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: March 31, 2000
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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
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HARBOR FLORIDA BANCSHARES, INC
------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 65-0813766
-------- -----------------------
(State or other jurisdiction (IRS 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 April 25, 2000, there were 25,901,584 shares of the Registrant's
common stock outstanding.
<PAGE>
HARBOR FLORIDA BANCSHARES, INC.
Table of Contents
Part I. Financial Information Page
Item 1. Financial Statements
Condensed Consolidated Statements of Financial
Condition as of March 31, 2000 and September
30, 1999(unaudited)............................................ 2
Condensed Consolidated Statements of Earnings
for the three and six months ended March 31, 2000
and 1999 (unaudited)............................................3
Condensed Consolidated Statements of Cash Flows
for the six months ended March 31, 2000 and 1999
(unaudited).................................................... 4
Notes to Condensed Consolidated Financial Statements
(unaudited).....................................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................11
Item 3. Quantitative and Qualitative Disclosures about
Market Risk and Asset and Liability Management.................15
Part II. Other Information
Item 1. Legal Proceedings..............................................15
Item 2. Changes in Securities..........................................15
Item 3. Defaults Upon Senior Securities................................15
Item 4. Submission of Matters to a Vote of Security-Holders............15
Item 5. Other Information..............................................15
Item 6. Exhibits and Reports on Form 8-K...............................16
Signature Page.................................................17
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
HARBOR FLORIDA BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition (unaudited)
(Dollars in thousands except share data)
<TABLE>
<CAPTION>
March 31, September 30,
2000 1999
---- -----
Assets
<S> <C> <C>
Cash and amounts due from depository institutions $ 33,823 $ 30,214
Interest-bearing deposits in other banks 2,185 32,959
Investment securities held to maturity 10,913 10,910
Investment securities available for sale 73,622 76,166
Mortgage-backed securities held to maturity 179,823 196,971
Loans held for sale 1,607 1,747
Loans, net 1,155,264 1,070,335
Accrued interest receivable 7,528 7,580
Real estate owned 1,672 911
Premises and equipment 21,005 20,139
Federal Home Loan Bank stock 11,775 11,250
Goodwill, net 2,259 2,361
Other assets 1,698 1,007
----- -----
Total assets $ 1,503,174 $1,462,550
=========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Deposits $ 1,039,039 $ 977,595
FHLB Advances 230,000 225,000
Advance payments by borrowers for taxes and insurance 10,214 18,951
Income taxes payable 35 22
Other liabilities 3,886 5,060
----- -----
Total liabilities 1,283,174 1,226,628
--------- ---------
Stockholders' Equity:
Preferred stock --- ---
Common stock 3,112 3,110
Paid-in capital 191,711 191,016
Retained earnings 102,742 96,485
Common stock purchased by:
Employee stock ownership plan (ESOP) (12,396) (12,746)
Recognition and retention plans (RRP) (6,258) (6,258)
Accumulated other comprehensive loss, net (1,148) (70)
Treasury stock (57,763) (35,615)
-------- --------
Total stockholders' equity 220,000 235,922
------- -------
Total Liabilities and Stockholders' Equity $ 1,503,174 $1,462,550
=========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
HARBOR FLORIDA BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Dollars in thousands except share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
--------- ---------
2000 1999 2000 1999
---- ---- ---- ----
Interest income:
<S> <C> <C> <C> <C>
Loans $ 22,677 $ 20,194 $ 44,509 $ 40,154
Investment securities 1,451 1,577 2,918 3,155
Mortgage-backed securities 2,938 3,391 5,995 6,770
Other 217 685 808 1,414
------------ ------------ ------------ ------------
Total interest income 27,283 25,847 54,230 51,493
------------ ------------ ------------ ------------
Interest expense:
Deposits 10,013 9,377 19,732 19,046
Other 3,200 2,844 6,475 5,356
------------ ------------ ------------ ------------
Total interest expense 13,213 12,221 26,207 24,402
------------ ------------ ------------ ------------
Net interest income 14,070 13,626 28,023 27,091
Provision for loan losses 189 354 392 509
------------ ------------ ------------ ------------
Net interest income after provision for loan
losses 13,881 13,272 27,631 26,582
------------ ------------ ------------ ------------
Other income:
Other fees and service charges 1,599 1,323 3,105 2,495
Income from real estate operations 15 75 98 294
Gain (loss) on sale of mortgage loans (13) 16 (28) 46
Gain on sale of securities 101 --- 103 ---
Other 67 47 122 108
------------ ------------ ------------ ------------
Total other income 1,769 1,461 3,400 2,943
------------ ------------ ------------ ------------
Other expenses:
Compensation and employee benefits 4,140 3,684 8,164 7,728
Occupancy 1,044 814 2,070 1,601
Advertising and promotion 309 293 530 556
Data processing services 369 361 736 678
Other 1,290 1,154 2,624 2,233
------------ ------------ ------------ ------------
Total other expense 7,152 6,306 14,124 12,796
------------ ------------ ------------ ------------
Income before income taxes 8,498 8,427 16,907 16,729
Income tax expense 3,287 3,204 6,547 6,552
------------ ------------ ------------ ------------
Net income $ 5,211 $ 5,223 $ 10,360 $ 10,177
============ ============ ============ ============
Net income per share
Basic $ 0.21 $ 0.19 $ 0.41 $ 0.36
====== ====== ====== ======
Diluted $ 0.21 $ 0.18 $ 0.41 $ 0.35
====== ====== ====== ======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
HARBOR FLORIDA BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Six months ended
March 31
2000 1999
---- ----
Cash provided by operating activities:
<S> <C> <C>
Net Income 10,360 $ 10,177
Adjustments to reconcile net income to net cash provided by operating
activities:
Gain on sale of investment securities available for sale (103) ---
(Gain) loss on sale of premises and equipment (13) 2
Gain on sale of real estate owned (104) (87)
Provision for loan losses 392 509
Provision for (recovery of) losses on real estate owned 16 (203)
Depreciation and amortization 909 786
Amortization of stock benefit plans 850 1,131
ESOP forfeitures transferred to Treasury stock (11) (44)
Amortization of goodwill 102 101
Net amortization of other purchase accounting adjustments 40 40
Amortization of deferred loan fees and costs (689) (820)
Accretion of discount on purchased loans (6) (6)
Originations of loans held for sale (1,169) (4,599)
Proceeds from sale of loans held for sale 1,309 4,336
Increase in deferred loan fees and costs 695 1,143
Decrease in accrued interest receivable 52 470
Increase in other assets (691) (285)
Increase in income taxes payable 168 100
Deferred income tax benefit (397) (14)
Decrease in other liabilities (101) (144)
--------------- ------
Net cash provided by operating activities 11,609 12,593
-------------- ------
Cash used by investing activities:
Net increase in loans (86,540) (65,292)
Purchase of mortgage-backed securities --- (50,152)
Proceeds from principal repayments of mortgage-backed securities 17,074 47,275
Proceeds from maturities and calls of investment securities held to
maturity --- 10,000
Purchase of investment securities held to maturity --- (715)
Proceeds from maturities and calls of investment securities
available for sale --- 10,000
Proceeds from sale of investment securities available for sale 1,663 ---
Purchase of investment securities available for sale (755) (15,204)
Proceeds from sale of real estate owned 506 1,031
Purchase of premises and equipment (1,822) (1,900)
Proceeds from sale of premises and equipment 116 71
FHLB stock purchase (525) (2,038)
--------------- -------
Net cash used by investing activities (70,283) (66,924)
--------------- --------
<PAGE>
HARBOR FLORIDA BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (unaudited)
(Dollars in thousands)
Six months ended
March 31
2000 1999
---- ----
Cash provided by financing activities:
Net increase in deposits 61,444 48,361
Net increase in FHLB advances 5,000 60,000
Decrease in advance payments by borrowers for taxes and insurance (8,737) (8,170)
Dividends paid (4,103) (4,058)
Common stock options exercised 42 301
Purchase of treasury stock (22,137) (22,613)
Purchase of common stock by recognition and retention plan --- (7,171)
-------------- -------
Net cash provided by financing activities 31,509 66,650
-------------- ------
Net increase (decrease) in cash and cash equivalents (27,165) 12,319
Cash and cash equivalents - beginning of period 63,173 63,763
-------------- ------
Cash and cash equivalents - end of period $36,008 $76,082
============== =======
Supplemental disclosures:
Cash paid for:
Interest $26,196 $24,019
Taxes 6,775 6,470
Noncash investing and financing activities:
Additions to real estate acquired in settlement of loans
through foreclosure 1,547 633
Sale of real estate owned financed by the Company 368 700
Tax benefit of stock plans credited to capital 155 107
Change in unrealized gain (loss) on securities available for
sale (1,754) 14
Change in deferred taxes related to securities available for
sale 676 5
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
Notes to Condensed Consolidated Financial Statements
1). BASIS OF PRESENTATION
The unaudited condensed consolidated interim financial statements for Harbor
Florida Bancshares, Inc. (the "Company") and its subsidiary Harbor Federal
Savings Bank (the "Bank") reflect all adjustments (consisting only of normal
recurring accruals) which, in the opinion of management, are necessary to
present fairly the Company'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 Company's Annual
Report on Form 10-K for the year ended September 30, 1999.
The Company's only significant business is holding the common stock of the Bank.
Consequently, its net income is derived from the Bank.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("Statement
133"). The effective date for Statement 133 was delayed by Statement of
Financial Accounting Standards No. 137, "Accounting for Derivative Instruments
and Hedging Activities - deferral of the effective date of FASB No. 133"
("Statement 137"), to fiscal years beginning after June 15, 2000. Statement 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. It is currently anticipated that the Company
will adopt Statement 133 on October 1, 2000, and that the statement will not
have a significant financial statement impact upon adoption.
<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 and six
months ended March 31, 2000 and 1999. 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.
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31 March 31
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $5,211,411 $5,222,670 $10,359,880 $10,176,506
========= ========= ========== ==========
Weighted average common shares outstanding:
Shares outstanding 25,980,828 29,400,060 26,394,428 30,012,628
Less weighted average uncommitted ESOP
shares (1,251,088) (1,320,926) (1,259,819) (1,338,692)
---------- ----------- ---------- -----------
Total 24,729,740 28,079,134 25,134,609 28,673,936
========== ========== ========== ==========
Basic earnings per share $ .21 0.19 $ 0.41 $ 0.36
==== ===== ===== =====
Weighted average common shares outstanding 24,729,740 28,079,134 25,134,609 28,673,936
Additional dilutive shares related to
stock benefit plans 194,649 219,516 291,000 253,680
---------- ---------- ---------- ----------
Total weighted average common shares and
equivalents outstanding for diluted
earnings per share computation 24,924,389 28,298,650 25,425,609 28,927,616
========== ========== ========== ==========
Diluted earnings per share $ 0.21 $ 0.18 $ 0.41 $ 0.35
===== ===== ===== =====
</TABLE>
Additional dilutive shares are calculated under the treasury stock method
utilizing the average market value of the Company's stock for the period.
<PAGE>
3). INVESTMENT AND MORTGAGE BACKED SECURITIES
The amortized cost and estimated market value of investment and mortgage-backed
securities as of March 31, 2000 are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
---- ----- ------ -----
(Dollars in thousands)
Available for sale:
<S> <C> <C> <C> <C>
FHLB notes $ 50,000 $ --- $1,091 $ 48,909
FNMA notes 19,976 --- 167 19,809
------ --- --- ------
69,976 --- 1,258 68,718
Equity securities 5,515 --- 611 4,904
----- --- --- -----
75,491 --- 1,869 73,622
------ --- ----- ------
Held to maturity:
FHLB notes 9,998 3 --- 10,001
Municipal securities 915 --- 92 823
--- -- --- -- ---
10,913 3 92 10,824
------ -- - -- ------
FHLMC mortgage-backed securities 80,713 212 3,736 77,189
FNMA mortgage-backed securities 99,110 120 2,851 96,379
------ --- ----- ------
179,823 332 6,587 173,568
------- --- ----- -------
$266,227 $335 $8,548 $258,014
======= === ===== =======
</TABLE>
The amortized cost and estimated market value of investment and mortgage-backed
securities as of September 30, 1999 are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
---- ----- ------ -----
(Dollars in thousands)
Available for sale:
<S> <C> <C> <C> <C>
FHLB notes $ 50,000 $ --- $498 $ 49,502
FNMA notes 19,961 --- 86 19,875
------ --- -- ------
69,961 --- 584 69,377
Equity securities 6,320 577 108 6,789
----- --- --- -----
76,281 577 692 76,166
------ --- --- ------
Held to maturity:
FHLB notes 9,995 --- 3 9,992
Municipal securities 915 --- 63 852
--- --- -- ---
10,910 --- 66 10,844
------ --- -- ------
FHLMC mortgage-backed securities 88,191 312 2,444 86,059
FNMA mortgage-backed securities 108,780 314 1,679 107,415
------- --- ----- -------
196,971 626 4,123 193,474
------- --- ----- -------
$284,162 $1,203 $4,881 $280,484
======= ===== ===== =======
</TABLE>
<PAGE>
The amortized cost and estimated market value of debt securities at March 31,
2000 and September 30, 1998 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.
<TABLE>
<CAPTION>
March 31, 2000 September 30, 1999
-------------- ------------------
Amortized Estimated Amortized Estimated
cost market value cost market value
---- ------------ ---- ------------
(Dollars in thousands)
Available for sale:
<S> <C> <C> <C> <C>
Due in one year or less $19,976 $ 19,809 $ --- $ ---
Due in one to five years 50,000 48,909 69,961 69,377
------ ------ ------ ------
69,976 68,718 69,961 69,377
------ ------ ------ ------
Held to maturity:
Due in one year or less 9,998 10,001 9,995 9,992
Due after ten years 915 823 915 852
--- --- --- ---
10,913 10,824 10,910 10,844
------ ------ -- ------ -- ------
FHLMC mortgage-backed securities 80,713 77,189 88,191 86,059
FNMA mortgage-backed securities 99,110 96,379 108,780 107,415
------ ------ ------- -------
179,823 173,568 196,971 193,474
------- ------- ------- -------
$260,712 $253,110 $277,842 $273,695
======= ======= ======= =======
</TABLE>
As of March 31, 2000, the Company had pledged securities with a market value of
$625,000 and a carrying value of $715,000 to collateralize the public funds on
deposit. The Company had also pledged mortgage-backed securities with a market
value of $895,000 and a carrying value of $893,000 to collateralize treasury,
tax and loan accounts as of March 31, 2000
<PAGE>
4). Loans
Loans are summarized below:
March 31 September 30,
2000 1999
---- ----
(Dollars in thousands)
Mortgage loans:
Construction 1-4 family $ 97,284 $ 91,922
Permanent 1-4 family 840,596 788,408
Multi-family 15,171 15,141
Nonresidential 110,969 99,824
Land 48,153 41,882
------ ------
Total mortgage loans 1,112,173 1,037,177
--------- ---------
Other loans:
Commercial nonmortgage 24,484 21,192
Home improvement 18,505 17,205
Manufactured housing 15,478 16,190
Other consumer 72,368 65,489
------ ------
Total other loans 130,835 120,076
------- -------
Total loans 1,243,008 1,157,253
--------- ---------
Less:
Loans in process 71,180 70,722
Net deferred loan fees and discounts 4,271 4,244
Allowance for loan losses 12,293 11,952
------ ------
87,744 86,918
------ ------
Total loans, net $ 1,155,264 $ 1,070,335
========== =========
An analysis of the allowance for loan losses follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Beginning balance $ 12,079 $ 11,920 $ 11,952 $ 11,818
Provision for loan losses 189 354 392 509
Charge-offs (36) (426) (124) (508)
Recoveries 61 21 73 50
-------- -------- -------- --------
Ending balance $ 12,293 $ 11,869 $ 12,293 $ 11,869
======== ======== ======== ========
</TABLE>
At March 31, 2000 and September 30, 1999, loans with unpaid principal balances
of approximately $2,597,000 and $2,541,000, respectively, were 90 days or more
contractually delinquent or on nonaccrual status. As of March 31, 2000 and
September 30, 1999, approximately $2,304,000 and $2,059,000, respectively, of
these loans were in the process of foreclosure.
As of March 31, 2000 and September 30, 1999 mortgage loans which had been sold
on a recourse basis had outstanding principal balances of approximately
$1,211,000 and $1,413,000, respectively.
<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." Harbor Florida
Bancshares, Inc. (the "Company") 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 the
Company's expectations of future financial results. The words "believe,"
"expect," "anticipate," "estimate," "project," and similar expressions identify
forward-looking statements. The Company's ability to predict results or the
effect of future plans or strategies or qualitative or quantitative changes
based on market risk exposure is inherently uncertain. Factors which could
affect actual results include but are not limited to i) change in 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 Company's loan and
investment portfolios, vi) demand for loan products, vii) deposit flows, viii)
competition, and ix) demand for financial services in the Company's markets.
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 March 31, 2000 and March 31, 1999. Comparisons of fiscal year to date
results are between the six months then ended.
General. Diluted earnings per share for the second fiscal quarter ended March
31, 2000, increased 16.7% to 21 cents per share on net income of $5.2 million,
compared to 18 cents per share on net income of $5.2 million for the same period
last year. Diluted earnings per share for the six months ended March 31, 2000,
increased 17.1% to 41 cents per share on net income of $10.4 million, compared
to 35 cents on net income of $10.2 million for the same period last year. The
increase for both the quarter and six months was due primarily to a decrease in
the average number of shares outstanding, the growth in the loan portfolio,
increased non-interest income due to the growth in transaction accounts
partially offset by increased operating expenses.
Net Interest Income. Net interest income increased 3.3% to $14.1 million for the
quarter ended March 31, 2000, from $13.6 million for the quarter ended March 31,
1999. For the six months ended March 31, 2000, net interest income increased
3.4% to $28.0 million compared to $27.1 million for the same period last year.
This increase was a result of a $70.4 million increase in average
interest-earning assets to $1.432 billion for the six months ended March 31,
2000, from $1.362 billion in the comparable period in 1999. The average balance
of the loan portfolio increased by $130.2 million partially offset by a decrease
of $59.8 million in the average balance of interest bearing deposits and the
securities portfolio, the proceeds of which were used primarily to fund the
repurchase of the Company's stock.
Provision for Loan Losses. The provision for loan losses was $189,000 for the
quarter ended March 31, 2000, compared to $354,000 for the comparable period in
1999. For the six months ended March 31, 2000, the provision for loan losses was
$392,000 compared to $509,000 for the comparable period in 1999. The provision
for the six months ended March 31, 2000 was principally comprised of a charge of
$473,000 due to loan growth, primarily in the commercial real estate and
residential loan portfolios, $51,000 for net charge offs partially offset by a
credit of $132,000 related to a decrease in the level of classified loans. The
provision for the six months ended March 31, 1999 was principally comprised of a
charge of $422,000 due to loan growth, primarily in the commercial real estate
and residential loan portfolios, $178,000 for net charge offs and a credit of
$91,000 related to a decrease in the level of classified loans. While the
Company's management uses available information to recognize losses on loans,
future additions to the allowance may be necessary based on changes in economic
conditions.
<PAGE>
Other Income. Other income increased to $1.8 million for the quarter ended March
31, 2000, from $1.5 million for the comparable period in 1999. Other income
increased to $3.4 million for the six months ended March 31, 2000, from $2.9
million for the comparable period in 1999. This increase is due primarily to an
increase of $610,000 in other fees and service charges partially offset by a
decrease of $196,000 in income from real estate operations. Other fees and
service charges, primarily from fees and service charges on deposit products,
were $3.1 million and $2.5 million for the six months ended March 31, 2000 and
1999, respectively. This increase was due primarily to the growth in deposits.
Income from real estate operations was $98,000 for the six months ended March
31, 2000, compared to $294,000 in the comparable period in 1999. This decrease
was due primarily to a $219,000 increase in the provision for losses on real
estate owned. The provision was $16,000 for the six months ended March 31, 2000,
compared to a credit of $203,000 for the comparable period in 1999.
Other Expenses. Other expenses increased to $7.2 million for the quarter ended
March 31, 2000, from $6.3 million for the comparable period in 1999. Other
expenses increased to $14.1 million for the six months ended March 31, 2000,
from $12.8 million for the comparable period in 1999 due primarily to an
increase of $436,000 in compensation and benefits, an increase of $469,000 in
occupancy expense and an increase of $391,000 in other expenses. The increase in
compensation and benefits is due primarily to annual salary increases and
additional staff required to support the growth in loans and deposits. The
increase in occupancy expense is due primarily to an increase in data processing
equipment expense and expenses resulting from the addition of three new branch
offices during the last fiscal year. The increase in other expenses is due
primarily to an increase of $123,000 in professional fees, $97,000 in deposit
account losses and other increases resulting from the growth in loans and
deposits.
Income Taxes. Income tax expense increased to $3.3 million for the quarter ended
March 31, 2000, from $3.2 million for the same period last year. Income tax
expense remained constant at $6.5 million for the six months ended March 31,
2000 and 1999, due primarily to a decrease in the effective tax rate to 38.7% in
2000 from 39.2% in 1999. The decrease in the effective tax rate for the six
months ending March 31, 2000 is due primarily to the difference between the
financial and the tax treatment of the expense of stock benefit plans.
Financial Condition
Total assets increased to $1.503 billion at March 31, 2000, from $1.463 billion
at the fiscal year ended September 30, 1999. The increase is due primarily to
the growth in net loans partially offset by the decrease in interest bearing
deposits and the securities portfolio.
Interest-bearing deposits in other banks decreased to $2.2 million at March 31,
2000, from $33.0 million at September 30, 1999. The decrease is due primarily to
a decrease in funds on deposit at the FHLB, the proceeds of which were used
primarily to fund the repurchase of the Company's stock.
Mortgage-backed securities decreased to $179.8 million at March 31, 2000, from
$197.0 million at September 30, 1999. The decrease is due primarily to $17.1
million of repayments.
Net loans increased to $1.155 billion at March 31, 2000, from $1.070 billion at
September 30, 1999. The increase is due primarily to loan disbursements of
$220.1 million partially offset by repayments of $133.6 million. The increase in
net loans for the six months ending March 31, 2000 is due primarily to a net
increase of $58.2 million in residential 1-4 family mortgage loans, $8.8 million
in nonresidential mortgage loans, $7.3 million in land loans and $7.5 million in
consumer loans.
<PAGE>
Deposits increased to $1.039 billion at March 31, 2000, from $977.6 million at
September 30, 1999. The increase is due primarily to a net increase in deposits
before interest credited of $43.8 million and interest credited of $17.6
million. The increase in deposits for the six months ending March 31, 2000 is
due primarily to an increase of $38.7 million in core deposits and $22.7 million
in certificate accounts.
FHLB advances increased to $230.0 million at March 31, 2000, from $225.0 million
at September 30, 1999. The increase is due to a new short-term daily rate
advance of $5.0 million.
Stockholders' equity decreased to $220.0 million at March 31, 2000, from $235.9
million at September 30, 1999. The decrease is due primarily to the repurchase
of $22.1 million of Company common stock to be held as treasury stock, partially
offset by $10.4 million of earnings for the fiscal year. During the fiscal year,
the Company repurchased 1,844,701 shares at an average price of $12.01 per share
to be held as treasury stock in accordance with the Company's stock repurchase
program.
At March 31, 2000, the Bank exceeded all regulatory capital requirements as
follows:
<TABLE>
<CAPTION>
Required Actual
-------- ------ Excess of Actual
% of % of Over Regulatory
Amount Assets Amount Assets Requirements
------ ------ ------ ------ ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Tangible Capital $22,459 1.50% $155,123 10.36% $132,664
Core Capital $59,892 4.00% $155,123 10.36% $ 95,231
Risk-Based Capital $67,483 8.00% $164,940 19.55% $ 97,457
</TABLE>
Cash Flow
Net cash provided by the Company's operating activities (i.e. cash items
affecting net income) was $11.6 million and $12.6 million for the six months
ended March 31, 2000 and 1999, respectively.
Net cash used by the Company's investing activities (i.e. cash used primarily
from its investment securities, mortgage-backed securities and loan portfolios)
was $70.3 million and $66.9 million for the six months ended March 31, 2000 and
1999, respectively. The increase in cash flows in 2000 was principally due to an
increase of $21.2 million in net loans partially offset by a $50.2 million
decrease in the purchase of mortgage-backed securities and a decrease of $30.2
million in proceeds from principal repayments from mortgage-backed securities.
Net cash provided by the Company's financing activities (i.e. cash receipts
primarily from net increases (decreases) in deposits and net FHLB advances) was
$31.5 million and $66.6 million for the six months ended March 31, 2000 and
1999, respectively. The decrease in cash flows in 2000 was principally due to a
$55.0 million decrease in borrowings from the FHLB partially offset by a $13.1
million increase in deposits. In 1999, the Company borrowed $50 million of new
long term fixed rate advances in order to fund the purchases of $50 million
fifteen-year fixed rate mortgage-backed securities.
<PAGE>
Asset Quality
Loans 90 days past due are generally placed on nonaccrual status. The Company
ceases to accrue interest on a loan once it is placed on nonaccrual 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 nonaccrual status. The Company 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 Company's nonaccrual
loans and foreclosed real estate at the dates indicated:
<TABLE>
<CAPTION>
March 31, September 30,
2000 1999
---- ----
(Dollars in thousands)
Nonaccrual mortgage loans:
<S> <C> <C>
Delinquent less than 90 days $ 346 $ ---
Delinquent 90 days or more 2,085 2,343
----- -----
Total 2,431 2,343
Nonaccrual other loans:
Delinquent 90 days or more 166 198
--- ---
Total nonperforming loans 2,597 2,541
Real estate owned, net of related allowance 1,672 911
----- ---
Total nonperforming assets $ 4,269 $ 3,452
===== =====
Nonperforming loans to total net loans .22% .24%
Total nonperforming assets to total assets .28% .24%
Allowance for loan losses to total loans 1.06% 1.12%
Allowance for loan losses to nonperforming loans 473.36% 470.31%
Allowance for loan losses to classified loans 274.33% 230.73%
</TABLE>
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk and Asset and
Liability Management.
For a discussion of the Company's asset and liability management policies as
well as the potential impact of interest rate changes upon the market value of
the Company's portfolio equity, see the Company's Annual Report on Form 10-K for
the year ended September 30, 1999. There has been no material change in the
Company's asset and liability position or the market value of the Company's
portfolio equity since September 30, 1999.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
There are various claims and lawsuits in which the Company is periodically
involved incident to the Company's business. In the opinion of management, no
material loss is anticipated from any such pending claims or lawsuits.
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.
An Annual Meeting of Stockholders of the Company was held January
21, 2000 for the purpose of considering and voting upon the following matters:
1. To elect three directors of the Company for three (3) year terms.
2. To ratify the appointment by the Company's Board of Directors of
the firm of KPMG LLP as independent public accountants for the
Company for the fiscal year ending September 30, 2000.
The following table sets forth the results as to each matter voted
upon:
<TABLE>
<CAPTION>
PROPOSAL FOR AGAINST ABSTAIN % APPROVED BROKER NON-VOTES
-------- --- ------- ------- --------- ---------
<S> <C> <C> <C> <C>
No. 1 - Bird 23,036,600 83,400 --- 85% ---
Fee 23,031,468 88,532 --- 85% ---
Neill 23,032,893 87,107 --- 85% ---
No. 2 22,450,000 16,894 44,239 83% ---
</TABLE>
Item 5. Other Information.
None
<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
3(i) Certificate of Incorporation of Registrant (Exhibit 3.3 to
Pre-effective Amendment No. 1 to the Registration Statement on Form
S-1, No. 333-37275 filed November 10, 1997)
3(ii) Bylaws of Registrant (Exhibit 3.4 to Pre-Effective Amendment No. 1 to
the Registration Statement on Form S-1, No. 333-37275, filed November
10, 1997)
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) 1994 Incentive Stock Option Plan (Exhibit 10(b) to the Registration
Statement on Form S-4 filed December 20, 1996)
10(iii) 1994 Stock Option Plan for Outside Directors (Exhibit 10(c) to the
Registration Statement on Form S-4 filed December 20, 1996)
10(iv) Harbor Federal Savings Bank Non-Employee Directors' Retirement Plan
(Exhibit 10(vi) to Form 10-Q for the quarter ended June 30, 1997 filed
August 11, 1997)
10(v) Unfunded Deferred Compensation Plan for Directors (Exhibit 10(vii) to
Form 10-K for the year ended September 30, 1998 filed December 24,
1998)
10(vi) 1998 Stock Incentive Plan for Directors, Officers and Employees
(Exhibit 4.3 to the Registration Statement on Form S-8 filed October
26, 1998)
10(vii) Change of Control Agreements (Exhibit 10(x) to Form 10-K for the
year ended September 30, 1998 filed December 24, 1998)
(b) Reports on Form 8-K.
-------------------
None
<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 BANCSHARES, INC.
Date: May 9, 2000 /S/
------------------
Michael J. Brown, Sr.
President and Chief Executive
Officer
Date: May 9, 2000 /S/
--------------------
Don W. Bebber
Senior Vice President, Finance
and Principal Financial Officer
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<S> <C>
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0
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