<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, 1999
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 or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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, 1999, 1,664,515 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
--- ---
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HARBOR FEDERAL BANCORP, INC.
---------------------------
Baltimore, Maryland
-------------------
INDEX
-----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
Consolidated Statements of Financial Condition at
December 31, 1999 (Unaudited) and March 31, 1999
Consolidated Statements of Income and Comprehensive
Income (Loss) for the nine and three months ended
December 31, 1999 and 1998 -- (Unaudited)
Consolidated Statements of Cash Flows for the nine
months ended December 31, 1999 and 1998 --
(Unaudited)
Notes to Consolidated Financial Statements --
(Unaudited)
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 and Use of Proceeds
-----------------------------------------
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
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PART I. FINANCIAL INFORMATION
3
<PAGE>
<PAGE>
HARBOR FEDERAL BANCORP, INC.
AND SUBSIDIARY
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
December 31, March 31,
Assets 1999 1999
------ ------------ --------
(Unaudited)
<S> <C> <C>
Cash:
On hand and due from banks $ 1,431,107 1,501,358
Interest-bearing deposits 251,372 114,259
Federal funds sold 2,773,496 2,545,437
Investment securities, fair value of $58,749,262
and $59,963,291, respectively 58,749,262 59,963,291
Mortgage-backed securities, fair value of
$11,072,536 and $14,280,938, respectively 11,108,258 14,172,392
Loans receivable, net 171,718,044 153,918,968
Investment in real estate, net -- 446,899
Investment in Federal Home Loan Bank stock, at cost 1,725,000 1,433,500
Investment in and advances to affiliated corporation -- 2,525,000
Property and equipment, net 1,699,619 1,760,516
Prepaid expenses and other assets 3,269,985 916,015
------------ ------------
Total assets $252,636,143 239,297,635
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Savings accounts $179,592,015 181,485,848
Borrowed funds 45,660,000 27,555,000
Advance payments by borrowers for taxes,
insurance and ground rents 1,253,951 1,841,672
Accrued expenses and other liabilities 1,376,098 1,612,963
------------ ------------
Total liabilities 227,882,064 212,495,483
------------ ------------
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; 1,664,515 and 1,676,515 shares
issued and outstanding 16,645 16,765
Additional paid-in capital 13,197,139 13,071,570
Unearned ESOP shares (407,118) (662,056)
Retained income, substantially restricted 15,248,063 14,422,503
Accumulated other comprehensive income (3,300,650) (46,630)
------------ ------------
Total stockholders' equity 24,754,079 26,802,152
------------ ------------
Total liabilities and stockholders' equity $252,636,143 239,297,635
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
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HARBOR FEDERAL BANCORP, INC.
AND SUBSIDIARY
Consolidated Statements of Income and Comprehensive Income (Loss)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
December 31, December 31,
------------------ ------------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $ 9,376,046 8,956,611 3,227,025 3,042,025
Mortgage-backed securities 589,741 970,593 193,111 291,397
Investment securities 3,584,818 2,725,768 1,271,001 866,712
Interest-earning deposits and other short-term
investments 87,961 243,689 34,866 80,617
----------- ----------- ---------- ---------
Total interest income 13,638,566 12,896,661 4,726,003 4,280,751
----------- ----------- ---------- ---------
Interest expense:
Savings accounts:
Certificates 5,276,454 5,396,096 1,750,173 1,776,509
NOW and money market deposit accounts 694,447 698,456 224,630 232,328
Passbook and statement savings 742,783 731,157 246,223 241,798
----------- ----------- ---------- ---------
6,713,684 6,825,709 2,221,026 2,250,635
Borrowed funds:
Federal Home Loan Bank advances 722,347 385,764 459,843 129,056
Securities sold under agreements to repurchase 721,497 590,610 231,025 192,873
----------- ----------- ---------- ---------
1,443,844 976,374 690,868 321,929
Total interest expense 8,157,528 7,802,083 2,911,894 2,572,564
----------- ----------- ---------- ---------
Net interest income 5,481,038 5,094,578 1,814,109 1,708,187
Provision for losses on loans 40,000 60,000 25,000 20,000
----------- ----------- ---------- ---------
Net interest income after provision for
losses on loans 5,441,038 5,034,578 1,789,109 1,688,187
----------- ----------- ---------- ---------
Noninterest income:
Loan fees and service charges 187,403 350,570 42,247 118,040
Other 170,548 139,840 47,385 52,522
----------- ----------- ---------- ---------
Total noninterest income 357,951 490,410 89,632 170,562
----------- ----------- ---------- ---------
Noninterest expense:
Compensation and benefits 2,044,209 2,111,884 647,142 760,916
Occupancy and equipment 284,461 293,842 93,465 87,824
SAIF deposit insurance premiums 64,281 67,209 22,092 21,846
Advertising 134,961 105,694 44,897 32,498
Other 745,689 588,124 244,242 219,896
----------- ----------- ---------- ---------
Total noninterest expense 3,273,601 3,166,753 1,051,838 1,122,980
----------- ----------- ---------- ---------
Income before income taxes 2,525,388 2,358,235 826,903 735,769
Income taxes 1,048,457 961,050 346,257 312,900
----------- ----------- ---------- ---------
Net income 1,476,931 1,397,185 480,646 422,869
Other comprehensive income (loss), net of tax:
Unrealized holding gain (loss) on securities
available for sale (3,254,020) 169,156 (1,305,339) (163,420)
----------- ----------- ---------- ---------
Comprehensive income (loss) $(1,777,089) $ 1,566,341 (824,693) 259,449
=========== =========== ========== =========
Net income per share of common stock:
Basic $ .91 .80 .30 .25
=========== =========== ========== =========
Diluted $ .89 .77 .29 .24
=========== =========== ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
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HARBOR FEDERAL BANCORP, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
-----------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $1,476,931 1,397,185
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 60,897 71,273
Provision for losses on loans 40,000 60,000
Amortization of premium on savings deposits 286,038 286,038
Noncash compensation under stock-based
benefit plans 357,487 504,689
Loans originated for sale, net of repayments 505,187 (988,897)
Sale of loans originated for sale -- 1,016,685
Amortization of loan fees, premiums and
discounts, net (40,722) (109,442)
Increase in prepaid expenses and other assets (306,720) (51,732)
Decrease in accrued expenses and other
liabilities (187,022) (87,307)
Decrease in federal and state income
taxes payable -- (355,981)
Increase in accrued interest receivable (604,783) (160,791)
Increase (decrease) in accrued interest
payable 61,157 (85,866)
Loss on sale of investments in real estate 14,600 --
------------ -----------
Net cash provided by operating
activities 1,663,050 1,495,854
------------ -----------
Cash flows from investing activities:
Maturities of investment securities available for sale -- 24,000,000
Maturities of investment securities held to maturity 1,000,000 13,000,000
Purchase of investment securities available for sale (4,184,845) (30,063,388)
Principal repayments of mortgage-backed securities
held to maturity 529,822 1,799,761
Principal repayments of mortgage-backed securities
available for sale 2,227,599 3,631,974
Proceeds from sale of investments in real estate 532,417 76,386
Loan principal disbursements, net of repayments (15,473,775) (6,899,435)
Loan purchases (2,830,783) (341,300)
Purchase of Federal Home Loan Bank stock, net (291,500) --
Purchases of property and equipment -- (19,426)
Decrease in investment in and advances to
affiliated corporation, net 2,525,000 325,000
------------ -----------
Net cash provided by (used in)
investing activities (15,966,066) 5,509,572
------------ -----------
(Continued)
</TABLE>
6
<PAGE>
<PAGE>
HARBOR FEDERAL BANCORP, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
-----------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in savings deposits (2,179,871) 4,016,153
Net increase (decrease) in borrowed funds 18,105,000 (6,456,250)
Decrease in advance payments by borrowers
for taxes, insurance and ground rents (587,721) (687,591)
Purchases of common stock (173,188) (1,225,699)
Purchases of common stock for Stock Option Trust (111,920) (642,325)
Dividends paid (651,371) (695,888)
Exercise of stock options by Stock Option Trust 197,008 81,813
----------- -----------
Net cash provided by (used in)
financing activities 14,455,937 (5,609,787)
----------- -----------
Net increase in cash and cash equivalents 294,921 1,395,639
Cash and cash equivalents at beginning of period 4,161,054 3,239,405
----------- -----------
Cash and cash equivalents at end of period $ 4,455,975 4,635,044
=========== ===========
Supplemental information noncash investing
activities:
Unrealized holding gain (loss) on
securities available for sale, net of
income tax effect $(3,254,020) 169,156
=========== ===========
Transfer of loans receivable to investments in
real estate $ 100,117 --
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
7
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HARBOR FEDERAL BANCORP, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(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 offices 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 agencies.
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, 1999
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.
Actual results could differ significantly from those estimates.
The results of operations for the nine and three months ended
December 31, 1999 are not necessarily indicative of the results
that may be expected for the entire year ending March 31, 2000.
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 Company. 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,
1999, Harbor Federal was in compliance with all regulatory
capital requirements.
Note 5 -- Earnings per Common Share. Information related to the
-------------------------
calculation of net income per share of common stock is
summarized as follows for the nine and three months ended
December 31, 1999 and December 31, 1998:
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
December 31, 1999 December 31, 1998
-------------------- ---------------------
Basic Diluted Basic Diluted
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income $1,476,931 1,476,931 1,397,185 1,397,185
Dividend on unvested common stock
awards (6,135) (4,773) (11,892) (8,034)
---------- --------- --------- ---------
Adjusted net income used in EPS
calculations $1,470,796 1,472,140 1,385,293 1,389,151
========== ========= ========= =========
Weighted average shares outstanding 1,612,044 1,612,044 1,739,784 1,739,784
Dilutive securities:
Options --- 33,659 --- 56,679
Unvested common stock awards --- 3,444 --- 10,205
---------- --------- --------- ---------
Adjusted weighted-average shares
used in EPS computation 1,612,044 1,649,147 1,739,784 1,806,668
========== ========= ========= =========
</TABLE>
8
<PAGE>
<PAGE>
HARBOR FEDERAL BANCORP, INC.
AND SUBSIDIARY
<TABLE>
<CAPTION>
Three Months Ended
------------------
December 31, 1999 December 31, 1998
-------------------- ---------------------
Basic Diluted Basic Diluted
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income $ 480,646 480,646 422,869 422,869
Dividend on unvested common stock
awards (2,045) (1,644) (4,090) (2,764)
---------- --------- --------- ---------
Adjusted net income used in EPS
calculations $ 478,061 478,990 418,779 420,105
========== ========= ========= =========
Weighted average shares outstanding 1,605,305 1,605,305 1,702,539 1,702,539
Dilutive securities:
Options -- 29,254 -- 56,640
Unvested common stock awards -- 2,994 -- 10,198
---------- --------- --------- ---------
Adjusted weighted-average shares used
in EPS computation 1,605,305 1,637,553 1,702,539 1,769,377
========== ========= ========= =========
</TABLE>
Note 6 Investment Securities. Investment securities available
---------------------
for sale included in investment securities have a carrying value
and fair market value of $57,603,287 at December 31, 1999 and
$59,458,780 at March 31, 1999 and related accrued interest of
$1,145,975 at December 31, 1999 and $504,511 at March 31, 1999.
Note 7 Mortgage-Backed Securities. Mortgage-backed securities
--------------------------
available for sale included in mortgage-backed securities have a
carrying value and fair market value of $9,243,688 at December
31, 1999 and $11,846,898 at March 31, 1999 and related accrued
interest of $67,891 at December 31, 1999 and $84,484 at March 31,
1999.
9
<PAGE>
<PAGE>
HARBOR FEDERAL BANCORP, INC.
AND SUBSIDIARY
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, 1999 and the results of operations of
the Company for the nine and three months ended December 31, 1999
and 1998.
When used in this Form 10-QSB, the words or phrases "will
likely result," "are expected to," "will continue," "is
anticipated," "estimate," "project" or similar expressions are
intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
Such statements are subject to certain risks and uncertainties
including changes in economic conditions in the Company's market
area, and competition that could cause actual results to differ
materially from historical earnings and those presently
anticipated or projected. The Company wishes to caution readers
not to place undue reliance on any such forward-looking
statements, which speak only as of the date made. The Company
wishes to advise readers that the factors listed above could
affect the Company's financial performance and could cause the
Company's actual results for the future periods to differ
materially from any opinions or statements expressed with respect
to future periods in any current statements.
The Company does not undertake, and specifically disclaims
any obligation, to publicly release the result of any revisions
which may be made to any forward-looking statements to reflect
events or circumstances after the date of such statements or to
reflect the occurrence of anticipated or unanticipated events.
FINANCIAL CONDITION
- -------------------
Harbor Federal's total assets increased by $13.3 million or
5.6% to $252.6 million at December 31, 1999 from $239.3 million
at March 31, 1999. Investment in and advances to affiliated
corporation decreased due to Harbor Federal selling its interest
in Bankers Affiliate, Inc. for the par value of the capital stock
which totaled $25,000. At that time, the $2.5 million of
advances were also repaid by Bankers Affiliate, Inc. Prepaid
expenses and other asets increased by $2.4 million or 257% to
$3.3 million at December 31, 1999 from $916,000 at March 31,
1999. This increase was primarily due to a deferred tax asset
related to an unrealized loss on Harbor Federal's investment
portfolio held for sale. The unrealized loss, net of tax effect,
was recorded as accumulated other comprehensive loss at December
31, 1999. Borrowed funds increased by $18.1 million or 65.7% to
$45.7 million at December 31, 1999 from $27.6 million at March
31, 1999, primarily to fund the increase in assets. The increase
in borrowed funds was due to an increase in Federal Home Loan
Bank advances of $24.5 million to $34.5 million, partially offset
by a reduction in repurchase agreements of approximately $6.4
million to $11.2 million.
Loans receivable increased by $17.8 million or 11.6% to
$171.7 million at December 31, 1999 from $153.9 million at March
31, 1999. The loan characteristics of the new originations were
consistent with the portfolio. This increase was due in part to
a greater demand for loans during this period. The increase was
funded by borrowed funds mentioned above.
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 and borrowed funds. Net income for the nine and three
months ended December 31, 1999 increased $80,000 and $58,000
respectively.
Interest Income. Total interest income for the nine months
ended December 31, 1999 increased by $742,000 or 5.8% to $13.6
million from $12.9 million for the same period in 1998. Total
interest income for the three months ended December 31, 1999
increased by $445,000 or 10.4% to $4.7 million from $4.3 million
for the same period in 1998. The increases in interest income
resulted primarily from $16.0 million or 7.0% and $27.8 million
or 12.3% increases in average interest-earning assets for the
nine and three months ended December 31, 1999 as compared to the
same periods in 1998. The yields on Harbor Federal's average
interest-earning assets were
10
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HARBOR FEDERAL BANCORP, INC.
AND SUBSIDIARY
7.46% and 7.43% for the nine and three months ended December 31,
1999 as compared to 7.55% each for the same periods ended
December 31, 1998.
Interest on loans for the nine months ended December 31,
1999 increased $419,000 or 4.7% as compared to the same period in
1998. Interest on loans for the three months ended December 31,
1999 increased $185,000 or 6.1% as compared to the same period in
1998. The increases were due primarily to increases in average
loans receivable of $10.3 million or 6.8% and $14.7 million or
9.5% for the nine and three months ended December 31, 1999,
respectively, as compared to the same periods in 1998. The
increases in average loans receivable were due primarily to
increased loan production over normal repayments.
Interest on mortgage-backed securities for the nine and
three months ended December 31,1999 decreased by $381,000 or
39.2% and $98,000 or 33.7%, respectively, as compared to the same
periods in 1998. The decreases were the result of decreases in
the average mortgage-backed securities of $6.1 million or 33.2%
and $5.2 million or 31.4% for the nine and three months ended
December 31, 1999, respectively, as compared to the same periods
in 1998. The decreases in average mortgage-backed securities
were due to normal repayments on these securities.
Interest on investment securities for the nine and three
months ended December 31, 1999 increased by $859,000 or 31.5% and
$404,000 or 46.6%, respectively, as compared to the same periods
in 1998. The increases were due primarily to increases in the
average investment securities of $11.5 million or 22.9% and $11.5
million or 23.5% for the nine and three months ended December 31,
1999, respectively, as compared to the same periods in 1998. The
increases in average investment securities were due primarily to
an increase in purchases of investment securities in the latter
half of the fiscal year ended March 31, 1999. The average yields
on investment securities for the nine and three months ended
December 31, 1999 increased by .51% and 1.32%, respectively, to
7.73% and 8.39% from 7.22% and 7.07% for the same periods in
1998.
Interest Expense. Total interest expense for the nine and
three months ended December 31, 1999 increased by $355,000 or
4.6% and $339,000 or 13.2% to $8.2 million and $2.9 million from
$7.8 million and $2.6 million for the same periods in 1998. 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, 1999 of $20.2 million or
10.1% and $33.4 million or 16.8%, respectively, over the same
periods in 1998. The weighted-average cost of Harbor Federal's
deposits and borrowings decreased to 4.95% for the nine months
ended December 31,1999 from 5.21%, for the same period in 1998.
In addition, the weighted-average cost of deposits and borrowings
decreased to 5.00% for the three months ended December 31, 1999
from 5.16% for the same period in 1998. These reductions were
primarily due to rate reductions on various deposit lines and
long term borrowings from the Federal Home Loan Bank.
Net Interest Income. Net interest income for the nine and
three months ended December 31, 1999 increased by $386,000 or
7.6% and $106,000 or 6.2% to $5.5 million and $1.8 million from
$5.1 million and $1.7 million for the same periods in 1998 due to
the above-mentioned changes.
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 economic conditions, status of nonperforming
loans and regulatory reviews conducted in the regulatory
examination process and other relevant factors. There were
provisions of $40,000 and $25,000 for loan losses during the nine
and three months ended December 31, 1999 as compared to $60,000
and $20,000 during the same periods in 1998. Based on the
results of management's review and analyses, it was concluded
that the level of the allowance for losses on loans was adequate
at December 31, 1999.
Noninterest Income. Noninterest income for the nine and
three months ended December 31, 1999 decreased by $132,000 or
27.0% and $81,000 or 47.4% to $358,000 and $90,000 from $490,000
and $171,000 for the same periods in 1998. The decrease in
noninterest income was due primarily to a decrease in loan
originations fees earned by Bank Street Mortgage Company,
partially offset by insurance commissions earned by Harbor
Service Corporation which began selling annuities in November
1998.
Noninterest Expense. Noninterest expense for the nine
months ended December 31, 1999 increased by
11
<PAGE>
<PAGE>
HARBOR FEDERAL BANCORP, INC.
AND SUBSIDIARY
$107,000 or 3.4% to $3.3 million from $3.2 million for the same
period in 1998. Noninterest expense for the three months ended
December 31, 1999 decreased by $71,000 or 6.3% to $1.1 million
from $1.2 million for the same period in 1998. The increase in
noninterest expense for the nine months ended December 31, 1999
was due primarily to increases in legal expenses of $39,000 and
computer data expense of $75,000. The decrease in noninterest
expense for the three months ended December 31, 1999 was due
primarily to a decrease in compensation and benefit expense due
to personnel reduction in Bank Street Mortgage Company and lower
costs related to stock compensation plans, partially offset by
increases in legal, advertising and computer data expenses.
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 19.3% and 21.1% for the
nine and three months ended December 31, 1999. 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, 1999, Harbor
Federal's cash and cash equivalents (cash and short-term
investments with maturities less than 90 days) increased by
$300,000.
The Company had $1.7 million in outstanding loan commitments
at December 31, 1999. Harbor Federal expects to fund its loan
origination's 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.
YEAR 2000 ISSUE
- ---------------
The transition to Y2k on January 1, 2000 was accomplished
without any discrepancies.
NEW ACCOUNTING STANDARDS
- ------------------------
The Financial Accounting Standards Board (FASB) has issued
SFAS No. 133 Accounting for Derivative Instruments and Hedging
Activities, as amended (SFAS No. 133). SFAS No. 133 establishes
accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) 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 effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. Initial application of this Statement
should be as of the beginning of an entity's fiscal quarter. On
the effective date, hedging relationships must be designated anew
and documented pursuant to the provisions of SFAS No. 133. SFAS
No. 133 does not apply retroactively. While the Company has not
completed its analysis of SFAS No. 133 and has not made a
decision regarding timing of adoption, management does not
believe that adoption will have a material effect on the
financial condition or results of operations of the Company.
12
<PAGE>
<PAGE>
HARBOR FEDERAL BANCORP, INC.
AND SUBSIDIARY
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, 1999, there were no
legal proceedings to which the Company, Harbor
Federal or its subsidiaries were 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 and Use of Proceeds
-----------------------------------------
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
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) List of Exhibits
27 Financial Data Schedule
(b) Form 8-K
None
13
<PAGE>
<PAGE>
SIGNATURES
----------
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HARBOR FEDERAL BANCORP, INC.
Date: February 1, 2000 /s/ Robert A. Williams
_____________________________
Robert A. Williams
President
(Duly Authorized Representative)
Date: February 1, 2000 /s/ Norbert J. Luken
_____________________________
Norbert J. Luken
Treasurer
(Principal Financial Officer)
14
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<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 1,431,107
<INT-BEARING-DEPOSITS> 251,372
<FED-FUNDS-SOLD> 2,773,496
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 68,075,012
<INVESTMENTS-CARRYING> 1,692,508
<INVESTMENTS-MARKET> 1,747,414
<LOANS> 171,718,044
<ALLOWANCE> 482,400
<TOTAL-ASSETS> 252,636,143
<DEPOSITS> 179,592,015
<SHORT-TERM> 45,660,000
<LIABILITIES-OTHER> 2,630,049
<LONG-TERM> 0
<COMMON> 16,645
0
0
<OTHER-SE> 24,737,434
<TOTAL-LIABILITIES-AND-EQUITY> 252,636,143
<INTEREST-LOAN> 9,376,046
<INTEREST-INVEST> 4,174,559
<INTEREST-OTHER> 87,961
<INTEREST-TOTAL> 13,638,556
<INTEREST-DEPOSIT> 6,713,684
<INTEREST-EXPENSE> 8,157,528
<INTEREST-INCOME-NET> 5,481,038
<LOAN-LOSSES> 40,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,273,601
<INCOME-PRETAX> 2,525,388
<INCOME-PRE-EXTRAORDINARY> 1,476,931
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,476,931
<EPS-BASIC> .91
<EPS-DILUTED> .89
<YIELD-ACTUAL> 7.46
<LOANS-NON> 0
<LOANS-PAST> 521,344
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 457,000
<CHARGE-OFFS> 14,600
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 482,400
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 482,400
</TABLE>
