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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: December 31, 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 January 20, 2004, there were 23,878,622 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
December 31, 2003 and September 30, 2003 (unaudited)................2
Condensed Consolidated Statements of Earnings for the three
months ended December 31, 2003 and 2002 (unaudited)................3
Condensed Consolidated Statements of Cash Flows for the three
months ended December 31, 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..............................................13
Item 3. Quantitative and Qualitative Disclosures about Market Risk and
Asset and Liability Management.....................................19
Item 4. Controls and Procedures............................................19
Part II. Other Information
- --------------------------
Item 1. Legal Proceedings..................................................19
Item 2. Changes in Securities..............................................19
Item 3. Defaults Upon Senior Securities....................................19
Item 4. Submission of Matters to a Vote of Security-Holders................19
Item 5. Other Information..................................................20
Item 6. Index of Exhibits and Reports on Form 8-K..........................20
Signature Page.....................................................22
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
HARBOR FLORIDA BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition (unaudited)
(In thousands)
December 31, September 30,
2003 2003
----- -----
Assets:
Cash and amounts due from depository institutions $ 57,816 $ 55,262
Interest-bearing deposits in other banks 2,737 4,432
Investment securities held to maturity 40,418 50,416
Investment securities available for sale 214,755 246,519
Mortgage-backed securities held to maturity 370,856 308,075
Loans held for sale 2,650 2,648
Loans, net 1,650,834 1,611,385
Accrued interest receivable 10,310 10,108
Real estate owned 664 906
Premises and equipment, net 31,392 30,935
Federal Home Loan Bank stock 25,475 25,525
Goodwill 3,591 3,719
Other assets 2,450 2,141
----------- -----------
Total assets $ 2,413,948 $ 2,352,071
=========== ===========
Liabilities and Stockholders' Equity:
Liabilities:
Deposits $ 1,615,396 $ 1,550,260
Short-term borrowings 36,072 25,071
Long-term debt 474,272 479,295
Advance payments by borrowers for taxes and insurance 7,371 25,523
Income taxes payable 5,767 2,246
Other liabilities 6,394 7,793
----------- -----------
Total liabilities 2,145,272 2,090,188
----------- -----------
Stockholders' Equity:
Preferred stock --- ---
Common stock 3,168 3,163
Paid-in capital 200,305 198,936
Retained earnings 179,438 173,150
Accumulated other comprehensive income, net 1,665 2,595
Common stock purchased by:
Employee stock ownership plan (ESOP) (9,778) (9,952)
Recognition and retention plan (RRP) (2,739) (2,795)
Treasury stock ( 103,383) (103,214)
----------- -----------
Total stockholders' equity 268,676 261,883
----------- -----------
Total liabilities and stockholders' equity $ 2,413,948 $ 2,352,071
=========== ===========
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
December 31,
2003 2002
---- ----
Interest income:
Loans $ 28,701 $ 29,325
Investment securities 1,939 1,901
Mortgage-backed securities 3,462 2,518
Other 34 329
------ ------
Total interest income 34,136 34,073
------ ------
Interest expense:
Deposits 5,911 7,937
Other 5,823 5,647
------ ------
Total interest expense 11,734 13,584
------ ------
Net interest income 22,402 20,489
Provision for loan losses 448 451
------ ------
Net interest income after provision for
loan losses 21,954 20,038
------ ------
Other income:
Fees and service charges 3,385 3,151
Insurance commissions and fees 721 570
Income from real estate operations 169 52
Gain on sale of mortgage loans 741 1,314
Gain on sale of equity securities 311 305
Other 1 7
------ ------
Total other income 5,328 5,399
------ ------
Other expenses:
Compensation and employee benefits 7,010 6,025
Occupancy 1,632 1,436
Data processing services 837 696
Advertising and promotion 343 343
Other 1,774 1,700
------ ------
Total other expense 11,596 10,200
------ ------
Income before income taxes 15,686 15,237
Income tax expense 6,137 5,962
------ ------
Net income $ 9,549 $ 9,275
====== ======
Net income per share
Basic $ 0.42 $ 0.41
====== ======
Diluted $ 0.41 $ 0.40
====== ======
See accompanying notes to condensed consolidated financial statements.
3
HARBOR FLORIDA BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)
Three months ended
December 31,
2003 2002
---- ----
Cash provided by operating activities:
Net income $ 9,549 $ 9,275
Adjustments to reconcile net income to net cash provided
by operating activities:
Gain on sale of investment securities available for sale (311) (305)
Loss (gain) on sale of premises and equipment 1 (2)
(Gain) loss on sale of real estate owned (117) 19
Gain on sale of mortgage loans (741) (1,314)
Provision for loan losses 448 451
Depreciation and amortization 200 268
Deferred income tax expense 287 52
Originations of loans held for sale (28,170) (43,188)
Proceeds from sale of loans held for sale 28,909 48,043
Increase in deferred loan fees and costs 1,546 1,677
Increase in accrued interest receivable (202) (45)
Increase in other assets (315) (367)
Increase in income taxes payable 3,970 5,033
Decrease in other liabilities (975) (1,131)
---------- ----------
Net cash provided by operating activities 14,079 18,466
---------- ----------
Cash used in investing activities:
Net increase in loans (39,765) (5,113)
Purchase of mortgage-backed securities (82,764) ---
Proceeds from principal repayments of mortgage-backed securities 19,719 24,808
Proceeds from maturities and calls of investment securities held
to maturity 10,000 ---
Purchase of investment securities held to maturity --- (244)
Proceeds from maturities and calls of investment securities
available for sale 40,000 ---
Proceeds from sale of investment securities available for sale 435 769
Purchase of investment securities available for sale (10,000) (90,336)
Proceeds from sale of real estate owned 258 85
Purchase of premises and equipment (1,152) (1,014)
Proceeds from sale of premises and equipment 13 42
FHLB stock, net 50 ---
---------- ----------
Net cash used in investing activities (63,206) (71,003)
---------- ----------
4
HARBOR FLORIDA BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)
Three months ended
December 31,
2003 2002
---- ----
Cash provided by financing activities:
Net increase in deposits 65,136 42,268
Net proceeds from short-term borrowings 6,000 ---
Repayments of long term debt (22) (5)
Decrease in advance payments by borrowers for taxes and
insurance (18,152) (16,422)
Dividends paid (3,261) (2,533)
Common stock options exercised 454 326
Purchase of treasury stock (169) (2,863)
------- -------
Net cash provided by financing activities 49,986 20,771
------- -------
Net increase (decrease) in cash and cash equivalents 859 (31,766)
Cash and cash equivalents - beginning of period 59,694 147,141
------- -------
Cash and cash equivalents - end of period $ 60,553 $ 115,375
======= =======
Supplemental disclosures:
Cash paid for:
Interest $ 11,821 $ 13,809
Taxes 2,100 1,190
Noncash investing and financing activities:
Additions to real estate acquired in settlement of loans
through foreclosure 59 101
Sale of real estate owned financed by the Company 160 --
Tax benefit of stock plans credited to capital 449 304
Change in unrealized gain on securities available for sale (1,515) 1,023
Change in deferred taxes related to securities available for
sale 585 (394)
Distribution of RRP shares 56 55
Transfer to short-term borrowings from long-term debt 5,001 --
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, 2003.
The Company's only significant business is holding the common stock of the Bank.
Consequently, its net income is primarily derived from the Bank.
Certain amounts included in the December 31, 2002 consolidated financial
statements have been reclassified in order to conform to the December 31, 2003
presentation.
At December 31, 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 Accounting
Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB
25"), 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 Financial
Accounting Standards Board (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 pro forma amounts indicated below:
Three months ended
December 31,
2003 2002
---- ----
(In thousands except per share data)
Net income - As reported $ 9,549 $ 9,275
Less: total stock-based employee
compensation expense determined under
fair value based method for all
awards, net of related tax (92) (340)
------- -------
Pro forma net income $ 9,457 $ 8,935
======= =======
Net income per share - basic
As reported .42 .41
Pro forma .42 .40
Net income per share - diluted
As reported .41 .40
Pro forma .41 .39
6
(2) NET INCOME PER SHARE
Net income per share was computed by dividing net income by the weighted average
number of shares of common stock outstanding during the three months ended
December 31, 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
December 31,
2003 2002
---- ----
Net income $ 9,548,766 $ 9,275,408
=========== ===========
Weighted average common shares outstanding:
Shares outstanding 23,556,969 23,638,486
Less weighted average
uncommitted ESOP shares (989,190) (1,059,030)
----------- -----------
Total
22,567,779 22,579,456
=========== ===========
Basic net income per share $ 0.42 $ 0.41
=========== ===========
Weighted average common shares
outstanding 22,567,779 22,579,456
Additional dilutive shares related to
stock options 620,366 592,925
----------- -----------
Total weighted average common shares and
equivalents outstanding for diluted
earnings per share computation 23,188,145 23,172,381
=========== ===========
Diluted net income per share $ 0.41 $ 0.40
=========== ===========
Additional dilutive shares are calculated under the treasury stock method
utilizing the average market value of the Company's stock for the period.
7
(3) INVESTMENT AND MORTGAGE BACKED SECURITIES
The amortized cost and estimated market value of investment and mortgage-backed
securities at December 31, 2003 are as follows:
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
---- ----- ------ -----
(In thousands)
Available for sale:
FHLB notes $ 140,340 $ 623 $ 18 $ 140,945
FNMA notes 50,034 172 173 50,033
FFCB notes 20,241 28 --- 20,269
-------- -------- -------- --------
210,615 823 191 211,247
Equity securities 1,429 2,079 --- 3,508
-------- -------- -------- --------
212,044 2,902 191 214,755
-------- -------- -------- --------
Held to maturity:
FHLB notes 20,000 21 --- 20,021
FHLMC notes 19,977 85 --- 20,062
Municipal securities 441 36 --- 477
-------- -------- -------- --------
40,418 142 --- 40,560
-------- -------- -------- --------
FHLMC mortgage-backed securities 187,142 1,844 1,382 187,604
FNMA mortgage-backed securities 183,714 1,854 1,154 184,414
-------- -------- ----- --------
370,856 3,698 2,536 372,018
-------- -------- ----- --------
$ 623,318 $ 6,742 $ 2,727 $ 627,333
======== ======== ======== ========
The amortized cost and estimated market value of investment and mortgage-backed
securities at September 30, 2003 are as follows:
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
---- ----- ------ -----
(In thousands)
Available for sale:
FHLB notes $ 170,404 $ 1,478 $ --- $ 171,882
FNMA notes 60,039 380 88 60,331
FFCB note 10,296 42 --- 10,338
-------- -------- -------- --------
240,739 1,900 88 242,551
Equity securities 1,554 2,414 --- 3,968
-------- -------- -------- --------
242,293 4,314 88 246,519
-------- -------- -------- --------
Held to maturity:
FHLB notes 30,000 128 --- 30,128
FHLMC notes 19,975 166 --- 20,141
Municipal securities 441 43 --- 484
-------- -------- -------- --------
50,416 337 --- 50,753
-------- -------- -------- --------
FHLMC mortgage-backed securities 138,884 1,911 1,237 139,558
FNMA mortgage-backed securities 169,191 2,200 1,027 170,364
-------- -------- -------- --------
308,075 4,111 2,264 309,922
-------- -------- -------- --------
$ 600,784 $ 8,762 $ 2,352 $ 607,194
======== ======== ======== ========
8
The amortized cost and estimated market value of debt securities at December 31,
2003 and September 30, 2003 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.
December 31, 2003 September 30, 2003
----------------- ------------------
Estimated Estimated
Amortized market Amortized market
cost value cost value
---- ----- ---- -----
(In thousands)
Available for sale:
Due in one year or less $ 40,027 $ 40,294 $ 50,044 $ 5 0,535
Due in one to five years 170,588 170,953 190,695 192,016
-------- -------- -------- --------
210,615 211,247 240,739 242,551
-------- -------- -------- --------
Held to maturity:
Due in one to five years 40,218 40,326 50,216 50,513
Due after five years 200 234 200 240
-------- -------- -------- --------
40,418 40,560 50,416 50,753
-------- -------- -------- --------
FHLMC mortgage-backed securities 187,142 187,604 138,884 139,558
FNMA mortgage-backed securities 183,714 184,414 169,191 170,364
-------- -------- -------- --------
370,856 372,018 308,075 309,922
-------- -------- -------- --------
$ 621,889 $ 623,825 $ 599,230 $ 603,226
======== ======== ======== ========
As of December 31, 2003, the Company had pledged mortgage-backed securities with
a market value of $16,059,000 and a carrying value of $15,287,000 to
collateralize the public funds on deposit. The Company had also pledged
mortgage-backed securities with a market value of $570,000 and a carrying value
of $528,000 to collateralize treasury, tax and loan accounts as of December 31,
2003.
9
(4) LOANS
Loans are summarized below:
December 31, September 30,
2003 2003
---- ----
(In thousands)
Mortgage loans:
Construction 1-4 family $ 206,433 $ 190,315
Permanent 1-4 family 1,017,553 1,014,405
Multi-family 15,072 19,754
Nonresidential 203,556 181,752
Land 132,182 126,950
--------- ---------
Total mortgage loans 1,574,796 1,533,176
--------- ---------
Other loans:
Commercial 60,428 56,268
Home improvement 28,663 26,442
Manufactured housing 18,689 17,849
Other consumer 131,625 126,770
--------- ---------
Total other loans 239,405 227,329
--------- ---------
Total loans 1,814,201 1,760,505
--------- ---------
Less:
Loans in process 138,333 124,427
Net deferred loan fees and discounts 8,420 8,494
Allowance for loan losses 16,614 16,199
--------- ---------
163,367 149,120
--------- ---------
Total loans, net $ 1,650,834 $ 1,611,385
========= =========
An analysis of the allowance for loan losses follows:
Three months ended
December 31,
2003 2002
---- ----
(In thousands)
Beginning balance $ 16,199 $ 14,377
Provision for loan losses 448 451
Charge-offs (41) (139)
Recoveries 8 11
------- -------
Ending balance $ 16,614 $ 14,700
======= =======
The allowance for loan losses was $16,614,000 and $16,199,000 at December 31,
2003 and September 30, 2003, 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 dependent loan. To the extent that an impaired loan's
value is less than the loan's recorded investment, a specific allowance is
recorded. There were no specific allowances recorded at December 31, 2003 and
September 30, 2003.
10
The investment in impaired loans (primarily consisting of
classified loans), other than those evaluated collectively for impairment was
$6,574,000 and $6,259,000 at December 31, 2003 and September 30, 2003
respectively.
At December 31, 2003 and September 30, 2003, loans with unpaid principal
balances of approximately $2,338,000 and $2,215,000, respectively, were 90 days
or more contractually delinquent or on nonaccrual status. As of December 31,
2003 and September 30, 2003, approximately $1,902,000 and $1,638,000,
respectively, of loans 90 days or more contractually delinquent were in the
process of foreclosure.
As of December 31, 2003 and September 30, 2003, mortgage loans which had been
sold on a recourse basis had outstanding principal balances of $229,000 and
$260,000, respectively.
(5) COMPREHENSIVE INCOME
The following table sets forth the components of the Company's comprehensive
income:
Three months ended
December 31,
2003 2002
---- ----
(In thousands)
Net income $ 9,549 $ 9,275
Other comprehensive income, net of tax:
Change in unrealized (loss) gain on securities
available for sale (net of deferred tax of
$585 and $(394) for the three months ended
December 31, 2003 and 2002, respectively) (930) 629
------ -------
Comprehensive income $ 8,619 $ 9,904
====== ======
(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.
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; and
d. Recognizes in earnings any gain or loss on the sale.
11
The Company recognized gains on sales of mortgage loans of $741,000 and
$1,314,000, respectively, for the three months ended December 31, 2003 and 2002.
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 December 31,
2003, no servicing assets and/or liabilities were recognized.
12
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.
Overview
The Company owns 100% of the common stock of Harbor Federal Savings Bank ("the
Bank"), a federal savings bank whose deposits are insured by the Federal Deposit
Insurance Corporation (FDIC). The Bank provides a wide range of banking and
related insurance services and is engaged in the business of attracting deposits
predominately from the communities it serves and using these and other funds to
originate primarily one-to-four family first mortgage loans. The Company's
results of operations are for the most part dependent on net interest income.
Net interest income is a function of the balances of loans and investments
("interest-bearing assets") outstanding in any one period, the yields earned on
such loans and investments, and the interest incurred on deposits and borrowed
funds ("interest-bearing liabilities") that were outstanding in that same
period. The Company's noninterest income consists primarily of fees and service
charges, insurance commissions, gains on sale of mortgage loans, gains on sale
of securities, gains on sale of premises and equipment and, depending on the
period, real estate operations which have either provided income or loss. The
results of operations are also significantly impacted by the amount of
provisions for loan losses which, in turn, is dependent upon, among other
things, the size and makeup of the loan portfolio, loan quality, and trends. The
noninterest expenses consist primarily of employee compensation and benefits,
occupancy expense and data processing services. Results of operations are
affected by general economic and competitive conditions, including changes in
prevailing interest rates and the policies of regulatory agencies.
The Company attempts to manage its assets and liabilities in a manner that
stabilizes net interest income and net economic value under a broad range of
interest rate environments. This is accomplished by matching maturity and
repricing periods on loans and investments to maturity and repricing periods on
deposits and borrowings.
13
The Company currently utilizes the following strategies to reduce interest rate
risk: (a) the Company seeks to originate and hold in portfolio adjustable rate
loans which have periodic interest rate adjustments; (b) the Company sells a
portion of newly originated fixed rate residential mortgage loans; (c) the
Company seeks to lengthen the maturities of deposits when deemed cost effective
through the pricing and promotion of certificates of deposits; (d) the Company
seeks to attract low cost checking and transaction accounts which tend to be
less interest rate sensitive when interest rates rise; and (e) the Company has
utilized long term Federal Home Loan Bank ("FHLB") advances to fund the
origination of fixed rate loans. The Company also maintains a high level of
liquid assets consisting of short-term securities as well as medium-term
securities with expected average lives in the three to four year range, which
are expected to increase in yield as interest rates rise.
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. Critical accounting policies are defined as policies which are
material to the portrayal of the Company's financial condition and results of
operations, and that require management's most difficult, subjective, or complex
judgements. The Company's financial results could differ significantly if
different judgements or estimates are applied in the application of these
policies.
The allowance for loan losses was $16,614,000 and $16,199,000 at December 31,
2003 and September 30, 2003, respectively. Impaired loans (primarily consisting
of classified loans), other than those evaluated collectively, were $6,574,000
and $6,259,000 at December 31, 2003 and September 30, 2003, 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. There were no specific allowances
recorded at December 31, 2003 and September 30, 2003.
Results of Operations
Comparisons of quarterly results of operations in this section are between the
three months ended December 31, 2003 and December 31, 2002.
General. Diluted earnings per share for the first fiscal quarter ended December
31, 2003, increased 2.5% to 41 cents per share on net income of $9.5 million,
compared to 40 cents per share on net income of $9.3 million for the same period
last year. The increase was due primarily to an increase in net interest income
resulting from a 13.0% increase in average interest-earning assets due to
purchases of mortgage-backed securities and originations of loans. This growth
was funded with low cost core deposits and FHLB advances. The increase in net
interest income was partially offset by a decrease in gain on sale of mortgage
loans and an increase in other expenses.
Net Interest Income. Net interest income increased 9.3% to $22.4 million for the
quarter ended December 31, 2003, from $20.5 million for the same period last
year. The increase was due primarily to a $263.5 million increase in average
interest-earning assets that was funded with low cost core deposits and FHLB
advances. The average balance of mortgage-backed securities increased $170.9
million and average total loans increased by $84.5 million. Growth in the
average balance of total loans was due primarily to increased loan originations
in the commercial real estate, commercial business and consumer portfolios. The
average balance of core deposits increased by $173.8 million, primarily in
transaction accounts, and FHLB advances increased by $66.6 million. The average
balance of core deposits increased to 48.1% of average total deposits compared
to 42% for the same period last year, resulting in lower costs of funds. The net
interest margin decreased to 3.92% for the three months ended December 31, 2003
from 4.05% for the same period last year, due to the yield on interest earning
assets decreasing by more than the cost of interest-bearing liabilities in the
current low interest rate environment.
14
Provision for Loan Losses. The provision for loan losses was $448,000 for the
quarter ended December 31, 2003, compared to $451,000 for the same period last
year. The provision for the quarter ended December 31, 2003 was principally
comprised of a charge of $348,000, due to growth in the loan portfolio,
primarily commercial real estate loans that are deemed to have more credit risk
than residential loans, $67,000 due to increases in the level of classified
loans and $33,000 for net chargeoffs. The provision for the quarter ended
December 31, 2002 was principally comprised of a charge of $252,000 due to
growth in the loan portfolio, primarily commercial real estate and commercial
business loans that are deemed to have more credit risk than residential loans,
$128,000 for net charge offs and $71,000 for an increase in the level of
classified loans.
There were no significant changes in the estimation methods or fundamental
assumptions used in the calculation of the allowance for loan losses at December
31, 2003, compared to September 30, 2003. Furthermore, there was no reallocation
of the allowance from September 30, 2003. 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, loan mix,
historical loss experience and trends in delinquencies and nonaccruals.
Other Income. Other income decreased to $5.3 million for the quarter ended
December 31, 2003, from $5.4 million for the same period last year. The decrease
was due primarily to decreases of $573,000 in gain on sale of mortgage loans,
principally residential fixed rate mortgage loans, partially offset by a
$234,000 increase in fees and services charges, and $151,000 increase in
insurance commissions and fees. Fees and service charges (primarily from fees
and service charges on deposit products) were $3.4 million and $3.2 million for
the quarters ended December 31, 2003 and 2002, respectively. This increase was
due primarily to the growth in transaction accounts. Gain on the sale of
mortgage loans was $741,000 and $1.3 million for the quarters ended December 31,
2003 and 2002, respectively. This decrease was due primarily to a decline in the
originations of fixed rate residential one-to-four family mortgage loans
available for sale as a result of a change in customer preference to adjustable
rate loans. Total fixed rate residential loan originations decreased by $22.2
million; however, adjustable rate loan originations increased by $18.7 million
compared to the same period last year. The Company sells loans in order to
reduce interest rate risk by limiting the growth of long term fixed rate loans
in the portfolio. Insurance commissions and fees were $721,000 and $570,000 for
the three months ended December 31, 2003 and 2002, respectively. This increase
was due primarily to the increased sales of insurance products. Income from real
estate operations was $169,000 and $52,000 for the quarters ended December 31,
2003 and 2002. This increase was due primarily to gains on sales of real estate
acquired in settlement of loans through foreclosure.
Other Expenses. Other expenses increased to $11.6 million for the quarter ended
December 31, 2003, from $10.2 million for the same period last year. The
increase was due primarily to increases of $985,000 in compensation and
benefits, $196,000 in occupancy expense, $141,000 in data processing services,
and $74,000 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 pension
plan. The increase in occupancy expense was due primarily to an increase in data
processing equipment expense. The increases in data processing services, and
other expenses were due primarily to increases resulting from the growth in
loans and deposits.
15
The Company has a non-contributory defined benefit pension plan (the "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. The Plan is part of a
multi-employer plan and separate actuarial evaluations are not made for each
employer nor are plan assets so segregated. As a result of the decline in market
value of the investments held in the Plan, the Bank, based on actuarial
calculations, currently expects to be required to increase its pension
contribution to approximately $1.4 million for fiscal year 2004. The Company
recorded pension expense of approximately $202,000 and $127,000 for the three
months ended December 31, 2003 and 2002, respectively.
Income Taxes. Income tax expense increased to $6.1 million for the quarter ended
December 31, 2003, from $6.0 million for the same period last year due primarily
to an increase in pretax accounting income. The effective tax rate was 39.1% for
the quarters ended December 31, 2003 and 2002.
Financial Condition
Comparisons of financial condition in this section are from the end of the
preceding fiscal year to December 31, 2003.
Total assets increased to $2.414 billion at December 31, 2003, from $2.352
billion at the fiscal year ended September 30, 2003. The increase is due
primarily to an increase in mortgage-backed securities and loans, partially
offset by a decrease in investment securities.
Investment securities available for sale decreased to $214.8 million at December
31, 2003, from $246.5 million at September 30, 2003. The decrease is due
primarily to maturities and calls of $40.0 million partially offset by purchases
of $10.0 million.
Investment securities held to maturity decreased to $40.4 million at December
31, 2003 from $50.4 million at September 30, 2003. The decrease is due primarily
to maturities and calls of 10.0 million.
Mortgage-backed securities increased to $370.9 million at December 31, 2003,
from $308.1 million at September 30, 2003. The increase is due primarily to
purchases of $82.8 million of 7 year fixed-rate balloon securities partially
offset by repayments of $19.7 million. The purchases were funded with proceeds
from maturities and calls of investment securities and excess cash provided by
the net increase in deposits. The Company's investment strategy has been to
shift the portfolio from lower yielding, shorter term investment securities into
higher yielding balloon mortgage-backed securities, with expected average lives
in the three to four year range. These securities will provide future monthly
principal and interest repayment cash flow to fund loan growth or other
investment alternatives.
Net loans increased to $1.651 billion at December 31, 2003, from $1.611 billion
at September 30, 2003. The increase is due primarily to loan disbursements of
$210.5 million partially offset by repayments of $142.9 million and sales of
mortgage loans of $28.2 million, primarily residential one-to-four family
fixed-rate mortgage loans. The increase in net loans for the three months is due
primarily to a net increase of $22.5 million in nonresidential mortgage loans,
$7.9 million in consumer loans and $5.2 million in land loans.
16
Deposits increased to $1.615 billion at December 31, 2003, from $1.550 billion
at September 30, 2003. The increase is due primarily to a net increase in
deposits before interest credited of $60.0 million and interest credited of $5.1
million. The increase in deposits for the three months is due primarily to a net
increase of $67.5 million in core deposits partially offset by a decrease of
$2.4 million in deposits in certificate accounts. This change reflects the
Company's emphasis in growing transaction accounts, the customer's preference
for shorter-term investments in a low interest rate environment and growth in
the Company's market area.
FHLB advances increased to $509.5 million from $503.5 million at December 31,
2003, from September 30, 2003 due to $6.0 million of daily rate advances.
Stockholders' equity increased to $268.7 million at December 31, 2003, from
$261.9 million at September 30, 2003. The increase is due primarily to $9.5
million of earnings for the three months partially offset by $3.3 million of
dividends paid and the repurchase of $169,000 of Company common stock to be held
as treasury stock. During the three months, the Company repurchased 6,036 shares
at an average price of $28.09 per share to be held as treasury stock in
accordance with the Company's stock repurchase program.
At December 31, 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 $ 36,128 1.50% $ 241,481 10.03% $ 205,353
Core Capital 72,256 3.00% 241,481 10.03% 169,225
Risk-Based Capital 107,120 8.00% 257,383 19.22% 150,264
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 $355.0 million at December 31, 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 December 31, 2003, the Bank had $813.3 million or 50.3% 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.
17
Net cash provided by the Company's operating activities (i.e. cash items
affecting net income) was $14.1 million and $18.5 million for the three months
ended December 31, 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 $63.2 million and $71.0
million for the three months ended December 31, 2003 and 2002, respectively. The
decrease in cash used in 2003 was principally due to a decrease of $80.3 million
in the purchase of investment securities available for sale and a $50.0 million
increase in proceeds from maturities and calls of investment securities,
partially offset by a $82.8 million increase in the purchase of mortgage-backed
securities and an increase of $34.7 million in the net increase in loans.
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
$50.0 million and $20.8 million for the three months ended December 31, 2003 and
2002, respectively. The increase in cash flows in 2003 was primarily due to a
$22.9 million increase in the net increase in deposits and a $6.0 million
increase in proceeds from short-term borrowings.
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:
December 31, September 30,
2003 2003
---- ----
(Dollars in thousands)
Nonaccrual mortgage loans:
Delinquent less than 90 days $ 160 $ 209
Delinquent 90 days or more 1,830 1,609
------- -------
Total 1,990 1,818
------- -------
Nonaccrual other loans:
Delinquent 90 days or more 348 397
------- -------
Total 348 397
------- -------
Total nonperforming loans 2,338 2,215
Real estate owned, net of related allowance 664 906
------- -------
Total nonperforming assets $ 3,002 $ 3,121
======= =======
Nonperforming loans to total net loans .14% .14%
Total nonperforming assets to total assets .12% .13%
Allowance for loan losses to total net loans 1.01% 1.01%
Allowance for loan losses to nonperforming loans 710.74% 731.34%
Allowance for loan losses to classified loans 263.65% 245.86%
18
Available Information
The Company's website address is www.harborfederal.com. The Company makes
available, free of charge, on or through its website, its annual report on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, and beneficial ownership reports on Forms 3, 4,
and 5 as soon as reasonably practicable after electronically filing such
material with, or furnishing it to, the Securities and Exchange Commission. The
information found on the Company's website is not incorporated by reference in
this or any other report the Company files or furnishes to the Securities and
Exchange Commission.
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, 2003. 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, 2003.
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 December 31,
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 reasonably 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
19
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
The exhibits listed below are included with this Report or are
incorporated herein by reference to an identified document previously filed with
the Securities and Exchange Commission as set forth parenthetically.
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 (Exhibit 10(viii) to Form 10-Q for
the quarter ended June 30, 2003 filed August 14, 2003)
10(ix) *Change of Control Agreement (Exhibit 10(ix) to Form 10-K for the
year ended September 30, 2003 filed December 29, 2003)
20
10(x) *Amendment to employment contract with Michael J. Brown, Sr.
(Exhibit 10(x) to Form 10-K for the year ended September 30, 2003
filed December 29, 2003)
10(xi) *Senior Officer Incentive Plan for fiscal year 2004
(Exhibit 10(xi) to Form 10-K for the year ended September 30,
2003 filed December 29, 2003)
14.1 *Code of Ethics (Exhibit 14.1 to Form 10-K for the year ended
September 30, 2003 filed December 29, 2003)
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.
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 of the 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.
*Incorporated by reference.
**Included with this report.
(b) Reports on Form 8-K
On October 16, 2003, the Company furnished a Form 8K announcing its earnings for
the fourth quarter of the 2003 fiscal year.
On December 1, 2003, the Company furnished a Form 8K announcing it would be
participating in the Friedman, Billings, Ramsey 10th Annual Investor Conference
in New York City on December 2-3, 2003.
On December 31, 2003, the Company furnished a Form 8K announcing that on Monday,
January 5th, members of the Company's executive leadership team would open the
world's largest electronic exchange, the NASDAQ, located in Times Square.
21
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: February 11, 2004 /s/
------------------------------------
Michael J. Brown, Sr.
President and Chief Executive Officer
Date: February 11, 2004 /s/
------------------------------------
H. Michael Callahan
Senior Vice President, Finance and
Chief Financial Officer
22
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. Anyfraud, 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
February 11, 2004
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL 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/
_______________________
H. Michael Callahan
Chief Financial Officer
February 11, 2004
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 December 31, 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, the financial condition and result of operations
of the Compan y.
/s/
_______________________
Michael J. Brown, Sr.
Chief Executive Officer
February 11, 2004
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 December 31, 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
February 11, 2004