Harbor Florida Bancshares, Inc. Announces Fourth Quarter Earnings Increase

Share Name	Share Symbol	Market	Type
Harbor Florida Bancshares	NASDAQ:HARB	NASDAQ	Common Stock

Harbor Florida Bancshares (NASDAQ:HARB)
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FORT PIERCE, Fla., Oct. 14 /PRNewswire-FirstCall/ -- Harbor Florida Bancshares, Inc. (NASDAQ:HARB) ("the Company"), the holding company for Harbor Federal Savings Bank ("the Bank"), announced today that diluted earnings per share for its fourth fiscal quarter ended September 30, 2005, increased 6.3% to 51 cents per share on net income of $12.0 million, compared to 48 cents per share on net income of $11.1 million for the same period last year. Diluted earnings per share for the year ended September 30, 2005 increased 11.9% to $1.98 per share on net income of $46.2 million, compared to $1.77 per share on net income of $41.0 million for the same period last year. The increases for both the quarter and fiscal year to date were predominately due to increased net interest income, resulting from an increase in average interest-earning assets due primarily to originations of loans. This growth was funded primarily with deposits and repayments of mortgage-backed securities. The Company also announced today that its Board of Directors declared a quarterly dividend of 20 cents per share for the quarter ending September 30, 2005. The dividend is payable November 18, 2005 to shareholders of record as of October 28, 2005. FINANCIAL CONDITION Total assets increased to $3.012 billion at September 30, 2005, from $2.627 billion at September 30, 2004. Total net loans increased to $2.276 billion at September 30, 2005, from $1.891 billion at September 30, 2004. Total deposits increased to $2.056 billion at September 30, 2005, from $1.745 billion at September 30, 2004. Total net loans increased 20.3% due primarily to net increases of $191.0 million in residential one-to-four family mortgage loans, $108.9 million in land loans, $33.1 million in nonresidential mortgage loans, $37.4 million in consumer loans, and $16.7 million in commercial business loans for the year ended September 30, 2005. These increases were due to strong loan originations during the year as a result of increased expansion and growth in the Bank's primary markets. When comparing originations for the year ended September 30, 2005 to the same period last year, residential one- to-four mortgage loan originations increased 28.5% to $964.6 million. Consumer loan originations increased 18.3% to $192.3 million. Commercial business loan originations increased 26.3% to $62.1 million. Commercial real estate loan originations increased 10.3% to $269.3 million. Deposits grew 17.9% during the year ended September 30, 2005 to $2.056 billion due to a net increase of $182.0 million in certificate accounts and $129.4 million in core deposits (transaction and passbook accounts). This increase reflects the Company's emphasis on growing deposits to fund loans and growth in the Company's market area. During the first quarter of its 2005 fiscal year, the Company had significant growth in transaction accounts, primarily attributable to short-term accumulation of disaster relief funds and insurance proceeds for the purpose of repairs to properties by homeowners and businesses. The Company continues to emphasize growth in transaction accounts. In the fourth quarter of its 2005 fiscal year, the Company began selective programs to attract additional certificate accounts as a longer term, fixed-rate funding source to offset anticipated increases in rates. The increase in certificate accounts was due to these programs and customers' increased preference for longer-term deposit products in a higher interest rate environment. RESULTS OF OPERATIONS Net interest income increased 15.2% to $28.2 million for the quarter ended September 30, 2005, from $24.5 million for the quarter ended September 30, 2004. This increase was primarily a result of a 13.1% increase in average interest-earning assets over the comparable period in 2004. Average total loans increased by $371.7 million, reflecting strong loan originations as a result of expansion and growth in the Bank's primary markets. The average balance of core deposits, certificate accounts and FHLB advances increased $140.6 million, $129.8 million and $43.1 million, respectively. The average balance of mortgage-backed securities decreased $51.9 million. The average balance of core deposits increased slightly to 51.6% of total average deposits from 51.5% for the same quarter last year. During the quarter ended September 30, 2005, the Company's earnings were negatively impacted by a reduction in the rate of dividends declared on capital stock by the Federal Home Loan Bank of Atlanta. The reduced dividend rate lowered pre-tax earnings and after-tax earnings by $98,000 and $60,000, respectively, when compared to the three months ended June 30, 2005. Provision for loan losses was $464,000 for the quarter ended September 30, 2005, compared to $350,000 for the quarter ended September 30, 2004. The provision for the quarter ended September 30, 2005 was principally comprised of a charge of $305,000 due to increased credit risk resulting from growth in the loan portfolio, an increase of $152,000 due to an increase in the level of classified loans and $7,000 in charge-offs. Other income increased to $6.7 million for the quarter ended September 30, 2005, compared to $5.6 million for the quarter ended September 30, 2004. This increase was due primarily to increases of $604,000 in loan and deposit- related fees and service charges, $476,000 in gain on disposal of premises and equipment and $103,000 in gain on sale of mortgage loans. The increase in deposit-related fees and service charges was primarily due to growth in transaction accounts. The gain on disposal of premises and equipment included the sale of business property and insurance proceeds received on hurricane damaged premises and equipment. Other expense increased to $14.7 million for the quarter ended September 30, 2005, from $12.6 million for the quarter ended September 30, 2004. This increase was due primarily to increases of $975,000 in compensation and benefits, $264,000 in occupancy, $184,000 in professional fees, $191,000 in data processing services, and $377,000 in other. The increase in compensation and benefits was primarily due to additional staff required to support the growth in loans and deposits and a $278,000 increase in pension expense. The increases in occupancy and data processing services were primarily due to growth in loans and deposits. The increase in professional fees was due to additional expense related to compliance with the Sarbanes-Oxley Act of 2002 and the Bank Secrecy Act. The increase in other was due primarily to a $368,000 reduction in the quarter ended September 30, 2004 of an accrual established in a previous quarter based on the settlement of an issue with the IRS related to the Company's Employee Stock Ownership Plan (ESOP). Income tax expense was $7.7 and $6.0 million for the quarters ended September 30, 2005 and 2004. The effective tax rate was 39.2% for the quarter ended September 30, 2005 and 35.1% for the same period last year. The increase in the tax rate for 2005 was primarily due to the tax benefit derived in the prior year from the settlement with the IRS in connection with the ESOP. ASSET QUALITY Asset quality improved as nonperforming loans decreased to $2.2 million at September 30, 2005 from $3.0 million at September 30, 2004. Net charge-offs for the quarter ended September 30, 2005 were $7,000 compared to $2,000 for the same period last year. The ratio of the allowance for loan losses to total net loans decreased to .87% as of September 30, 2005, from .94% for the same period last year. The allowance for loan losses remains sufficient to cover losses inherent in the loan portfolio. BRANCH EXPANSION Harbor Federal is expanding its branch network to include two new branches in Sanford and one new branch in Clermont on State Route 50. All three branches are scheduled to open during the first fiscal quarter of 2006. In the second fiscal quarter, Harbor Federal will open new branch facilities for its Virginia Avenue branch in Fort Pierce. TREASURY STOCK REPURCHASES Harbor Florida Bancshares, Inc.'s Board of Directors approved an extension of the Company's stock repurchase plan to October 13, 2006, permitting the Company to acquire up to 1,200,000 shares of its common stock, subject to market conditions. The Company has repurchased 465,200 shares under the current stock repurchase program. As of September 30, 2005, the Company has a total of 8,022,182 shares held as treasury stock. Harbor Federal is located in Fort Pierce, Florida and has 37 offices located in a seven-county area of East Central Florida. Harbor Florida Bancshares, Inc. common stock trades on the NASDAQ National Market under the symbol HARB. HARBOR FLORIDA BANCSHARES, INC. September 30, September 30, 2005 2004 (In Thousands) Selected Consolidated Financial Data: Total assets $3,012,185 $2,627,109 Loans, gross 2,295,609 1,908,971 Allowance for loan losses 19,748 17,802 Net loans 2,275,861 1,891,169 Loans held for sale 10,695 2,438 Interest-bearing deposits 23,689 7,053 Investment securities 128,871 130,200 Mortgage-backed securities 388,458 443,060 Goodwill 3,591 3,591 Deposits 2,056,307 1,744,830 FHLB advances 595,473 553,492 Stockholders' equity 320,511 286,644 # of common shares outstanding 23,977 23,789 Three months ended Twelve months ended September 30, September 30, 2005 2004 2005 2004 (In Thousands Except per Share Data) Selected Consolidated Operating Data: Interest income $44,158 $36,843 $164,885 $142,085 Interest expense 15,971 12,385 56,065 47,426 Net interest income 28,187 24,458 108,820 94,659 Provision for loan losses 464 350 1,915 1,652 Net interest income after provision for loan losses 27,723 24,108 106,905 93,007 Other Income: Fees and service charges 4,639 4,035 16,718 14,889 Insurance commissions and fees 843 863 3,237 3,391 Gain on sale of mortgage loans 656 553 2,289 2,260 Gain on disposal of premises and equipment 476 -- 800 334 Gain on sale of equity securities -- -- -- 1,997 Gain on sale of debt securities -- -- 41 248 Other 76 107 354 428 Total other income 6,690 5,558 23,439 23,547 Other expenses: Compensation and benefits 8,330 7,356 31,773 29,192 Occupancy 2,187 1,922 7,823 7,032 Other 4,144 3,279 14,803 13,643 Total other expenses 14,661 12,557 54,399 49,867 Income before income taxes 19,752 17,109 75,945 66,687 Income tax expense 7,740 6,002 29,749 25,691 Net income $12,012 $11,107 $46,196 $40,996 Net income per share: Basic $0.52 $0.49 $2.03 $1.81 Diluted $0.51 $0.48 $1.98 $1.77 Weighted average shares outstanding Basic 22,953 22,651 22,811 22,618 Diluted 23,437 23,203 23,276 23,155 HARBOR FLORIDA BANCSHARES, INC. Three months ended Twelve months ended September 30, September 30, 2005 2004 2005 2004 Selected Financial Ratios: Performance Ratios: Return on average assets (1) 1.61 % 1.69 % 1.61 % 1.64 % Return on average stockholders' equity (1) 15.14 % 15.73 % 15.31 % 15.06 % Book value per share $13.37 $12.05 $13.37 $12.05 Net interest rate spread (1) 3.79 % 3.73 % 3.78 % 3.73 % Net interest margin (1) 3.99 % 3.92 % 3.96 % 3.93 % Non-interest expense to average assets (1) 1.96 % 1.91 % 1.90 % 1.99 % Net interest income to non- interest expense (1) 1.95 x 1.97 x 2.00 x 1.90 x Average interest- earning assets to average interest-bearing liabilities 109.11 % 109.65 % 108.70 % 109.63 % Efficiency ratio (1) 43.12 % 43.66 % 42.24 % 43.70 % Asset Quality Ratios: Non-performing assets to total assets 0.07 % 0.12 % 0.07 % 0.12 % Allowance for loan losses to total loans 0.87 % 0.94 % 0.87 % 0.94 % Allowance for loan losses to classified loans 459.55 % 383.37 % 459.55 % 383.37 % Allowance for loan losses to non-performing loans 904.99 % 587.20 % 904.99 % 587.20 % Capital Ratios: Average shareholders' equity to average assets 10.63 % 10.76 % 10.53 % 10.87 % Shareholders' equity to assets at period end 10.64 % 10.91 % 10.64 % 10.91 % (1) Ratio is annualized. Three months ended Twelve months ended September 30, September 30, 2005 2004 2005 2004 (In Thousands) Selected Average Balances: Total assets $2,962,287 $2,609,767 $2,866,124 $2,503,862 Interest earning assets 2,837,158 2,508,637 2,747,786 2,411,568 Gross loans 2,246,943 1,875,292 2,084,792 1,747,201 Stockholders' equity 314,825 280,903 301,764 272,264 Deposits 2,001,917 1,731,544 1,951,760 1,663,438 Asset Quality: Nonaccrual loans 2,182 3,032 2,182 3,032 Net loan charge-offs (recoveries) 7 2 (31) 49 Loan Originations: Residential 277,241 178,653 964,626 750,422 Commercial Real Estate 61,613 69,062 269,275 244,206 Consumer 51,594 41,134 192,332 162,583 Commercial Business 14,539 12,935 62,134 49,189 Loan Sales: 45,308 24,285 123,531 95,403 HARBOR FLORIDA BANCSHARES, INC. For the three months ended Sept. June Mar. Dec. Sept. 30, 30, 31, 31, 30, 2005 2005 2005 2004 2004 (In Thousands Except Per Share Data) Selected Consolidated Operating Data: Interest income $44,158 $42,481 $39,916 $38,330 $36,843 Interest expense 15,971 14,447 12,841 12,805 12,385 Net interest income 28,187 28,034 27,075 25,525 24,458 Provision for loan losses 464 463 538 450 350 Net interest income after provision for loan losses 27,723 27,571 26,537 25,075 24,108 Other Income: Fees and service charges 4,639 4,315 4,091 3,672 4,035 Insurance commissions and fees 843 899 850 645 863 Gain on sale of mortgage loans 656 601 564 468 553 Gain (loss) on disposal of premises and equipment 476 29 (8) 303 -- Gain on sale of debt securities -- 41 -- -- -- Other 76 171 52 55 107 Total other income 6,690 6,056 5,549 5,143 5,558 Other expenses: Compensation and benefits 8,330 8,130 7,828 7,485 7,356 Occupancy 2,187 1,964 1,877 1,795 1,922 Other 4,144 3,893 3,568 3,198 3,279 Total other expenses 14,661 13,987 13,273 12,478 12,557 Income before income taxes 19,752 19,640 18,813 17,740 17,109 Income tax expense 7,740 7,701 7,358 6,950 6,002 Net income $12,012 $11,939 $11,455 $10,790 $11,107 Net income per share: Basic $0.52 $0.52 $0.50 $0.48 $0.49 Diluted $0.51 $0.51 $0.49 $0.46 $0.48 HARBOR FLORIDA BANCSHARES, INC. Three months ended September 30, 2005 Average Interest & Yield/ Balance Dividend Rate (Dollars in Thousands) Analysis of Net Interest Income: Assets: Interest-earning assets : Interest-bearing deposits $23,937 $205 3.35 % Investment securities 161,584 1,141 2.82 Mortgage-backed securities 404,694 3,829 3.78 Mortgage loans 1,922,884 32,930 6.84 Other loans 324,059 6,053 7.41 Total interest-earning assets 2,837,158 44,158 6.21 Total noninterest-earning assets 125,129 Total assets 2,962,287 Liabilities and Stockholders' Equity: Interest-bearing liabilities Deposits: Transaction accounts $822,188 $1,414 0.68 % Passbook savings 187,936 197 0.42 Official checks 22,312 0 0 Certificate accounts 969,481 7,707 3.15 Total deposits 2,001,917 9,318 1.85 FHLB advances 598,285 6,653 4.35 Other borrowings 0 0 0.00 Total interest-bearing liabilities 2,600,202 15,971 2.42 Noninterest-bearing liabilities 47,260 Total liabilities 2,647,462 Stockholders' equity 314,825 Total liabilities and stockholders' equity $2,962,287 Net interest income/ interest rate spread $28,187 3.79 % Net interest-earning assets/ net interest margin $236,956 3.99 % Interest-earning assets to interest-bearing liabilities 109.11 % Three months ended September 30, 2004 Average Interest & Yield/ Balance Dividend Rate Analysis of Net Interest Income: Assets: Interest-earning assets : Interest-bearing deposits $8,841 $28 1.26 % Investment securities 167,862 1,086 2.59 Mortgage-backed securities 456,642 4,434 3.88 Mortgage loans 1,600,123 26,545 6.63 Other loans 275,169 4,750 6.87 Total interest-earning assets 2,508,637 36,843 5.87 Total noninterest-earning assets 101,130 Total assets 2,609,767 Liabilities and Stockholders' Equity: Interest-bearing liabilities Deposits: Transaction accounts 710,022 $769 0.43 % Passbook savings 165,489 113 0.27 Official checks 16,305 0 0 Certificate accounts 839,728 5,281 2.50 Total deposits 1,731,544 6,163 1.42 FHLB advances 555,224 6,209 4.38 Other borrowings 1,003 13 5.24 Total interest-bearing liabilities 2,287,771 12,385 2.14 Noninterest-bearing liabilities 41,093 Total liabilities 2,328,864 Stockholders' equity 280,903 Total liabilities and stockholders' equity $2,609,767 Net interest income/ interest rate spread $24,458 3.73 % Net interest-earning assets/ net interest margin $220,866 3.92 % Interest-earning assets to interest-bearing liabilities 109.65 % HARBOR FLORIDA BANCSHARES, INC. Twelve months ended September 30, 2005 Average Interest & Yield/ Balance Dividend Rate (Dollars in Thousands) Analysis of Net Interest Income: Assets: Interest-earning assets : Interest-bearing deposits $46,454 $1,117 2.40 % Investment securities 173,747 4,888 2.81 Mortgage-backed securities 442,793 16,901 3.82 Mortgage loans 1,783,844 120,208 6.74 Other loans 300,948 21,771 7.23 Total interest-earning assets 2,747,786 164,885 6.00 Total noninterest-earning assets 118,338 Total assets 2,866,124 Liabilities and Stockholders' Equity: Interest-bearing liabilities Deposits: Transaction accounts $839,707 $4,836 0.58 % Passbook savings 192,115 657 0.34 Official checks 22,254 0 0 Certificate accounts 897,684 25,282 2.82 Total deposits 1,951,760 30,775 1.58 FHLB advances 575,926 25,273 4.39 Other borrowings 276 17 6.26 Total interest-bearing liabilities 2,527,962 56,065 2.22 Noninterest-bearing liabilities 36,400 Total liabilities 2,564,362 Stockholders' equity 301,764 Total liabilities and stockholders' equity $2,866,126 Net interest income/ interest rate spread $108,820 3.78 % Net interest-earning assets/ net interest margin $219,825 3.96 % Interest-earning assets to interest-bearing liabilities 108.70 % Twelve months ended September 30, 2004 Average Interest & Yield/ Balance Dividend Rate Analysis of Net Interest Income: Assets: Interest-earning assets : Interest-bearing deposits $10,042 $101 1.00 % Investment securities 219,452 5,664 2.58 Mortgage-backed securities 434,873 17,154 3.94 Mortgage loans 1,493,576 101,866 6.82 Other loans 253,625 17,300 6.82 Total interest-earning assets 2,411,568 142,085 5.89 Total noninterest-earning assets 92,294 Total assets 2,503,862 Liabilities and Stockholders' Equity: Interest-bearing liabilities Deposits: Transaction accounts $666,018 $2,697 0.41 % Passbook savings 154,924 412 0.27 Official checks 15,956 0 0 Certificate accounts 826,540 20,615 2.49 Total deposits 1,663,438 23,724 1.43 FHLB advances 535,382 23,651 4.42 Other borrowings 875 51 5.79 Total interest-bearing liabilities 2,199,695 47,246 2.16 Noninterest-bearing liabilities 31,903 Total liabilities 2,231,598 Stockholders' equity 272,264 Total liabilities and stockholders' equity $2,503,862 Net interest income/ interest rate spread $94,659 3.73 % Net interest-earning assets/ net interest margin $211,873 3.93 % Interest-earning assets to interest-bearing liabilities 109.63 % DATASOURCE: Harbor Florida Bancshares, Inc. CONTACT: Michael J. Brown, Sr., President, +1-772-460-7000, or H. Michael Callahan, CFO, +1-772-460-7009, or Toni Santiuste, Investor Relations, +1-772-460-7002, all of Harbor Florida Bancshares Web site: http://www.harborfederal.com/

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