HARB Harbor Florida Bancshares

Harbor Florida Bancshares, Inc. Announces Increased Fourth Quarter and Annual Earnings Per Share FORT PIERCE, Fla., Oct. 13 /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 fourth fiscal quarter ended September 30, 2004, increased 14.3% to 48 cents per share on net income of $11.1 million, compared to 42 cents per share on net income of $9.7 million for the same period last year. Diluted earnings per share for the fiscal year ended September 30, 2004, increased 7.9% to $1.77 per share on net income of $41.0 million, compared to $1.64 per share on net income of $37.9 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 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 supplemented by an increase in other income and was partially offset by an increase in other expenses. During the quarter ended September 30, 2004, the Company agreed to pay the Internal Revenue Service (IRS) $505,000 to settle the issue related to an operational adjustment in its Employee Stock Ownership Plan (ESOP) and recorded a $368,000 partial reversal of the $873,000 non-deductible amount expensed in the quarter ended June 30, 2004. The Company also recognized a tax benefit of $545,000 from the settlement with the IRS. The two hurricanes that hit the Treasure Coast in September had a negative effect on the Company's earnings this quarter as a result of lower levels of loan originations, loan sales and fee income. Additional expenses were also incurred as a result of damages to buildings and equipment. DIVIDEND Harbor Florida Bancshares, Inc.'s Board of Directors declared a quarterly dividend of 16 cents per share for the fourth quarter. The dividend is payable November 19, 2004 to shareholders of record as of October 22, 2004. FINANCIAL CONDITION Total assets increased to $2.627 billion at September 30, 2004, from $2.352 billion at September 30, 2003. Total net loans increased to $1.891 billion at September 30, 2004, from $1.611 billion at September 30, 2003. Total deposits increased to $1.745 billion at September 30, 2004, from $1.550 billion at September 30, 2003. Strong loan originations contributed to net increases of $97.2 million in residential one-to-four family mortgage loans, $71.5 million in land loans, $54.1 million in nonresidential mortgage loans, $36.3 million in consumer loans, and $15.8 million in commercial business loans for the fiscal year ended September 30, 2004. Residential one-to-four mortgage loan originations increased 6.4% from the same period last year to $750.4 million for the year ended September 30, 2004. Commercial real estate loan originations increased 51.4% to $244.2 million for the year ended September 30, 2004. Consumer loan originations increased 27.4% to $162.6 million for the year ended September 30, 2004. Commercial business loan originations were $49.2 million for the fiscal year, up 24.7% from the same period last year. The increase in deposits for the year was due primarily to a net increase of $166.7 million in core deposits (transaction and passbook accounts), and $27.9 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 11.3% to $24.5 million for the quarter ended September 30, 2004, from $22.0 million for the quarter ended September 30, 2003 as a result of a 13.0% 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 $206.9 million, partially offset by a decrease of $165.9 million in investment securities and $24.3 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 $272.2 million. The average balance of core deposits and FHLB advances increased by $198.3 million and $61.4 million, respectively. The average balance of core deposits increased to 51.5% of total average deposits from 45.9% for the same quarter last year. Provision for loan losses was $350,000 for the quarter ended September 30, 2004, compared to $334,000 for the quarter ended September 30, 2003. The provision for the quarter ended September 30, 2004 was principally comprised of a charge of $503,000 due to increased credit risk resulting from growth in the loan portfolio, primarily commercial real estate loans, partially offset by a $155,000 decrease in the level of classified loans. Other income increased to $5.6 million for the quarter ended September 30, 2004, from $5.3 million for the quarter ended September 30, 2003. This increase was due primarily to increases of $707,000 in fees and service charges and $136,000 in insurance commissions and fees, partially offset by a decrease of $665,000 in gains on sale of equity and debt securities. The increase in other fees and service charges was primarily due to growth in transaction accounts. The increase in insurance commissions and fees was due primarily to increased sales of insurance products. Other expense increased to $12.6 million for the quarter ended September 30, 2004, from $11.2 million for the quarter ended September 30, 2003. This increase was due primarily to increases of $592,000 in compensation and benefits, $317,000 in occupancy, $240,000 in advertising and promotion, and $111,000 in data processing services. The increase in occupancy includes $146,000 of costs, not covered by insurance, related to damages to buildings and equipment due to the two hurricanes. Other expense for the quarter ended September 30, 2004 was offset by a $368,000 partial reversal of the non- deductible amount expensed in the quarter ended June 30, 2004 as a result of the IRS settlement concerning the ESOP. Income tax expense remained constant at $6.0 million for the quarters ended September 30, 2004 and 2003. The effective tax rate was 35.1% for the quarter ended September 30, 2004 and 38.4% for the same period last year. The decrease in the effective tax rate for the quarter ended September 30, 2004 is primarily a result of the tax benefit resulting from the IRS settlement concerning the ESOP. ASSET QUALITY Nonperforming loans increased to $3.0 million at September 30, 2004 from $2.2 million at September 30, 2003. Net chargeoffs for the fiscal year ended September 30, 2004 decreased to $49,000 compared to $124,000 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 September 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 expanded into Lake County with a new branch in Clermont at US 27 and Citrus Tower Boulevard during the quarter and will open another branch in Martin County in south Stuart in October. TREASURY STOCK REPURCHASES Harbor Florida Bancshares, Inc.'s Board of Directors also approved an extension of the Company's stock repurchase plan to October 14, 2005, permitting the Company to acquire up to 1,200,000 shares of its common stock subject to market conditions. The Company has repurchased 522,702 shares under the current stock repurchase program. As of September 30, 2004, the Company has a total of 8,003,812 shares held as treasury stock. Harbor Federal is located in Fort Pierce, Florida and has 36 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. follow. HARBOR FLORIDA BANCSHARES, INC. September 30, September 30, 2004 2003 (In Thousands) Selected Consolidated Financial Data: Total assets $2,627,109 $2,352,071 Loans, gross 1,908,971 1,627,584 Allowance for loan losses 17,802 16,199 Net loans 1,891,169 1,611,385 Loans held for sale 2,438 2,648 Interest-bearing deposits 7,053 4,432 Investment securities 130,200 296,935 Mortgage-backed securities 443,060 308,075 Real estate owned 48 906 Goodwill 3,591 3,719 Deposits 1,744,830 1,550,260 FHLB advances 553,492 503,511 Stockholders' equity 286,644 261,883 # of common shares outstanding 23,789 23,780 Three months ended Twelve months ended September 30, September 30, 2004 2003 2004 2003 (In Thousands Except per Share Data) Selected Consolidated Operating Data: Interest income $36,843 $33,846 $142,085 $134,905 Interest expense 12,385 11,859 47,426 49,665 Net interest income 24,458 21,987 94,659 85,240 Provision for loan losses 350 334 1,652 1,946 Net interest income after provision for loan losses 24,108 21,653 93,007 83,294 Other Income: Fees and service charges 4,035 3,329 14,889 12,963 Insurance commissions and fees 863 726 3,391 2,768 Gain on sale of mortgage loans 553 473 2,260 4,171 Gain on sale of equity securities 0 304 1,997 1,303 Gain on sale of debt securities 0 361 248 361 Gain on sale of fixed assets 0 0 334 (3) Other 107 80 428 224 Total other income 5,558 5,273 23,547 21,787 Other expenses: Compensation and benefits 7,356 6,763 29,192 25,646 Occupancy 1,922 1,606 7,032 6,070 Other 3,279 2,878 13,643 11,318 Total other expenses 12,557 11,247 49,867 43,034 Income before income taxes 17,109 15,679 66,687 62,047 Income tax expense 6,002 6,015 25,691 24,188 Net income $11,107 $9,664 $40,996 $37,859 Net income per share: Basic $0.49 $0.43 $1.81 $1.68 Diluted $0.48 $0.42 $1.77 $1.64 Weighted average shares outstanding Basic 22,651 22,496 22,618 22,564 Diluted 23,203 23,108 23,155 23,134 HARBOR FLORIDA BANCSHARES, INC. Three months ended Twelve months ended September 30, September 30, 2004 2003 2004 2003 Selected Financial Ratios: Performance Ratios: Return on average assets (1) 1.69% 1.67% 1.64% 1.73% Return on average stockholders' equity (1) 15.73% 14.95% 15.06% 15.14% Book value per share $12.05 $11.01 $12.05 $11.01 Net interest rate spread (1) 3.73% 3.75% 3.73% 3.78% Net interest margin (1) 3.92% 3.98% 3.93% 4.03% Non-interest expense to average assets (1) 1.91% 1.94% 1.99% 1.97% Net interest income to non-interest expense (1) 1.97x 1.98x 1.90x 1.98x Average interest-earning assets to average interest-bearing liabilities 109.65% 110.64% 109.63% 110.74% Efficiency ratio (1) 43.66% 42.74% 43.70% 42.60% Asset Quality Ratios: Non-performing assets to total assets 0.12% 0.13% 0.12% 0.13% Allowance for loan losses to total loans 0.94% 1.01% 0.94% 1.01% Allowance for loan losses to classified loans 383.37% 245.86% 383.37% 245.86% Allowance for loan losses to non-performing loans 587.20% 731.34% 587.20% 731.34% Capital Ratios: Average shareholders' equity to average assets 10.76% 11.16% 10.87% 11.42% Shareholders' equity to assets at period end 10.91% 11.13% 10.91% 11.13% (1) Ratio is annualized. Three months ended Twelve months ended September 30, September 30, 2004 2003 2004 2003 (In Thousands) Selected Average Balances: Total assets 2,609,767 2,298,169 2,503,862 2,190,175 Interest earning assets 2,508,637 2,219,655 2,411,568 2,115,979 Gross loans 1,875,292 1,603,060 1,747,201 1,578,837 Stockholders' equity 280,903 256,402 272,264 250,030 Deposits 1,731,544 1,511,530 1,663,438 1,452,867 Asset Quality: Nonaccrual loans 3,032 2,215 3,032 2,215 Net charge-offs 2 (17) 49 124 Loan Originations: Residential 178,653 227,280 750,422 705,573 Commercial Real Estate 69,062 46,010 244,206 161,319 Consumer 41,134 39,310 162,583 127,641 Commercial Business 12,935 10,370 49,189 39,437 Loan Sales: 24,285 23,455 95,403 144,493 HARBOR FLORIDA BANCSHARES, INC. For the three months ended Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, 2004 2004 2004 2003 2003 (In Thousands Except Per Share Data) Selected Consolidated Operating Data: Interest income $36,843 $36,007 $35,099 $34,136 $33,846 Interest expense 12,385 11,649 11,658 11,734 11,859 Net interest income 24,458 24,358 23,441 22,402 21,987 Provision for loan losses 350 503 351 448 334 Net interest income after provision for loan losses 24,108 23,855 23,090 21,954 21,653 Other Income: Fees and service charges 4,035 3,974 3,495 3,385 3,329 Insurance commissions and fees 863 923 884 721 726 Gain on sale of mortgage loans 553 297 669 741 473 Gain on sale of equity securities 0 1,379 307 311 304 Gain on sale of debt securities 0 0 248 0 361 Gain (loss) on sale of fixed assets 0 342 (2) (6) 0 Other 107 50 100 171 80 Total other income 5,558 6,965 5,701 5,323 5,273 Other expenses: Compensation and benefits 7,356 7,483 7,343 7,010 6,763 Occupancy 1,922 1,773 1,705 1,632 1,606 Other 3,279 4,205 3,210 2,949 2,878 Total other expenses 12,557 13,461 12,258 11,591 11,247 Income before income taxes 17,109 17,359 16,533 15,686 15,679 Income tax expense 6,002 7,090 6,462 6,137 6,015 Net income $11,107 $10,269 $10,071 $9,549 $9,664 Net income per share: Basic $0.49 $0.45 $0.45 $0.42 $0.43 Diluted $0.48 $0.44 $0.44 $0.41 $0.42 HARBOR FLORIDA BANCSHARES, INC. Three months ended September 30, 2004 Average Interest & Yield/ Balance Dividend Rate (Dollars in Thousands) Analysis of Net Interest Income: Assets: Interest-earning assets : Interest-bearing deposits $8,841 28 1.26 % Investment securities 167,862 1,086 2.59 Mortgage-backed securities 456,642 4,434 3.88 Mortgage loans 1,600,123 26,544 6.63 Other loans 275,169 4,750 6.87 Total interest-earning assets 2,508,637 36,843 5.87 Total noninterest-earning assets 101,130 Total assets $2,609,767 Liabilities and Stockholders' Equity: Interest-bearing liabilities Deposits: Transaction accounts $710,021 769 0.43 % Passbook savings 165,489 113 0.27 Official checks 16,305 0 0 Certificate accounts 839,728 5,281 2.50 Total deposits 1,731,544 6,163 1.42 FHLB advances 555,224 6,209 4.38 Other borrowings 1,003 13 5.24 Total interest-bearing liabilities 2,287,771 12,385 2.14 Noninterest-bearing liabilities 41,093 Total liabilities 2,328,864 Stockholders' equity 280,903 Total liabilities and stockholders' equity $2,609,767 Net interest income/ interest rate spread 24,458 3.73 % Net interest-earning assets/ net interest margin $220,866 3.92 % Interest-earning assets to interest-bearing liabilities 109.65 % HARBOR FLORIDA BANCSHARES, INC. Three months ended September 30, 2003 Average Interest & Yield/ Balance Dividend Rate Analysis of Net Interest Income: Assets: Interest-earning assets : Interest-bearing deposits $33,127 $76 0.90 % Investment securities 333,749 2,181 2.61 Mortgage-backed securities 249,719 2,638 4.22 Mortgage loans 1,380,098 25,073 7.25 Other loans 222,962 3,878 6.90 Total interest-earning assets 2,219,655 33,846 6.08 Total noninterest-earning assets 78,514 Total assets 2,298,169 Liabilities and Stockholders' Equity: Interest-bearing liabilities Deposits: Transaction accounts 536,875 485 0.36 % Passbook savings 139,315 99 0.28 Official checks 17,293 0 0 Certificate accounts 818,046 5,461 2.65 Total deposits 1,511,530 6,045 1.59 FHLB advances 493,828 5,801 4.60 Other borrowings 866 13 5.99 Total interest-bearing liabilities 2,006,224 11,859 2.33 Noninterest-bearing liabilities 35,543 Total liabilities 2,041,767 Stockholders' equity 256,402 Total liabilities and stockholders' equity 2,298,169 Net interest income/ interest rate spread $21,987 3.75 % Net interest-earning assets/ net interest margin $213,431 3.98 % Interest-earning assets to interest-bearing liabilities 110.64 % HARBOR FLORIDA BANCSHARES, INC. Twelve months ended September 30, 2004 Average Interest & Yield/ Balance Dividend Rate (Dollars in Thousands) Analysis of Net Interest Income: Assets: Interest-earning assets : Interest-bearing deposits $10,041 $101 1.00 % Investment securities 219,452 5,664 2.58 Mortgage-backed securities 434,873 17,154 3.94 Mortgage loans 1,493,576 101,868 6.82 Other loans 253,625 17,300 6.82 Total interest-earning assets 2,411,568 142,085 5.89 Total noninterest-earning assets 92,294 Total assets $2,503,862 Liabilities and Stockholders' Equity: Interest-bearing liabilities Deposits: Transaction accounts $666,018 2,697 0.41 % Passbook savings 154,924 412 0.27 Official checks 15,955 0 0 Certificate accounts 826,541 20,615 2.49 Total deposits 1,663,438 23,724 1.43 FHLB advances 535,382 23,651 4.42 Other borrowings 875 51 5.79 Total interest-bearing liabilities 2,199,695 47,426 2.16 Noninterest-bearing liabilities 31,903 Total liabilities 2,231,598 Stockholders' equity 272,264 Total liabilities and stockholders' equity $2,503,862 Net interest income/ interest rate spread $94,659 3.73 % Net interest-earning assets/ net interest margin $211,873 3.93 % Interest-earning assets to interest-bearing liabilities 109.63 % HARBOR FLORIDA BANCSHARES, INC. Twelve months ended September 30, 2003 Average Interest & Yield/ Balance Dividend Rate Analysis of Net Interest Income: Assets: Interest-earning assets : Interest-bearing deposits $55,596 $712 1.28 % Investment securities 301,269 8,748 2.90 Mortgage-backed securities 180,277 9,241 5.13 Mortgage loans 1,370,189 101,302 7.39 Other loans 208,648 14,902 7.14 Total interest-earning assets 2,115,979 134,905 6.38 Total noninterest-earning assets 74,196 Total assets 2,190,175 Liabilities and Stockholders' Equity: Interest-bearing liabilities Deposits: Transaction accounts 492,892 2,243 0.45 % Passbook savings 128,505 488 0.38 Official checks 16,002 0 0 Certificate accounts 815,468 24,543 3.01 Total deposits 1,452,867 27,274 1.88 FHLB advances 457,300 22,356 4.89 Other borrowings 591 35 5.96 Total interest-bearing liabilities 1,910,758 49,665 2.60 Noninterest-bearing liabilities 29,387 Total liabilities 1,940,145 Stockholders' equity 250,030 Total liabilities and stockholders' equity 2,190,175 Net interest income/ interest rate spread $85,240 3.78 % Net interest-earning assets/ net interest margin $205,221 4.03 % Interest-earning assets to interest-bearing liabilities 110.74 % 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 Florida Bancshares, Inc. Web site: http://www.harborfederal.com/

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