HARB Harbor Florida Bancshares

Harbor Florida Bancshares, Inc. Announces Dividend Increase and First Quarter Earnings FORT PIERCE, Fla., Jan. 12 /PRNewswire-FirstCall/ -- Harbor Florida Bancshares, Inc. ("the Company") (NASDAQ:HARB), the holding company for Harbor Federal Savings Bank ("the Bank"), announced today that its Board of Directors declared a 25% increase in the quarterly dividend to 20 cents per share for the quarter ending December 31, 2004 from 16 cents per share. The dividend is payable February 18, 2005 to shareholders of record as of January 21, 2005. The Company also announced today that diluted earnings per share for its first fiscal quarter ended December 31, 2004, increased 12.2% to 46 cents per share on net income of $10.8 million, compared to 41 cents per share on net income of $9.5 million for the same period last year. The increase was due primarily to increased net interest income, resulting from an increase in average interest-earning assets due to originations of loans and purchases of mortgage-backed securities. This growth was funded with low cost core deposits and FHLB advances. The increase in net interest income was partially offset by a decrease in other income and an increase in other expenses. The two hurricanes that hit the Treasure Coast in September continued to have a negative effect on the Company's operations this quarter as a result of lower levels of loan originations, loan sales and fee income. The Company also recognized approximately $186,000, after tax, gain on disposal of fixed assets during this quarter as a result of insurance proceeds received on hurricane damaged premises and equipment. FINANCIAL CONDITION Total assets increased to $2.805 billion at December 31, 2004, from $2.627 billion at September 30, 2004. Total net loans increased to $1.933 billion at December 31, 2004, from $1.891 billion at September 30, 2004. Total deposits increased to $1.941 billion at December 31, 2004, from $1.745 billion at September 30, 2004. Total net loans increased due primarily to net increases of $17.1 million in residential one-to-four family mortgage loans, $8.2 million in land loans, $7.9 million in nonresidential mortgage loans, $4.3 million in consumer loans, and $2.4 million in commercial business loans for the quarter ended December 31, 2004. These increases were due to strong loan originations during the quarter as compared to the same quarter last year. Residential one-to-four mortgage loan originations increased 13.6% from the same period last year to $182.7 million for the quarter ended December 31, 2004. Consumer loan originations increased 27.7% to $40.3 million for the quarter ended December 31, 2004. Commercial business loan originations were $13.0 million for the quarter, up 2.6% from the same period last year. Commercial real estate loan originations decreased 19.6% from the same period last year but remain strong at $41.2 million for the quarter ended December 31, 2004. The significant growth in deposits for the quarter of 11.3% was due primarily to a net increase of $177.5 million in core deposits (transaction and passbook accounts), and $19.1 million in certificate accounts. The increase in core deposits includes approximately $55 million increase in public funds on deposit, primarily due to year-end property tax collections. The increase in core deposits also reflects disaster relief funds and insurance proceeds flowing into the Company's market area, as well as the customer's continued preference for shorter-term investments in a low interest rate environment and growth in the Company's market area. The Company will continue to emphasize growth in transaction accounts. However, the Company believes that much of the current quarter's significant growth was attributable to short-term accumulation of funds for the purpose of repairs to properties by homeowners and businesses. Future growth in such deposits may, therefore, be less than the amounts obtained for the quarter. RESULTS OF OPERATIONS Net interest income increased 13.9% to $25.5 million for the quarter ended December 31, 2004, from $22.4 million for the quarter ended December 31, 2003. This increase is primarily a result of a 14.8% increase from the quarter ended December 31, 2003 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 $125.9 million and average interest bearing deposits in other banks increased $66.0 million, partially offset by a decrease of $137.6 million in investment securities from the same quarter 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 $286.6 million. The average balance of core deposits and FHLB advances increased by $294.1 million and $41.4 million, respectively. The average balance of core deposits increased to 54.5% of total average deposits from 48.1% for the same quarter last year. Provision for loan losses was $450,000 for the quarter ended December 31, 2004, compared to $448,000 for the quarter ended December 31, 2003. The provision for the quarter ended December 31, 2004 was principally comprised of a charge of $421,000 due to increased credit risk resulting from growth in the loan portfolio, primarily commercial real estate loans, and a charge of $23,000 due to an increase in the level of classified loans. Other income decreased to $5.1 million for the quarter ended December 31, 2004, from $5.3 million for the quarter ended December 31, 2003. This decrease was due primarily to a decrease of $311,000 in gain on sale of equity securities, a decrease of $273,000 in gain on sale of mortgage loans and a decrease of $121,000 in income from real estate operations, partially offset by increases of $287,000 in fees and service charges and $303,000 in gain on disposal of fixed assets. The increase in fees and service charges is primarily due to growth in transaction accounts. Other expense increased to $12.5 million for the quarter ended December 31, 2004, from $11.6 million for the quarter ended December 31, 2003. This increase was due primarily to increases of $475,000 in compensation and benefits, $163,000 in occupancy, $116,000 in advertising and promotion, and $118,000 in other. These increases are primarily due to growth in loans and deposits and expenses incurred in the opening of new branches. Income tax expense was $6.9 and $6.1 million for the quarters ended December 31, 2004 and 2003. The effective tax rate was 39.2% for the quarter ended December 31, 2004 and 39.1% for the same period last year. ASSET QUALITY Nonperforming loans increased to $3.0 million at December 31, 2004 from $2.3 million at December 31, 2003. Net chargeoffs for the quarter ended December 31, 2004 decreased to $6,000 compared to $33,000 for the same period last year. The ratio of the allowance for loan losses to total net loans decreased to .94% of loans as of December 31, 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 EXPANSION Harbor Federal opened another branch in Martin County in south Stuart during the quarter. Harbor Federal currently has five branches serving Martin County. TREASURY STOCK REPURCHASES Harbor Florida Bancshares, Inc.'s Board of Directors has previously approved a stock repurchase plan, permitting the Company to acquire up to 1,200,000 shares of its common stock subject to market conditions. The Company has repurchased 524,020 shares under the current stock repurchase program. As of December 31, 2004, the Company has a total of 8,005,130 shares held as treasury stock. Harbor Federal is located in Fort Pierce, Florida and has 37 offices located in a seven-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. are attached. HARBOR FLORIDA BANCSHARES, INC. December 31, September 30, 2004 2004 (In Thousands) Selected Consolidated Financial Data: Total assets $2,805,294 $2,627,109 Loans, gross 1,951,515 1,908,971 Allowance for loan losses 18,246 17,802 Net loans 1,933,269 1,891,169 Loans held for sale 2,677 2,438 Interest-bearing deposits 93,503 7,053 Investment securities 149,300 130,200 Mortgage-backed securities 473,431 443,060 Real estate owned 76 48 Goodwill 3,591 3,591 Deposits 1,941,482 1,744,830 FHLB advances 548,489 553,492 Stockholders' equity 294,895 286,644 # of common shares outstanding 23,809 23,789 Three months ended December 31, 2004 2003 (In Thousands Except per Share Data) Selected Consolidated Operating Data: Interest income $38,330 $34,136 Interest expense 12,805 11,734 Net interest income 25,525 22,402 Provision for loan losses 450 448 Net interest income after provision for loan losses 25,075 21,954 Other Income: Fees and service charges 3,672 3,385 Insurance commissions and fees 645 721 Gain on sale of mortgage loans 468 741 Gain on disposal of fixed assets 303 - Gain on sale of equity securities - 311 Other 55 165 Total other income 5,143 5,323 Other expenses: Compensation and benefits 7,485 7,010 Occupancy 1,795 1,632 Other 3,198 2,949 Total other expenses 12,478 11,591 Income before income taxes 17,740 15,686 Income tax expense 6,950 6,137 Net income $10,790 $9,549 Net income per share: Basic $0.48 $0.42 Diluted $0.46 $0.41 Weighted average shares outstanding Basic 22,684 22,568 Diluted 23,257 23,188 HARBOR FLORIDA BANCSHARES, INC. Three months ended December 31, 2004 2003 Selected Financial Ratios: Performance Ratios: Return on average assets (1) 1.56 % 1.59 % Return on average stockholders' equity (1) 14.84 % 14.38 % Book value per share $12.39 $11.28 Net interest rate spread (1) 3.71 % 3.71 % Net interest margin (1) 3.88 % 3.92 % Non-interest expense to average assets (1) 1.81 % 1.93 % Net interest income to non- interest expense (1) 2.06 x 1.96 x Average interest-earning assets to average interest-bearing liabilities 108.98 % 110.15 % Efficiency ratio (1) 41.48 % 43.28 % Asset Quality Ratios: Non-performing assets to total assets 0.11 % 0.12 % Allowance for loan losses to total loans 0.94 % 1.01 % Allowance for loan losses to classified loans 400.08 % 263.65 % Allowance for loan losses to non-performing loans 612.82 % 710.74 % Capital Ratios: Average shareholders' equity to average assets 10.52 % 11.07 % Shareholders' equity to assets at period end 10.51 % 11.13 % (1) Ratio is annualized. Three months ended December 31, 2004 2003 (In Thousands) Selected Average Balances: Total assets 2,749,578 2,379,815 Interest earning assets 2,638,442 2,297,473 Gross loans 1,925,404 1,638,760 Stockholders' equity 289,215 263,534 Deposits 1,866,863 1,572,764 Asset Quality: Nonaccrual loans 2,977 2,338 Net loan charge-offs 6 33 Loan Originations: Residential 182,717 160,778 Commercial Real Estate 41,175 51,188 Consumer 40,269 31,522 Commercial Business 13,020 12,687 Loan Sales: 21,395 28,168 HARBOR FLORIDA BANCSHARES, INC. For the three months ended Dec. 31, Sept. 30,June 30, Mar. 31, Dec. 31, 2004 2004 2004 2004 2003 (In Thousands Except Per Share Data) Selected Consolidated Operating Data: Interest income $38,330 $36,843 $36,007 $35,099 $34,136 Interest expense 12,805 12,385 11,649 11,658 11,734 Net interest income 25,525 24,458 24,358 23,441 22,402 Provision for loan losses 450 350 503 351 448 Net interest income after provision for loan losses 25,075 24,108 23,855 23,090 21,954 Other Income: Fees and service charges 3,672 4,035 3,974 3,495 3,385 Insurance commissions and fees 645 863 923 884 721 Gain on sale of mortgage loans 468 553 297 669 741 Gain on sale of equity securities - - 1,379 307 311 Gain on sale of debt securities - - - 248 - Gain (loss) on disposal of fixed assets 303 - 342 (2) (6) Other 55 107 50 100 171 Total other income 5,143 5,558 6,965 5,701 5,323 Other expenses: Compensation and benefits 7,485 7,356 7,483 7,343 7,010 Occupancy 1,795 1,922 1,773 1,705 1,632 Other 3,198 3,279 4,205 3,210 2,949 Total other expenses 12,478 12,557 13,461 12,258 11,591 Income before income taxes 17,740 17,109 17,359 16,533 15,686 Income tax expense 6,950 6,002 7,090 6,462 6,137 Net income $10,790 $11,107 $10,269 $10,071 $9,549 Net income per share: Basic $0.48 $0.49 $0.45 $0.45 $0.42 Diluted $0.46 $0.48 $0.44 $0.44 $0.41 HARBOR FLORIDA BANCSHARES, INC. Three months ended December 30, 2004 Interest Average & Yield/ Balance Dividend Rate (Dollars in Thousands) Analysis of Net Interest Income: Assets: Interest-earning assets : Interest-bearing deposits $81,021 $397 1.92 % Investment securities 165,023 1,060 2.57 Mortgage-backed securities 466,994 4,493 3.85 Mortgage loans 1,645,005 27,466 6.67 Other loans 280,399 4,914 6.97 Total interest-earning assets 2,638,442 38,330 5.80 Total noninterest-earning assets 111,136 Total assets $2,749,578 Liabilities and Stockholders' Equity: Interest-bearing liabilities Deposits: Transaction accounts $811,025 1,052 0.51 % Passbook savings 185,005 128 0.28 Official checks 21,875 - - Certificate accounts 848,958 5,467 2.56 Total deposits 1,866,863 6,647 1.42 FHLB advances 553,436 6,146 4.35 Other borrowings 778 12 6.00 Total interest-bearing liabilities 2,421,077 12,805 2.09 Noninterest-bearing liabilities 39,286 Total liabilities 2,460,363 Stockholders' equity 289,215 Total liabilities and stockholders' equity $2,749,578 Net interest income/ interest rate spread $25,525 3.71 % Net interest-earning assets/ net interest margin $217,365 3.88 % Interest-earning assets to interest-bearing liabilities 108.98 % HARBOR FLORIDA BANCSHARES, INC. Three months ended December 30, 2003 Interest Average & Yield/ Balance Dividend Rate (Dollars in Thousands) Analysis of Net Interest Income: Assets: Interest-earning assets : Interest-bearing deposits $14,978 $34 0.89 % Investment securities 302,641 1,939 2.56 Mortgage-backed securities 341,095 3,462 4.06 Mortgage loans 1,403,326 24,664 7.02 Other loans 235,434 4,037 6.80 Total interest-earning assets 2,297,474 34,136 5.93 Total noninterest-earning assets 82,341 Total assets 2,379,815 Liabilities and Stockholders' Equity: Interest-bearing liabilities Deposits: Transaction accounts 594,580 609 0.41 % Passbook savings 144,785 97 0.27 Official checks 17,076 - - Certificate accounts 816,323 5,205 2.53 Total deposits 1,572,764 5,911 1.49 FHLB advances 512,074 5,810 4.44 Other borrowings 849 13 6.02 Total interest-bearing liabilities 2,085,687 11,734 2.22 Noninterest-bearing liabilities 30,594 Total liabilities 2,116,281 Stockholders' equity 263,534 Total liabilities and stockholders' equity 2,379,815 Net interest income/ interest rate spread $22,402 3.71 % Net interest-earning assets/ net interest margin $211,787 3.92 % Interest-earning assets to interest-bearing liabilities 110.15 % DATASOURCE: Harbor Florida Bancshares, Inc. CONTACT: Michael J. Brown, Sr., President, +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 Federal Web site: http://www.harborfederal.com/

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