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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20552
-----------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2003
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission file number 000-22817
---------
HARBOR FLORIDA 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 (772) 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
--- ---
Indicate by check whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes X No
--- ---
As of July 22, 2003, there were 23,761,658 shares of the Registrant's
common stock outstanding.
HARBOR FLORIDA BANCSHARES, INC.
Table of Contents
Part I. Financial Information Page
Item 1. Financial Statements
Condensed Consolidated Statements of Financial Condition as of
June 30, 2003 and September 30, 2002 (unaudited)....................2
Condensed Consolidated Statements of Earnings for the three and
nine months ended June 30, 2003 and 2002 (unaudited)................3
Condensed Consolidated Statements of Cash Flows for the nine
months ended June 30, 2003 and 2002 (unaudited).....................4
Notes to Condensed Consolidated Financial Statements (unaudited)....6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..............................................15
Item 3. Quantitative and Qualitative Disclosures about Market Risk and
Asset and Liability Management.....................................22
Item 4. Controls and Procedures............................................22
Part II. Other Information
Item 1. Legal Proceedings..................................................22
Item 2. Changes in Securities..............................................22
Item 3. Defaults Upon Senior Securities....................................22
Item 4. Submission of Matters to a Vote of Security-Holders................22
Item 5. Other Information..................................................22
Item 6. Index of Exhibits and Reports on Form 8-K..........................23
Signature Page.....................................................25
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
HARBOR FLORIDA BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition (unaudited)
(In thousands)
June 30, September 30,
2003 2002
---- -----
Assets
- ------
Cash and amounts due from depository institutions $ 57,349 $ 52,299
Interest-bearing deposits in other banks 6,503 95,326
Investment securities held to maturity 50,414 200
Investment securities available for sale 297,620 147,205
Mortgage-backed securities held to maturity 208,440 181,269
Loans held for sale 5,141 8,263
Loans, net 1,571,851 1,541,468
Accrued interest receivable 10,289 9,847
Real estate owned 863 733
Premises and equipment, net 28,830 27,049
Federal Home Loan Bank stock 24,176 22,276
Goodwill and other intangibles, net 4,126 3,378
Other assets 1,694 1,810
--------- ---------
Total assets $ 2,267,296 $ 2,091,123
========= ==========
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities:
Deposits $ 1,498,741 $ 1,372,362
Short-term borrowings 15,069 22,000
Long-term debt 469,318 423,528
Advance payments by borrowers for taxes and insurance 18,525 23,290
Income taxes payable 1,629 1,822
Other liabilities 9,067 9,203
--------- ---------
Total liabilities 2,012,349 1,852,205
--------- ---------
Stockholders' Equity:
Preferred stock --- ---
Common stock 3,158 3,145
Paid-in capital 198,309 195,506
Retained earnings 166,733 146,932
Accumulated other comprehensive income, net 3,302 2,338
Common stock purchased by:
Employee stock ownership plan (ESOP) (10,127) (10,650)
Recognition and retention plans (RRP) (3,537) (3,652)
Treasury stock (102,891) (94,701)
--------- ---------
Total stockholders' equity 254,947 238,918
--------- ---------
Total liabilities and stockholders' equity $ 2,267,296 $ 2,091,123
========= =========
See accompanying notes to condensed consolidated financial statements.
2
HARBOR FLORIDA BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (unaudited)
(In thousands except per share data)
Three months ended Nine months ended
June 30, June 30,
-------- --------
2003 2002 2003 2002
---- ---- ---- ----
Interest income:
Loans $ 29,028 $ 28,782 $ 87,254 $ 85,369
Investment securities 2,482 1,118 6,567 3,016
Mortgage-backed securities 1,938 3,064 6,604 8,294
Other 127 227 635 988
------- ------- ------- -------
Total interest income 33,575 33,191 101,060 97,667
------- ------- ------- -------
Interest expense:
Deposits 6,390 8,884 21,228 29,254
Other 5,479 4,720 16,578 13,420
------- ------- ------- -------
Total interest expense 11,869 13,604 37,806 42,674
------- ------- ------- -------
Net interest income 21,706 19,587 63,254 54,993
Provision for loan losses 659 403 1,612 1,117
------- ------- ------- -------
Net interest income after provision for loan
losses 21,047 19,184 61,642 53,876
------- ------- ------- -------
Other income:
Fees and service charges 3,197 2,761 9,634 7,768
Insurance commissions 860 514 2,042 1,605
Income (loss) from real estate operations 50 (4) 135 84
Gain on sale of mortgage loans 1,266 481 3,698 1,433
Gain on sale of securities 389 467 999 467
Other (10) 40 5 44
------- ------- ------- -------
Total other income 5,752 4,259 16,513 11,401
------- ------- ------- -------
Other expenses:
Compensation and employee benefits 6,620 5,545 18,883 16,029
Occupancy 1,551 1,396 4,464 3,946
Data processing services 750 670 2,231 1,933
Advertising and promotion 364 227 1,095 784
Other 1,752 1,656 5,113 4,768
------- ------- ------- -------
Total other expense 11,037 9,494 31,786 27,460
------- ------- ------- -------
Income before income taxes 15,762 13,949 46,369 37,817
Income tax expense 6,187 5,462 18,173 14,774
------- ------- ------- -------
Net income $ 9,575 $ 8,487 $ 28,196 $ 23,043
======= ======= ======= =======
Net income per share
Basic $ 0.43 $ 0.37 $ 1.25 $ 1.01
======= ======= ======= =======
Diluted $ 0.42 $ 0.37 $ 1.22 $ 0.99
======= ======= ======= =======
See accompanying notes to condensed consolidated financial statements.
3
HARBOR FLORIDA BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)
Nine months ended
June 30,
--------
2003 2002
---- ----
Cash provided by operating activities:
Net income $ 28,196 $ 23,043
Adjustments to reconcile net income to net cash provided by
operating activities:
Gain on sale of investment securities available for sale (999) (467)
Loss (gain) on sale of premises and equipment 17 (26)
(Gain) loss on sale of real estate owned (23) 23
Gain on sale of loans held for sale (3,698) (1,433)
Provision for loan losses 1,612 1,117
Depreciation and amortization 798 1,390
ESOP forfeitures (108) (57)
Deferred income tax expense (benefit) (740) 120
Originations of loans held for sale (117,916) (72,369)
Proceeds from sale of loans held for sale 124,736 75,943
Increase in deferred loan fees and costs 5,266 3,214
Increase in accrued interest receivable (442) (182)
Decrease in other assets 179 212
Increase (decrease) in income taxes payable 135 (2,645)
(Decrease) increase in other liabilities (225) 645
-------- --------
Net cash provided by operating activities 36,788 28,528
-------- --------
Cash used by investing activities:
Net increase in loans (34,051) (109,652)
Purchase of mortgage-backed securities (102,075) (84,143)
Proceeds from principal repayments of mortgage-backed securities 74,672 41,810
Purchase of investment securities held to maturity (50,216) ---
Proceeds from maturities and calls of investment securities
available for sale 70,000 10,000
Proceeds from sales of investment securities available for sale 2,038 1,931
Purchase of investment securities available for sale (220,361) (60,934)
Proceeds from sale of real estate owned 362 1,112
Purchase of premises and equipment (2,811) (2,640)
Proceeds from sale of premises and equipment 58 101
FHLB stock purchase (1,900) (5,250)
Purchase of insurance agency (600) ---
-------- --------
Net cash used by investing activities (264,884) (207,665)
-------- --------
4
HARBOR FLORIDA BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)
Nine months ended
June 30,
--------
2003 2002
---- ----
Cash provided by financing activities:
Net increase in deposits 126,379 138,691
Net proceeds from short-term borrowings 3,000 ---
Repayments of borrowings (15,041) (10,051)
Net proceeds from long-term borrowings 50,000 110,000
Decrease in advance payments by borrowers for taxes and insurance (4,765) (5,444)
Dividends paid (8,395) (7,385)
Common stock options exercised 1,227 1,693
Purchase of treasury stock (8,082) (7,813)
------- -------
Net cash provided by financing activities 144,323 219,691
------- -------
Net (decrease) increase in cash and cash equivalents (83,773) 40,554
Cash and cash equivalents - beginning of period 147,625 92,792
------- -------
Cash and cash equivalents - end of period $ 63,852 $133,346
======= =======
Supplemental disclosures:
Cash paid for:
Interest $ 37,831 $ 42,640
Taxes 19,091 17,300
Noncash investing and financing activities
Additions to real estate acquired in settlement of loans
through foreclosure 470 1,129
Sale of real estate owned financed by the Company --- 156
Tax benefit of stock plans credited to capital 328 122
Change in unrealized gain on securities available for sale 1,569 643
Change in deferred taxes related to securities available for
sale (605) (247)
Distribution of recognition and retention plan 115 112
Transfer to short-term borrowings from long-term debt 5,000 15,000
Note payable issued to purchase premises 900 ---
See accompanying notes to condensed consolidated financial statements.
5
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, 2002.
The Company's only significant business is holding the common stock of the Bank.
Consequently, its net income is primarily derived from the Bank.
In July 2002, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("Statement 146") which requires,
among other things, recording a liability for costs associated with an exit or
disposal activity when that liability is incurred and can be measured at fair
value. Commitment to an exit plan or a plan of disposal expresses only
management's future actions and, therefore, does not meet the requirement for
recognizing a liability and the related expense. The provisions of Statement 146
are effective prospectively for exit and disposal activities initiated after
December 31, 2002, with early application encouraged. This statement did not
have a material impact on the Company's consolidated financial statements.
In November 2002, the FASB issued Financial Interpretation (FIN) 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, an interpretation of FASB
Statements No. 5, 57, and 107 and rescission of FASB interpretation No. 34"
which requires disclosures about the guarantor's obligations and liquidity risks
related to guarantees issued. The disclosure requirements in this Interpretation
are effective for financial statements of interim or annual periods ending after
December 15, 2002. This interpretation did not have a material impact on the
Company's consolidated financial statements.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure, an amendment of FASB Statement No. 123"
("Statement 148") to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, this statement amends the disclosure requirements of
Statement 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The
provisions of Statement 148 are effective for interim periods beginning after
December 15, 2002, with early application encouraged. This statement did not
have a material impact on the Company's consolidated financial statements.
6
At June 30, 2003, the Company had stock option plans for the benefit of
directors, officers and other employees of the Company. The Company accounts for
those plans under the recognition and measurement principles of APB Opinion No.
25 "Accounting for Stock Issued to Employees", and related Interpretations.
Accordingly, no compensation cost has been recognized for the stock plans, since
stock option exercise prices are equal to market price at dates of grant.
Had compensation cost for the Company's stock-based compensation plans been
determined in accordance with the fair value based method in FASB Statement No.
123 "Accounting for Stock Based Compensation", the Company's net income and net
income per share would have been reduced to the proforma amounts indicated
below:
Three months ended Nine months ended
June 30, June 30,
-------- --------
2003 2002 2003 2002
---- ---- ---- ----
(In thousands except per share data)
Net income - As reported $ 9,575 $ 8,487 $ 28,196 $ 23,043
Less: total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects (265) (257) (791) (753)
------ ------ ------- -------
Pro forma net income $ 9,310 $ 8,230 $ 27,405 $ 22,290
====== ====== ======= =======
Net income per share - Basic
As reported .43 .37 1.25 1.01
Pro forma .41 .36 1.21 .98
Net income per share - Diluted
As reported .42 .37 1.22 .99
Pro forma .40 .35 1.18 .96
In January 2003, the FASB issued FIN 46, "Consolidation of Variable Interest
Entities, an interpretation of Accounting Research Bulletin No. 51", which
addresses consolidation by business enterprises of variable interest entities.
The Interpretation clarifies the application of Accounting Research Bulletin No.
51, Consolidated Financial Statements, to certain entities in which equity
investors do not have the characteristics of a controlling financial interest or
do not have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties. The
Interpretation applies immediately to variable interest entities created after
January 31, 2003, and to variable interest entities in which an enterprise
obtains an interest after that date. This interpretation did not have a material
impact on the Company's consolidated financial statements.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities" ("Statement 149") to amend and
clarify financial accounting and reporting for derivative instruments, including
certain derivative instruments embedded in other contracts and for hedging
activities under FASB Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities. " The statement is effective for contracts entered into
or modified after June 30, 2003. The statement is not expected to have a
material impact on the Company's consolidated financial statements.
7
In May 2003, the FASB issued SFAS No. 150 ("Statement 150"), "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity." Statement 150 establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both liabilities
and equity. Statement 150 requires that an issuer classify a financial
instrument that is within the scope of Statement 150 as a liability. Statement
150 is effective for financial instruments entered into or modified after May
31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. This statement did not have a material
impact on the Company's consolidated financial statements.
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 and nine months
ended June 30, 2003 and 2002. 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.
Three months ended Nine months ended
June 30, June 30,
-------- --------
2003 2002 2003 2002
---- ---- ---- ----
Net income $ 9,575,001 $ 8,486,929 $28,195,511 $23,043,230
========== ========== ========== ==========
Weighted average common shares outstanding:
Shares outstanding 23,635,001 23,846,382 23,627,984 23,865,812
Less weighted average
uncommitted ESOP shares (1,024,108) (1,093,948) (1,041,568) (1,111,408)
---------- ---------- ---------- ----------
Total 22,610,893 22,752,434 22,586,416 22,754,404
========== ========== ========== ==========
Basic earnings per share $ 0.43 $ 0.37 $ 1.25 $ 1.01
========== ========== ========== ==========
Weighted average common shares
outstanding 22,610,893 22,752,434 22,586,416 22,754,404
Additional dilutive shares related to
stock benefit plans 630,186 682,975 583,742 583,393
---------- ---------- ---------- ----------
Total weighted average common shares and
equivalents outstanding for diluted
earnings per share computation 23,241,079 23,435,409 23,170,158 23,337,797
========== ========== ========== ==========
Diluted earnings per share $ 0.42 $ 0.37 $ 1.22 $ 0.99
========== ========== ========== ==========
Additional dilutive shares are calculated under the treasury stock method
utilizing the average market value of the Company's stock for the period.
8
3). INVESTMENT AND MORTGAGE BACKED SECURITIES
-----------------------------------------
The amortized cost and estimated market value of investment and mortgage-backed
securities as of June 30, 2003 are as follows:
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
---- ----- ------ -----
(In thousands)
Available for sale:
FHLB notes $ 160,256 $ 1,825 $ --- $ 162,081
FHLMC notes 70,217 671 --- 70,888
FNMA notes 60,045 570 --- 60,615
-------- -------- -------- --------
290,518 3,066 --- 293,584
Equity securities 1,725 2,311 --- 4,036
-------- -------- -------- --------
292,243 5,377 --- 297,620
-------- -------- -------- --------
Held to maturity:
FHLB notes 30,000 228 --- 30,228
FHLMC notes 19,972 252 --- 20,224
Municipal securities 442 51 --- 493
-------- -------- -------- --------
50,414 531 --- 50,945
-------- -------- -------- --------
FHLMC mortgage-backed securities 124,958 2,813 --- 127,771
FNMA mortgage-backed securities 83,482 2,763 --- 86,245
-------- -------- -------- --------
208,440 5,576 --- 214,016
-------- -------- -------- --------
$ 551,097 $ 11,484 $ --- $ 562,581
======== ======== ======== ========
The amortized cost and estimated market value of investment and mortgage-backed
securities as of September 30, 2002 are as follows:
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
---- ----- ------ -----
(In thousands)
Available for sale:
FHLB notes $ 90,226 $ 1,413 $ --- $ 91,639
FHLMC notes 50,408 724 --- 51,132
-------- -------- -------- --------
140,634 2,137 --- 142,771
Equity securities 2,763 1,671 --- 4,434
-------- -------- -------- --------
143,397 3,808 --- 147,205
-------- -------- -------- --------
Held to maturity:
Municipal securities 200 45 --- 245
-------- -------- --- --------
200 45 --- 245
-------- -------- -------- --------
FHLMC mortgage-backed securities 90,657 3,684 --- 94,341
FNMA mortgage-backed securities 90,612 3,900 --- 94,512
-------- -------- -------- --------
181,269 7,584 --- 188,853
-------- -------- -------- --------
$ 324,866 $ 11,437 $ --- $ 336,303
======== ======== ======== ========
9
The amortized cost and estimated market value of debt securities at June 30,
2003 and September 30, 2002 by contractual maturity are shown below. Expected
maturities may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
June 30, 2003 September 30, 2002
------------- ------------------
Estimated Estimated
Amortized market Amortized market
cost value cost value
---- ----- ---- -----
(In thousands)
Available for sale:
Due in one year or less $ 80,107 $ 80,926 $ 60,306 $ 61,358
Due in one to five years 210,411 212,658 80,328 81,413
-------- -------- -------- --------
290,518 293,584 140,634 142,771
-------- -------- -------- --------
Held to maturity:
Due in one to five years 50,214 50,697 --- ---
Due after five years 200 248 200 245
-------- -------- -------- --------
50,414 50,945 200 245
-------- -------- -------- --------
FHLMC mortgage-backed securities 124,958 127,771 90,657 94,341
FNMA mortgage-backed securities 83,482 86,245 90,612 94,512
-------- -------- ------ --------
208,440 214,016 181,269 188,853
-------- -------- -------- --------
$ 549,372 $ 558,545 $ 322,103 $ 331,869
======== ======== ======== ========
As of June 30, 2003, the Company had pledged mortgage-backed securities with a
market value of $15,290,000 and a carrying value of $14,604,000 to collateralize
the public funds on deposit. The Company had also pledged mortgage-backed
securities with a market value of $751,000 and a carrying value of $698,000 to
collateralize treasury, tax and loan accounts as of June 30, 2003.
10
4). LOANS
-----
Loans are summarized below:
June 30, September 30,
2003 2002
---- ----
(In thousands)
Mortgage loans
Construction 1-4 family $ 162,357 $ 142,181
Permanent 1-4 family 1,001,195 1,072,175
Multi-family 17,951 14,995
Nonresidential 172,795 153,635
Land 119,113 82,339
--------- ---------
Total mortgage loans 1,473,411 1,465,325
--------- ---------
Other loans:
Commercial 48,803 34,172
Home improvement 25,359 25,104
Manufactured housing 16,780 14,832
Other consumer 126,167 116,591
--------- ---------
Total other loans 217,109 190,699
--------- ---------
Total loans 1,690,520 1,656,024
--------- ---------
Less:
Loans in process 95,332 93,999
Net deferred loan fees and discounts 7,489 6,180
Allowance for loan losses 15,848 14,377
--------- ---------
118,669 114,556
--------- ---------
Total loans, net $1,571,851 $1,541,468
========= =========
An analysis of the allowance for loan losses follows:
Three months ended Nine months ended
June 30, June 30,
-------- --------
2003 2002 2003 2002
---- ---- ---- ----
(In thousands)
Beginning balance $ 15,192 $ 13,914 $ 14,377 $ 13,417
Provision for loan losses 659 403 1,612 1,117
Charge-offs (25) (250) (201) (507)
Recoveries 22 19 60 59
------- ------- ------- -------
Ending balance $ 15,848 $ 14,086 $ 15,848 $ 14,086
======= ======= ======= =======
11
The allowance for loan losses consists of general allowances of $15,846,000 and
$14,377,000 and specific allowances of $2,000 and $-0- at June 30, 2003 and
September 30, 2002, respectively. Impaired loans (primarily consisting of
classified loans), other than those evaluated collectively, were $8,813,000 and
$8,941,000 at June 30, 2003 and September 30, 2002, respectively. The Company
evaluates impaired loans based on (a) the present value of the expected future
cash flows of the impaired loan discounted at the loan's original effective
interest rate, (b) the observable market price of the impaired loan, or (c) the
fair value of the collateral of a collateral dependant loan. To the extent that
an impaired loan's value is less than the loan's recorded investment, a specific
allowance is recorded.
At June 30, 2003 and September 30, 2002, loans with unpaid principal balances of
approximately $2,276,000 and $1,660,000, respectively, were 90 days or more
contractually delinquent or on nonaccrual status. As of June 30, 2003 and
September 30, 2002, approximately $1,639,000 and $1,209,000, respectively, of
these loans were in the process of foreclosure.
As of June 30, 2003 and September 30, 2002, mortgage loans which had been sold
on a recourse basis had outstanding principal balances of approximately $280,000
and $370,000 respectively.
5). COMPREHENSIVE INCOME
--------------------
The following table sets forth the components of the Company's comprehensive
income:
Three months ended Nine months ended
June 30, June 30,
-------- --------
2003 2002 2003 2002
---- ---- ---- ----
(In thousands)
Net income $ 9,575 $ 8,487 $28,196 $23,043
Other comprehensive income, net of tax:
Unrealized gain on securities available for sale
(net of deferred tax of $15 and $208 for the three
months ended June 30, 2003 and 2002, respectively,
and $605 and $247 for the nine months ended June 30,
2003 and 2002, respectively) 23 333 964 396
------ ------ ------- -------
Comprehensive income $ 9,598 $ 8,820 $29,160 $23,439
====== ====== ====== ======
6). TRANSFERS OF FINANCIAL ASSETS AND SERVICING RIGHTS RETAINED
-----------------------------------------------------------
Transfers of financial assets, primarily mortgage loans, are accounted for as
sales when control over the assets has been surrendered. Control over
transferred assets is deemed to be surrendered when (1) the assets have been
isolated from the Company, (2) the transferee obtains the right (free of
conditions that constrain it from taking advantage of that right) to pledge or
exchange the transferred assets, and (3) the Company does not maintain effective
control over the transferred assets through an agreement to repurchase them
before their maturity.
12
Upon completion of a transfer of assets that satisfies the conditions described
above to be accounted for as a sale, the Company:
a. Derecognizes all assets sold
b. Recognizes all assets obtained and liabilities incurred in consideration as
proceeds of the sale
c. Initially measures, at fair value, assets obtained and liabilities incurred
in a sale
d. Recognizes in earnings any gain or loss on the sale.
The Company recognized gains on sales of mortgage loans of $1,266,000 and
$481,000, respectively, for the three months ended June 30, 2003 and 2002. For
the nine months ended June 30, 2003 and 2002, the Company recognized gains on
sale of mortgage loans of $3,698,000 and $1,433,000, respectively.
The Company receives fees for servicing activities on loans it has sold. These
activities include, but are not limited to, collecting principal, interest and
escrow payments from borrowers; paying taxes and insurance from escrowed funds;
monitoring delinquencies; and accounting for and remitting principal and
interest payments. To the extent that the servicing fees exceed or do not
provide adequate compensation for the services provided, the Company records a
servicing asset or liability for the fair value of the servicing retained.
Currently, the servicing fees retained by the Company are just adequate to
compensate the Company for the servicing responsibilities. As of June 30, 2003,
no servicing assets and/or liabilities were recognized.
7). ACQUISITION OF INSURANCE AGENCY
-------------------------------
On March 27, 2003, Harbor Insurance Agency, Inc., a subsidiary of Harbor Federal
Savings Bank, completed its acquisition of the David G. Willbur Insurance
Agency. David G. Willbur Insurance Agency has specialized in property and
casualty insurance and has served the residents and businesses of St. Lucie
county for over 76 years. The principal owner, David G. Willbur, joined the
management of Harbor Insurance Agency, Inc. The acquisition further complements
Harbor Insurance Agency's existing line of insurance products and provides a
broader range of insurance company providers to meet changing and growing
customer needs.
The acquisition was accounted for using the purchase method. The results of
operations of the insurance agency acquired are included in the consolidated
financial statements of the Company from the date of acquisition.
13
The fair value of assets acquired and liabilities assumed in conjunction with
the acquisition of the insurance agency was as follows:
2003
----
(In thousands)
Cash $ 1
Premises and equipment 6
Goodwill 319
Other intangibles subject to amortization 415
Other assets 63
---
Fair value of assets acquired 804
---
Deferred tax liability 160
Other liabilities 65
---
Fair value of liabilities assumed 225
---
Fair value of net assets acquired 579
Acquisition costs 22
---
Purchase of insurance agency 601
Less cash acquired 1
---
Net cash used by purchase of insurance agency $ 600
===
Results of operations as if the acquisition had been completed as of October 1,
2002 were not significantly different than actual amounts.
14
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
Comparisons of quarterly results of operations in this section are between the
three months ended June 30, 2003 and June 30, 2002. Comparison of fiscal year to
date results is between the nine months then ended.
General. Diluted earnings per share for the third fiscal quarter ended June 30,
2003, increased 13.5% to 42 cents per share on net income of $9.6 million,
compared to 37 cents per share on net income of $8.5 million for the same period
last year. Diluted earnings per share for the nine months ended June 30, 2003,
increased 23.2% to $1.22 per share on net income of $28.2 million, compared to
99 cents per share on net income of $23.0 million for the same period last year.
The increases for both the three and nine month periods were due primarily to
the increase in net interest income as a result of decreases in interest expense
on deposits and growth in loans and investment securities. The decreases in
interest expense on deposits were caused by a continuation of historically low
interest rates, notwithstanding growth in total average deposits in both the
three and nine month periods.
Net Interest Income. Net interest income increased 10.8% to $21.7 million for
the quarter ended June 30, 2003, from $19.6 million for the same period last
year. For the nine months ended June 30, 2003, net interest income increased
15.0% to $63.3 million from $55.0 million for the same period last year. This
increase was due primarily to the decrease in interest expense on deposits
(notwithstanding total average deposit growth of $156.9 million over prior year
averages) and the increase in interest income due to growth in loans and
investment securities. The decreased interest expense, due substantially to
lower costs of deposits, reflects a continuation of historically low interest
rates. Average interest-earning assets increased by $281.7 million to $2.081
billion for the nine months ended June 30, 2003, from $1.799 billion for the
same period last year. The average balance of the loan portfolio increased by
$105.2 million. The average balance of investment securities increased by $205.1
million. The net interest margin decreased to 4.06% for the nine months ended
June 30, 2003, from 4.08% for the same period last year due primarily to the
yield on interest-earning assets decreasing more than the cost of
interest-bearing liabilities in the declining interest rate environment.
15
The average deposit composition changed to 43.2% and 56.8% of core deposits and
certificate accounts, respectively, for the nine months ended June 30, 2003 from
39.2% and 60.8%, respectively, for the same period last year.
Provision for Loan Losses. The determination of the allowance for loan losses is
considered by management to be a critical accounting policy and is based upon
estimates made by management.
The provision for loan losses was $659,000 for the quarter ended June 30, 2003,
compared to $403,000 for the same period last year. The provision for the
quarter ended June 30, 2003 was principally comprised of a charge of $647,000
due to growth in the loan portfolio, primarily in the commercial real estate and
commercial business loan portfolios, $3,000 for net charge offs and $9,000 due
to changes in the levels of classified loans. The provision for the quarter
ended June 30, 2002 was principally comprised a charge of $290,000 due to growth
in the loan portfolio, primarily in the commercial real estate and consumer loan
portfolios, and $231,000 for net charge offs partially offset by a credit of
$118,000 related to a decrease in the level of classified loans.
For the nine months ended June 30, 2003, the provision for loan losses was $1.6
million compared to $1.1 million for the same period last year. The provision
for the nine months ended June 30, 2003 was principally comprised of a charge of
$1.4 million related to growth in the loan portfolio, primarily commercial real
estate and commercial business loans, $141,000 in net charge offs, and $53,000
due to changes in the levels of classified loans. The provision for the nine
months ended June 30, 2002 was principally comprised of a charge of $362,000 due
to growth in the loan portfolio, primarily in the commercial real estate and
consumer loan portfolios, $307,000 due to an increase in the level of classified
loans, due primarily to the change in classifications of two commercial real
estate loans, and $448,000 in net charge offs. Nonperforming loans decreased to
$2.3 million at June 30, 2003 from $2.7 million at June 30, 2002. The ratio of
the allowance for loan losses to total nonperforming loans increased to 696.39%
at June 30, 2003 from 520.50% at June 30, 2002.
There were no significant changes in the estimation methods or fundamental
assumptions used in the calculation of the allowance for loan losses at June 30,
2003, compared to September 30, 2002. Furthermore, there was no reallocation of
the allowance from September 30, 2002. 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.
Other Income. Other income increased to $5.8 million for the quarter ended June
30, 2003, from $4.3 million for the same period last year. The increase was due
primarily to increases of $436,000 in fees and service charges, $785,000 in gain
on sale of mortgage loans, principally residential fixed rate mortgage loans,
and $346,000 in insurance commissions and fees. Fees and service charges
(primarily from fees and service charges on deposit products) were $3.2 million
and $2.8 million for the quarters ended June 30, 2003 and 2002, respectively.
This increase was due primarily to the growth in transaction accounts. Gain on
the sale of mortgage loans was $1.3 million and $481,000 for the quarters ended
June 30, 2003 and 2002, respectively. This increase was due to an increase in
the sale of residential one-to-four family fixed rate mortgage loans to reduce
interest rate risk by limiting the growth of long term fixed rate loans in the
portfolio. Insurance commissions and fees were $860,000 and $514,000 for the
three months ended June 30, 2003 and 2002, respectively. This increase was due
primarily to the acquisition of an insurance agency in the quarter ended March
31, 2003 and increased sales of insurance products.
Other income increased to $16.5 million for the nine months ended June 30, 2003,
compared to $11.4 million for the same period last year. This increase was due
primarily to increases of $1.9 million in fees and service charges, $2.3 million
in gain on sale of mortgage loans, principally residential fixed rate mortgage
loans, $532,000 in gain on sale of equity securities, and $437,000 in insurance
commission and fees.
16
Fees and service charges (primarily from fees and service charges on deposit
products) were $9.6 million and $7.8 million for the nine months ended June 30,
2003 and 2002, respectively. This increase was due primarily to the growth in
transaction accounts. Gain on sale of mortgage loans was $3.7 million and $1.4
million for the nine months ended June 30, 2003 and 2002, respectively. This
increase was due to an increase in the sale of residential one-to-four family
fixed rate mortgage loans to reduce interest rate risk by limiting the growth of
long term fixed rate loans in the portfolio. Gain on the sale of securities,
primarily equity securities, was $999,000 and $467,000 for the nine months ended
June 30, 2003 and 2002, respectively. Insurance commissions and fees were $2.0
million and $1.6 million for the nine months ended June 30, 2003 and 2002,
respectively. This increase was due to the acquisition of an insurance agency in
the quarter ended March 31, 2003 and increased sales of insurance products.
Other Expenses. Other expenses increased to $11.0 million for the quarter ended
June 30, 2003, from $9.5 million for the same period last year, due primarily to
increases of $1.1 million in compensation and benefits, $155,000 in occupancy
expense, $80,000 in data processing services, $137,000 in advertising and
promotion, and $96,000 in other expenses. The increase in compensation and
benefits was due primarily to annual salary increases, additional staff required
to support the growth in loans and deposits and contributions to the defined
benefit plan. The increase in occupancy expense was due primarily to an increase
in data processing equipment expense. The increases in data processing services,
advertising and promotion, and other expenses were due primarily to increases
resulting from the growth in loans and deposits.
For the nine months ended June 30, 2003, other expenses increased to $31.8
million compared to $27.5 million for the same period last year. This increase
was due primarily to increases of $2.9 million in compensation and benefits,
$518,000 in occupancy expense, $298,000 in data processing services, $311,000 in
advertising and promotion, and $345,000 in other expenses. The increase in
compensation and benefits was due primarily to annual salary increases,
additional staff required to support the growth in loans and deposits, and
contributions to the defined benefit plan. The increase in occupancy expense was
due primarily to an increase in data processing equipment expense. The increases
in data processing services, advertising and promotion and other expenses were
due primarily to increases resulting from the growth in loans and deposits.
The Company has a non-contributory defined benefit pension plan covering all
full-time employees who were hired before January 1, 2003 and have attained one
year of service and 21 years of age. As a result of the decline in market value
of the investments held in the defined benefit plan, the Bank, based on
actuarial calculations, currently expects to be required to increase its pension
contribution to approximately $650,000 and $800,000 for fiscal years 2003 and
2004, respectively. The Company recorded pension expense of approximately
$388,000 and $10,700 for the nine months ended June 30, 2003 and 2002,
respectively.
Income Taxes. Income tax expense increased to $6.2 million for the quarter ended
June 30, 2003, from $5.5 million for the same period last year due primarily to
an increase in pretax accounting income. The effective tax rates were 39.3% and
39.2% for the quarters ended June 30, 2003 and 2002, respectively.
For the nine months ended June 30, 2003, income tax expense increased to $18.2
million from $14.8 million for the same period last year due primarily to an
increase in pretax accounting income. The effective tax rates were 39.2% and
39.1% for the nine months ended June 30, 2003 and 2002, respectively.
17
Financial Condition
Comparisons of financial condition in this section are from the end of the
preceding fiscal year to June 30, 2003.
Total assets increased to $2.267 billion at June 30, 2003, from $2.091 billion
at the fiscal year ended September 30, 2002. The increase is due primarily to an
increase in investment securities, loans and mortgage-backed securities,
partially offset by a decrease in interest bearing deposits in other banks.
Interest-bearing deposits in other banks decreased to $6.5 million at June 30,
2003, from $95.3 million at September 30, 2002. The decrease is due primarily to
a decrease in funds on deposit at the FHLB used to fund purchases of investment
securities.
Investment securities available for sale increased to $297.6 million at June 30,
2003, from $147.2 million at September 30, 2002. The increase is due primarily
to the purchase of $220.4 million FHLMC, FHLB, and FNMA notes partially offset
by maturities and calls of $70.0 million. The purchases were funded with excess
cash provided by the net increase in deposits and the decrease in interest
bearing deposits in other banks.
Investment securities held to maturity increased to $50.4 million at June 30,
2003 from $200,000 at September 30, 2002. The increase is due primarily to the
purchase of $50.2 million FHLB and FHLMC notes, funded with excess cash provided
by the net increase in deposits and the decrease in interest bearing deposits in
other banks.
Mortgage-backed securities increased to $208.4 million at June 30, 2003, from
$181.2 million at September 30, 2002. The increase is due primarily to purchases
of $102.1 million of 5 and 7 year fixed-rate balloon securities partially offset
by repayments of $74.7 million. The purchases were funded with a $50.0 million
long-term fixed rate FHLB advance and excess cash provided by the net increase
in deposits.
Net loans increased to $1.572 billion at June 30, 2003, from $1.541 billion at
September 30, 2002. The increase is due primarily to loan disbursements of
$609.3 million partially offset by repayments of $457.9 million and sales of
mortgage loans of $121.0 million, primarily residential one-to-four family
fixed-rate mortgage loans. The increase in net loans for the nine months ended
June 30, 2003 is due primarily to a net increase of $36.4 million in land loans,
$21.8 million in nonresidential mortgage loans, $14.5 million in commercial
business loans, and $11.8 million in consumer loans, partially offset by a $58.8
million decrease in residential one-to-four family mortgage loans.
Deposits increased to $1.499 billion at June 30, 2003, from $1.372 billion at
September 30, 2002. The increase is due primarily to a net increase in deposits
before interest credited of $106.4 million and interest credited of $18.1
million. The increase in deposits for the nine months ended June 30, 2003 is due
primarily to a net increase of $119.3 million in core deposits and an increase
of $7.1 million in deposits in certificate accounts.
FHLB advances increased to $484.4 million from $445.5 million at June 30, 2003,
from September 30, 2002 due to $53.0 million of new advances partially offset by
$15.0 million of maturing advances. Of the new advances, $50.0 million were
long-term fixed rate advances taken in order to fund the purchase of mortgage
backed securities and to offset the interest rate risk of newly originated
residential one-to-four family fixed rate mortgage loans held in the portfolio.
The remaining $3.0 million of new advances were daily rate advances.
18
Stockholders' equity increased to $254.9 million at June 30, 2003, from $238.9
million at September 30, 2002. The increase is due primarily to $28.2 million of
earnings for the nine months partially offset by $8.4 million of dividends paid
and the repurchase of $8.2 million of Company common stock to be held as
treasury stock. During the nine months, the Company repurchased 352,688 shares
at an average price of $23.22 per share to be held as treasury stock in
accordance with the Company's stock repurchase program.
At June 30, 2003, the Bank exceeded all regulatory capital requirements as
follows:
Required Actual
-------- ------ Excess of Actual
% of % of Over Regulatory
Amount Assets Amount Assets Requirements
------ ------ ------ ------ ------------
(Dollars in thousands)
Tangible Capital 33,863 1.50% 221,530 9.81% 187,667
Core Capital 67,726 3.00% 221,530 9.81% 153,804
Risk-Based Capital 99,951 8.00% 236,422 18.92% 136,471
Cash Flow
The Bank's primary sources of funds are deposits, repayments of loans and
mortgage-backed securities, maturities of investment securities and other
short-term investments, and earnings and funds from operations. The Bank will
consider increasing its borrowings from the Federal Home Loan Bank (FHLB) from
time to time as an alternative to increasing deposit account interest rates. In
addition, the Bank holds unpledged fixed and adjustable rate mortgage-backed
securities totaling $193.1 million at June 30, 2003 that could be used as
collateral under repurchase transactions with securities dealers.
Repurchase transactions serve as secured borrowings and provide a source of
short-term liquidity for the Bank. At June 30, 2003, the Bank had $821.2 million
or 54.8% of the Bank's deposits in certificate accounts. Based on past
experience, management believes that a substantial percentage of these
certificates will be renewed at maturity, although there can be no assurance
that this will occur. The Bank would use borrowings from the FHLB or repurchase
transactions with securities dealers if replacement funding was needed as a
result of maturing certificate accounts.
Net cash provided by the Company's operating activities (i.e. cash items
affecting net income) was $36.8 million and $28.5 million for the nine months
ended June 30, 2003 and 2002, 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 $264.9 million and $207.7 million for the nine months ended June 30, 2003
and 2002, respectively. The increase in cash used in 2003 was principally due to
an increase of $209.6 million in the purchases of investment securities and a
$17.9 million increase in the purchase of mortgage-backed securities offset by a
$75.6 million decrease in the net increase in loans, a $60,000 increase in
proceeds from maturities of investment securities available for sale and a $32.9
million increase in the proceeds from repayments of mortgage-backed securities.
19
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
$144.3 million and $219.7 million for the nine months ended June 30, 2003 and
2002, respectively. The decrease in cash flows in 2003 was primarily due to a
decrease of $57.0 million in proceeds from FHLB advances, a decrease of $12.3
million in the net increase in deposits, and a $5.0 million increase in
repayments of borrowings.
Critical Accounting Policies
The determination of the allowance for loan losses is considered by management
to be a critical accounting policy and is based upon estimates made by
management. The allowance for loan losses consists of general allowances of
$15,846,000 and $14,377,000 and specific allowances of $2,000 and $-0- at June
30, 2003 and September 30, 2002, respectively. Impaired loans (primarily
consisting of classified loans), other than those evaluated collectively, were
$8,813,000 and $8,941,000 at June 30, 2003 and September 30, 2002, respectively.
The Company evaluates impaired loans based on (a) the present value of the
expected future cash flows of the impaired loan discounted at the loan's
original effective interest rate, (b) the observable market price of the
impaired loan, or (c) the fair value of the collateral of a collateral dependant
loan. To the extent that an impaired loan's value is less than the loan's
recorded investment, a specific allowance is recorded.
20
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:
June 30, September 30,
2003 2002
---- ----
(Dollars in thousands)
Nonaccrual mortgage loans:
Delinquent less than 90 days $ --- $ ---
Delinquent 90 days or more 1,903 1,237
----- -----
Total 1,903 1,237
----- -----
Nonaccrual other loans:
Delinquent less than 90 days --- ---
Delinquent 90 days or more 373 423
----- -----
Total 373 423
----- -----
Total nonperforming loans 2,276 1,660
Real estate owned, net of related allowance 863 733
----- -----
Total nonperforming assets $ 3,139 $ 2,393
===== =====
Nonperforming loans to total net loans .14% .11%
Total nonperforming assets to total assets .14% .11%
Allowance for loan losses to total net loans 1.01% .93%
Allowance for loan losses to nonperforming loans 696.39% 865.87%
Allowance for loan losses to classified loans 182.34% 219.44%
21
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, 2002. The Company believes 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, 2002.
Item 4. Controls and Procedures
Based on their evaluation, the Company's Chief Executive Officer, Michael J.
Brown, Sr. and Chief Financial Officer, H. Michael Callahan, have concluded the
Company's disclosure controls and procedures are effective as of June 30, 2003
to ensure that information required to be disclosed in the reports that the
Company files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. During the last fiscal
quarter, there have been no changes in the internal control over financial
reporting that have materially affected, or are reasonable likely to materially
affect, the internal control over financial reporting.
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.
None
Item 5. Other Information.
None
22
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 December 31, 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(vii) to Form 10-K for the
year ended September 30, 2000 filed December 29, 2000)
10(viii)* Change of Control Agreement
31.1* Certification by Michael J. Brown, Sr., Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* Certification by H. Michael Callahan, Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
23
32.1* Certification by Michael J. Brown, Sr., Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 Sarbanes-Oxley Act of 2002.
32.2* Certification by H. Michael Callahan, Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
*Included with this report.
(b) Reports on Form 8-K.
On April 9, 2003, the Company filed a report on Form 8-K announcing its earnings
for the second quarter of the 2003 fiscal year.
24
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: August 14, 2003 /s/
---------------------------------
Michael J. Brown, Sr.
President and Chief Executive Officer
Date: August 14, 2003 /s/
---------------------------------
H. Michael Callahan
Senior Vice President, Finance and
Chief Financial Officer
25
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael J. Brown, Sr., Chief Executive Officer of Harbor Florida Bancshares,
Inc., certify that:
1. I have reviewed this report on Form 10-Q of Harbor Florida
Bancshares, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b. Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
c. Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons
performing the equivalent functions):
a. All significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
b. Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls over financial reporting.
/s/
- ---------------------
Michael J. Brown, Sr.
Chief Executive Officer
August 14, 2003
EXHIBIT 31.2
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, H. Michael Callahan, Chief Financial Officer of Harbor Florida Bancshares,
Inc., certify that:
1. I have reviewed this report on Form 10-Q of Harbor Florida
Bancshares,Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
c. Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
registrant's most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's
internal controls over financial reporting.
/s/
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H. Michael Callahan
Chief Financial Officer
August 14, 2003
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Harbor Florida Bancshares, Inc. (the
"Company") on Form 10-Q for the period ending June 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Michael
J. Brown, Sr., Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, th efinancial condition and result of operations of
the Company.
/s/
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Michael J. Brown, Sr.
Chief Executive Officer
August 14, 2003
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Harbor Florida Bancshares, Inc. (the
"Company") on Form 10-Q for the period ending June 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, H.
Michael Callahan, Chief Financial Officer of the Company, certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations
of the Company.
/s/
- -------------------
H. Michael Callahan
Chief Financial Officer
August 14, 2003