HARBOR FLORIDA BANCSHARES, INC.


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20552

                                   ----------

                                    FORM 10-K

(Mark One)
[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the fiscal year ended    September 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                (I.R.S. 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
                                                  ----------------------

Securities registered pursuant to Section 12(b) of the Act:

                                      None

Securities registered pursuant to Section 12(g) of the Act:

                         Common Stock (par value $0.10)
                                (Title of class)



                                       1
<PAGE>



         Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes  X     No
   ------    ------

         [ ] Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.

         The aggregate  market value of the voting and non-voting  common equity
held by  non-affiliates  of the registrant  computed by reference to the average
bid and asked  price of the common  stock as of December  5, 2003  ($29.75)  was
$708,545,516.

         The number of shares of common  stock  outstanding  on December 5, 2003
was 23,816,656.

         Indicate by check whether the  registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Act).
Yes  X     No
   ------    ------

         The aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant computed by reference to the average
bid and asked price of the common stock as of March 31, 2003 ($23.36) was
$559,110,901.

         The number of shares of common stock outstanding on March 31, 2003
was 23,934,542.

Documents incorporated by reference:

         Parts II and IV of Form 10-K

                  Annual  Report  to  Shareholders  for the  fiscal  year  ended
                  September 30, 2003. With the exception of those portions which
                  are incorporated by reference in this Form 10-K Annual Report,
                  the 2003  Annual  Report to  Shareholders  is not deemed to be
                  filed as part of this report.

         Part III of Form 10-K

                  Proxy Statement for the 2003 Annual Meeting of Shareholders.


                                       2
<PAGE>



                                TABLE OF CONTENTS



Item                                                                       Page
 No.                                                                        No.

         Part I
         ------

1        Business.............................................................4

2        Properties..........................................................22

3        Legal Proceedings...................................................25

4        Submission of Matters to a Vote of Security-Holders.................25

         Part II
         -------

5        Market for Registrant's  Common Equity and Related
         Stockholder Matters.................................................25

6        Selected Financial Data.............................................26

7        Management's Discussion and Analysis of Financial Condition
         and Results of Operations...........................................26


7A       Quantitative and Qualitative Disclosures about Market
         Risk................................................................26

8        Financial Statements and Supplementary Data.........................26

9        Changes in and Disagreements with Accountants on
         Accounting and Financial Disclosure.................................26

9A       Controls and Procedures.............................................27

         Part III
         --------

10       Directors and Executive Officers of the
         Registrant..........................................................27

11       Executive Compensation..............................................27

12       Security Ownership of Certain Beneficial Owners and Management......27

13       Certain Relationships and Related
         Transactions........................................................28

14       Principal Accounting Fees and
         Services............................................................28

         Part IV
         -------

15       Exhibits, Financial Statement Schedules, and Reports on Form
         8-K.................................................................29

         Signatures..........................................................31




                                       3
<PAGE>



                                     PART I

Item 1.  Business

General

         Harbor Florida Bancshares, Inc., (the "Company" or "Bancshares"),  is a
Delaware  corporation  organized  in 1998 and is the holding  company for Harbor
Federal Savings Bank (the "Bank"), a federally  chartered savings bank. The Bank
was founded in 1934 as a federally  chartered savings  institution.  The Company
owns 100% of the Bank's common stock. Currently, the Company engages in no other
significant  activities  beyond  its  ownership  of  the  Bank's  common  stock.
Consequently,  its net income is derived from the Bank. The Bank provides a wide
range of banking and related  insurance  services and is engaged in the business
of attracting  deposits primarily from the communities it serves and using these
and other funds to originate primarily  one-to-four family first mortgage loans.
Harbor  Insurance  Agency,  Inc., a wholly owned  subsidiary  of the Bank,  also
provides a full range of insurance products.

         Prior to March 18,  1998,  the  Company's  predecessor  entity,  Harbor
Florida Bancorp,  Inc.  ("Bancorp"),  was owned  approximately  53.37% by Harbor
Financial M.H.C.  ("Mutual Holding Company") and 46.63% by public  shareholders.
On March 18, 1998,  pursuant to a plan of  conversion  and  reorganization,  and
after a series of  transactions:  (1)  Bancshares  was  formed  and  became  the
surviving  corporate  entity,  (2)  Bancshares  sold the  ownership  interest in
Bancorp  previously  held by the  Mutual  Holding  Company  to the  public  in a
subscription  offering  (the  "Offering")  (16,586,752  common  shares at $10.00
resulting  in  net  cash  proceeds   (after  costs  and  funding  the  ESOP)  of
approximately  $150 million),  (3) previous  public  shareholders of Bancorp had
their shares  exchanged into  14,112,400  common shares of Bancshares  (exchange
ratio of 6.0094  to 1) (the  "Exchange"),  and (4) the  Mutual  Holding  Company
ceased to  exist.  The total  number  of  shares  of  common  stock  outstanding
following  the  Offering and Exchange was  30,699,152.  The  reorganization  was
accounted  for in a manner  similar to a pooling of interests and did not result
in any significant accounting adjustments.

Market Area

         The Company  serves  communities  in six  growing  and diverse  Florida
counties. Its headquarters are in Fort Pierce,  Florida,  located on the eastern
coast  of  Florida  between  Stuart  and  Daytona  Beach.  In  addition  to  its
headquarters, it has seventeen branch offices and three insurance agency offices
in St. Lucie,  Indian River and Martin counties,  located on Florida's "Treasure
Coast." This area is  characterized by both a large retirement and vacation home
population and a significant  agricultural economy,  primarily citrus crops. The
Company has eight branch offices  located in Brevard County,  which  encompasses
the "Space Coast" of the state.  Brevard  County has an  industrial  base fueled
primarily by companies  related to NASA and the John F.  Kennedy  Space  Center.
Prominent  electronics  concerns  such as  Harris  Corporation  are  also  major
employers  in this area.  The Company also has one branch  office in  Okeechobee
County, a rural,  agricultural area, and seven branch offices in Volusia County,
where tourism and a large retirement population predominate.

Lending Activities

         General.  The Company's  principal  activity has historically been, and
will continue to be for the foreseeable  future,  the origination of one-to-four
family residential mortgage loans. The Company sells conforming loans, primarily
to the  Federal  National  Mortgage  Association  ("FNMA"),  and  has,  on  rare
occasions,  purchased  whole  loans and loan  participations,  but it  primarily
focuses  on the  origination  of loans and  retains  them in its  portfolio  for
investment.  See "Lending Activities,  One-to-Four Family Permanent  Residential
Mortgage  Loans"  below.   The  Company  also  originates   one-to-four   family
residential   construction  and  consumer  loans,   and  consumer   installment,
commercial real estate and commercial  business loans.  Substantially all of the
Company's  mortgage  loans  are  secured  by  property  in its  market  area and
substantially all of its other loans are made to borrowers in its market area.

         The Company offers both fixed-rate and adjustable rate mortgage ("ARM")
loans. The Company has sought to increase its origination of ARM loans to reduce
its interest rate risk.  However,  the Company's  ability to originate ARM loans
has been limited by borrower preference for fixed-rate loans.

                                       4
<PAGE>



         Loan and Mortgage - Backed Securities Portfolio Composition. The
following table sets forth a summary of the composition of the Company's loan
and mortgage-backed securities portfolio by type of loan at the dates indicated.
<TABLE>
<CAPTION>
                                                                            At September 30,
                        ----------------------------------------------------------------------------------------------------------
                                       2003              2002                  2001                  2000                     1999
                                       ----              ----                  ----                  ----                     ----
                                      Percent               Percent               Percent               Percent             Percent
                                         of                   of                    of                    of                  of
                           Amount      Total     Amount      Total      Amount     Total    Amount       Total     Amount    Total
                           ------      -----     ------      -----      ------     -----    ------       -----     ------    -----
                                                                  (Dollars in thousands)
<S>                       <C>         <C>       <C>         <C>      <C>           <C>      <C>         <C>       <C>        <C>
Mortgage Loans:
Construction 1-4 Family   $ 190,315   10.81%    $ 142,181    8.59%   $ 119,648      7.95%   $ 106,063    7.88%    $ 91,922    7.94%
Permanent 1-4 Family      1,014,405   57.62     1,072,175   64.74    1,016,248     67.53      899,229   66.81      788,408   68.12
Multifamily                  19,754    1.13        14,995    0.90       21,314      1.42       20,474    1.52       15,141    1.31
Nonresidential              181,752   10.32       153,635    9.28      129,875      8.63      120,067    8.92       99,824    8.63
Land                        126,950    7.21        82,339    4.97       51,196      3.40       54,731    4.07       41,882    3.62
                          ---------   -----     ---------   -----    ---------     -----    ---------   -----    ---------   -----
    Total Mortgage
    Loans                 1,533,176   87.09     1,465,325   88.48    1,338,281     88.93    1,200,564   89.20    1,037,177   89.62
                          ---------   -----     ---------   -----    ---------     -----    ---------   -----    ---------   -----
Other Loans:
Commercial                   56,268    3.20        34,172    2.06       31,945      2.12       28,606    2.13       21,192    1.83
Consumer:
    Home Improvement         26,442    1.50        25,104    1.52       24,973      1.66       21,636    1.61       17,205    1.49
    Manufactured
        Housing              17,849    1.01        14,832     .90       14,607       .97       15,736    1.17       16,190    1.40
    Other Consumer (1)      126,770    7.20       116,591    7.04       95,074      6.32       79,363    5.89       65,489    5.66
                          ---------   -----     ---------   -----    ---------     -----    ---------   -----    ---------   -----
    Total Other Loans       227,329   12.91       190,699   11.52      166,599     11.07      145,341   10.80      120,076   10.38
                          ---------   -----     ---------   -----    ---------     -----    ---------   -----    ---------   -----
Total Loans Receivable    1,760,505  100.00%    1,656,024  100.00%   1,504,880    100.00%   1,345,905  100.00%   1,157,253  100.00%
                          ---------  ======     ---------  ======    ---------    ======    ---------  ======    ---------  ======
Less:
Loans in process            124,427                93,999               84,777                 77,074               70,722
Deferred loan fees and
    discounts                 8,494                 6,180                4,813                  4,433                4,244
Allowance for loan
    losses                   16,199                14,377               13,417                 12,729               11,952
                        -----------           -----------          -----------            -----------          -----------
    Subtotal                149,120               114,556              103,007                 94,236               86,918
                        -----------           -----------          -----------            -----------          -----------
Total Loans Receivable,
    Net                   1,611,385             1,541,468            1,401,873              1,251,669            1,070,335
Loans Held for Sale           2,648                 8,263                5,373                  2,548                1,747
Mortgage-backed
    Securities              308,075               181,269              153,714                165,059              196,971
                        -----------           -----------          -----------            -----------          -----------
Total                   $ 1,922,108           $ 1,731,000          $ 1,560,960            $ 1,419,276          $ 1,269,053
                        ===========           ===========          ===========            ===========          ===========
</TABLE>

(1) Includes home equity and other second mortgage loans.




                                       5
<PAGE>


         The  following  table shows the  maturity or period to repricing of the
Company's loan and mortgage-backed  securities portfolios at September 30, 2003.
Loans that have  adjustable  rates are shown as being due in the period in which
the  interest  rates are next  subject  to change.  The table  does not  include
prepayments  or scheduled  principal  amortization.  Prepayments  and  scheduled
principal  amortization  on loans totaled  $658.5  million,  $446.9  million and
$384.4 million for fiscal years 2003, 2002 and 2001, respectively.  Loans having
no stated maturity and no schedule of repayments  (including  delinquent loans),
and demand loans are reported as due within one year.

<TABLE>
<CAPTION>
                                             One          Three        Five
                               Within       through      through      through    Ten through   Beyond twenty
                              one year   three years    five years   ten years   twenty years       years          Total
                              --------   -----------    ----------   ---------   ------------       -----          -----
                                                                  (In thousands)
<S>                           <C>         <C>         <C>            <C>          <C>             <C>         <C>
Mortgage loans:
  1-4 family                    $87,808     $62,838     $65,339        $74,329      $ 349,390       $ 443,360   $ 1,083,064
  Other                         101,939      39,678      42,851         64,766         76,296             985       326,515
Other loans:
  Consumer                       62,548      17,451      27,743         25,538         36,995             528       170,803
  Commercial                     24,847       5,893      14,222          4,042          7,125             ---        56,129
Nonperforming loans (1)           2,215         ---         ---            ---            ---             ---         2,215
Mortgage-backed
  securities                      4,169       2,291      40,345        197,232         64,038             ---       308,075
                              ---------   ---------   ---------      ---------      ---------       ---------   -----------
    Sub-total                 $ 283,526   $ 128,151   $ 190,500      $ 365,907      $ 533,844       $ 444,873   $ 1,946,801
                              =========   =========   =========      =========      =========       =========
Deferred loan fees and
    discounts                                                                                                       (8,494)
Allowance for loan losses                                                                                          (16,199)
                                                                                                                 ----------
Total (2)(3)                                                                                                    $ 1,922,108
                                                                                                                 ==========
</TABLE>

(1)      All nonperforming  loans are reported as due within one year regardless
         of the actual  maturity  term.
(2)      Amounts  reported  do not  include principal  repayment or  prepayment
         assumptions.
(3)      Amounts  include loans  held  for  sale  of  $2.6   million  at
         September   30,  2003.
                                 --------------

         The  following   table  sets  forth  the  amount  of   fixed-rate   and
adjustable-rate loans at September 30, 2003 due or repricing after September 30,
2004.


                                                     Adjustable
                                   Fixed Rate          Rate             Total
                                   ----------          ----             -----
                                                   (In thousands)
Mortgage loans:
  1-4 family                        $ 867,936        $ 127,320        $ 995,256
  Other                               111,441          113,135          224,576
Other loans:
  Consumer                            107,357              898          108,255
  Commercial                           27,017            4,265           31,282
                                  -----------        ---------      -----------
Total loans                         1,113,751          245,618        1,359,369
Mortgage-backed securities            303,906              ---          303,906
                                  -----------        ---------      -----------
Total                             $ 1,417,657        $ 245,618      $ 1,663,275
                                  ===========        =========      ===========

                                                   --------------


                                       6
<PAGE>


         One-to-Four Family Permanent  Residential Mortgage Loans. The Company's
primary  lending  activities  focus on the  origination  of  one-to-four  family
residential mortgage loans. The Company generally does not originate one-to-four
family  residential loans on properties outside of its market area. At September
30, 2003,  $1.0 billion or 57.6% of the Company's total loan portfolio and 43.1%
of total assets consisted of one-to-four family loans.

         The  Company's   fixed  rate  loans   generally  are   originated   and
underwritten  according to standards that permit sales in the secondary  market.
The decision to sell depends on a number of factors  including the yield and the
term of the  loan,  market  conditions,  and  the  Company's  current  portfolio
position. In addition,  the Company sells loans under the single family Mortgage
Revenue Bond Programs  through local County  Housing  Finance  Authorities.  The
servicing on these loans is  released.  Servicing is retained for all other sold
loans.

         The Company currently offers one-to-four  family  residential  mortgage
loans with fixed,  adjustable  or a  combination  of  fixed/adjustable  interest
rates.  Adjustable rate loans enable the Company to create a loan portfolio more
sensitive to fluctuating  interest  rates.  Originations  of fixed rate mortgage
loans  versus  ARM loans are  monitored  on an  ongoing  basis and are  affected
significantly by the level of market interest rates,  customer  preference,  the
Company's interest rate gap position, and loan products offered by the Company's
competitors.  In a low interest rate  environment,  borrowers  typically  prefer
fixed rate loans to ARM loans, and even if management's strategy is to emphasize
ARM loans,  market conditions may be such that there is greater demand for fixed
rate mortgage loans.

         The Company generates  residential mortgage loan activity through local
advertising, its existing customers and referrals from local real estate brokers
and home  builders.  Residential  loans are originated by Company loan officers,
none of whom have underwriting authority. Independent loan brokers are not used.

         Residential  loans are authorized and approved under central  authority
by experienced  underwriters.  Underwriters have individual authority to approve
loans up to the maximum amount of $350,000. Residential mortgage loans in excess
of this amount are  approved  by  management  individually  up to $750,000 or by
committee if above $750,000.  The Company also has direct endorsement  authority
from the Federal Housing Authority ("FHA") and Veteran's  Administration (VA) to
allow for internal  approval of FHA and VA insured  loans.  FHA and VA loans are
approved under central  authority by an underwriter with a "Direct  Endorsement"
designation  from  the FHA and VA.  The  Company's  underwriting  standards  are
intended to ensure that borrowers are sufficiently credit worthy, and all of the
Company's  lending is subject to written  underwriting  policies and  guidelines
approved by the Company's  Board of Directors.  Detailed loan  applications  are
designed  to  determine  the  borrower's  ability to repay the loan and  certain
information  solicited  in these  applications  is  verified  through the use of
credit  reports,  financial  statements  and other  confirmations.  The  Company
obtains an appraisal of substantially  all of the proposed  security property in
connection with  residential  mortgage loans.  Additionally,  title insurance is
required for all mortgage loans above $50,000.

         The types, amounts, terms of and security for conventional loans (those
not insured or guaranteed by the U.S.  government or agencies thereof,  or state
housing  agencies)  originated  by the Company are  predominately  prescribed by
federal  regulation.  The Office of Thrift Supervision ("OTS") regulations limit
the amount which the Company can lend up to specified  percentages  of the value
of the real  property  securing the loan,  as  determined by an appraisal at the
time the loan is originated (referred to as "loan-to-value ratios"). The Company
makes one-to-four family home loans and other residential real estate loans with
loan-to-value  ratios  generally  of up to  80% of the  appraised  value  of the
security property. In certain circumstances  loan-to-value ratios exceed 80%, in
which case private mortgage insurance is generally required.  A substantial part
of the Company's loan originations are made to borrowers to finance second homes
for vacation use or for use as a rental  property.  Such loans may be considered
to have a higher credit risk than loans to finance a primary residence.

         One-to-Four  Family  Residential  Construction  Loans.  A  part  of the
Company's  loan  originations  are to finance the  construction  of  one-to-four
family homes in the Company's  market area.  At September 30, 2003,  the Company
had $190.3 million in such loans,  representing  10.8% of total loans. It is the
Company's  policy to disburse loan proceeds as  construction  progresses  and as
warranted by inspections.

                                       7
<PAGE>

         A portion of these loans is made  directly to the  individual  who will
ultimately  own and occupy the home. Of these,  the vast majority are structured
at origination  to guarantee the permanent  financing to the Company as well. In
recent years,  the  origination  of these  construction  loans to individuals is
second in volume only to the  origination  of  traditional  loans to finance the
purchase or refinance of an existing home.  However,  the  significance  of this
type of lending to the Company is not evident  from the amount of these loans in
its portfolio at any given time because these  construction loans to individuals
usually "roll" into permanent financing.

         Consumer Loans. The Company  originates  consumer loans as an essential
element  in  its  retail-oriented  strategy.   Secured  consumer  loans  include
automobile,  manufactured  housing,  boat and truck loans,  home equity and home
improvement  loans as well as loans secured by the borrower's  deposit  accounts
with the Company.  The loans for manufactured  housing are generally  originated
within  quality,  retirement  lifestyle  communities  spread  throughout the six
county market area. Such communities  generally  feature  amenities such as full
service  clubhouse  facilities,  swimming pools, and, in a number of cases, golf
courses.  These loans are subject to the normal  underwriting  standards  of the
Company.  Loans are made on either a fixed-rate or  adjustable-rate  basis, with
terms generally up to 15 years. A limited amount of unsecured consumer loans are
also originated.  At September 30, 2003,  consumer-oriented  loans accounted for
$171.1 million or 9.7% of the Company's total loan portfolio.

         Non-Residential and Land Mortgage Loans. Non-residential mortgage loans
are offered on properties  within the Company's  primary  market area using both
fixed or adjustable rate programs.  The Company originated $83.5 million,  $46.7
million,  and $30.7 million of non-residential  mortgage loans in 2003, 2002 and
2001,  respectively.  At September 30, 2003,  nonresidential  loans  constituted
$181.8 million or 10.3% of the Company's  total loan  portfolio.  Origination of
these loans plays a secondary role to the  origination  of residential  mortgage
loans.

         Loans secured by  non-residential  real estate  generally  carry larger
balances  and  involve  a  greater  degree  of  risk  than  one-to-four   family
residential  mortgage loans. This increased risk is a result of several factors,
including  the  concentration  of  principal  in a  limited  number of loans and
borrowers,  the  effects  of general  economic  conditions  on  income-producing
properties,  and the increased  difficulty of evaluating  and  monitoring  these
loans.  Furthermore,  the repayment of loans secured by non-residential property
is typically dependent upon the successful  operation of the related real estate
project. If the cash flow from the project is reduced, the borrower's ability to
repay the loan may be impaired.  See "Business -- Delinquent,  Nonperforming and
Classified Assets."

         The Company originates land loans to residential  builders,  developers
and individuals for future residential construction. The majority of these loans
are secured by fully  developed  residential  lots.  Lot loans are offered  with
either a fixed or adjustable  interest rate. Loan terms vary with a maximum term
of up to 15 years for individual  borrowers.  At September 30, 2003,  land loans
accounted for $127.0 million or 7.2% of the Company's total loan portfolio.

         Other  Loans.  The  balance  of  the  Company's   lending  consists  of
multi-family  mortgage and commercial  loans. At September 30, 2003, these loans
represented  $19.8 million or 1.1% and $56.3 million or 3.2%,  respectively,  of
the Company's total loan portfolio.  The multi-family mortgage loans are secured
primarily  by apartment  complexes.  These loans are subject to the same lending
limits as apply to the Company's  commercial real estate lending. The commercial
loans primarily  represent  equipment and other business loans to  professionals
such as  physicians  and  attorneys.  These  loans are an  integral  part of the
Company's  strategy of seeking  synergy  between  its  various  deposit and loan
products and as a service to existing customers.

Origination and Sale of Loans

         Historically,  the Company has sold  conforming,  newly  originated  or
refinanced 15 and 30-year fixed rate mortgage  loans,  primarily to the FNMA and
the Federal Home Loan Mortgage Corporation (FHLMC), with servicing retained. For
the year  ending  September  30,  2003,  the  Company  sold  $143.7  million  of
conforming newly originated or refinanced 15-30 year fixed rate loans to FNMA.

         In addition,  the Company sells loans under the single family  Mortgage
Revenue Bond Programs  through local County  Housing  Finance  Authorities.  The
servicing  on these loans is  released,  which means the Company does not retain
any administrative or collection  responsibilities in connection with the loans.
For the year ending  September 30, 2003, the Company sold $817,000 in fixed rate
loans to local County Housing Finance Authorities.


                                       8

<PAGE>

         The  purpose of  selling a portion  of fixed  rate  loans from  current
production is to reduce interest rate risk by limiting the growth of longer term
fixed rate loans in the portfolio and to generate  service fee income over time.
Historically, the Company has not purchased significant amounts of loans.

         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
September  30,  2003 and 2002,  no  servicing  assets  and/or  liabilities  were
recognized.

         The following  table shows total loan  origination  activity  including
mortgage-backed securities, during the periods indicated.


<TABLE>
<CAPTION>
                                                                      Years ended September 30,
                                                                      -------------------------
                                                           2003                2002                2001
                                                           ----                ----                ----
                                                                          (In thousands)
<S>                                                    <C>                  <C>               <C>
Mortgage loans (gross):
  At beginning of year (1)                              $ 1,473,615          $ 1,343,699       $ 1,203,146
  Mortgage loans originated:
  Construction 1-4 Family                                   271,796              212,956           151,440
  Permanent 1-4 Family                                      395,210              310,545           228,169
  Multi-family                                               15,787               10,122             2,739
  Nonresidential                                             83,518               46,748            30,746
  Land                                                      100,581               46,676            21,316
                                                        -----------          -----------       -----------
  Total mortgage loans originated (2)                       866,892              627,047           434,410
  Mortgage loans sold                                      (144,493)            (104,177)          (29,021)
  Principal repayments                                     (659,890)            (392,039)         (263,211)
  Mortgage loans transferred to real estate owned              (279)                (915)           (1,625)
                                                        -----------          -----------       -----------
  At end of year (1)                                    $ 1,535,845          $ 1,473,615       $ 1,343,699
Other loans (gross):
  At beginning of year                                    $ 190,699            $ 166,599         $ 145,341
  Other loans originated                                    121,821              109,068           143,631
  Principal repayments                                      (85,191)             (84,968)         (122,373)
                                                        -----------          -----------       -----------
  At end of year                                          $ 227,329            $ 190,699         $ 166,599
                                                        ===========          ===========       ===========
Mortgage-backed securities:
  At beginning of year                                    $ 181,269            $ 153,714         $ 165,059
  Mortgage-backed securities purchased                      232,822               84,143            26,112
  Principal repayments                                     (106,016)             (56,588)          (37,457)
                                                        -----------          -----------       -----------
  At end of year                                          $ 308,075            $ 181,269         $ 153,714
                                                        ===========          ===========       ===========
</TABLE>

(1)      Includes  loans held for sale.
(2)      Loans originated  represent loans closed,  however all loans may not be
         fully disbursed at time of closing.


                                       9
<PAGE>
Mortgage-backed Securities

         A substantial part of the Company's  business  involves  investments in
mortgage-backed  securities  issued or  guaranteed  by an  agency of the  United
States  government.   Historically,  the  Company's  mortgage-backed  securities
portfolio  has  consisted  primarily  of  pass-through  mortgage   participation
certificates issued by FHLMC and FNMA. These pass-through certificates represent
a participation interest in a pool of single-family mortgages, the principal and
interest payments on which are passed from the loans'  originators,  through the
FHLMC and FNMA that pools and packages the participation interests into the form
of securities,  to investors  such as the Company.  The FHLMC and FNMA guarantee
the payment of principal  and  interest.  The  underlying  pool of mortgages can
consist of either  fixed-rate or  adjustable-rate  loans. At September 30, 2003,
the Company's  portfolio of  mortgage-backed  securities  consisted  entirely of
FHLMC  and  FNMA   participation   certificates.   Of  the  $308.1   million  in
mortgage-backed  securities  at that date,  approximately  $3.1  million or 1.0%
represented  adjustable-rate  securities and $305.0 million or 99.0% represented
fixed-rate securities with anticipated maturity dates from 1 month to 24 years.

         Adjustable-rate  mortgage-backed  securities  ("ARM  Securities")  have
periodic  adjustments  in the coupons based on the underlying  mortgages.  These
periodic  coupon  adjustments  are subject to annual and lifetime caps. The caps
serve  as a  limit  to the  amount  that  the  coupon  will  change  during  any
coupon-reset  period.  As interest  rates on the  mortgages  underlying  the ARM
Securities  are  reset  periodically  (one to 12  months),  the  yields on these
securities will gradually adjust to reflect changes in market rates.  Management
believes that the adjustable-rate  feature of ARM Securities will help to reduce
sharp fluctuations in security value that result from normal changes in interest
rates.

         During  periods  of  declining   interest  rates,  the  coupon  on  ARM
Securities  may adjust  downward,  resulting in lower yields and reduced  income
from these securities.  Thus, ARM Securities may have less potential for capital
appreciation as compared to fixed-rate debt securities. During periods of rising
interest  rates,  the coupon on ARM  Securities  may not fully adjust  upward in
conjunction  with  changes  in market  rates due to  annual or  lifetime  coupon
adjustment  caps.  This could result in ARM Securities  that depreciate in value
similar to long-term,  fixed-rate  mortgage securities in a rising interest rate
environment.

         The Company's  fixed-rate  mortgage-backed  securities  consist of both
long-term  and  balloon  securities.  The  long-term  securities  have  original
maturity terms of ten,  fifteen and thirty years.  The balloon  securities  have
principal and interest  amortization  based on a thirty-year  maturity  schedule
with final principal  balloon  payments due in five, seven or ten years from the
date  of the  security.  Balloon  mortgage-backed  securities  are  held  in the
portfolio as a means of reducing the average life of the fixed-rate portfolio. A
shorter  average  portfolio  life  will  help  reduce  the  interest  rate  risk
associated  with  these  investments.  As  of  September  30,  2003,  long-term,
fixed-rate  mortgage-backed  securities amounted to $75 million,  which included
$74 million in fifteen-year and $944,000 in thirty-year securities. In addition,
five-year,  seven-year, and ten-year balloon mortgage-backed securities amounted
to $37.5 million, $190.6 million and $1.9 million, respectively.

         During periods of declining interest rates, fixed-rate  mortgage-backed
securities  may  have   accelerated   principal   reductions  due  to  increased
refinancing  activity on the underlying  mortgage loans. The reinvestment of the
accelerated principal reductions at lower prevailing rates could result in lower
overall  portfolio  yields and income.  During periods of rising interest rates,
fixed-rate  mortgage-backed  securities will tend to depreciate in value.  Thus,
total returns on fixed-rate  mortgage-backed  securities are expected to decline
as market interest rates rise.

         If the  Company  purchases  mortgage-backed  securities  at a  premium,
accelerated principal repayments may result in some loss of principal investment
to the extent of the premium paid. Conversely, if mortgage-backed securities are
purchased at a discount,  accelerated principal reductions will increase current
and total returns.



Delinquent, Nonperforming and Classified Assets

         Delinquent  Loans.  All delinquent loan results are reviewed monthly by
the  Company's  Board of  Directors.  The Company  believes it has an  effective
process and policy for dealing with delinquent loans.

         Residential   delinquencies   are  handled  by  the  Loan   Collections
Department.  This department begins collection efforts on residential loans when
a loan appears on the 15-day  delinquent  list.  Borrowers  are sent a notice to
accelerate  the  debt  when the debt is 45 days  delinquent.  If the  delinquent
account has not been corrected,  foreclosure  proceedings are begun generally at
the 75th day of delinquency. At September 30, 2003, residential loans delinquent
90 days and longer represented .1% of the total residential loan portfolio.

                                       10
<PAGE>

         Commercial  delinquent  accounts are processed by the Special Asset and
Lending  Departments.  For commercial  accounts  classified as  Substandard,  as
defined below, or worse, the Special Asset Department has jurisdiction  over the
collection efforts. As with residential  delinquent loans,  commercial loans are
placed  on a  non-accrual  basis  when  they  are 90 days  past  due or when the
collection of the interest or full principal is considered doubtful.

         If a collection  action is instituted on a consumer or commercial loan,
the Company,  in compliance  with the loan  documents and the law, may repossess
and sell the collateral  security for the loan through  private sales or through
judicially ordered sales when necessary.  Should the sale result in a deficiency
owing to the Company,  the borrowers  generally are pursued where such action is
deemed appropriate,  including recourse based on personal loan guarantees by the
borrower's principals.

         The  following  table shows the Company's  loans  delinquent 90 days or
more and loan delinquencies as a percent of total loans at the dates indicated.


<TABLE>
<CAPTION>

                                                             September 30,
                                       2003                       2002                       2001
                                       ----                       ----                       ----

                                   Number   Amount            Number  Amount            Number   Amount
                                   ------   ------            ------  ------            ------   ------
                                                         (Dollars in thousands)
<S>                               <C>      <C>             <C>      <c>                <C>      <C>
Mortgage loans:
  Construction and land               ---  $   ---             ---  $   ---                ---  $   ---
  Permanent 1-4 family                 19    1,134              20    1,170                 20    1,348
  Other mortgage                        1      475               1       67                  3      791
                                  -------  -------         -------  -------            -------  -------
  Total mortgage loans                 20    1,609              21    1,237                 23    2,139
Other loans                            11      397              13      423                  9      183
                                  -------  -------         -------  -------            -------  -------
Total loans                            31  $ 2,006              34  $ 1,660                 32  $ 2,322
                                  =======  =======         =======  =======            =======  =======

Delinquent loans to total loans                .14%                     .11%                        .18%
</TABLE>


         As of September 30, 2003,  2002 and 2001,  $209,000,  $0, and $263,000,
respectively,  of loans were on  nonaccrual  status which were less than 90 days
past due.

         Nonperforming  Assets.  The Company  also places  emphasis on improving
asset quality and asset quality has improved  substantially each year since 1998
when  nonperforming  assets  as a  percentage  of total  assets  was  .37%.  The
Company's  nonperforming  assets as a percentage  of total assets has  increased
from .11% at September 30, 2002 to .13% at September 30, 2003.

       Loans 90 days past due are generally placed on non-accrual status. The
Company ceases to accrue interest on a loan once it is placed on non-accrual
status, and interest accrued but unpaid at that 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 non-accrual status. The Company
evaluates impaired loans (primarily consisting of classified 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.

       The investment in impaired loans (primarily consisting of classified
loans), other than those evaluated collectively for impairment, at September 30,
2003, 2002 and 2001 was $6,259,000, $8,941,000 and $5,813,000, respectively. The
average recorded investment in impaired loans during the years ended September
30, 2003, 2002 and 2001 was approximately $8,011,000, $9,469,000 and $4,949,000,
respectively. There are no commitments to lend additional funds to these
borrowers. The total specific allowance for loan losses related to these loans
was $-0- at September 30, 2003 and 2002. Interest income on impaired loans of
approximately $584,000, $743,000 and $437,000 was recognized in the years ended
September 30, 2003, 2002 and 2001, respectively.

                                       11

<PAGE>

         If a foreclosure action is instituted on a real estate-secured loan and
the loan is not  reinstated,  paid in full,  refinanced,  or deeded  back to the
Company,  the property is sold at a foreclosure sale at which the Company may be
the buyer.  Thereafter,  such acquired  property is listed in the Company's real
estate  owned  ("REO")  account or that of a  subsidiary,  until the property is
sold. Upon acquisition, the Company records all REO at fair value at the date of
foreclosure,  establishing  a new cost  basis.  The fair value is based upon the
most recent  appraisal  and  management's  evaluation.  If the fair value of the
asset is less than the loan  balance  outstanding,  the  difference  is  charged
against the Company's loan loss  allowance  prior to  transferring  the asset to
REO. Should the foreclosure sale not produce sufficient proceeds to pay the loan
balance and court costs, the Company's attorneys, where appropriate,  may pursue
the collection of a deficiency judgment against the responsible borrower.

         It is the Company's policy to try to liquidate its holdings in REO on a
timely basis while  considering both market  conditions and the cost of carrying
REO properties.  The Company also finances the sales of REO properties,  subject
to certain initial  investment  criteria by the borrower.  Administration of REO
property is handled by the Special Assets  Department,  which is responsible for
the sale of all residential and commercial properties.  In those instances where
the  property  may be located  outside  the  Company's  market area or where the
property, due to its nature, requires certain expertise (i.e., hotels, apartment
complexes), outside management firms may be utilized.

         At the dates indicated, nonperforming assets in the Company's portfolio
were as follows:


<TABLE>
<CAPTION>
                                                                            September 30,
                                               ---------------------------------------------------------------------
                                                    2003           2002          2001          2000            1999
                                                    ----           ----          ----          ----            ----
                                                                       (Dollars in thousands)
<S>                                               <C>           <C>           <C>           <C>              <C>
Non-accrual mortgage loans:
  Delinquent less than 90 days                    $   209       $   ---       $    87       $   ---         $   ---
  Delinquent 90 days or more                        1,609         1,237         2,139         2,031           2,343
                                                  -------       -------       -------       -------         -------
     Total                                          1,818         1,237         2,226         2,031           2,343
                                                  -------       -------       -------       -------         -------
Non-accrual other loans:
  Delinquent less than 90 days                        ---           ---           176           505             ---
  Delinquent 90 days or more                          397           423           183           230             198
                                                  -------       -------       -------       -------         -------
     Total                                            397           423           359           735             198
                                                  -------       -------       -------       -------         -------
Total non-accrual loans                             2,215         1,660         2,585         2,766           2,541
Accruing loans 90 days or more delinquent             ---           ---           ---           ---             ---
                                                  -------       -------       -------       -------         -------
  Total nonperforming loans                         2,215         1,660         2,585         2,766           2,541
                                                  -------       -------       -------       -------         -------
Other nonperforming assets:
  Real estate owned                                   906           733           917           871             911
  Less allowance for losses                           ---           ---           ---           ---             ---
                                                  -------       -------       -------       -------         -------
      Total                                           906           733           917           871             911
                                                  -------       -------       -------       -------         -------
Total nonperforming assets, net                   $ 3,121       $ 2,393       $ 3,502       $ 3,637         $ 3,452
                                                  =======       =======       =======       =======         =======
Nonperforming loans to total net loans               0.14%         0.11%         0.18%         0.22%           0.24%
Total nonperforming assets to total assets           0.13%         0.11%         0.20%         0.23%           0.24%

</TABLE>


         For the year ended  September  30,  2003,  interest  income of $147,000
would have been recorded on loans  accounted  for on a non-accrual  basis if the
loans had been current  throughout the period.  No interest  income was actually
included in net income regarding non-accrual loans during the same period.


                                       12

<PAGE>

         No allowance  was  recorded on REO  property at September  30, 2003 and
2002. At September 30, 2001, the allowance was as follows (in thousands):


                                                 2001
                                            -------------
           Beginning balance                    $---
           Provision for losses                    4
           Charge offs                            (4)
                                              ------
           Ending balance                       $---
                                              ======

         After foreclosure,  management periodically performs valuations and the
real estate is carried at the lower of  carrying  amount or fair value less cost
to sell.  Revenue and  expenses  from  operations  and changes in the  valuation
allowance are included in income from real estate operations on the consolidated
statement of earnings.

         Not included in the preceding  table are net gains on the sale of real
estate owned of $78,000, $35,000, and $215,000 for the years ended September 30,
2003, 2002 and 2001, respectively.

         Classified  Assets.  Under OTS  regulations,  problem assets of insured
institutions  are classified as either  "substandard,"  "doubtful" or "loss." An
asset is considered  "substandard"  if the current net worth and paying capacity
of the obligor and/or the value of the collateral pledged are no longer adequate
to support the loan.  "Substandard"  assets are  characterized  by the "distinct
possibility"  that the  insured  institution  will  sustain  "some  loss" if the
deficiencies are not corrected.  Assets classified as "doubtful" have all of the
weaknesses   inherent  in  those  classified   "substandard,"   with  the  added
characteristic  that the weaknesses  present make  "collection or liquidation in
full," on the basis of currently existing facts, conditions, and values, "highly
questionable  and  improbable."  Assets  classified  "loss" are those considered
"uncollectible"  and of such little value that the continuance as assets without
the  establishment  of a specific loss reserve is not warranted.  In addition to
the  classification  of assets as  "substandard,"  "doubtful" or "loss," the OTS
regulations also require that assets that do not currently expose the Company to
a   sufficient   degree  of  risk  to  warrant   one  of  the  three   foregoing
classifications but which do possess credit deficiencies or potential weaknesses
deserving management's close attention must be designated "special mention."

         When  an  insured  institution  classifies  problem  assets  as  either
substandard  or doubtful,  it is required to establish  specific  allowances for
loan losses in an amount considered appropriate by management.  See "--Allowance
for Loan  Losses"  below.  Additionally,  the  institution  establishes  general
allowances to recognize the inherent risk  associated  with lending  activities,
but which,  unlike  specific  allowances,  have not been allocated to particular
problem assets. When an insured institution classifies problem assets as "loss,"
it is required either to establish a specific allowance for losses equal to 100%
of the  amount  of the asset so  classified  or to charge  off such  amount.  An
institution's  determination  as to the  classification  of its  assets  and the
amount of its valuation  allowances  is subject to review by the OTS,  which can
order the establishment of additional general or specific loss allowances.

       The following table presents the Company's classified assets at the dates
indicated.


                                         September 30,
                               2003               2002             2001
                               ----               ----             ----
                                        (In thousands)
Substandard:
  Real Estate Owned          $   906            $   733          $   917
  Loans                        6,449              6,348            5,098
                             -------            -------          -------
    Total Substandard          7,355              7,081            6,015
Doubtful                         140                203              229
Loss                             ---                ---              ---
                             -------            -------          -------
                             $ 7,495            $ 7,284          $ 6,244
                             =======            =======          =======

                                       13
<PAGE>

Allowance for Loan Losses

         Provisions  for loan losses are charged to  operations  to establish an
allowance for loan losses;  recognized loan losses (recoveries) are then charged
(credited)  to  the  allowance.  The  Company  evaluates  the  outstanding  loan
portfolio with respect to the adequacy of the allowance for loan losses at least
quarterly.

         Management's policy is to provide for estimated losses on the Company's
loan portfolio based on management's evaluation of the probable losses (existing
and  inherent).  Such  evaluations  are made for all major  loans on which  full
collectibility of interest and/or principal may not be reasonably  assured.  The
factors that the Company  considers  are the estimated  value of the  underlying
collateral,  the  management of the  borrower,  and current  operating  results,
trends and cash flow. In addition to analyzing individual loans, management also
analyzes on a regular basis its asset  classification and recent loss experience
on other loans to help insure that prudent general  allowances are maintained on
one-to-four  family loans,  automobile  loans and home equity loans.  Management
periodically  evaluates the allowance percentages utilized for general allowance
purposes based upon delinquencies, charge off, underwriting, and other trends.

         The Company  segregates  the loan portfolio for loan loss purposes into
the following broad segments:  commercial real estate,  residential real estate,
commercial business and consumer loans.

         The Company provides for a general allowance for losses inherent in the
portfolio by the above categories, which consists of two components: (1) General
loss  percentages  are  calculated  based  upon  historical   analyses.   (2)  A
supplemental  portion of the allowance is calculated  for inherent  losses which
probably  exist as of the  evaluation  date even though they might not have been
identified by the more objective processes used for the portion of the allowance
described above. This is due to the risk of error and/or inherent imprecision in
the  process.  This  portion of the  allowance is  particularly  subjective  and
requires judgments based on qualitative  factors which do not lend themselves to
exact   mathematical   calculations   such  as:  trends  in  delinquencies   and
nonaccruals;  migration  trends in the portfolio;  trends in volume,  terms, and
portfolio mix; new credit products and/or changes in the geographic distribution
of those  products;  changes in lending  policies  and  procedures;  loan review
reports  on the  efficacy  of the risk  identification  process;  changes in the
outlook for local, regional and national economic conditions;  concentrations of
credit; and peer group comparisons.

         Specific  allowances  are  provided  in the  event  that  the  specific
collateral  analysis on each  classified  loan  indicates that the probable loss
upon  liquidation  of  collateral  would be in excess of the general  percentage
allocation.  The  provision  for loan  losses is debited or credited in order to
state the allowance for loan losses to the required level as determined above.

         The Company  considers a loan to be impaired  when it is probable  that
the Company  will be unable to collect  all  amounts  due,  both  principal  and
interest,  according to the contractual terms of the loan agreement. When a loan
is impaired,  the Company may measure  impairment 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. The Company selects the measurement method on a loan-by-loan basis, except
collateral-dependent  loans for which foreclosure is probable,  must be measured
at the fair value of the collateral.  In a troubled debt restructuring involving
a restructured  loan, the Company  measures  impairment by discounting the total
expected future cash flows at the loan's original effective rate of interest.

                                       14
<PAGE>


       The following tables set forth an analysis of the Company's allowance for
loan losses at the dates indicated.


<TABLE>
<CAPTION>
                                                                         Years ended September 30,
                                       -----------------------------------------------------------------------------
                                              2003             2002           2001             2000           1999
                                              ----             ----           ----             ----           ----
                                                                      (Dollars in thousands)
<S>                                        <C>              <C>            <C>              <C>            <C>
Balance at beginning of year...            $ 14,377         $ 13,417       $ 12,729         $ 11,952       $ 11,818
    Provision for losses                      1,946            1,515            798              847            816
Charge offs:
    Residential                                 (50)             (15)           (20)             (75)           (22)
    Commercial real estate                      ---              (87)           ---              (30)           (49)
    Consumer                                   (169)            (266)          (231)            (125)          (324)
    Other                                       ---             (299)          (102)              (3)          (367)
                                           --------         --------       --------         --------       --------
       Total charge offs                       (219)            (667)          (353)            (233)          (762)

Recoveries:
    Residential                                  14               49             25               40             39
    Commercial real estate                        2                2            ---               39             21
    Consumer                                     75               56             21               70             14
    Other                                         4                5            197               14              6
                                           --------         --------       --------         --------       --------
       Total recoveries                          95              112            243              163             80

Balance at end of year                     $ 16,199         $ 14,377       $ 13,417         $ 12,729       $ 11,952
                                           ========         ========       ========         ========       ========

Allowance for loan losses to total
    net loans                                 1.01%             .93%            .96%            1.02%          1.12%
Allowance for loan losses to  total
    nonperforming loans                     731.34%          865.87%         519.01%          460.19%        470.31%
Allowance for loan losses and
    allowance for REO to total
    nonperforming assets                    519.10%          600.72%         383.09%          350.02%        346.20%
Net charge offs to average loans
    outstanding during the period             0.01%            0.04%           0.01%            0.01%          0.07%
Classified loans to total net loans           0.41%            0.43%           0.38%            0.37%          0.48%
</TABLE>



                                       15
<PAGE>



         The following table presents an allocation of the entire  allowance for
loan losses among various loan  classifications and sets forth the percentage of
loans in each category to total loans.  The allowance  shown in the table should
not be  interpreted  as an  indication  that charge offs in future  periods will
occur in these  amounts or  proportions  or that the analysis  indicates  future
charge off trends.


<TABLE>
<CAPTION>
                                                                        September 30,
                       -----------------------------------------------------------------------------------------------------------
                                 2003                   2002                 2001                  2000                   1999
                                 ----                   ----                 ----                  ----                   ----
                                % of Loans           % of Loans            % of Loans           % of Loans            % of Loans
                                   in Each              in Each               in Each              in Each               in Each
                                 Category to          Category to          Category to          Category to           Category to
                         Amount  Total Loans  Amount  Total Loans  Amount  Total Loans  Amount  Total Loans   Amount  Total Loans
                         ------  -----------  ------  -----------  ------  -----------  ------  -----------   ------  -----------
<S>                     <C>        <C>      <C>         <C>      <C>          <C>     <C>          <C>      <C>           <C>
Allowance at end of
  period applicable to:
Residential             $  2,957    68.43%  $  3,160     73.33%  $  3,177      75.48% $  2,820      74.69%  $  2,605       76.06%
Commercial real estate     8,152    18.66      6,884     15.15      5,931      13.45     6,192      14.51      6,142       13.56
Consumer                   3,238     9.71      3,056      9.46      2,786       8.95     2,432       8.67      2,128        8.55
Commercial business        1,852     3.20      1,277      2.06      1,523       2.12     1,285       2.13      1,077        1.83
                        --------   ------   --------    ------   --------     ------  --------     ------   --------      ------
    Total               $ 16,199   100.00%  $ 14,377    100.00%  $ 13,417     100.00% $ 12,729     100.00%  $ 11,952      100.00%
                        ========   ======   ========    ======   ========     ======  ========     ======   ========      ======
</TABLE>




Investment Activities

         The Company invests primarily in overnight funds,  U.S.  Government and
agency  obligations,  and Federal Home Loan Bank capital stock. The Company does
not invest in derivatives,  collateralized mortgage obligations or other hedging
instruments.

         The table below  summarizes  the carrying  value and  estimated  market
value  of  the  Company's  portfolio  of  investment  securities  at  the  dates
indicated.


<TABLE>
<CAPTION>
                                                                 September 30,
                                            2003                       2002                        2001
                                            ----                       ----                        ----
                                                                 (In thousands)
                                 Carrying         Market       Carrying       Market       Carrying       Market
                                   Value          Value          Value        Value         Value          Value
                                   -----          -----          -----        -----         -----          -----
<S>                               <C>            <C>            <C>            <C>          <C>           <C>
  Available for sale:
    FHLB notes                    $ 171,882      $ 171,882      $ 91,639       $ 91,639     $ 30,991      $ 30,991
    FNMA notes                       60,331         60,331           ---            ---          ---           ---
    FHLMC notes                         ---            ---        51,132         51,132       10,458        10,458
    FFCB note                        10,338         10,338           ---            ---          ---           ---
    Equity securities                 3,968          3,968         4,434          4,434        4,965         4,965
                                  ---------      ---------     ---------      ---------     --------      --------
        Total                     $ 246,519      $ 246,519     $ 147,205      $ 147,205     $ 46,414      $ 46,414
                                  =========      =========     =========      =========     ========      ========
  Held to maturity:
    FHLB notes                       30,000         30,128           ---            ---          ---           ---
    FHLMC notes                      19,975         20,141           ---            ---          ---           ---
    Municipal securities                441            484           200            245          200           220
                                  ---------      ---------     ---------      ---------     --------      --------
        Total                      $ 50,416       $ 50,753         $ 200          $ 245        $ 200         $ 220
                                  =========      =========     =========      =========     ========      ========

  FHLB stock                        $25,525        $25,525       $22,276        $22,276      $15,027       $15,027
</TABLE>


                                       16
<PAGE>


         The table  below  presents  the  contractual  maturities  and  weighted
average  yields of investment  securities at September 30, 2003  excluding  FHLB
stock and equity  securities.  Yields on tax exempt obligations are not reported
on a tax equivalent basis.

<TABLE>
<CAPTION>
                                                                                                 Total Investment
                One Year or Less     One to Five Years       More Than Five Years                  Securities
                ----------------     -----------------       --------------------                  ----------
                                                            (Dollars in thousands)
                                                                                   Average
                          Weighted               Weighted              Weighted   Remaining                          Weighted
               Carrying   Average    Carrying    Average    Carrying   Average    Years to     Carrying     Market    Average
                Value      Yield       Value      Yield      Value      Yield     Maturity       Value      Value      Yield
                -----      -----       -----      -----      -----      -----     --------       -----      -----      -----
<S>              <C>        <C>       <C>          <C>       <C>       <C>         <C>       <C>         <C>          <C>
  FHLB Notes     $50,535    3.03%     $ 151,347    2.44%     $  ---     ---%       2.0       $ 201,882   $ 202,010    2.59%
  FNMA Notes         ---     ---         60,331    2.36         ---     ---        2.3          60,331      60,331    2.36
  FHLMC Notes        ---     ---         19,975    2.55         ---     ---        2.6          19,975      20,141    2.55
  FFCB Notes         ---     ---         10,338    1.62         ---     ---        1.3          10,338      10,338    1.62
  Municipal
     Securities      ---     ---            241    2.29         200    7.40        4.4             441         484    4.61
</TABLE>

                                                 ------------------


Sources of Funds

         Deposits.  The Company offers a number of different  deposit  accounts,
including   regular   savings,   interest-bearing   checking  or  NOW  accounts,
non-interest  checking,  money market accounts,  term  certificate  accounts and
individual retirement accounts.

         The  Company  has  thirty-two  full-service  banking  offices  and  one
in-store  branch  location in addition  to its home office in Fort  Pierce.  The
Company's  strategy  has been to have  conveniently  located  offices  in growth
markets as one of its main methods of attracting  funds. The Company's  deposits
primarily are obtained from areas surrounding its offices.  Certificate accounts
in excess of $100,000 are not actively  solicited nor are brokers used to obtain
deposits.

         During the year ended  September 30, 2000,  the Company began  offering
internet banking  services.  This online service allows customers the ability to
access their accounts  through any computer  terminal that has internet  browser
capabilities,  using secure  technology.  Customers  benefit by having access to
their  accounts and being able to initiate  transactions  at the time that suits
them best. The Company also offers a bill pay service.

         Management   believes  that  demand  and  passbook  accounts  are  less
sensitive  to changes in interest  rates than other types of  accounts,  such as
certificate  accounts.  As of September 30, 2003,  the Company had 46.13% of its
deposits in passbook and demand  accounts,  52.62% in  certificate  accounts and
1.25% in official checks.  When management  determines the levels of its deposit
rates,  consideration is given to local  competition,  U.S. Treasury  securities
offerings, and anticipated funding requirements.


                                    17
<PAGE>



         The  following  table  sets  forth the  distribution  of the  Company's
deposit  accounts at the dates indicated and the weighted average interest rates
on each category of deposits presented. Management does not believe that the use
of year-end  balances instead of average monthly balances  produces any material
difference in the information presented:


<TABLE>
<CAPTION>
                                                                             September 30,
                                            2003                                 2002                            2001
                                            -----                                -----                           ----
                                                                                       Weighted                        Weighted
                                                      Weighted                          Average                         Average
                                                      Average                           Nominal                         Nominal
                              Amount      Percent   Nominal Rate  Amount      Percent    Rate      Amount    Percent     Rate
                              ------      -------   ------------  ------      -------    ----      ------    -------     ----
                                                                   (Dollars in thousands)
<S>                          <C>          <C>          <C>       <C>          <C>         <C>   <C>          <C>         <C>
 Demand accounts:
   Non-interest
    Bearing demand           $  245,665    15.85%       N/A      $  158,599    11.55%      N/A  $  122,115    10.18%      N/A
   NOW accounts                 115,054     7.42        .10%         97,150     7.08       .30%     80,342     6.69       .50%
   Money market accounts        213,961    13.80       1.00         166,004    12.09      1.44     128,454    10.70      2.54
                             ----------   ------       ----      ----------   ------      ----  ----------   ------      ----
   Subtotal                     574,680    37.07        .66         421,753    30.72       .64     330,911    27.57      1.11
 Savings accounts:
   Passbook                     140,432     9.06        .27         115,306     8.40       .52      96,516     8.04      1.05
 Certificate accounts           815,727    52.62       2.60         814,127    59.30      3.74     756,727    63.06      5.43
 Official checks                 19,421     1.25        N/A          21,697     1.58       N/A      15,938     1.33       N/A
                             ----------   ------       ----      ----------   ------      ----  ----------   ------      ----
   Total deposits            $1,550,260   100.00%      1.54%     $1,372,883   100.00%     2.46% $1,200,092   100.00%     3.81%
                             ==========   ======       ====      ==========   ======      ====  ==========   ======      ====
</TABLE>


    The following table sets forth the Company's certificate accounts classified
by rates as of the dates indicated.


                                                     September 30,
                           -----------------------------------------------------
                                2003                2002                2001
                                ----                ----                ----
                                           (Dollars in thousands)
  0.00 - 3.00%              $ 587,931           $ 227,361           $  10,875
  3.01 - 4.00%                134,985             318,683              90,812
  4.01 - 5.00%                 69,737             122,280             181,100
  5.01 - 6.00%                 17,614              56,015             183,727
  6.01 - 7.00%                  5,460              87,692             282,215
  7.01 - 8.00%                    ---               2,096               7,980
  8.01 - 9.00%                    ---                 ---                  18
                            ---------           ---------           ---------
Total certificate accounts  $ 815,727           $ 814,127           $ 756,727
                            =========           =========           =========

                                       18
<PAGE>


         At September 30, 2003, the Company had certificate  accounts in amounts
of $100,000 or more maturing as follows:


                                                                  Amount
                                                                  ------
Maturity Period                                              (In thousands)
---------------
3 Months or Less                                                 $  35,214
Over 3 to 6 Months                                                  42,592
Over 6 to 12 Months                                                 34,374
Over 12 Months                                                      55,111
                                                                 ---------
Total                                                            $ 167,291
                                                                 =========

         The following  table contains  information  regarding  deposit  account
activity for the periods shown.


<TABLE>
<CAPTION>
                                                                       Years ended September 30,
                                                   ---------------------------------------------------
                                                        2003                2002                2001
                                                        ----                ----                ----
                                                                    (Dollars in thousands)
<S>                                                 <C>                 <C>                 <C>
Net increase before interest credited               $ 154,208           $ 140,568           $  57,794
Interest credited                                      23,169              31,794              43,807
                                                    ---------           ---------           ---------
Deposit account increase                            $ 177,377           $ 172,362           $ 101,601
                                                    =========           =========           =========

Weighted average cost of deposits during the year        1.88%               2.93%               4.34%
Weighted average cost of deposits at end of year         1.54%               2.46%               3.81%
</TABLE>


         Borrowings.  The  Company  is a member  of the  FHLB.  The FHLB  offers
various  fixed  rate  and  variable  rate  advances  to its  members.  The  FHLB
underwrites each advance request based on factors such as adequacy and stability
of capital position,  quality and composition of assets,  liquidity  management,
level of  borrowings  from all  sources  and other such  factors.  Pursuant to a
collateral  agreement  with the FHLB,  advances  are secured by all stock in the
FHLB  and a  blanket  floating  lien  that  requires  the  Company  to  maintain
qualifying  first  mortgage  loans as pledged  collateral in an amount equal to,
when discounted at 75% of the unpaid principal balances, the advances.

         As of September 30, 2003, the Company had $503.5 million of outstanding
FHLB  advances.  Of this amount,  $478.5  million have maturity dates of fifteen
months or longer.  The remaining  $25 million of FHLB  advances are  short-term,
with maturity  dates of twelve months or less. Of the $478.5  million  long-term
FHLB advances,  the FHLB could call $90 million on specified  dates in 2005, $75
million on specified dates in 2006, $160 million on specified dates in 2007, and
$50 million on specified dates in 2008.

         As of  September  30,  2003,  the Company had a total  credit  limit of
$588.0 million and an availability limit of $84.5 million with the FHLB.

         In  addition  to FHLB  advances,  the  Company  had  $289.4  million of
unpledged  mortgage-backed  securities  at September 30, 2003.  These  unpledged
mortgage-backed  securities could be used as collateral under reverse repurchase
transactions with various security dealers.  Such borrowing  transactions  could
provide  additional  cash and liquidity to the Company in the event of sudden or
unforeseen deposit withdrawals.



                                       19
<PAGE>


         The  following  table sets forth  information  regarding  the Company's
borrowing at and for the periods indicated:

<TABLE>
<CAPTION>
                                                             At or for the year ended September 30,
                                                                    2003          2002         2001
                                                                    ----          ----         ----
                                                                     (Dollars in thousands)
<S>                                                             <C>          <C>          <C>
FHLB Advances:
      Average balance                                           $ 457,300    $ 352,199    $ 266,340
      Maximum balance at any month-end                            510,512      445,528      295,544
      Balance at year end                                         503,511      445,528      295,544
      Weighted average interest rate during the year                 4.89%        5.34%        5.56%
      Weighted average interest rate at year end                     4.50%        4.97%        5.40%
Other Borrowings:
      Average balance                                           $     591    $      20    $      69
      Maximum balance at any month-end                                900           43           91
      Balance at year end                                             855          ---           43
      Weighted average interest rate during the year                 5.96%       13.82%       18.84%
      Weighted average interest rate at year end                     6.00%         .00%        8.00%
Total Borrowings:
      Average balance                                           $ 457,891    $ 352,219    $ 266,409
      Maximum balance at any month-end                            511,373      445,528      295,587
      Balance at year end                                         504,366      445,528      295,587
      Weighted average interest rate during the year                 4.89%        5.34%        5.57%
      Weighted average interest rate at year end                     4.50%        4.97%        5.40%
</TABLE>

                                            ---------------

Subsidiaries

         Federal  associations  generally may invest up to 2% of their assets in
service corporations plus an additional 1% of assets for community purposes.  In
addition,  federal  associations  such as the Bank may invest up to 50% of their
regulatory capital in conforming loans to service  corporations.  In addition to
investments  in service  corporations,  federal  associations  are  permitted to
invest  an  unlimited  amount  in  operating   subsidiaries  engaged  solely  in
activities that a federal association may engage in directly.

         The  Company  has  four  active  subsidiary   corporations.   Appraisal
Analysts, Inc. provides real estate appraisal services to the Company as well as
third parties. H. F. Development  Company,  Inc. serves as a repository for some
of the Company's  commercial REO properties held for disposition.  See "Business
-- Delinquent,  Nonperforming and Classified  Assets".  Harbor Insurance Agency,
Inc. specializes in property and casualty insurance and provides a full range of
insurance  products to its  customers.  (See Note 17 to  Consolidated  Financial
Statements on page 60 in the Annual Report).  Harbor Florida Financial Services,
Inc. offers non-deposit  investment  products for sale through the Bank's branch
offices.

Competition

         The Company encounters strong  competition both in attracting  deposits
and in originating real estate,  commercial, and consumer loans. Its most direct
competition for deposits has come historically from commercial banks,  brokerage
houses,  other savings  associations  and credit unions in its market area.  The
Company expects continued strong competition from such financial institutions in
the foreseeable  future. The Company's market area includes branches of a number
of commercial banks that are  substantially  larger than the Company in terms of
statewide  deposits.  The Company competes for deposits by offering depositors a
high level of personal service,  convenient  locations and competitive  interest
rates.

         The competition for real estate and other loans comes  principally from
commercial  banks,  mortgage banking  companies and other savings  associations.
Lending  competition has increased  substantially in recent years as a result of
the large  number of  institutions  seeking  to  benefit  from the growth in the
Company's market area.

                                       20
<PAGE>


         The Company competes for loans primarily through the interest rates and
loan fees it  charges,  the types of loans it  offers,  and the  efficiency  and
quality of services it provides  borrowers,  real estate  brokers and  builders.
Factors that affect competition  include general and local economic  conditions,
current  interest rate levels and volatility of the mortgage  markets.  Based on
total  assets,  as of September  30, 2003,  the Company was the largest  savings
institution headquartered in the six county area served by the Company.

Employees

         At September 30, 2003,  the Company had a total of 575 full-time and 68
part-time  employees,  none of whom were represented by a collective  bargaining
unit. The Company considers its relations with its employees to be good.

Financial Services Modernization Bill

         On  November  12,  1999,   President   Clinton   signed  into  law  the
Gramm-Leach-Bliley-Financial  Services  Modernization  Act of 1999 (the  "Act"),
federal  legislation  intended to modernize the financial  services  industry by
establishing a comprehensive  framework to permit  affiliations among commercial
banks,  insurance  companies,  securities  firms  and  other  financial  service
providers.  Generally,  the Act:  (i) repeals the  historical  restrictions  and
eliminates  many  federal and state law  barriers to  affiliations  among banks,
securities firms,  insurance  companies and other financial  service  providers;
(ii)  provides  a  uniform  framework  for  the  functional  regulation  of  the
activities of banks,  savings  institutions and their holding  companies;  (iii)
broadens  the  activities  that may be  conducted  by  national  banks,  banking
subsidiaries of bank holding  companies and their financial  subsidiaries;  (iv)
provides  an  enhanced   framework  for   protecting  the  privacy  of  consumer
information;  (v) adopts a number of provisions  related to the  capitalization,
membership,  corporate  governance and other measures  designed to modernize the
Federal  Home  Loan  Bank  system;   (vi)   modifies  the  laws   governing  the
implementation of the Community  Reinvestment Act; and (vii) addresses a variety
of other  legal  and  regulatory  issues  affecting  day-to-day  operations  and
long-term activities of financial institutions.

         Thrift  holding  companies  such as the Company  will be  permitted  to
engage in financial activities in the same manner as bank holding companies with
respect to insurance and securities  activities.  In addition,  in a change from
prior law, thrift holding companies can be owned, controlled or acquired only by
companies engaged in financially-related activities.

         The Company  does not believe  that the Act has had a material  adverse
effect on its  operations.  However,  to the extent  that the Act has  permitted
banks,  securities  firms and insurance  companies to  affiliate,  the financial
services industry may experience further  consolidation.  This could result in a
growing number of larger financial  institutions  that can offer a wider variety
of  financial   services  than  the  Company   currently  offers  and  that  can
aggressively compete in the markets the Company currently serves.

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.

                                       21

<PAGE>

Item 2.  Properties

      The Company conducts its business from its headquarters in Fort Pierce and
through 33 full-service banking offices, one loan production office, one
in-store branch location and three insurance agency locations. These offices are
located in Brevard, Indian River, Martin, Okeechobee, St. Lucie, and Volusia
counties, Florida. The net book value at September 30, 2003 of the Company's
offices was $24.9 million. The following table sets forth information regarding
the Company's offices.


<TABLE>
<CAPTION>
                                                       Year                                          Lease
                 Location                             Opened           Owned/Leased             Expiration Date
                 --------                             ------           ------------             ---------------
<S>                                                  <C>                  <C>                       <C>

ST. LUCIE COUNTY

Main Office                                          1934                 Owned
100 South Second Street
Fort Pierce, FL 34950

Virginia Avenue                                      1968                 Owned
500 Virginia Avenue
Fort Pierce, FL 34982

Port St. Lucie Main                                  1975                 Owned
7181 South U.S. Highway 1
Port St. Lucie, FL 34952

Harbor Federal Center                                1981                 Owned
2400 S.E. Midport Road, Suite 100
Port St. Lucie, FL 34952

Lakewood Park                                        1981                 Owned
5100 Turnpike Feeder Road
Fort Pierce, FL 34951

Darwin Square                                        1991                 Owned
3201 S.W. Port St. Lucie Boulevard
Port St. Lucie, FL 34953

Orange Blossom                                       1984                 Owned
4156 Okeechobee Road
Fort Pierce, FL 34947

St. Lucie West                                       1993                 Owned
1320 S.W. St. Lucie West Boulevard
Port St. Lucie, FL 34986

Harbor Insurance Agency, Inc.
2222 Colonial Road                                   2000                 Leased                    01/14/06
Suite 100
Fort Pierce, FL 34950

Harbor Insurance Agency, Inc.
2400 SE Midport Road                                 2003                 Owned
Suite 110
Port St. Lucie, FL 34952

St. James
5493 NW St. James Drive                              2003                 Owned
Port St. Lucie, FL 34983

</TABLE>

                                       22
<PAGE>
<TABLE>
<CAPTION>
                                                       Year                                          Lease
                 Location                             Opened           Owned/Leased             Expiration Date
                 --------                             ------           ------------             ---------------
<S>                                                  <C>                  <C>                       <C>

INDIAN RIVER

Vero Main                                            1973                 Owned
655 21st Street
Vero Beach, FL 32960

Causeway                                             1981                 Owned
1700 A1A
Vero Beach, FL 32963

Indian River Mall                                    1997                 Owned
6080 20th Street
Vero Beach, FL 32966

Harbor Insurance Agency, Inc.                        2001                 Owned
6078 20th Street
Vero Beach, FL  32966

Sebastian
13397 U.S. Highway #1                                1979                 Owned
Sebastian, FL 32958

West Sebastian                                       1998                 Owned
993 Sebastian Boulevard
Sebastian, FL 32958

MARTIN COUNTY

Palm City                                            1978                 Owned
1251 S.W. 27th Street
Palm City, FL  34990

East Ocean                                           1981                 Owned
1500 E. Ocean Boulevard
Stuart, FL 34996

Stuart Main                                          1996                 Leased                    08/14/05
789 S. Federal Highway
Stuart, FL 34994

Jensen Beach                                         1999                 Leased                    05/31/05
3639 N.W. Federal Highway
Jensen Beach, FL  34957

BREVARD COUNTY

Palm Bay                                             1981                 Owned
5295 Babcock Street, N.E.
Palm Bay, FL 32905

Indialantic                                          1981                 Owned
305 5th Avenue
Indialantic, FL 32903

West Melbourne                                       1982                 Owned
2950 W. New Haven Avenue
West Melbourne, FL 32904

Viera/Baytree                                        1995                 Owned
100 Capron Trail
Melbourne, FL  32940

Wal-Mart Superstore                                  1998                 Leased                    08/31/05
1000 N. Wickham Road
Melbourne, FL 32935

Palm Bay West                                        2001                 Owned
122 Malabar Road, S.W.
Palm Bay, FL 32907

</TABLE>

                                       23

<PAGE>

<TABLE>
<CAPTION>
                                                       Year                                          Lease
                 Location                             Opened           Owned/Leased             Expiration Date
                 --------                             ------           ------------             ---------------
<S>                                                  <C>                  <C>                       <C>
Rockledge                                            2001                 Owned
630 Barnes Boulevard
Rockledge, FL  32955

Cocoa Commons                                        2002                 Owned
2323 Highway 524
Cocoa, FL 32926

Loan Production Office                               1998                 Leased                    07/31/04
1355 N Courtenay Parkway
   Suite I
Merritt Island, FL 32953

OKEECHOBEE COUNTY

Okeechobee                                           1980                 Owned
2801 Highway #441 South
Okeechobee, FL 34974

VOLUSIA COUNTY

New Smyrna Beach                                     1988                 Owned
2230 State Road #44
New Smyrna Beach, FL 32168

Port Orange                                          1983                 Owned
4035 S. Nova Road
Port Orange, FL 32127

Ormond Beach                                         1984                 Owned
75 N. Nova Road
Ormond Beach, FL 32174

Deltona                                              1998                 Owned
2901 Howland Boulevard
Deltona, FL 32725

Deland
312 N. Woodland Boulevard                            1999                 Owned
Deland, FL  32720

Ormond By The Sea
1190 Ocean Shore Boulevard                           1999                 Owned
Ormond Beach, FL  32176

Orange City/DeBary                                   2002                 Owned
884 Saxon Boulevard
Orange City, FL 32763
</TABLE>


         Subject  to  business  decisions  which may occur  from time to time on
selected leases, leases are anticipated to renew upon their expiration.

         The  Company  uses a data  processing  service  located  in  Milwaukee,
Wisconsin for record  keeping  activities.  The data  processor  specializes  in
servicing  financial  institutions.  The Company's  current  contract expires in
2006. All data  processing  equipment that is used  internally by the Company is
owned by the Company.  The net book value of such data processing  equipment and
related software as of September 30, 2003 was $3,544,000.

Item 3.  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 4.  Submission of Matters to a Vote of Security-Holders

         None.

                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

         The Company's  common stock trades on the NASDAQ  National Market under
the symbol HARB. The approximate number of shareholders of record and beneficial
shareholders  of the common  stock at December 5, 2003 was 7,541,  some of which
are street name holders.

                                       25

<PAGE>

         The Company  paid  $0.5500 in cash  dividends  per share for the twelve
months ended in fiscal 2003. Payments were $0.1125 in the first quarter, $0.1300
in the second and third quarters and $0.1450 in the fourth quarter.  The Company
currently expects that comparable cash dividends will continue to be paid in the
future.

         On December 5, 2003,  the closing sales price of the  Company's  common
stock was $29.75  per share.  The  following  table sets forth the market  price
range of the high and low closing sales price and cash  dividends paid per share
of common stock as reported by the NASDAQ stock market for the four  quarters of
fiscal years 2003 and 2002.

                                     Low               High           Dividends
FISCAL 2003
   First Quarter................  $19.06             $23.14              $.1125
   Second Quarter ..............   22.46              24.77               .1300
   Third Quarter................   23.51              27.25               .1300
   Fourth Quarter...............   23.97              27.76               .1450

FISCAL 2002
   First Quarter................  $15.90             $17.65              $.1000
   Second Quarter ..............   16.92              20.00               .1125
   Third Quarter................   19.03              24.33               .1125
   Fourth Quarter...............   18.55              24.63               .1125

         Information  concerning  securities  authorized  for issuance under the
Company's equity compensation plans is set forth in "Item 12. Security Ownership
of  Certain  Beneficial  Owners  and  Management  --  Equity  Compensation  Plan
Information," and is incorporated herein by reference.

Item 6.  Selected Financial Data

         The information contained in the table captioned "Selected Consolidated
Financial  Data" in the Annual  Report on pages 18  through  19 is  incorporated
herein by reference.

Item 7.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

         The  information  contained  in  the  section  captioned  "Management's
Discussion  and Analysis of Financial  Condition and Results of  Operations"  on
pages 19 through 32 in the Annual Report is incorporated herein by reference.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

         The  information  contained in the sections  captioned  "Disclosure  on
Quantitative  and Qualitative  Market Risk and Asset and Liability  Management",
"Interest Rate  Sensitivity",  "Interest Rate Risk" and "Equity Pricing Risk" is
contained on pages 20 through 23 in the Annual Report and is incorporated herein
by reference.

Item 8.  Financial Statements and Supplementary Data

         The  Company's  consolidated  financial  statements  listed  in Item 15
herein,  together  with the report  thereon by KPMG LLP, are found in the Annual
Report on pages 33 through 64 and is incorporated herein by reference.

Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

         None.

                                       26

<PAGE>

Item 9A.  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
September  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 reasonably likely to
materially affect the internal control over financial reporting.


                                    PART III

Item 10. Directors and Executive Officers of the Registrant

         The  information  contained  under the sections  captioned  "Beneficial
Ownership  of  Common  Stock,"  on  pages  2  through  4,  "Board  Meetings  and
Committees" on pages 7 and 8 and "Section 16(A) Beneficial  Ownership  Reporting
Compliances"  on page 15 of the Proxy  Statement of Harbor  Florida  Bancshares,
Inc.  (the  "Proxy  Statement)  filed  with  the  SEC on  December  17,  2003 is
incorporated herein by reference.

         The Company has  adopted a code of ethics for  financial  professionals
that  applies  to its chief  executive  officer,  chief  financial  officer  and
controller.  A copy of the Company's  code of ethics is attached as Exhibit 14.1
to   this   Form   10-K   and  is  also   posted   on  its   Internet   site  at
www.harborfederal.com.  In the event that the Company makes any amendment to, or
grants any waiver  from,  a provision  of the code of ethics that applies to the
chief executive officer, chief financial officer or controller and that requires
disclosure  under  applicable  SEC rules,  the Company  intends to disclose such
amendment or waiver and the reasons therefor on its Internet site.

Item 11.  Executive Compensation

         The  information  contained  under the  sections  captioned  "Executive
Compensation"  on pages 10 through 12 of the Proxy  Statement filed with the SEC
on December 17, 2003 is incorporated herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

         (a)Security Ownership of Certain Beneficial Owners

         The  information  required  by this item under the  sections  captioned
"Voting  Procedures"  on page 1 and  "Beneficial  Ownership of Common  Stock" on
pages 2 through 4 of the Proxy Statement filed with the SEC on December 17, 2003
is incorporated herein by reference.

         (b)Security Ownership of Management

         The  information  required  by this item  under the  section  captioned
"Beneficial  Ownership  of  Common  Stock"  on pages 2  through  4 of the  Proxy
Statement  filed with the SEC on  December  17, 2003 is  incorporated  herein by
reference.

         (c)Changes in Control

         Management  of the  Company  knows of no  arrangements,  including  any
pledge by any persons of securities of the Company,  the operation of which may,
at a subsequent date, result in a change in control of the Registrant.

                                       27
<PAGE>

         (d) Equity Compensation Plan Information

         The following  table provides  information  about the Company's  common
stock that may be issued under the Company's 1994  Incentive  Stock Option Plan,
1994 Stock Option Plan for Outside Directors,  Directors  Deferred  Compensation
Plan and 1998 Stock  Incentive Plan for Directors,  Officers and Employees.  The
Company  does not have any equity  compensation  plan that was not  approved  by
shareholders,  except for its  employee  stock  ownership  plan and as indicated
below.
<TABLE>
<CAPTION>
                                                                                                 Number of securities remaining
                                    Number of securities to be                                   available for future issuance
                                      issued upon exercise of      Weighted-average exercise    under equity compensation plans
                                       outstanding options,          price of outstanding       (excluding securities reflected
Plan Category                           warrants and rights      options, warrants and rights               in (a))
----------------------------------- ---------------------------- ------------------------------ ---------------------------------
                                                 (a)                         (b)                               (c)
<S>                                               <C>                       <C>                              <C>
Equity compensation plans
 approved by shareholders:
   Incentive stock option plans                   1,188,620                 $11.99                           176,292
   1998 Recognition and Retention
     Plan                                           218,327                    N/A                            40,237
Equity Compensation plans not
   approved by shareholders(1):
   Director's Deferred
     Compensation Plan                              312,166                    N/A                               N/A
</TABLE>

(1) Includes shares to be distributed in accordance with the Directors' Deferred
Compensation  Plan. The plan permits  directors to elect to defer all or part of
their annual  director fees.  Under the plan,  directors may elect to have their
deferred  compensation  invested in shares of the Company's common stock. Shares
to be  distributed  will increase in future  years,  subject to the elections of
directors under the plan. The plan,  which is more fully described in Note 16 to
the Company's  Consolidated Financial Statements and originally adopted in 1971,
was most recently amended in 1998 and was not submitted to shareholder vote and,
therefore, not approved by shareholders.


Item 13.  Certain Relationships and Related Transactions

         The  information  required  by this item under the  sections  captioned
"Voting Procedures" on page 1, "Beneficial Ownership of Common Stock" on pages 2
through 4 and "Certain  Transactions"  on page 14 of the Proxy  Statement  filed
with the SEC on December 17, 2003 is incorporated herein by reference.

Item 14.  Principal Accounting Fees and Services

         The  information  required  by this item under the  section captioned
"Independent  Auditors" on page 16 of the Proxy  Statement filed with the SEC on
December 17, 2003 is incorporated herein by reference.

                                       28
<PAGE>

                                     PART IV

Item 15.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) Documents filed as a part of this Report:

         (1) The Consolidated  Financial  Statements of the Registrant as listed
below (See Exhibit 13):

                                                                  Pages in
                                                                Annual Report
                                                                -------------
Independent Auditors' Report                                         33
Consolidated Statements of Financial Condition                       34
Consolidated Statements of Earnings                                  35
Consolidated Statements of Stockholders' Equity and
  Comprehensive Income                                               36
Consolidated Statements of Cash Flows                                38
Notes to Consolidated Financial Statements                           40

         (2) The Consolidated Financial Statement Schedules of the Registrant as
required to be filed in this Report are either not  applicable  or are  included
elsewhere in this Report.

         (3) Exhibit Index

         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)

                                       29
<PAGE>

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

10(x)    **Amendment to employment contract with Michael J. Brown, Sr.

10(xi)   **Senior Officer Incentive Plan for fiscal year 2004.

13       **Excerpts from the 2003 Annual Report to Shareholders  filed herewith.
         Such Annual Report, except for those portions specifically incorporated
         by reference, is furnished to the SEC for information purposes only and
         should not be deemed to be filed.

14.1     **Code of Ethics

21       **Subsidiaries of the Registrant

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
         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.

99       *Proxy Statement for the 2003 Annual Meeting of Shareholders filed with
         the SEC on December 17, 2003

*Incorporated by reference.
**Included with this report.

(b) Reports on Form 8-K


         On July 10, 2003, the Company furnished a report on Form 8-K announcing
an increase to  dividends  and its  earnings  for the third  quarter of the 2003
fiscal year.

         On July 29, 2003, the Company furnished a report on Form 8-K announcing
that it would be  participating  in the Keefe,  Bruyette & Woods  Fourth  Annual
Community Bank Investor Conference in New York on July 29 thru 31.

         On  September  25,  2003,  the  Company  furnished a report on Form 8-K
announcing  that it will  report its 2003 fiscal  year  earnings  on  Wednesday,
October 15, 2003.


                                       30
<PAGE>


                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) 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.
                                                        (Registrant)

Dated: December 24, 2003                  By:              /s/
                                          -------------------------------------
                                          Michael J. Brown, Sr.
                                          President and Chief Executive
                                          Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the date indicated.


             /s/                                           December 24, 2003
---------------------------------------------
Michael J. Brown, Sr.
President, Chief Executive
Officer and Director

             /s/                                           December 24, 2003
---------------------------------------------
H. Michael Callahan
Chief Financial Officer

             /s/                                           December 24, 2003
---------------------------------------------
Bruce R. Abernethy, Sr., Director

             /s/                                           December 24, 2003
----------------------------------------------
Richard N. Bird, Director

             /s/                                           December 24, 2003
---------------------------------------------
Edward G. Enns, Director

             /s/                                           December 24, 2003
---------------------------------------------
Frank H. Fee, III, Director

             /s/                                           December 24, 2003
---------------------------------------------
Richard B. Hellstrom, Director

             /s/                                           December 24, 2003
-------------------------------------------
Larry Lee, Jr., Director

             /s/                                           December 24, 2003
--------------------------------------------
Richard L. Lynch, Director

             /s/                                           December 24, 2003
-------------------------------------------
Dr. Edwin R. Massey, Director

             /s/                                           December 24, 2003
-------------------------------------------
Richard V. Neill, Sr., Director





                                       31
<PAGE>


                                                                      EXHIBIT 21

                         SUBSIDIARIES OF THE REGISTRANT


         The Registrant has one wholly-owned subsidiary  corporation,  the Bank,
and the Bank has eight wholly-owned subsidiary  corporations.  Each is a Florida
corporation.

1. Appraisal Analysts, Inc.

2. H. F. Development Company, Inc.

3. Indigo Tree, Inc. (inactive)

4. The Palm Bay Inn Corporation (inactive)

5. Highland Communities, Inc. (inactive)

6. CFD, Inc. (inactive)

7. Harbor Insurance Agency, Inc.

8. Harbor Florida Financial Services, Inc.


<PAGE>



                                                                    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-K 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
December 24, 2003
<PAGE>

                                                                    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-K 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   operationof   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
December 24, 2003
<PAGE>
                                                                    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 Annual Report of Harbor  Florida  Bancshares,  Inc. (the
"Company") on Form 10-K for the period  ending  September 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,  the financial  condition and result of
                  operations of the Company.






              /s/
-----------------------------------
Michael J. Brown, Sr.
Chief Executive Officer
December 24, 2003



<PAGE>


                                                                    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 Annual Report of Harbor  Florida  Bancshares,  Inc. (the
"Company") on Form 10-K for the period  ending  September 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
December 24, 2003