<PAGE>
<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
MARK ONE
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ------- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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: 0-24194
-------
HARBOR FEDERAL BANCORP, INC.
--------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 52-1860591
- ----------------------- -----------------
(State of incorporation) (I.R.S. Employer
Identification No.)
705 York Road, Baltimore, Maryland 21204-2562
- -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(410) 321-7041
--------------
Indicate by check mark 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 ninety days. Yes X No
------ -------
As of December 31, 1997, 1,693,420 shares of the
registrant's Common Stock, par value $0.01 per share, were issued
and outstanding.
Transitional small business disclosure format (check one):
YES NO X
------- ------<PAGE>
<PAGE>
HARBOR FEDERAL BANCORP, INC.
Baltimore, Maryland
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
Consolidated Statements of Financial Condition
-- As of December 31, 1997 (Unaudited) and
March 31, 1997
Consolidated Statements of Income -- (Unaudited)
for the nine and three months ended December 31,
1997 and 1996
Consolidated Statements of Cash Flows --
(Unaudited) for the nine months ended
December 31, 1997 and 1996
Notes to (Unaudited) Consolidated Financial
Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
-------------------------------------------------
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Item 2. Changes in Securities
---------------------
Item 3. Defaults Upon Senior Securities
-------------------------------
Item 4. Submission of Matters to a Vote of Security
Holders
-------------------------------------------
Item 5. Other Information
-----------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
2<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
3<PAGE>
<PAGE>
HARBOR FEDERAL BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
December 31, March 31,
1997 1997
------------ ------------
Assets (Unaudited)
- ------
<S> <C> <C>
Cash:
On hand and due from banks $ 6,143,567 1,482,872
Interest-bearing deposits 146,040 275,962
Federal funds sold -- 3,939,419
Investment securities, fair value of
$50,513,121 and $46,968,577, respectively 50,584,640 47,543,418
Mortgage-backed securities, fair value of
$22,354,996 and $14,251,452, respectively 22,204,545 14,161,239
Loans receivable, net 148,077,447 144,701,746
Investment in Federal Home Loan Bank stock,
at cost 1,366,000 1,366,000
Investment in real estate, net -- 465,136
Investment in and advances to affiliated
corporation 2,850,000 2,775,000
Property and equipment, net 1,854,835 1,938,699
Prepaid expenses and other assets 345,004 812,693
------------ -----------
Total assets $233,572,078 219,462,184
============ ===========
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities:
Savings accounts $176,670,915 171,466,629
Borrowed funds 25,093,000 16,500,000
Advance payments by borrowers for taxes,
insurance and ground rents 1,292,182 1,902,414
Accrued expenses and other liabilities 1,297,434 1,296,861
Federal and state income taxes payable 53,408 71,501
------------ -----------
Total liabilities 204,406,939 191,237,405
------------ -----------
Stockholders' equity:
Preferred stock $0.01 par value; authorized
5,000,000 shares; none issued -- --
Common stock $0.01 par value; authorized
20,000,000 shares; 1,693,420 and
1,754,420 shares issued and outstanding 16,934 17,544
Additional paid-in capital 13,030,455 13,611,599
Unearned ESOP shares (912,830) (1,136,840)
Retained income, substantially restricted 16,720,121 6,068,969
Unrealized holding gain (loss) on
securities available for sale, net 310,459 (336,493)
------------ -----------
Total stockholders' equity 29,165,139 28,224,779
------------ -----------
Total liabilities and stockholders'
equity $233,572,078 219,462,184
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4<PAGE>
<PAGE>
HARBOR FEDERAL BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
December 31, December 31,
---------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $ 8,740,628 7,635,705 2,943,746 2,742,154
Mortgage-backed securities 738,247 938,516 252,449 297,682
Investment securities 2,383,995 2,561,385 786,637 848,968
Interest-earning deposits and
other short-term investments 235,855 223,279 80,087 69,453
----------- ---------- --------- ---------
Total interest income 12,098,725 11,358,885 4,062,919 3,958,257
----------- ---------- --------- ---------
Interest expense:
Savings accounts:
Certificates 5,104,960 4,726,666 1,786,520 1,617,778
NOW and money market deposit
accounts 752,006 805,006 247,986 265,422
Passbook and statement savings 760,719 789,272 246,643 253,905
----------- ---------- --------- ---------
6,617,685 6,320,944 2,281,149 2,137,105
Borrowed funds 650,032 630,625 200,856 303,333
----------- ---------- --------- ---------
Total interest expense 7,267,717 6,951,569 2,482,005 2,440,438
----------- ---------- --------- ---------
Net interest income 4,831,008 4,407,316 1,580,914 1,517,819
Provision for losses on loans 80,000 32,605 40,000 --
----------- ---------- --------- ---------
Net interest income after
provision for losses 4,751,008 4,374,711 1,540,914 1,517,819
----------- ---------- --------- ---------
Noninterest income:
Loan fees and service charges 129,645 50,566 57,918 17,464
Other 219,987 138,109 133,999 24,741
----------- ---------- --------- ---------
Total noninterest income 349,632 188,675 191,917 42,205
----------- ---------- --------- ---------
Noninterest expense:
Compensation and benefits 1,991,909 1,782,121 654,749 628,365
Occupancy and equipment 336,972 325,972 112,060 108,232
SAIF deposit insurance premiums 67,624 1,008,023 22,416 56,747
Advertising 100,510 133,058 51,552 52,801
Other 600,147 494,119 217,024 179,558
----------- ---------- --------- ---------
Total noninterest expense 3,097,162 3,743,293 1,057,801 1,025,703
----------- ---------- --------- ---------
Income before income taxes 2,003,478 820,093 675,030 534,321
Income tax provision 773,863 316,700 260,750 206,350
----------- ---------- --------- ---------
Net income $ 1,229,615 503,393 414,280 327,971
=========== ========== ========= =========
Net income per share of common stock
Basic $ .77 .31 .26 .20
=========== ========== ========= =========
Diluted $ .76 .31 .25 .20
=========== ========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
5<PAGE>
<PAGE>
HARBOR FEDERAL BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
---------------------
1997 1996
------- -------
<S> <C> <C>
Cash flows from operating activities
Net income $ 1,229,615 503,393
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 101,735 111,406
Provision for losses on loans 80,000 32,605
Amortization of premium on savings deposits 286,038 286,038
Gain on sale of loans available for sale (96,428) --
Non-cash compensation under stock-based
benefit plans 521,350 444,735
Loans originated for sale, net of repayments (3,564,722) --
Sale of loans originated for sale 4,803,060 --
Amortization of loan fees, premiums and
discounts, net (106,491) (47,855)
Decrease (increase) in prepaid expenses and
other assets 62,162 (25,957)
Increase (decrease) in accrued expenses and
other liabilities (11,599) 606,529
Increase (decrease) in federal and state income
taxes payable (18,093) 150,796
Increase in accrued interest receivable (239,489) (198,233)
Increase (decrease) in accrued interest payable 12,172 (193,993)
------------ ------------
Net cash provided by operating activities 3,059,310 1,669,464
------------ ------------
Cash flows from investing activities:
Maturities of investment securities available
for sale 4,000,000 --
Maturities of investment securities held to
maturity 5,000,000 5,000,000
Purchase of investment securities available
for sale (11,000,000) (3,997,969)
Purchase of mortgage-backed securities
available for sale (10,122,750) (4,996,875)
Sale of mortgage-backed securities available
for sale -- 3,538,099
Principal repayments on mortgage-backed
securities held to maturity 1,484,172 2,169,877
Principal repayments on mortgage-backed
securities available for sale 844,303 949,250
Sale of investment in real estate 465,136 43,848
Loan principal disbursements, net of repayments (2,680,494) (17,114,378)
Loan purchases (1,808,911) (8,049,798)
Purchases of property and equipment (17,871) (88,336)
Decrease (increase) in investment in and
advances to affiliated corporation, net ( 75,000) 50,000
------------ ------------
Net cash used in investing activities (13,911,415) (22,496,282)
------------ ------------
(Continued)
</TABLE>
6<PAGE>
<PAGE>
HARBOR FEDERAL BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
---------------------
1997 1996
------- -------
<S> <C> <C>
Cash flows from financing activities:
Net increase in savings deposits 4,918,248 5,767,402
Net increase in borrowed funds 8,593,000 15,895,000
Decrease in advance payments by borrowers
for taxes, insurance and ground rents (610,232) (662,821)
Stock repurchases (965,687) --
Purchase of stock for stock option and
incentive plan trust -- (8,987)
Dividends paid (578,463) (701,768)
Exercise of stock options 86,593 --
------------ ------------
Net cash provided by financing activities 11,443,459 20,288,826
------------ ------------
Net increase (decrease) in cash and cash equivalents 591,354 (537,992)
Cash and cash equivalents at beginning of period 5,698,253 6,249,221
------------ ------------
Cash and cash equivalents at end of period $ 6,289,607 5,711,229
============ ============
Supplemental information -- noncash investing
activities:
Unrealized holding gain (loss) on securities
available for sale, net of income tax effect $ 646,952 (79,541)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
7<PAGE>
<PAGE>
HARBOR FEDERAL BANCORP, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Nine Months Ended December 31, 1997
(Unaudited)
Note 1 -- Business. The accompanying unaudited consolidated
financial statements include the accounts of Harbor Federal
Bancorp, Inc. (the "Company") and wholly-owned subsidiaries,
including Harbor Federal Savings Bank ("Harbor Federal"). Harbor
Federal provides a full range of banking services to individual
and corporate customers through its subsidiaries and branch
banks in Maryland. Harbor Federal is subject to competition
from other financial institutions. Harbor Federal is subject to
the regulations of certain federal agencies and undergoes
periodic examinations by those regulatory authorities.
Note 2 -- Basis of Presentation. The accompanying unaudited
consolidated financial statements were prepared in accordance
with instructions for Form 10-QSB and, therefore, do not include
information or footnotes necessary for a complete presentation
of financial position, results of operations, and cash flows in
conformity with generally accepted accounting principles.
However, all adjustments, consisting of normal recurring
adjustments, which in the opinion of management, are necessary
for a fair presentation of the consolidated financial statements
at and for the nine and three months ended December 31, 1997
have been recorded.
In preparing the financial statements, management is required to
make estimates and assumptions that affect the reported amounts
of assets and liabilities as of the date of the statement of
financial condition and revenues and expenses for the period.
The results of operations for the nine and three months ended
December 31, 1997 are not necessarily indicative of the results
that may be expected for the entire year ending March 31, 1998.
Actual results could differ significantly from those estimates.
Note 3 -- Principles of Consolidation. The accompanying
unaudited consolidated financial statements include the accounts
of the Company and Harbor Federal, and its wholly owned
subsidiaries, Harbor Service Corporation and Bank Street
Mortgage, Inc.. All significant intercompany items have been
eliminated.
Note 4 -- Retained Income. Harbor Federal is required to
maintain certain levels of regulatory capital. At December 31,
1997, Harbor Federal was in compliance with all regulatory
capital requirements. In addition to these requirements, Harbor
Federal must maintain sufficient capital for the "liquidation
account" for the benefit of eligible account holders. In the
event of a complete liquidation of Harbor Federal, eligible
depositors would have an interest in the account.
Note 5 -- Earnings per Common Share. The Company adopted
Statement of Financial Accounting Standards No. 128 "Earnings Per
Share," during the three months ended December 31, 1997.
Statement No. 128 establishes revised standards for computing
and presenting earnings per share (EPS) data. It requires dual
presentation of "basic" and "diluted" EPS on the face of the
statements of income and reconciliation of the numerators and
denominators used in the basic and diluted EPS calculations. As
required by Statement No. 128, EPS data for prior periods
presented have been restated to conform to the new standard.
Basic EPS is calculated by dividing net income by the weighted
average number of common shares outstanding for the applicable
period. Diluted EPS is calculated after adjusting the numerator
and the denominator of the basic EPS calcuation for the effect
of all dilutive potential common shares outstanding during the
period. Information related to the calculation of earnings per
share of common stock is summarized as follows:
8
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
December 31, December 31,
-------------------------------------- ----------------------------------
1997 1996 1997 1996
-------------------------------------- ----------------------------------
Basic Diluted Basic Diluted Basic Diluted Basic Diluted
----- ------- ----- ------- ----- ------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Income 1,229,615 1,229,615 503,393 503,393 414,280 414,280 327,971 327,971
Dividends on unvested
common stock (10,595) (8,694) (9,348) (7,922) (3,739) (1,596) (3,116) (1,309)
--------- --------- --------- --------- --------- --------- --------- ---------
Adjusted net income used
in EPS calculations 1,219,020 1,220,921 494,045 495,471 410,541 412,684 324,855 326,662
========= ========= ========= ========= ========= ========= ========= =========
Weighted average shares
outstanding 1,573,861 1,573,861 1,593,995 1,593,995 1,570,977 1,570,977 1,593,995 1,593,995
Diluted securities:
Options 36,970 15,019 41,665 19,649
Unvested common stock awards 5,592 4,194 6,303 5,316
--------- --------- --------- --------- --------- --------- --------- ---------
Adjusted weighted-average
shares used in EPS
computation 1,573,861 1,616,423 1,593,995 1,613,208 1,570,977 1,618,945 1,593,995 1,618,960
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
9<PAGE>
<PAGE>
Note 6 -- Investment Securities. Investment securities
available for sale included in investment securities have a book
and fair market value of $30,346,252 at December 31, 1997 and
$22,519,150 at March 31, 1997 and related accrued interest of
$406,391 at December 31, 1997 and $171,221 at March 31, 1997.
Note 7 -- Mortgage-Backed Securities. Mortgage-backed
securities available for sale included in mortgage-backed
securities have a book and fair market value of $17,569,322 at
December 31, 1997 and $8,088,950 at March 31, 1997 and related
accrued interest of $127,230 at December 31, 1997 and $49,821 at
March 31, 1997.
10<PAGE>
<PAGE>
HARBOR FEDERAL BANCORP, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion analyzes the financial condition
of the Company at December 31, 1997 and the results of
operations of the Company for the nine and three months ended
December 31, 1997 and 1996.
FINANCIAL CONDITION
- -------------------
Harbor Federal's total assets increased by $14.1 million or
6.4% to $233.6 million at December 31, 1997 from $219.5 million
at March 31, 1997.
Investment securities increased by $3.0 million or 6.4% to
$50.6 milluion at December 31, 1997 from $47.5 million at March
31, 1997. Mortgage-backed securities increased by $8.0 million
or 56.8% to $22.2 million at December 31, 1997 from $14.2
million at March 31, 1997. Loans receivable, net increased by
$3.4 million or 2.3% to $148.1 million at December 31, 1997 from
$144.7 million at March 31, 1997. These increases were funded
by increase in savings deposits of $5.2 million or 3.0% to
$176.7 million at December 31, 1997 from $171.5 million at March
31, 1997 and increase in borrowed funds of $8.6 million or 52.1%
to $25.1 million at December 31, 1997 from $16.5 million at
March 31, 1997.
RESULTS OF OPERATIONS
- ---------------------
The earnings of Harbor Federal depend primarily on its
level of net interest income, which is the difference between
interest earned on Harbor Federal's interest-earning assets,
consisting primarily of mortgage loans, mortgage-backed
securities, interest-bearing deposits at other institutions,
investment securities and other investments, and the interest
paid on interest-bearing liabilities consisting primarily of
savings accounts. Net income for the nine and three months
ended December 31, 1997 increased $726,000 and $86,000
respectively.
The increase for the nine months was primarily due to a
reduction in the SAIF deposit insurance premiums. A one time
assessment for recapitalization of the SAIF was recorded during
the nine months ended December 31, 1996. This one time
assessment amounted to $806,000 and reduced after tax earnings
by $495,000 for the nine months ended December 31, 1996.
Interest Income. Total interest income for the nine months
ended December 31, 1997 increased by $740,000 or 6.5% to $12.1
million from $11.4 million for the same period in 1996. Total
interest income for the three months ended December 31, 1997
increased by $105,000 or 2.6% to $4.1 million from $4.0 million
for the same period in 1996. The increases in interest income
resulted from increases of $12.0 million or 5.9% and $5.3
million or 2.5% in average interest-earning assets for the nine
and three months ended December 31, 1997 as compared to the same
periods in 1996 and from an increase in the average yield on
Harbor Federal's average interest-earning assets to 7.54% and
7.55% for the nine and three months ended December 31, 1997
from 7.50% and 7.54% for the nine and three months ended
December 31, 1996.
Interest on loans for the nine months ended December 31,
1997 increased $1.1 million or 14.5% as compared to the same
period in 1996. Interest on loans for the three months ended
December 31, 1997 increased $202,000 or 7.4% as compared to the
same period in 1996. The increases were due primarily to
increases in average loans receivable of $18.3 million or 14.1%
and $11.4 million or 8.2% for the nine and three months ended
December 31, 1997, respectively, as compared to the same periods
in 1996.
11<PAGE>
<PAGE>
Interest on mortgage-backed securities for the nine and
three months ended December 31,1997 decreased by $200,000 or
21.3% and $45,000 or 15.2% respectively, as compared to the same
periods in 1996. The decreases were the result of decreases in
the average mortgage-backed securities of $3.4 million or 19.5%
and $1.8 million or 10.9% for the nine and three months ended
December 31, 1997, respectively, as compared to the same periods
in 1996. The decreases in average mortgage-backed securities
were due to normal repayments. In December 1997 Harbor Federal
purchased a $9.9 million GNMA II package which will impact
future periods. This purchase was funded by borrowings with a
favorable rate spread of over 200 basis points.
Interest on investment securities for the nine and three
months ended December 31, 1997 decreased by $177,000 or 6.9% and
$62,000 or 7.3%, respectively, as compared to the same periods
in 1996. The decreases were due primarily to decreases in the
average investment securities of $3.8 million or 7.6% and $4.0
million or 8.2% for the nine and three months ended December 31,
1997, respectively, as compared to the same periods in 1996.
The decreases in average investment securities were due to
maturities of several investment securities. In December 1997
Harbor Federal purchased $11.0 million in United States
Government Agencies obligations which will impact future
periods. These investments were partially funded by borrowings
with a favorable rate spread of over 140 basis points.
Interest Expense. Total interest expense for the nine and
three months ended December 31, 1997 increased by $316,000 or
4.5% and $42,000 or 1.7% to $7.3 million and $2.5 million from
$7.0 million and $2.4 million for the same periods in 1996. The
increases were primarily attributable to increases in the
weighted average balance of deposits and borrowings for the nine
and three months ended December 31 1997 of $11.4 million or 6.5%
and $5.3 million or 2.9%, respectively, over the same periods in
1996. The effects of the increases were partially offset by a
reduction in the weighted average cost of Harbor Federal's
deposits and borrowings to 5.17% and 5.24%, respectively, for
the nine and three months ended December 31,1997 from 5.26% and
5.30%, respectively, for the same periods in 1996.
Net Interest Income. Net interest income for the nine and
three months ended December 31, 1997 increased by $424,000 or
9.6% and $63,000 or 4.2% to $4.8 million and $1.6 million from
$4.4 million and $1.5 million for the same periods in 1996. The
principal reason for the increases in net interest income was an
increase in Harbor Federal's net interest margin to 3.01% for
the nine months ended December 31. 1997 from 2.91% for the nine
months ended December 31, 1996.
Provision for Loan Losses. The Company maintains an
allowance for loan losses based on management's review and
classification of the loan portfolio and analyses of borrowers'
ability to pay, past collection experience, risk characteristics
of individual loans or groups of similar loans and underlying
collateral, current and prospective economic conditions, status
of non-performing loans and regulatory reviews conducted in the
regulatory examination process. Provisions of $80,000 and
$40,000 were made for loan losses during the nine and three
months ended December 31, 1997 as compared to $32,600 and none
during the same periods in 1996. Based on the results of
managements' review and analyses, it was concluded that the
level of the allowance for losses on loans was adequate at
December 31, 1997.
Noninterest Income. Noninterest income for the nine and
three months ended December 31, 1997 increased by $161,000 or
85.3% and $150,000 or 354.7% to $349,000 and $192,000 from
$189,000 and $42,000 for the same periods in 1996. The increase
for the nine and three months ended December 31, 1997 was due
primarily to an increase in loan fees and gain on sale of loans
originated for sale.
The loan fees were received primarily from the Company's
mortgage subsidiary, Bank Street Mortgage, Inc. that began
operations in June 1997. These loan fees amounted to $79,400
and $42,200 for the nine and three months ended December 31,
1997. In December 1997, Harbor Federal sold $4.8 million in
mortgage loans originated for sale which produced a $96,400 gain
on sale. These increases were partially offset by a $14,300
reduction in ATM fees. This reduction was due to the closing of
Harbor Federal's ATM facility in Ocean City, Maryland in October
1997.
Noninterest Expense. Noninterest expense for the nine
months ended December 31, 1997 decreased by $646,000 or 17.3% to
$3.1 million from $3.7 million for the same period in 1996. As
mentioned above in the results of operations the reduction was
due primarily to the one time SAIF assessment in the prior year.
This
12<PAGE>
<PAGE>
reduction was partially offset by an increase in compensation
and benefits due primarily to costs relating to Bank Street
Mortgage, Inc.. Noninterest expense for the three months ended
December 31, 1997 increased by $32,000 or 3.1% to $1.06 million
from $1.03 million for the same period in 1996. This increase
was primarily due to increase in compensation and benefits as
mentioned in the nine month results.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Harbor Federal is required to maintain minimum levels of
liquid assets as defined by OTS regulations. This requirement,
which varies from time to time depending upon economic
conditions and deposit flows, is based upon a percentage of
deposits and short-term borrowings. The required ratio
currently is 4.0%. Harbor Federal's liquidity ratio averaged
7.12% and 7.51% for the nine and three months ended December
31, 1997. Harbor Federal adjusts its liquidity levels in order
to meet funding needs of deposit outflows, payment of real
estate taxes on mortgage loans, repayment of borrowings and loan
commitments. Harbor Federal also adjusts liquidity as
appropriate to meet its asset and liability management
objectives.
The Company's primary sources of funds are deposits,
amortization and prepayment of loans and mortgage-backed
securities, maturities of investment securities and other
investments and earnings and funds provided from operations and
borrowings. While scheduled principal repayments on loans and
mortgage-backed securities are a relatively predictable source
of funds, deposit flows and loan prepayments are greatly
influenced by general interest rates, economic conditions, and
competition. The Company manages the pricing of its deposits to
maintain a desired deposit balance. In addition, the Company
invests in short-term interest-earning assets, which provide
liquidity to meet lending requirements.
During the nine months ended December 31, 1997, Harbor
Federal's cash and cash equivalents (cash and short-term
investments with maturities less than 90 days) increased by
$591,000.
The Company had $639,000 in outstanding loan commitments at
December 31, 1997. Harbor Federal expects to fund its loan
originations through principal and interest payments on loans
and mortgage-backed securities, proceeds from investment and
other securities as maturities occur, and to the extent
necessary, borrowed funds. Management expects that funds
provided from these sources will be adequate to meet the
Company's needs.
13
<PAGE>
<PAGE>
HARBOR FEDERAL BANCORP, INC.
AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
From time to time Harbor Federal is a party to various
legal proceedings incident to its business. At
December 31, 1997, there were no legal proceedings to
which the Company, Harbor Federal or its subsidiary
was a party, or to which any of their property was
subject, which were expected by management to result
in a material loss.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
14<PAGE>
<PAGE>
HARBOR FEDERAL BANCORP, INC.
AND SUBSIDIARIES
PART II. OTHER INFORMATION - continued
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) List of Exhibits
* 3.1 Articles of Incorporation of Harbor Federal
Bancorp, Inc.
* 3.2 Bylaws of Harbor Federal Bancorp, Inc.
* 4 Form of Common Stock Certificate of Harbor
Federal Bancorp, Inc.
** 10.1 Employment Agreements between Harbor Federal
Bancorp, Inc. and Harbor Federal Savings
Bank and Robert A. Williams, as amended
** 10.2 Severance Agreements between Harbor Federal
Bancorp, Inc. and Harbor Federal Savings
Bank and Norbert J. Luken and Lawrence W.
Williams
** 10.3 Harbor Federal Savings Bank Non-Employee
Director Retirement Plan
* 10.4 Harbor Federal Savings Bank Deferred
Compensation Plan
* 10.5 Harbor Federal Savings Bank Supplemental
Executive Retirement Agreement
* 10.6 Harbor Federal Bancorp, Inc. Employee Stock
Ownership Plan, as amended
* 10.7 Harbor Federal Bancorp, Inc. Incentive
Compensation Plan, as amended
27 Financial Data Schedule
* Incorporated by reference to Registration Statement on
Form S-1, No. 33-75624.
** Incorporated by reference to Quarterly Report on Form
10-QSB for Quarter Period ended June 30, 1994.
(b) Form 8-K
None
15<PAGE>
<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.
Date: February 10, 1998 By /s/ Robert A. Williams
-----------------------------
Robert A. Williams
President
(Duly Authorized Representative)
Date: February 10, 1998 By /s/ Norbert J. Luken
-----------------------------
Norbert J. Luken
Treasurer
(Principal Financial Officer)
16
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