, Fla., July 14 /PRNewswire-FirstCall/ -- Harbor Florida Bancshares, Inc. (NASDAQ:HARB) ("the Company"), the holding company for Harbor Federal Savings Bank ("Harbor Federal"), announced today that diluted earnings per share for its third fiscal quarter ended June 30, 2004, increased 4.8% to 44 cents per share on net income of $10.3 million, compared to 42 cents per share on net income of $9.6 million for the same period last year. Diluted earnings per share for the nine months ended June 30, 2004, increased 5.7% to $1.29 per share on net income of $29.9 million, compared to $1.22 per share on net income of $28.2 million for the same period last year. The increases for both the quarter and fiscal year to date were due primarily to increased net interest income, resulting from an increase in average interest- earning assets due to purchases of mortgage-backed securities and originations of loans. This growth was funded with low cost core deposits and FHLB advances. The increase in net interest income was supplemented by an increase in other income and was partially offset by an increase in other expenses. Harbor Florida Bancshares, Inc.'s Board of Directors declared a quarterly dividend of 16 cents per share for the third quarter. The dividend is payable August 20, 2004 to shareholders of record as of July 23, 2004. FINANCIAL CONDITION Total assets increased to $2.592 billion at June 30, 2004, from $2.352 billion at September 30, 2003. Total net loans increased to $1.832 billion at June 30, 2004, from $1.611 billion at September 30, 2003. Total deposits increased to $1.740 billion at June 30, 2004, from $1.550 billion at September 30, 2003. Strong loan originations contributed to net increases of $82.7 million in residential one-to-four family mortgage loans, $44.4 million in land loans, $54.2 million in nonresidential mortgage loans, $29.3 million in consumer loans, and $11.9 million in commercial business loans for the nine months ended June 30, 2004. Residential one-to-four mortgage loan originations increased 19.5% from the same period last year to $571.8 million for the nine months ended June 30, 2004. Commercial real estate loan originations increased 51.9% to $175.1 million for the nine months ended June 30, 2004. Consumer loan originations increased 37.5% to $121.4 million for the nine months ended June 30, 2004. Commercial business loan originations were $36.3 million for the nine-month period, up 24.7% from the same period last year. The increase in deposits for the nine months was due primarily to a net increase of $172.5 million in core deposits, and $16.9 million in certificate accounts. This change reflects the Company's emphasis on growing transaction accounts, the customer's preference for shorter-term investments in a low interest rate environment and growth in the Company's market area. RESULTS OF OPERATIONS Net interest income increased 12.2% to $24.4 million for the quarter ended June 30, 2004, from $21.7 million for the quarter ended June 30, 2003 as a result of a 14.9% increase in average interest-earning assets that were funded primarily with low cost core deposits and FHLB advances. The average balance of mortgage-backed securities increased $335.6 million, partially offset by a decrease of $174.4 million in investment securities and $36.7 million in interest-bearing deposits in other banks from the same period last year. The Company's investment strategy has been to shift the securities portfolio from lower yielding, shorter term investment securities into higher yielding balloon mortgage-backed securities, with expected average lives in the three to four year range. Average total loans increased by $194.3 million. The average balance of core deposits and FHLB advances increased by $221.9 million and $91.4 million, respectively. The average balance of core deposits increased to 51.6% of total average deposits from 44.5% for the same quarter last year. Provision for loan losses was $503,000 for the quarter ended June 30, 2004, compared to $659,000 for the quarter ended June 30, 2003. The provision for the quarter ended June 30, 2004 was principally comprised of a charge of $607,000 due to increased credit risk resulting from growth in the loan portfolio, primarily commercial real estate loans, partially offset by a decrease in the level of classified loans. Other income increased to $7.0 million for the quarter ended June 30, 2004, from $5.8 million for the quarter ended June 30, 2003. This increase was due primarily to increases of $990,000 and $360,000, respectively, in non- operating gains on sale of equity securities and premises and equipment, and an increase of $777,000 in other fees and service charges, partially offset by a decrease of $969,000 in gain on sale of mortgage loans. The increase in other fees and service charges was primarily due to growth in transaction accounts. The decrease in gain on sale of mortgage loans was due primarily to a decline in the originations of fixed-rate residential mortgage loans available for sale partly as a result of a change in customer preference to adjustable rate loans. Other expenses increased to $13.5 million for the quarter ended June 30, 2004, from $11.0 million for the quarter ended June 30, 2003. This increase was due primarily to increases of $863,000 in compensation and benefits, $222,000 in occupancy, $128,000 in data processing services. Other expense increased $1.2 million primarily due to the recognition of a non-deductible excise tax assessed by the Internal Revenue Service ("IRS") of $873,000 related to an operational adjustment in the Company's Employee Stock Ownership Plan ("ESOP"). The Company has recognized an expense for the proposed IRS assessment but is contesting both its validity and the amount thereof. Income tax expense increased to $7.1 million for the quarter ended June 30, 2004, from $6.2 million for the quarter ended June 30, 2003. The effective tax rate was 40.8% for the quarter ended June 30, 2004 and 39.2% for the same period last year. The increase in the tax rate is primarily due to the $873,000 non-deductible ESOP excise tax. ASSET QUALITY Nonperforming loans decreased to $2.1 million at June 30, 2004 from $2.3 million at June 30, 2003. Net chargeoffs for the nine months ended June 30, 2004 decreased to $47,000 compared to $141,000 for the same period last year. The ratio of the allowance for loan losses to total net loans decreased to .95% of loans as of June 30, 2004, from 1.01% of total net loans for the same period last year. The allowance for loan losses remains sufficient to cover losses inherent in the loan portfolio. BRANCH AND INSURANCE EXPANSION Harbor Federal opened two new branches during the third quarter as well as completed the relocation of its north Port St. Lucie branch into new facilities at Prima Vista Crossing Shopping Center. The new branches are in south Vero Beach on Oslo Road and in Merritt Island at the Publix Shopping Center at Courtenay Parkway (Route 3) and Florida Boulevard. During the fourth fiscal quarter, Harbor Federal will expand into Lake County with a new branch in Clermont at US 27 and Citrus Tower Boulevard. Harbor Insurance Agency, a subsidiary of Harbor Federal, also opened one new office in Brevard County during the quarter. Harbor Insurance Agency is headquartered in Fort Pierce, Florida and now has five full service locations along Florida's East Coast. TREASURY STOCK REPURCHASES Harbor Florida Bancshares, Inc.'s Board of Directors has previously approved a stock repurchase program permitting the Company to acquire up to 1,200,000 shares of its common stock subject to market conditions. The Company has repurchased 512,677 shares under the current stock repurchase program. As of June 30, 2004, the Company has a total of 7,993,787 shares held as treasury stock. Harbor Federal is located in Fort Pierce, Florida and has 35 offices located in a six-county area of East Central Florida. Harbor Florida Bancshares, Inc. common stock trades on the Nasdaq National Market under the symbol HARB. Financial highlights for Harbor Florida Bancshares, Inc. follow. HARBOR FLORIDA BANCSHARES, INC. June 30, September 30, 2004 2003 (In Thousands) Selected Consolidated Financial Data: Total assets $2,592,190 $2,352,071 Loans, gross 1,849,733 1,627,584 Allowance for loan losses 17,454 16,199 Net loans 1,832,279 1,611,385 Loans held for sale 3,716 2,648 Interest-bearing deposits 5,528 4,432 Investment securities 139,528 296,935 Mortgage-backed securities 468,431 308,075 Real estate owned 333 906 Goodwill 3,591 3,719 Deposits 1,739,670 1,550,260 FHLB advances 544,497 503,511 Stockholders' equity 277,816 261,883 # of common shares outstanding 23,788 23,780 Three months ended Nine months ended June 30, June 30, 2004 2003 2004 2003 (In Thousands Except per Share Data) Selected Consolidated Operating Data: Interest income $36,007 $33,575 $105,242 $101,060 Interest expense 11,649 11,869 35,042 37,806 Net interest income 24,358 21,706 70,200 63,254 Provision for loan losses 503 659 1,302 1,612 Net interest income after provision for loan losses 23,855 21,047 68,898 61,642 Other Income: Fees and service charges 3,974 3,197 10,853 9,634 Insurance commissions and fees 923 860 2,529 2,042 Gain on sale of mortgage loans 297 1,266 1,707 3,698 Gain on sale of equity securities 1,379 389 1,998 999 Gain on sale of debt securities -- -- 248 -- Gain on sale of premises and equipment 342 (18) 334 (17) Other 50 60 320 150 Total other income 6,965 5,754 17,989 16,506 Other expenses: Compensation and benefits 7,483 6,620 21,836 18,883 Occupancy 1,773 1,551 5,109 4,464 Other 4,205 2,868 10,365 8,432 Total other expenses 13,461 11,039 37,310 31,779 Income before income taxes 17,359 15,762 49,577 46,369 Income tax expense 7,090 6,187 19,689 18,173 Net income $10,269 $9,575 $29,888 $28,196 Net income per share: Basic $0.45 $0.43 $1.32 $1.25 Diluted $0.44 $0.42 $1.29 $1.22 Weighted average shares outstanding Basic 22,610 22,611 22,606 22,586 Diluted 23,139 23,241 23,150 23,170 HARBOR FLORIDA BANCSHARES, INC. Three months ended June 30, 2004 2003 Selected Financial Ratios: Performance Ratios: Return on average assets (1) 1.62 % 1.73 % Return on average stockholders' equity (1) 15.05 % 15.08 % Book value per share $11.68 $10.74 Net interest rate spread (1) 3.80 % 3.83 % Net interest margin (1) 3.97 % 4.07 % Non-interest expense to average assets (1) 2.12 % 2.00 % Net interest income to non-interest expense (1) 1.81 x 1.96 x Average interest-earning assets to average interest-bearing liabilities 109.32 % 110.88 % Efficiency ratio (1) 43.10 % 42.83 % Asset Quality Ratios: Non-performing assets to total assets 0.09 % 0.14 % Allowance for loan losses to total loans 0.95 % 1.01 % Allowance for loan losses to classified loans 322.92 % 182.34 % Allowance for loan losses to non-performing loans 838.13 % 696.39 % Capital Ratios: Average shareholders' equity to average assets 10.73 % 11.50 % Shareholders' equity to assets at period end 10.72 % 11.24 % (1) Ratio is annualized. HARBOR FLORIDA BANCSHARES, INC. Nine months ended June 30, 2004 2003 Selected Financial Ratios: Performance Ratios: Return on average assets (1) 1.62 % 1.75 % Return on average stockholders' equity (1) 14.82 % 15.21 % Book value per share $11.68 $10.74 Net interest rate spread (1) 3.76 % 3.80 % Net interest margin (1) 3.95 % 4.06 % Non-interest expense to average assets (1) 2.02 % 1.97 % Net interest income to non- interest expense (1) 1.88 x 1.99 x Average interest-earning assets to average interest-bearing liabilities 109.62 % 110.78 % Efficiency ratio (1) 43.52 % 42.40 % Asset Quality Ratios: Non-performing assets to total assets 0.09 % 0.14 % Allowance for loan losses to total loans 0.95 % 1.01 % Allowance for loan losses to classified loans 322.92 % 182.34 % Allowance for loan losses to non-performing loans 838.13 % 696.39 % Capital Ratios: Average shareholders' equity to average assets 10.91 % 11.51 % Shareholders' equity to assets at period end 10.72 % 11.24 % (1) Ratio is annualized. Three months ended Nine months ended June 30, June 30, 2004 2003 2004 2003 (In Thousands) Selected Average Balances: Total assets 2,556,386 2,215,017 2,468,301 2,153,781 Interest earning assets 2,460,283 2,141,463 2,378,975 2,081,041 Gross loans 1,780,361 1,586,037 1,704,192 1,570,675 Stockholders' equity 274,343 254,644 269,364 247,882 Deposits 1,709,192 1,481,411 1,640,571 1,433,098 Asset Quality: Nonaccrual loans 2,083 2,276 2,083 2,276 Net charge-offs 9 3 47 141 Loan Originations: Residential 245,395 166,217 571,769 478,293 Commercial real estate 70,346 57,711 175,143 115,309 Consumer 49,822 34,089 121,448 88,330 Commercial business 16,413 11,842 36,254 29,067 Loan Sales: 17,806 38,718 71,118 121,038 HARBOR FLORIDA BANCSHARES, INC. For the Three Months Ended June 30, Mar. 31, Dec. 31, Sept. 30, June 30, 2004 2004 2003 2003 2003 (In Thousands Except Per Share Data) Selected Consolidated Operating Data: Interest income $36,007 $35,099 $34,136 $33,846 $33,575 Interest expense 11,649 11,658 11,734 11,859 11,869 Net interest income 24,358 23,441 22,402 21,987 21,706 Provision for loan losses 503 351 448 334 659 Net interest income after provision for loan losses 23,855 23,090 21,954 21,653 21,047 Other Income: Fees and service charges 3,974 3,495 3,385 3,329 3,197 Insurance commissions and fees 923 884 721 726 860 Gain on sale of mortgage loans 297 669 741 473 1,266 Gain on sale of equity securities 1,379 307 311 304 389 Gain on sale of debt securities -- 248 -- 361 -- Gain (loss) on sale of premises and equipment 342 (2) (6) -- (18) Other 50 100 176 80 60 Total other income 6,965 5,701 5,328 5,273 5,754 Other expenses: Compensation and benefits 7,483 7,343 7,010 6,763 6,620 Occupancy 1,773 1,705 1,632 1,606 1,551 Other 4,205 3,210 2,954 2,878 2,868 Total other expenses 13,461 12,258 11,596 11,247 11,039 Income before income taxes 17,359 16,533 15,686 15,679 15,762 Income tax expense 7,090 6,462 6,137 6,015 6,187 Net income $10,269 $10,071 $9,549 $9,664 $9,575 Net income per share: Basic $0.45 $0.45 $0.42 $0.43 $0.43 Diluted $0.44 $0.44 $0.41 $0.42 $0.42 HARBOR FLORIDA BANCSHARES, INC. FQE JUNE 30, 2004 Three months ended June 30, 2004 Average Interest & Yield/ Balance Dividend Rate (Dollars in Thousands) Analysis of Net Interest Income: Assets: Interest-earning assets : Interest-bearing deposits $7,047 $17 0.94 % Investment securities 186,089 1,216 2.62 Mortgage-backed securities 486,786 4,726 3.88 Mortgage loans 1,520,536 25,677 6.76 Other loans 259,825 4,371 6.77 Total interest-earning assets 2,460,283 36,007 5.86 Total noninterest-earning assets 96,103 Total assets $2,556,386 Liabilities and Stockholders' Equity: Interest-bearing liabilities Deposits: Transaction accounts $706,976 $646 0.37 % Passbook savings 158,790 102 0.26 Official checks 15,690 0 0 Certificate accounts 827,736 5,067 2.46 Total deposits 1,709,191 5,815 1.37 FHLB advances 540,478 5,822 4.27 Other borrowings 814 12 6.00 Total interest-bearing liabilities 2,250,484 11,649 2.05 Noninterest-bearing liabilities 31,559 Total liabilities 2,282,043 Stockholders' equity 274,343 Total liabilities and stockholders' equity $2,556,386 Net interest income/ interest rate spread $24,358 3.80 % Net interest-earning assets/net interest margin $209,799 3.97 % Interest-earning assets to interest-bearing liabilities 109.32 % HARBOR FLORIDA BANCSHARES, INC. FQE JUNE 30, 2004 Three months ended June 30, 2003 Average Interest & Yield/ Balance Dividend Rate Analysis of Net Interest Income: Assets: Interest-earning assets : Interest-bearing deposits $43,737 $127 1.15 % Investment securities 360,500 2,482 2.75 Mortgage-backed securities 151,189 1,938 5.13 Mortgage loans 1,373,583 25,262 7.36 Other loans 212,454 3,766 7.11 Total interest-earning assets 2,141,463 33,575 6.28 Total noninterest-earning assets 73,554 Total assets $2,215,017 Liabilities and Stockholders' Equity: Interest-bearing liabilities Deposits: Transaction accounts $513,081 $531 0.42 % Passbook savings 132,316 120 0.36 Official checks 14,134 0 0 Certificate accounts 821,880 5,739 2.80 Total deposits 1,481,411 6,390 1.73 FHLB advances 449,122 5,467 4.82 Other borrowings 883 12 5.48 Total interest-bearing liabilities 1,931,416 11,869 2.45 Noninterest-bearing liabilities 28,957 Total liabilities 1,960,373 Stockholders' equity 254,644 Total liabilities and stockholders' equity $2,215,017 Net interest income/ interest rate spread $21,705 3.83 % Net interest-earning assets/net interest margin $210,047 4.07 % Interest-earning assets to interest-bearing liabilities 110.88 % HARBOR FLORIDA BANCSHARES, INC. YTD JUNE 30, 2004 Nine months ended June 30, 2004 Average Interest & Yield/ Balance Dividend Rate (Dollars in Thousands) Analysis of Net Interest Income: Assets: Interest-earning assets : Interest-bearing deposits $10,444 $72 0.91 % Investment securities 236,774 4,578 2.58 Mortgage-backed securities 427,564 12,719 3.97 Mortgage loans 1,457,801 75,324 6.89 Other loans 246,391 12,549 6.80 Total interest-earning assets 2,378,975 105,242 5.90 Total noninterest-earning assets 89,326 Total assets $2,468,301 Liabilities and Stockholders' Equity: Interest-bearing liabilities Deposits: Transaction accounts $651,243 $1,929 0.40 % Passbook savings 151,376 298 0.26 Official checks 15,838 0 0 Certificate accounts 822,114 15,334 2.49 Total deposits 1,640,571 17,561 1.43 FHLB advances 528,719 17,444 4.34 Other borrowings 832 37 6.01 Total interest-bearing liabilities 2,170,122 35,042 2.14 Noninterest-bearing liabilities 28,815 Total liabilities 2,198,937 Stockholders' equity 269,364 Total liabilities and stockholders' equity $2,468,301 Net interest income/ interest rate spread $70,200 3.76 % Net interest-earning assets/ net interest margin $208,853 3.95 % Interest-earning assets to interest-bearing liabilities 109.62 % HARBOR FLORIDA BANCSHARES, INC. YTD JUNE 30, 2004 Nine months ended June 30, 2003 Average Interest & Yield/ Balance Dividend Rate Analysis of Net Interest Income: Assets: Interest-earning assets : Interest-bearing deposits $63,167 $635 1.33 % Investment securities 290,324 6,567 3.02 Mortgage-backed securities 156,875 6,604 5.61 Mortgage loans 1,366,850 76,230 7.44 Other loans 203,825 11,024 7.23 Total interest-earning assets 2,081,041 101,060 6.48 Total noninterest-earning assets 72,740 Total assets $2,153,781 Liabilities and Stockholders' Equity: Interest-bearing liabilities Deposits: Transaction accounts 478,070 1,757 0.40 % Passbook savings 124,862 388 0.42 Official checks 15,567 0 0 Certificate accounts 814,599 19,083 3.13 Total deposits 1,433,098 21,228 1.98 FHLB advances 444,990 16,556 4.91 Other borrowings 498 22 5.95 Total interest-bearing liabilities 1,878,586 37,806 2.68 Noninterest-bearing liabilities 27,313 Total liabilities 1,905,899 Stockholders' equity 247,882 Total liabilities and stockholders' equity 2,153,781 Net interest income/ interest rate spread $63,254 3.80 % Net interest-earning assets/ net interest margin $202,455 4.06 % Interest-earning assets to interest-bearing liabilities 110.78 % DATASOURCE: Harbor Florida Bancshares, Inc. CONTACT: Michael J. Brown, Sr., President, Inc., +1-772-460-7000, or H. Michael Callahan, CFO, +1-772-460-7009, or Toni Santiuste, Investor Relations, +1-772-460-7002, all of Harbor Florida Bancshares Web site: http://www.harborfederal.com/

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