UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20552
-----------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission file number 000-22817
HARBOR FLORIDA BANCORP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 65-0737675
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
100 S. SECOND STREET
FORT PIERCE, FL 34950
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (561) 461-2414
-----------------
Indicate by check 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 ____
As of July 14, 1997 there were 4,970,240 shares of the Registrant's common stock
outstanding.
<PAGE>
HARBOR FLORIDA BANCORP, INC.
Part I Financial Information Page
Item 1 Financial Statements (Unaudited)
Condensed Consolidated Statements of Financial
Condition as of June 30, 1997 and September 30, 1996 2
Condensed Consolidated Statements of Earnings
for the Three Months and Nine Months ended
June 30, 1997 and 1996 3
Condensed Consolidated Statements of Changes in
Stockholders' Equity for the Nine Months ended
June 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows
for the Nine Months ended June 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 8
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 15
Part II Other Information
Item 1 Legal Proceedings 20
Item 2 Changes in Securities 20
Item 3 Defaults Upon Senior Securities 20
Item 4 Submission of Matters to a Vote of Security-Holders 20
Item 5 Other Information 20
Item 6 Exhibits and Reports on Form 8-K 21
Signature Page 22
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
HARBOR FLORIDA BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
June September
30, 1997 30, 1996
----------- -----------
Assets
- - ------
Cash and amounts due from depository
institutions .............................. $ 19,472 $ 16,137
Interest-bearing deposits in other banks ....... 15,039 16,350
Federal funds sold ............................. 10,250 16,075
Investment securities held to maturity ......... 15,000 20,000
Investment securities available for sale ....... 47,493 33,493
Mortgage-backed securities held to maturity .... 156,559 153,293
Loans held for sale ............................ 3,090 4,870
Loans, net ..................................... 815,789 765,019
Accrued interest receivable .................... 7,106 6,621
Real estate owned .............................. 2,896 3,118
Premises and equipment ......................... 12,248 10,543
Federal Home Loan Bank stock ................... 7,595 7,158
Goodwill ....................................... 3,100 3,587
Other assets ................................... 1,081 1,179
----------- -----------
Total .......................................... $ 1,116,718 $ 1,057,443
=========== ===========
Liabilities and Stockholders' Equity
- - ------------------------------------
Deposits ....................................... $ 904,904 $ 851,853
Short-term borrowings .......................... 30,000 25,000
Long-term debt ................................. 70,449 70,674
Advance payments by borrowers for taxes and
insurance ................................. 11,610 15,212
Income taxes payable ........................... 919 962
Other liabilities .............................. 5,130 8,910
----------- -----------
Total liabilities .............................. 1,023,012 972,611
----------- -----------
Preferred stock ($.01 par value; authorized
1,000,000 shares; none issued and
outstanding) .............................. -- --
Common stock ($.01 par value; authorized
13,000,000 shares;
issued and outstanding 4,970,240
shares at June 30,1997 and 4,934,454
shares at September 30, 1996) ............. 50 49
Paid-in capital ................................ 26,550 25,339
Retained earnings, substantially restricted .... 68,484 60,893
Common stock purchased by:
Employee stock ownership plan (ESOP) ........... (449) (674)
Recognition and retention plans (RRP) .......... -- (53)
Deferred compensation plan ..................... (886) (673)
Unrealized loss on investment securities
available for sale, net ................... (43) (49)
----------- -----------
Total stockholders' equity ..................... 93,706 84,832
----------- -----------
Total .......................................... $ 1,116,718 $ 1,057,443
=========== ===========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
HARBOR FLORIDA BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands except per share data)
Three Months Nine Months
Ended Ended
June 30, June 30,
-------- --------
1997 1996 1997 1996
------- -------- ------- --------
Interest income:
Loans ............................ $17,465 $ 15,060 $51,026 $ 43,484
Investment securities ............ 1,055 677 2,835 1,731
Mortgage-backed securities ....... 2,532 2,418 7,354 7,661
Other ............................ 502 463 1,590 1,595
------- -------- ------- --------
Total interest income .......... 21,554 18,618 62,805 54,471
------- -------- ------- --------
Interest expense:
Deposits ......................... 9,940 8,598 28,941 25,224
Other ............................ 1,507 1,156 4,441 3,429
------- -------- ------- --------
Total interest expense ......... 11,447 9,754 33,382 28,653
------- -------- ------- --------
Net interest income ............ 10,107 8,864 29,423 25,818
Provision for (recovery of)
loan losses .................... 205 (19) 456 (149)
------- -------- ------- --------
Net interest income after
provision for (recovery of)
loan losses ................... 9,902 8,883 28,967 25,967
------- -------- ------- --------
Other income:
Other fees and service charges ... 788 694 2,478 2,085
Income (losses) from real estate
operations .................... 68 (199) 23 (181)
Gain (loss) on sale of
mortgage loans ................ 98 (63) 135 (67)
Other ............................ 87 130 259 304
------- -------- ------- --------
Total other income ............. 1,041 562 2,895 2,141
------- -------- ------- --------
Other expenses:
Compensation and employee
benefits ...................... 2,968 2,710 8,864 7,947
Occupancy ........................ 715 798 2,100 2,025
Professional fees ................ 223 3 485 397
SAIF deposit insurance premium ... 138 437 645 1,270
Other ............................ 1,274 909 3,612 3,012
------- -------- ------- --------
Total other expense ............ 5,318 4,857 15,706 14,651
------- -------- ------- --------
Income before income taxes ......... 5,625 4,588 16,156 13,457
Income tax expense ................. 2,209 1,781 6,339 5,207
------- -------- ------- --------
Net income ..................... $ 3,416 $ 2,807 $ 9,817 $ 8,250
======= ======== ======= ========
Net income per share
primary and fully diluted ......... $ 0.68 $ 0.57 $ 1.96 $ 1.67
======= ======== ======= ========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
HARBOR FLORIDA BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Common
stock Unreal.
Common Common purch.by gain(loss)-
stock stock deferred securities
Common Paid-in Retained purch. by purch. comp. avail. for
stock capital earnings ESOP by RRP's plan sale,net Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nine Months Ended
June 30, 1996
Balance at
September 30, 1995 ...... $ 49 $ 24,455 $ 54,672 $ (974) $ (267) $ (435) $ -- $ 77,500
Stock options exercised ... -- 219 -- -- -- -- -- 219
Net income ................ -- -- 8,250 -- -- -- -- 8,250
Amortization of award
of ESOP and RRP's ....... -- 360 -- 225 160 -- -- 745
Tax benefit of RRP's ...... -- 137 -- -- -- -- -- 137
Dividends paid ............ -- -- (1,769) -- -- -- -- (1,769)
Unrealized gain on
securities available
for sale, net ........... -- -- -- -- -- -- 126 126
Change in unrealized
gain (loss) on securities
available for sale, net ... -- -- -- -- -- -- (177) (177)
Tax benefit of non-
qualified stock options . -- 31 -- -- -- -- -- 31
-------- -------- -------- -------- -------- -------- -------- --------
Balance at
June 30,1996 ............ $ 49 $ 25,202 $ 61,153 $ (749) $ (107) $ (435) $ (51) $ 85,062
======== ======== ======== ======== ======== ======== ======== ========
Nine Months Ended
June 30, 1997
Balance at
September 30, 1996 ...... $ 49 $ 25,339 $ 60,893 $ (674) $ (53) $ (673) $ (49) $ 84,832
Stock options exercised ... 1 357 -- -- -- -- -- 358
Net income ................ -- -- 9,817 -- -- -- -- 9,817
Amortization of award
of ESOP and RRP's ....... -- 562 -- 225 53 -- -- 840
Tax benefit of RRP's ...... -- 193 -- -- -- -- -- 193
Dividends paid ............ -- -- (2,226) -- -- -- -- (2,226)
Change in unrealized
gain (loss) on securities
available for sale, net . -- -- -- -- -- -- 6 6
Tax benefit of non-
qualified stock options . -- 99 -- -- -- -- -- 99
Stock purchased by
deferred compensation
plan ...................... -- -- -- -- -- (213) -- (213)
-------- -------- -------- -------- -------- -------- -------- --------
Balance at
June 30, 1997 ........... $ 50 $ 26,550 $ 68,484 $ (449) $ 0 $ (886) $ (43) $ 93,706
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
HARBOR FLORIDA BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Nine months ended
June 30,
1997 1996
-------- --------
Cash provided by operating activities:
Net income ........................................... $ 9,817 $ 8,250
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of stock benefit plans .............. 840 745
Tax benefit of stock plans credited to capital ... 292 168
Originations of loans held for sale .............. (3,939) (6,621)
Proceeds from sale of loans held for sale ........ 5,719 3,463
Depreciation and amortization .................... 820 833
Deferred income tax provision .................... 1,787 408
Increase in deferred loan fees and costs ......... 830 802
Amortization of deferred loan fees and costs ..... (668) (735)
Amortization of goodwill ......................... 180 27
Net accretion of other purchase accounting
adjustments .................................. (32) (5)
Gain on sale of real estate owned ................ (95) (7)
Accretion of discount on purchased loans ......... (12) (17)
Increase in accrued interest receivable .......... (484) (49)
Provision for (recovery of) loan losses .......... 456 (149)
Provision for (recovery of) losses on
real estate owned ............................ (20) 67
(Increase) decrease in other assets .............. 98 (32)
Decrease in income taxes payable ................ (43) (15)
Decrease in other liabilities .................... (5,573) (376)
-------- --------
Net cash provided by operating activities ...... 9,973 6,757
-------- --------
Cash used by investing activities:
Net increase in loans ............................ (52,686) (58,455)
Purchase of mortgage-backed securities ........... (31,843) (19,430)
Proceeds from principal repayments of
mortgage-backed securities .................... 28,438 31,108
Proceeds from maturities of investment
securities held to maturity .................. 20,000 15,876
Purchase of investment securities held to
maturity ..................................... (15,000) (17,939)
Proceeds from maturities of investment
securities available for sale ................ 15,528 --
(Continued)
5
<PAGE>
HARBOR FLORIDA BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Nine months ended
June 30,
1997 1996
-------- --------
Proceeds from sale of investment
securities available for sale .............. -- 906
Purchase of investment securities
available for sale ......................... (29,500) --
Proceeds from sale of real estate owned ........ 1,587 751
Purchase of premises and equipment ............. (2,404) (1,271)
Proceeds from sale of premises and equipment ... 1 8
FHLB stock purchase ............................ (437) (619)
Purchase of Treasure Coast Bank, net of
cash acquired .............................. -- (4,451)
Other .......................................... 306 --
-------- --------
Net cash used by investing activities ....... (66,010) (53,516)
-------- --------
Cash provided by financing activities:
Net increase in deposits ....................... 53,143 44,010
Net increase (decrease) in short-term
borrowings ................................. 5,000 (5,000)
Repayments of long-term borrowings ............. (225) (225)
Net proceeds from long-term borrowings ......... -- 15,000
Decrease in advance payments by
borrowers for taxes and insurance ........... (3,601) (5,381)
Stock dividend paid ............................ (2,226) (1,769)
Common stock options exercised ................. 358 219
Purchase of common stock by deferred
compensation plan .......................... (213) --
-------- --------
Net cash provided by financing activities ... 52,236 46,854
-------- --------
Net increase (decrease) in cash and
cash equivalents ........................... (3,801) 95
Cash and cash equivalents - beginning of period ...... 48,562 38,655
-------- --------
Cash and cash equivalents - end of period ............ $ 44,761 $ 38,750
======= =======
(Continued)
6
<PAGE>
HARBOR FLORIDA BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Nine months ended
June 30,
1997 1996
-------- --------
Supplemental Disclosures:
Cash paid for:
Interest ........................................ $ 33,388 $ 28,842
Taxes ........................................... 4,303 4,647
Noncash investing and financing activities:
Additions to real estate acquired in
settlement of loans through foreclosure ....... 2,200 1,853
Sale of real estate owned financed by
the Bank ...................................... 950 834
Transfer of investment securities from
held to maturity to available for sale ........ -- 26,011
Change in unrealized gain (loss) on
securities available for sale .................. 10 (82)
Change in deferred taxes related to
securities available for sale .................. (4) 31
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
7
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1). BASIS OF PRESENTATION
The unaudited condensed consolidated interim financial statements for Harbor
Florida Bancorp, Inc. ("Bancorp") and its subsidiary Harbor Federal Savings Bank
("Bank") reflect all adjustments (consisting only of normal recurring accruals)
which, in the opinion of management, are necessary to present fairly Bancorp's
consolidated financial condition and the consolidated results of operations and
cash flows for interim periods. The results for interim periods are not
necessarily indicative of trends or results to be expected for the full year.
These condensed consolidated interim financial statements and notes should be
read in conjunction with the Bank's Annual Report on Form 10-K for the year
ended September 30, 1996.
On June 25, 1997, the Bank completed its reorganization into the two-tier form
of mutual holding company ownership. Pursuant to the reorganization, the Bank is
now the wholly owned subsidiary of Bancorp, a Delaware corporation. Bancorp is
the majority owned subsidiary of Harbor Financial, M.H.C. Pursuant to the
reorganization each share of the Bank's outstanding common stock was
automatically converted into one share of Bancorp common stock. The consolidated
financial statements for prior periods have been restated to reflect the change
in the par value of Bancorp common stock from $1.00 to $.01 per share.
The reorganization was accounted for in a manner similar to a pooling of
interest and did not result in any significant accounting adjustments.
Bancorp conducts no business other than holding the common stock of the Bank.
Consequently, its net income is derived from the Bank.
In October, 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("Statement 123"). The adoption date of Statement 123 varies
depending upon the various provisions of the statement. Statement 123
established financial accounting and reporting standards for stock-based
employee compensation plans. The statement defines a "fair value based method"
of accounting for employee stock option or similar equity instruments and
encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, Statement 123 also allows an entity
to continue to measure compensation costs for those plans using the "intrinsic
value based method" of accounting which Bancorp currently uses. Management has
determined that it will continue to use the method of accounting prescribed by
APB No. 25, "Accounting for Stock Issued to Employees". Bancorp will present
required proforma amounts and disclosures under Statement 123 beginning with the
fiscal year ending September 30, 1997.
8
<PAGE>
In February, 1997, the FASB issued Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" ("Statement 128"). Statement 128 is effective for
financial statements issued for periods ending after December 15, 1997.
Statement 128 establishes standards for computing and presenting earnings per
share ("EPS"), simplifies the standards previously found in APB No. 15,
"Earnings Per Share", and makes them comparable to international EPS standards.
Bancorp will begin disclosing EPS in accordance with Statement 128 beginning
with the quarter ended December 31, 1997.
In June, 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("Statement 130"). Statement 130 is
effective for fiscal years beginning after December 15, 1997. Statement 130
establishes standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. Statement 130
requires all items to be recognized under accounting standards as components of
comprehensive income and be reported in a separate financial statement. Such
statement will be presented by Bancorp beginning with the quarter ended December
31, 1998.
In June, 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information"
("Statement 131"). Statement 131 is effective for periods beginning after
December 15, 1997. Statement 131 establishes standards for the way that public
business enterprises report information about operating segments , based on how
the enterprise defines such segments. Bancorp is required to report operating
segment information, to the extent such segments are defined, beginning with the
year ended September 30, 1999.
9
<PAGE>
2). NET INCOME PER SHARE
Net income per share was computed by dividing net income by the weighted average
number of shares of common stock outstanding during the three months ended June
30, 1997 and 1996. Adjustments have been made, where material, to give effect to
the shares that would be outstanding, assuming the exercise of dilutive stock
options, all of which are considered common stock equivalents.
Quarter Ended
June 30,
1997 1996
---------- ----------
Net income ....................................... $3,415,861 $2,806,597
========== ==========
Weighted average common shares outstanding ....... 4,919,152 4,850,758
Common stock equivalents due to dilutive
effect of stock options ..................... 94,192 103,713
---------- ----------
Total weighted average common shares
and equivalents outstanding for
primary earnings per share computation ...... 5,013,344 4,954,471
========== ==========
Primary earnings per share ....................... $ 0.68 $ 0.57
========== ==========
Weighted average common shares outstanding ....... 5,013,344 4,954,471
Additional dilutive shares using the
higher of end of period market value
versus average market value for the
period utilizing the treasury stock
method regarding stock options .............. 8,112 0
---------- ----------
Total weighted average common shares and
equivalents outstanding for fully
diluted earnings per share computation ...... 5,021,456 4,954,471
========== ==========
Fully diluted earnings per share ................. $ 0.68 $ 0.57
========= =========
10
<PAGE>
3). INVESTMENT AND MORTGAGE-BACKED SECURITIES
The amortized cost and estimated market value of investment and mortgage-backed
securities as of June 30, 1997 are as follows:
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
---- ----- ------ -----
(Dollars in thousands)
Available for sale:
Treasury notes $ 17,954 $ -- $ -- $ 17,954
FHLB notes 29,452 -- -- 29,452
Other securities 87 -- -- 87
-------- -------- -------- --------
47,493 -- -- 47,493
-------- -------- -------- --------
Held to maturity:
FHLB notes 15,000 -- 6 14,994
-------- -------- -------- --------
FHLMC mortgage-backed securities 94,483 329 -- 94,812
FNMA mortgage-backed securities 62,076 573 -- 62,649
-------- -------- -------- --------
156,559 902 -- 157,461
-------- -------- -------- --------
$219,052 $ 902 $ 6 $219,948
======== ======== ======== ========
The amortized cost and estimated market value of investment and mortgage-backed
securities as of September 30, 1996 are as follows:
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
---- ----- ------ -----
(Dollars in thousands)
Available for sale:
Treasury notes $ 23,457 $ -- $ 110 $ 23,347
FHLB notes 10,000 31 -- 10,031
Other securities 115 -- -- 115
-------- -------- -------- --------
33,572 31 110 33,493
-------- -------- -------- --------
Held to maturity:
FHLB notes 20,000 16 -- 20,016
-------- -------- -------- --------
FHLMC mortgage-backed securities 114,072 -- 333 113,739
FNMA mortgage-backed securities 39,221 328 -- 39,549
-------- -------- -------- --------
153,293 328 333 153,288
-------- -------- -------- --------
$206,865 $ 375 $ 443 $206,797
======== ======== ======== ========
11
<PAGE>
The amortized cost and estimated market value of debt securities at June 30,
1997 and September 30, 1996 by contractual maturity are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
June 30, 1997 September 30, 1996
------------- ------------------
Estimated Estimated
Amortized market Amortized market
cost value cost value
---- ----- ---- -----
(Dollars in thousands)
Available for sale:
Due in one year or less $ 17,954 $ 17,954 $ 15,505 $ 15,539
Due in one to five years 29,452 29,452 17,952 17,839
Other securities 87 87 115 115
-------- -------- -------- --------
47,493 47,493 33,572 33,493
-------- -------- -------- --------
Held to maturity:
Due in one year or less -- -- -- --
Due in one to five years 15,000 14,994 20,000 20,016
Other securities -- -- -- --
-------- -------- -------- --------
15,000 14,994 20,000 20,016
-------- -------- -------- --------
FHLMC mortgage-backed securities 94,483 94,812 114,072 113,739
FNMA mortgage-backed securities 62,076 62,649 39,221 39,549
-------- -------- -------- --------
156,559 157,461 153,293 153,288
-------- -------- -------- --------
$219,052 $219,948 $206,865 $206,797
======== ======== ======== ========
As of June 30, 1997, the Bank had pledged mortgage-backed securities with a
market value of $506,000 and a carrying value of $497,000 to collateralize the
public funds on deposit. The Bank had also pledged mortgage-backed securities
with a market value of $2,130,000 and a carrying value of $2,095,000 to
collateralize Treasury, tax and loan accounts.
12
<PAGE>
4). LOANS
Loans are summarized below: JUNE 30, SEPTEMBER 30,
1997 1996
-------- --------
MORTGAGE LOANS: (DOLLARS IN THOUSANDS)
CONSTRUCTION 1-4 FAMILY $ 41,417 $ 43,994
PERMANENT 1-4 FAMILY 620,066 584,592
MULTI-FAMILY 14,457 17,804
NONRESIDENTIAL 53,006 41,970
LAND 31,881 29,034
-------- --------
TOTAL MORTGAGE LOANS 760,827 717,394
-------- --------
OTHER LOANS:
COMMERCIAL NONMORTGAGE 11,446 8,199
HOME IMPROVEMENT 20,670 20,679
MANUFACTURED HOUSING 16,046 15,784
OTHER CONSUMER 50,320 44,265
-------- --------
TOTAL OTHER LOANS 98,482 88,927
-------- --------
TOTAL LOANS RECEIVABLE 859,309 806,321
-------- --------
LESS:
LOANS IN PROCESS 28,727 26,788
DEFERRED LOAN FEES AND
DISCOUNTS 3,385 3,498
ALLOWANCE FOR LOAN LOSSES 11,408 11,016
-------- --------
43,520 41,302
-------- --------
TOTAL LOANS RECEIVABLE, NET $815,789 $765,019
======== ========
An analysis of the allowance for loan losses follows:
Three Months Nine Months
Ended June 30, Ended June 30,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
(DOLLARS IN THOUSANDS)
BEGINNING BALANCE $ 11,280 $ 10,085 $ 11,016 $ 10,083
PROVISION FOR (RECOVERY
OF) LOAN LOSSES 205 (19) 456 (149)
ALLOWANCE FOR LOAN LOSSES
ACQUIRED 0 885 0 885
CHARGE-OFFS (112) (10) (184) (79)
RECOVERIES 35 110 120 311
-------- -------- -------- --------
ENDING BALANCE $ 11,408 $ 11,051 $ 11,408 $ 11,051
======== ======== ======== ========
13
<PAGE>
At June 30, 1997 and September 30, 1996, loans with unpaid principal balances of
approximately $2,227,000 and $2,172,000, respectively, were 90 days or more
contractually delinquent or on nonaccrual status. As of June 30, 1997 and
September 30, 1996, $1,853,000 and $2,081,000, respectively, of these loans were
in the process of foreclosure.
As of June 30, 1997 and September 30, 1996, mortgage loans which had been sold
on a recourse basis had outstanding principal balances of $3,562,000 and
$4,424,000, respectively.
5). REAL ESTATE OWNED
Real estate owned includes the following:
June 30, September 30,
1997 1996
---- ----
(Dollars in thousands)
Real estate acquired in satisfaction
of loans $ 3,620 $ 4,830
Allowance for losses (724) (1,712)
------- -------
$ 2,896 $ 3,118
======= =======
Activity in the allowance for losses on real estate owned is as follows:
Three Months Nine Months
Ended June 30, Ended June 30,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
Beginning balance $ 763 $ 1,509 $ 1,712 $ 1,857
Provision for (recovery
of) losses (16) 180 (20) 67
Allowance for losses
acquired 0 21 0 21
Charge-offs (23) (8) (968) (243)
------- ------- ------- -------
Ending balance $ 724 $ 1,702 $ 724 $ 1,702
======= ======= ======= =======
Provision for losses on real estate owned is included in income (losses) from
real estate operations in the consolidated statements of earnings.
Legal and consulting fees relating to real estate operations and real estate
owned are included in professional fees on the consolidated statements of
earnings.
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain "forward-looking statements." Bancorp desires to
take advantage of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995 and is including this statement for the express
purpose of availing itself of the protections of the safe harbor with respect to
all such forward-looking statements. These forward-looking statements, which are
included in Management's Discussion and Analysis, describe future plans or
strategies and include Bancorp's expectations of future financial results. The
words "believe," "expect," "anticipate," "estimate," "project," and similar
expressions identify forward-looking statements. Bancorp's ability to predict
results or the effect of future plans or strategies is inherently uncertain.
Factors which could affect actual results include but are not limited to i)
general market interest rates, ii) general economic conditions, iii)
legislative/regulatory changes, iv) monetary and fiscal policies of the U.S.
Treasury and the Federal Reserve, v) changes in the quality or composition of
the Bank's loan and investment portfolios, vi) demand for loan products, vii)
deposit flows, viii) competition, ix) demand for financial services in the
Bank's markets, and x) changes in the accounting principles, policies, and
guidelines. These factors should be considered in evaluating the forward-looking
statements, and undue reliance should not be placed on such statements.
RESULTS OF OPERATIONS
Comparison of quarterly results in this section are between the three months
ended June 30, 1997 and June 30, 1996. Comparison of fiscal year to date results
are between the nine month periods then ended.
GENERAL. Net income for the third fiscal quarter ended June 30, 1997, increased
21.7% to $3.4 million or 68 cents per share, compared to $2.8 million or 57
cents per share for the same period last year. Net income for the nine months
ended June 30, 1997 increased 19.0% to $9.8 million or $1.96 per share, compared
to $8.3 million or $1.67 per share for the same period last year. This increase
was due primarily to the growth in earning assets. The acquisition of Treasure
Coast Savings Bank on June 1, 1996, increased total assets by $75 million, net
loans by $62 million and deposits by $70 million.
NET INTEREST INCOME. Net interest income increased to $10.1 million for the
quarter ended June 30, 1997, from $8.9 million for the same period last year.
For the nine months ended June 30, 1997, net interest income was $29.4 million
compared to $25.8 million in the comparable period in 1996. This increase was
primarily the result of an increase in average interest-earning assets to $1.056
billion for the nine months ended June 30, 1997, compared to $905.9 million for
the comparable period in 1996, partially offset by a decline of 4 basis points
in the net interest margin. The net interest margin was 3.36% for the nine
months ended June 30, 1997, compared
15
<PAGE>
to 3.40% for the comparable period in 1996. The increase in average
interest-earning assets was primarily due to the growth in loans.
PROVISION FOR LOAN LOSSES. The provision for loan losses is charged to
operations to bring the total allowance for loan losses to a level considered
appropriate by management based on historical experience, volume and type of
lending conducted by the Bank, industry standards, the levels and status of past
due and non-performing loans, the general economic conditions of the Bank's
lending area and other factors affecting collectibility of the Bank's loan
portfolio. The provision for loan losses was $205,000 for the quarter ended June
30, 1997, compared to a credit of $19,000 for the comparable period in 1996. For
the nine months ended June 30, 1997, the provision for loan losses was $456,000
compared to a credit of $149,000 in the comparable period in 1996. The credit to
the provision for the nine months ended June 30, 1996, was primarily due to a
reduction in classified loans. The allowance for loan losses was $11.4 million
and $11.0 million for June 30, 1997 and September 30, 1996, respectively. The
allowance was 1.4% of total loans at both June 30, 1997 and September 30, 1996;
109.0% and 129.4% of classified loans at June 30, 1997 and September 30, 1996,
respectively; and was 511.8% and 507.3% of nonperforming loans at June 30, 1997
and September 30, 1996, respectively. While the Bank's management uses available
information to recognize losses on loans, future additions to the allowance may
be necessary based on changes in economic conditions.
OTHER INCOME. Other income increased to $1.0 million for the quarter ended June
30, 1997, from $562,000 for the same period last year due primarily to an
increase of $267,000 in income from real estate operations and an increase of
$161,000 in gain on sale of mortgage loans. Income from real estate operations
was $68,000 for the quarter ended June 30, 1997, compared to a loss of $199,000
in the comparable period in 1996. The loss for the quarter ended June 30, 1996,
was primarily due to a $180,000 provision for losses on real estate owned. Other
income increased to $2.9 million for the nine months ended June 30, 1997, from
$2.1 million for the comparable period in 1996, due primarily to an increase of
$393,000 in other fees and service charges, an increase of $204,000 in income
from real estate operations and an increase of $202,000 in gain on sale of
mortgage loans. Other fees and service charges, primarily from fees and service
charges on deposit products, was $2.5 million and $2.1 million for the nine
months ended June 30, 1997 and 1996, respectively. This increase was primarily
due to the growth in deposits. Income from real estate operations was $23,000
for the nine months ended June 30, 1997, compared to a loss of $181,000 in the
comparable period in 1996. Gain on sale of mortgage loans was $135,000 for the
nine months ended June 30, 1997, compared to a loss of $67,000 in the comparable
period in 1996.
OTHER EXPENSE. Other expense increased to $5.3 million for the quarter ended
June 30, 1997, from $4.9 million for the same period last year. The quarter
ending June 30, 1997, included the expensing of $129,000 of costs relating to
the organization of the mid-tier holding company. For the nine months ended June
30, 1997, other expense was $15.7 million compared to $14.7 million in the
comparable period in 1996. The change was due primarily to an increase of
$917,000 in compensation and benefits and an increase of $600,000 in other
expense partially
16
<PAGE>
offset by a decrease of $625,000 in SAIF deposit insurance premiums. The
increase in compensation and benefits is due primarily to additional staff
required to support the growth in loans and deposits. The increase in other
expense is primarily due to an increase of $153,000 in amortization of goodwill,
an increase of $118,000 in advertising and promotion, an increase of $69,000 in
data processing services and $52,000 in filing fees relating to the organization
of the mid-tier holding company. The decrease in SAIF deposit insurance premiums
is due to lower assessment rates resulting from The Deposit Insurance Act of
1996.
INCOME TAXES. Income tax expense increased to $2.2 million for the quarter ended
June 30, 1997 from $1.8 million for the same period last year. For the nine
months ended June 30, 1997, income tax expense was $6.3 million compared to $5.2
million for the comparable period in 1996. The effective tax rate remained
constant at 39% for both the nine months ended June 30, 1997 and 1996.
FINANCIAL CONDITION
Total assets increased to $1.117 billion at June 30, 1997, from $1.057 billion
at the fiscal year ended September 30, 1996. The increase is primarily due to
the growth in net loans and deposits.
Interest-bearing deposits in other banks decreased to $15.0 million at June 30,
1997 from $16.3 million at September 30, 1996. The decrease is primarily due to
a decrease in funds on deposit at the FHLB.
Federal funds sold decreased to $10.3 million at June 30, 1997 from $16.1
million at September 30, 1996. The decrease is primarily due to the funding of
the payments of annual real estate taxes held in escrow for borrowers.
Investment securities held to maturity decreased to $15.0 million at June 30,
1997 from $20.0 million at September 30, 1996. The decrease is primarily due to
the purchase of $15.0 million FHLB Notes offset by the call prior to maturity of
$20.0 million FHLB Notes.
Investment securities available for sale increased to $47.5 million at June 30,
1997 from $33.5 million at September 30, 1996. The increase is primarily due to
the purchase of $29.5 million FHLB Notes partially offset by the maturities of
$5.5 million U.S. Treasury Notes and $10.0 million FHLB Notes.
Mortgage-backed securities increased to $156.6 million at June 30,1997 from
$153.3 million at September 30, 1996. The increase is primarily due to the
purchase of $17.0 million of seven-year balloon securities, $5.0 million of
five-year balloon securities and $10.0 million of adjustable rate securities
offset by $28.4 million of repayments.
17
<PAGE>
Net loans increased to $815.8 million at June 30, 1997 from $765.0 million at
September 30, 1996. The increase is primarily due to loan originations of $177.0
million partially offset by repayments of $117.5 million.
Real estate owned decreased to $2.9 million at June 30, 1997 from $3.1 million
at September 30, 1996. The decrease is primarily the result of sales of real
estate owned properties.
Deposits increased to $904.9 million at June 30, 1997 from $851.9 million at
September 30, 1996. The increase is primarily due to a net increase in deposits
before interest credited of $27.8 million.
FHLB advances increased to $100 million at June 30, 1997 from $95 million at
September 30, 1996. The increase is primarily due to $30 million of short-term
fixed rate advances taken in order to fund the purchase of $30 million FHLB
Notes partially offset by the maturity of $25 million FHLB advances.
Stockholders' equity increased to $93.7 million at June 30, 1997 from $84.8
million at September 30, 1996, primarily due to $9.8 million in earnings for the
nine months ended June 30, 1997. At June 30, 1997, the Bank exceeded all
regulatory capital requirements as follows:
Required Actual Excess of Actual
% of %of over Regulatory
Amount Assets Amount Assets Requirements
------ ------ ------ ------ ------------
(Dollars in thousands)
Tangible Capital $16,701 1.50% $78,386 7.04% $ 61,685
Core Capital $33,402 3.00% $78,386 7.04% $ 44,984
Risk-Based Capital $46,416 8.00% $85,688 14.77% $ 39,272
18
<PAGE>
ASSET QUALITY
Loans 90 days past due are generally placed on non-accrual status. The Bank
ceases to accrue interest on a loan once it is placed on non-accrual status, and
interest accrued but unpaid at the time is charged against interest income.
Additionally, any loan where it appears evident that the collection of interest
is in doubt is also placed on a non-accrual status. The Bank carries real estate
owned at the lower of cost or fair value, less cost to dispose. Management
regularly reviews assets to determine proper valuation.
The following table sets forth information regarding the Bank's non-accrual
loans and foreclosed real estate at the dates indicated:
June 30, September 30,
1997 1996
---- ----
(Dollars in thousands)
Non-accrual mortgage loans:
Delinquent less than 90 days $ 336 $ 323
Delinquent 90 days or more 1,755 1,717
------ ------
Total 2,091 2,040
------ ------
Non-accrual other loans:
Delinquent less than 90 days 23 --
Delinquent 90 days or more 113 132
------ ------
Total 136 132
------ ------
Total non-accrual loans 2,227 2,172
Accruing loans 90 days or more delinquent -- --
------ ------
Total nonperforming loans 2,227 2,172
Real estate owned, net of related allowance 2,896 3,118
------ ------
Total non-performing assets $5,123 $5,290
====== ======
Non-performing loans to total net loans .27% .28%
Total non-performing assets to total assets .46% .50%
19
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are various claims and lawsuits in which Bancorp and the Bank are
periodically involved incident to the business of Bancorp and the Bank. In the
opinion of management, no material loss is anticipated from any such pending
claims or lawsuits. The most significant of these lawsuits is described below.
The Bank and certain other entities are defendants in a class action lawsuit
which was filed in May, 1991. The plaintiffs in the litigation are purchasers of
parcels of developed and undeveloped land from General Development Corporation
("GDC") who allege that GDC, through fraudulent means, induced them to buy land
at inflated values. The Bank is a defendant in this matter along with a number
of other financial institutions, purchasers of loans in the secondary market,
broker dealers, an insurance company and numerous other individuals and
companies. The involvement of the Bank arises from its purchase from GDC of land
sales contracts originated by GDC. The Bank, along with the other defendants,
filed a motion to dismiss the case which was granted. The plaintiffs filed an
appeal with the Third Circuit Court of Appeals which remanded the case to the
District Court for reconsideration. The District Court entered its order
dismissing the case again.
The plaintiffs filed a motion requesting the District Court to amend the
dismissal order to permit the plaintiffs to file another amended complaint. The
District Court denied the plaintiff's motion. The plaintiffs appealed that order
to the Third Circuit and both sides were directed to submit supplementary
briefs. Management believes that the position of the plaintiffs is without
merit.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
None
ITEM 5. OTHER INFORMATION.
Bancorp announced on June 25, 1997 that its Board of Directors had authorized
the repurchase of up to 248,000 shares of Bancorp's common stock. This
represents approximately 5% of the total outstanding common stock. Repurchases
will be conducted in the open market.
20
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
The following Exhibits are included with this Report or are incorporated into
this Report by reference, as indicated:
Exhibit
Number Description
10(i) Employment contract with Michael J. Brown, Sr. (Exhibit
10(a) to the Registration Statement on Form S-4 filed
December 20, 1996.
10(ii) Recognition and Retention Plan and Trust Agreement (Exhibit
10(d) to the Registration Statement on Form S-4 filed
December 20, 1996.
10(iii) Outside Directors' Recognition and Retention Plan and Trust
Agreement (Exhibit 10(e) to the Registration Statement on
Form S-4 filed December 20, 1996.
10(iv) 1994 Incentive Stock Option Plan (Exhibit 10(b) to
the Registration Statement on Form S-4 filed
December 20, 1996.
10(v) 1994 Stock Option Plan for Outside Directors (Exhibit 10(c)
to the Registration Statement on Form S-4 filed December 20,
1996.
10(vi) Harbor Federal Savings Bank Non-Employee Directors'
Retirement Plan
10(vii) Unfunded Deferred Compensation Plan for Directors
10(viii) Management Incentive Compensation Plan for fiscal year
ending September 30, 1997
(b) Reports on Form 8-K.
Form 8-K was filed for a reportable event dated June 27, 1997.
Events under both items number 1 and 5 were reported.
21
<PAGE>
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.
HARBOR FLORIDA BANCORP, INC.
Date: August 11, 1997 /s/
----------------------------
Michael J. Brown, Sr.
President and Chief Executive Officer
Date: August 11, 1997 /s/
----------------------------
Don W. Bebber
Senior Vice President, Finance and
Principal Financial Officer
22
HARBOR FEDERAL SAVINGS BANK
NON-EMPLOYEE DIRECTORS'
RETIREMENT PLAN
TABLE OF CONTENTS
SECTION TITLE PAGE
1 Purpose 1
2 Definitions 1
3 Administration 2
4 Participation 2
5 Annual Basic Benefits 3
6 Assignment and
Alienation of Benefits 3
7 Amendment, Suspensions
or Terminations 3
8 General 4
<PAGE>
NON-EMPLOYEE DIRECTORS'
RETIREMENT PLAN
SECTION 1: PURPOSE. The purpose of the Harbor Federal Savings Bank Non-Employee
Directors' Retirement Plan (hereafter referred to as the "Plan") is to provide
an additional incentive for Non-Employee Directors to continue in service to the
Corporation or its successors and to attract future Non-Employee Directors to
the Corporation or its successors.
SECTION 2: DEFINITIONS. Unless the context clearly requires a
different meaning, the following words shall have the following
meanings when used herein.
(a) "Annual Basis Benefit" means the benefit described in
section 5.2.
(b) "Benefit Period" means the period described in
Section 5.3.
(c) "Board" means the Board of Directors of the Corporation.
(d) "Corporation" means Harbor Federal Savings Bank, its
successors and assigns.
(e) "Disability" means a disability of such a nature that it
prevents a Director from performing his or her duties as
a Director for the Corporation.
(f) "Effective Date" means January 1, 1994.
(g) "Non-Employee Director" or "Director" means a member or
former member of the Board who is not considered as an
employee by the Corporation or any Subsidiary.
(h) "Plan Year" means the calendar year.
(i) "Retainer" means the annual base fee as adjusted from
time to time, paid to members of the Board as
compensation for their service. Such term excludes (in
addition to any other excludable amounts) (i) any
additional fees paid for attendance at any meeting of the
Board or a committee thereof, or chairing any committee,
(ii) any stock awards paid to a Director, and (iii) any
reimbursement of expenses paid to a Director.
1
<PAGE>
(j) "Subsidiary" means any corporation of which more than 50% of
the voting stock is owned directly or indirectly by the
Corporation.
(k) "Surviving Beneficiary Benefit" means the benefit, if
any, payable under Section 5.4.
(l) "Year of Service" means a consecutive twelve (12) month period
during which a Non-Employee Director served as a member of the
Board. Years prior to the effective date and partial years
shall be used for the purpose of this plan. Partial years
shall be used on a prorated basis. Only years as a
Non-Employee Director shall count as Years of Service for
purposes of this Plan.
SECTION 3: ADMINISTRATION. This Plan shall be administered by the Compensation
Committee (hereinafter referred to as the "Committee") of the Board of Directors
or such other committee as the Board shall designate. The Committee shall have
full discretionary authority to interpret the Plan, establish administrative
regulations to further the purpose of the Plan and take any other action
necessary to the proper operation of the Plan. All decisions and acts of the
committee shall be final and binding upon all Participants.
SECTION 4: PARTICIPATION. Each non-employee who is a Non-employee Director of
the Corporation on the Effective Date of the Plan or who thereafter becomes a
Non-Employee Director of the corporation shall be a Participant in the Plan
(herein referred to as a "Participant").
SECTION 5: ANNUAL BASIC BENEFITS.
5.1. ELIGIBILITY. To receive an Annual Basic Benefit under
the Plan, a Non-Employee Director must: (1) have completed at
least ten (10) Years of Service as a Non-Employee Director; and (2)
no longer serve as a Non-Employee Director of the Corporation.
5.2. AMOUNT OF BENEFITS. The annual amount of a Non-Employee Director's
Annual Basic Benefit shall equal 2 1/2 % of the average of the annual Retainer
paid to such Director in the last three full years preceding his or her
termination of service multiplied by the number of years for which the
Non-Employee Director has completed service as a Director of the Company;
PROVIDED that notwithstanding the number of years served as a Director the
maximum Annual Basic Benefit shall not exceed 50% of the average annual
Retainer.
5.3. BENEFIT PERIOD. A Non-Employee Director's Benefit Period
shall be his or her remaining life and shall commence at the later
of (i) age 65, or (ii) termination of service with the Corporation.
2
<PAGE>
5.4. SURVIVING BENEFICIARY BENEFIT.
5.4.1. Upon the death of a Non-Employee Director prior to termination
of service with the Corporation, and provided the Non-Employee Director had
completed ten (10) Years of Service as a Non-Employee Director, a benefit equal
to one hundred percent (100%) of the Annual Basic Benefit calculated pursuant to
Paragraph 5.2 hereof and for which such Non-Employee Director would have been
eligible at the time of his death shall be paid to his or her surviving spouse
or designated beneficiary, if any, for a period of ten (10) years or until such
spouse or beneficiary's death if it occurs in less than ten years.
5.4.2 Upon the death of a Non-Employee Director subsequent to
termination of service with the Corporation, a benefit equal to one hundred
percent (100%) of the annual Basic Benefit calculated pursuant to Paragraph 5.2
hereof shall continue to be paid to his or her surviving spouse or designated
beneficiary for a period not to exceed ten(10) years from the date of the
Director's termination of service with the Corporation or until such spouse's or
beneficiary's death if it occurs in less than ten (10) years.
5.5. PAYMENT OF BENEFIT. Within thirty (30) days after a Non-Employee
Director becomes eligible for benefits under the Plan, the Corporation shall
begin paying such Non-Employee Director payments equal to one-twelfth of the
Annual Basic Benefit. Monthly payments will continue for the duration of the
Benefit Period.
The Surviving Beneficiary Benefit payable in accordance with Section
5.4 shall be paid to the surviving spouse or beneficiary within thirty (30) days
of the date of the Non-Employee Director's death.
5.6. DISABILITY OR DEATH. If any Non-Employee Director terminates
service as a Non-Employee Director before completing ten (10) Years of Service
as a result of a disability or death, notwithstanding the requirements of
Section 5.1, the Committee may authorize a benefit to be paid to such
Non-Employee Director or the surviving spouse under this Plan.
SECTION 6: ASSIGNMENT AND ALIENATION OF BENEFITS. No retirement benefit under
this Plan shall be subject to anticipation, alienation, sale, assignment,
transfer, pledge, encumbrance, or charge, and any attempt to anticipate,
alienate, sell, assign, transfer, pledge, encumber, or charge the same shall be
void. No rights or benefits hereunder shall in any manner be liable for or be
subject to the debts, contracts, liabilities, engagements, or torts of the
person entitled to such benefit and, to the extent permitted by law, the rights
of any Non-Employee Director shall not be subject in any manner to attachment or
other legal process for the debts of such Non-Employee Director.
3
<PAGE>
SECTION 7: AMENDMENT, SUSPENSIONS OR TERMINATION. The Board of Directors may
amend, suspend or terminate the Plan at any time; provided, however, that no
such termination of the Plan shall alter or impair the rights of a Non-Employee
Director to receive a benefit under the Plan if such Non-Employee Director would
be eligible to receive a benefit at the time of termination but for the
Director's continuing to serve as a Non-Employee Director at the time of such
Plan termination.
SECTION 8: GENERAL.
8.1 Nothing in the Plan shall be deemed to confer upon any Non-Employee
Director any right to continued service as director of the Corporation or any
Subsidiary or affect any right of the Corporation or any Subsidiary, acting
through their Board of Directors or otherwise, to terminate or otherwise affect
the service of such Non-Employee Director.
8.2 The Plan shall be interpreted in accordance with, and the
enforcement of the Plan shall be governed by, the laws of the State of Florida.
8.3 All costs and expenses incurred in the operation and administration
of this Plan shall be borne by the Corporation.
8.4 This Plan is intended to be administered as an unfunded employee
benefit plan established and maintained primarily for the purpose of providing
deferred compensation for non-employee directors.
Adopted: December 8, 1993
HARBOR FEDERAL SAVINGS BANK
/S/
- - ---------------------
Michael J. Brown, Sr.
President
Attest:
/S/
- - ---------------------
Christine Fowler
Secretary
4
UNFUNDED DEFERRED COMPENSATION PLAN
FOR THE DIRECTORS OF
HARBOR FEDERAL SAVINGS AND LOAN ASSOCIATION
OF FORT PIERCE
The provisions of the plan are as follows:
1. Each director may elect on or before December 31st of any year to defer
all or a specified portion of his annual fees for succeeding calendar
years.
2. Any person elected to fill a vacancy on the board, and who was not a
director on the preceding December 31st, may elect, before his term
begins, to defer all or a specified part of his annual fees for the
balance of the calendar year following such election and for succeeding
years.
3. Interest on the deferred fees is to be computed at the 2 1/2 year CD
rate.
4. Amounts deferred under the plan, together with accumulated interest,
will be distributed in annual installments over a ten-year period
beginning with the first day of the calendar year immediately following
the year in which the director (1) ceases to be a director, or (2)
having attained the age of 65 years and having been a participant in
the plan for a minimum of five years terminates the request by written
request and in writing, requests distribution as before stated.
5. An election to defer fees shall continue from year to year unless
terminated by the director by written request. In the event a director
elects to terminate deferring fees, the amount already deferred cannot
be paid to him except as provided in the preceding paragraph.
6. In the event the director ceases to be a voting member of the Board of
Directors of the Company, or if he becomes a proprietor, officer,
partner, employee or otherwise becomes affiliated with any business
that is in competition with the corporation, the entire balance of his
deferred fees, including interest, may, if directed by the Board of
Directors, in its sole discretion, be paid immediately to him in a lump
sum.
7. Upon the death of a director or former director prior to the expiration
of the period during which the deferred amounts are payable, the
balance of the deferred fees and interest in his account shall be
payable to his estate or designated beneficiary 50% on the first day of
the calendar year following the death of the director and the remaining
50% on the first day of the next succeeding calendar year.
ADOPTED December 22, 1971.
<PAGE>
FIRST AMENDMENT TO THE
UNFUNDED DEFERRED COMPENSATION
PLAN FOR THE DIRECTORS OF
HARBOR FEDERAL SAVINGS AND LOAN ASSOCIATION
OF FORT PIERCE
The Unfunded Deferred Compensation Plan for the Directors of Harbor Federal
Savings Bank (the "Plan") is hereby amended as follows:
1. The name of the Plan is amended to read "The Unfunded Deferred Compensation
Plan for the Directors of Harbor Federal Savings Bank."
2. A new paragraph is added to the Plan to read as follows:
"8. On or before December 17, 1993, a director participating
in the Plan may elect in writing to have all or a portion of
the amounts previously deferred by the director under the
Plan plus interest credited on such amounts used to purchase
shares of common stock of Harbor Federal Savings Bank
("harbor Federal") at the time of the reorganization of
Harbor Federal Savings and Loan Association into a mutual
holding company. The amount so chosen must equal the value
of a whole number of such shares at the offering price. With
respect to the funds, the director will no longer receive
the interest credit described in paragraph 3. Dividends paid
on shares of stock held by the Plan for the account of a
participant will be credited to the Plan account of the
participant as will interest on these dividends in the
manner described in paragraph 3."
<PAGE>
SECOND AMENDMENT TO THE
UNFUNDED DEFERRED COMPENSATION
PLAN FOR THE DIRECTORS OF
HARBOR FEDERAL SAVINGS BANK
The Unfunded Deferred Compensation Plan for the Directors of Harbor Federal
Savings Bank (the "Plan") is hereby amended as follows:
1. Amended paragraph to the Plan to read as follows:
"8. On or before December 17, 1993 a director participating
in the Plan may elect in writing to have all or a portion of
the amounts previously deferred by the Director under the
Plan plus interest credited on such amounts used to purchase
shares of common stock of Harbor Federal Savings Bank
("harbor Federal") at the time of the reorganization of
Harbor Federal Savings and Loan Association into a mutual
holding company or thereafter provided that the common stock
is purchased at its fair market value and the director so
electing notifies Harbor Federal on or before July 31 of
each year of the amount chosen for the purchase of stock.
The amount so chosen must equal the value of a whole number
of shares at the offering price/fair market value. With
respect to the funds, the director will no longer receive
the interest credit described in paragraph 3. Dividends paid
on shares of stock held by the Plan for the account of a
participant will be credited to the Plan account of the
participant as will interest on these dividends in the
manner described in paragraph 3."
Harbor Federal Savings Bank
By: /S/
------------------
Edward G. Enns
Date: July 11, 1996
<PAGE>
THIRD AMENDMENT TO THE
UNFUNDED DEFERRED COMPENSATION
PLAN FOR THE DIRECTORS OF
HARBOR FEDERAL SAVINGS BANK
The Unfunded Deferred Compensation Plan for the Directors of Harbor Federal
Savings Bank (the "Plan") is hereby amended as follows:
1. Amended Paragraph to the plan to read as follows:
"8. On or before December 17, 1993 a director participating
in the Plan may elect in writing to have all or a portion of
the amounts previously deferred by the Director under the
Plan plus interest credited on such amounts used to purchase
shares of common stock of Harbor Federal Savings Bank
("Harbor Federal") at the time of the reorganization of
Harbor Federal Savings and Loan Association into a mutual
holding company or thereafter provided that the common stock
is purchased at its fair market value and the director so
electing notifies Harbor Federal on or before January 31,
April 30, July 31 or October 31 of each year of the amount
chosen for the purchase of stock. The amount so chosen must
equal the value of a whole number of shares at the offering
price/fair market value. With respect to the funds, the
director will no longer receive the interest credit
described in paragraph 3. Dividends paid on shares of stock
held by the Plan for the account of a participant will be
credited to the Plan account of the participant as will
interest on these dividends in the manner described in
paragraph 3."
Harbor Federal Savings Bank
By: /S/
------------------
Edward G. Enns
Date: April 23, 1997
MANAGEMENT INCENTIVE COMPENSATION PLAN - FY 97
PURPOSE
The purpose of the Plan is to provide an incentive for extraordinary
performance by those management personnel who, individually and collectively as
a management team, have the greatest influence over the financial success of the
Bank.
In addition to its primary purpose, the Plan is designed to accomplish
other important objectives of the Bank including:
- fostering teamwork and cooperation among management personnel;
- helping to retain, and encourage commitment on the part of management
and key personnel; and
- setting high goals and increasing returns to shareholders.
ADMINISTRATION
The Plan shall be administered by the Compensation Committee of the
Bank's Board of Directors.
PARTICIPANTS
Participation is at the discretion of Senior Management, but is limited
to management personnel who report directly to either a Senior Vice President,
the President, or the Board of Directors during Fiscal Plan Year 1997.
Participants must be actively employed in this capacity on the date the
incentive is paid to be eligible to receive the full award. Those participants
who are no longer "direct reports" on the date the incentive is paid, may be
eligible for a partial award, depending upon the circumstances. Those
participants promoted into this category during the Fiscal year may receive a
pro-rated amount of any incentive compensation awarded.
BANK PERFORMANCE GOALS
Performance goals to be determined by the Board of Directors.
CALCULATION OF INCENTIVE AWARDS
Incentive compensation awards are calculated based on the attainment of
either the first goal or both goals. Meeting goal #1 constitutes an award of 5%
of salary for those participating management personnel. Attainment of both goals
would mean a 10% incentive award.
NOT AN EMPLOYMENT CONTRACT
Nothing contained in the Plan shall give any Employee the right to be
retained in the employment of the Bank or affect the right of the Bank to
dismiss any Employee. The adoption of the Plan shall not constitute a contract
between the Bank and any Employee.
<PAGE>
FINAL REVIEW AND APPROVAL BY COMPENSATION COMMITTEE
The Compensation Committee will review the Bank's results for the year,
to determine whether the Plan goals should be adjusted for the purpose of the
Management Incentive Plan. If extraordinary events distorted the results, it
will be at the Committee's sole discretion to modify those results to determine
whether the bonus should be paid. The budget will be a gauge in determining what
is an extraordinary event.
The Compensation Committee reserves the right to amend or terminate the
plan should the Bank encounter unforeseen or extraordinary circumstances which
impact the financial stability/profitability of the Bank.
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