Exhibit 99.1
Harrington West Financial Group, Inc. Announces Financial Results for the September 2008 Quarter
SOLVANG, Calif.--(BUSINESS WIRE)--November 3, 2008--Harrington West Financial Group, Inc. (NASDAQ:HWFG), the holding company for Los Padres Bank, FSB and its division Harrington Bank, today announced a net loss for the September 2008 quarter of $3.2 million or 52 cents per diluted share compared to a net profit of $498 thousand or 9 cents per diluted share in the quarter a year ago. For the first nine months of 2008, HWFG reported a net loss of $6.6 million or $1.10 per diluted share compared to a net profit of $3.5 million or 63 cents per diluted share for the first nine months of 2007.
The net loss for the September 2008 quarter of $3.2 million was comprised of the following components:
1. $1.5 million of after-tax core banking income (net interest income before provision for loan loss plus banking fee income minus operating expenses).
2. $3.5 million after-tax other-than-temporary impairment on $10.3 million of securities available for sale. This loss was transferred from equity to earnings upon determination of the impairment and, therefore, has no effect on book value per share.
3. $1.2 million in after-tax addition to reserves and write-downs on loans and real estate owned. On a pre-tax basis, this expense includes $1.6 million of provision for loan losses and $400 thousand of write-downs on real estate owned.
Los Padres Bank remained well capitalized at September 30, 2008 with a risk based capital ratio of 10.36% and a tangible capital ratio of 7.28%, increasing from 10.04% and 7.07%, respectively, at June 30, 2008. As previously announced on September 29, 2008, HWFG raised $11.4 million in equity capital in the quarter. This private placement consisted of an offering of common stock at $6.25 per share and non-cumulative, perpetual preferred stock at $25 per share with an 8% annual dividend, convertible into 4 shares of common stock ($6.25 conversion price). Concordia Financial Services Fund, L.P. (Concordia) has committed to $10 million of this capital by purchasing common and preferred shares in two closings as follows:
1. On September 29, Concordia purchased 458,768 shares of common stock and 61,757 of the preferred stock for proceeds of $4.4 million.
2. Within 5 days of Concordia receiving regulatory approval and HWFG shareholder approval (expected by mid-December 2008), Concordia will purchase 581,232 shares of common stock and 78,243 shares of preferred stock on the same terms or $5.6 million in proceeds.
An additional 57,000 shares of the preferred stock were purchased on September 29, 2008 by other accredited investors and HWFG Board members for $1.4 million in proceeds.
Based on the results of the capital raising and the implementation of Financial Accounting Standards Board Staff Position (FSP) No. FAS 157-3 on fair value accounting in the September 2008 quarter, book value per common share improved to $7.52 at September 30, 2008 compared to $6.83 at June 30, 2008. FSP FAS 157-3 clarified the definition of inactive and distressed markets and provided for Level 3 pricing (model pricing) on mortgage securities in distressed and inactive markets.
The HWFG’s Board of Directors decided to continue the suspension of its quarterly common dividend to preserve capital in the current economic environment. The Board will re-evaluate this decision quarterly, based on income trends and the success of its initiatives to increase capital ratios.
Financial Performance Analysis
HWFG continues to be affected by the very weak housing market, the credit crisis, and the sluggish economy. Management remains focused on minimizing problem assets and maintaining well capitalized levels as it works to restore HWFG to profitability. As such, loan spreads have been widened to compensate for the higher credit risk in the environment, while various funding sources have been utilized to reduce the overall cost of funds and to generate additional liquidity. The summary of financial results for the September 2008 quarter follows:
1. Net interest income and net interest margin increased in the September 2008 quarter from the June 2008 quarter by $423 thousand and 30 basis points to $7.7 million and 2.67%, respectively.
2. HWFG added $1.6 million in the provision for loan losses in the September 2008 quarter based on the growth of the loan portfolio and credit reserve policy. Total allowance for loan losses were $7.0 million or .86% of loans at September 30, 2008.
3. Total banking fee and other income was $1.1 million in the September 2008 quarter, up $124 thousand from the June 2008 quarter and $63 thousand from the September 2007 quarter.
4. Operating expenses were $6.3 million in the September quarter compared to $6.1 million in the June 2008 quarter and $5.7 million in the September 2007 quarter.
5. Net loan balances were $811.4 million at September 30, 2008 compared with $802.5 million at June 30, 2008 (up 1.1%) and $766.0 million at September 30, 2007 (up 5.9%).
6. Non-accrual loans and real estate owned (net of reserves) were $10.3 million or 1.26% of total loans at September 30, 2008 compared with $11.0 million or 1.36% of total loans at June 30, 2008.
7. Retail and commercial deposits (net of brokered and California State deposits) were $770.0 million at September 30, 2008 compared with $794.0 million and $775.4 million at June 30, 2008 and September 30, 2007, respectively. HWFG had $132.6 million in brokered CD deposits at September 30, 2008, $105.7 million of brokered and California CD deposits at June 30, 2008, and $50.3 million of California CD deposits at September 30, 2007.
8. The available for sale investment portfolio was $285.1 million at September 30, 2008 compared to $290.0 million at June 30, 2008 and $355.3 million at September 30, 2007.
Net Interest Income
Net interest income and net interest margin rebounded in the September 2008 quarter from the June 2008 quarter as the lag in the repricing of HWFG’s CD deposit accounts started to catch-up with the repricing of HWFG’s floating rate LIBOR and PRIME based loans and securities and as HWFG reduced lower spread investment securities at the end of the June 2008 quarter. Furthermore, HWFG has made a concerted effort to re-price loan renewals and new loans at wider spreads to its funding cost to compensate for the credit environment. We expect this expansion of net interest margin to continue into the December 2008 quarter, especially if the high spreads of LIBOR rates to comparable maturity FHLB borrowing and CD rates persists throughout the quarter, tempered somewhat by the 1% decrease in the Fed Funds and PRIME rates in October 2008.
Banking Fee Income
Banking fee and other income increased in the September 2008 quarter over both the June 2008 and September 2007 quarters. The increase in the third quarter of 2008 over the June 2008 quarter is due primarily to higher deposit fees and bank-owned life insurance income, as the crediting rate increased on its cash value. The increase in September 2008 quarter over the September 2007 quarter is primarily due to higher deposit fees. The following schedule shows the comparisons of income sources:
| Banking Fee & Other Income |
| (Dollars in thousands) |
| | | | | | | |
| | September 2008 Quarter | | September 2007 Quarter | | September 2008 YTD | | September 2007 YTD |
| Banking Fee Type | | | | | | | |
| Mortgage Brokerage Fee, Prepayment Penalties & Other Loan Fees | $125 | | $119 | | $460 | | $628 |
| Deposit, Other Retail Banking Fees & Other Fee Income | 520 | | 430 | | 1,402 | | 1,239 |
| Harrington Wealth Management Fees | 234 | | 238 | | 743 | | 715 |
| Increase in Cash Surrender Value of Life Insurance, net | 180 | | 209 | | 421 | | 616 |
| Total Banking Fee & Other Income | $1,059 | | $996 | | $3,026 | | $3,198 |
Operating Expenses
Operating expenses were marginally higher at $6.3 million in the September 2008 quarter than comparative quarters due to three primary factors:
1. With lower loan volumes as HWFG sought to build capital levels, the deferral of loan origination costs has been reduced, thus increasing expenses about $200 thousand on a quarterly basis
2. With higher levels of real estate owned, the cost to stabilize and maintain the real estate has increased expenses about $120 thousand per quarter, especially considering initial acquisition and refurbishment, if necessary.
3. Deposit insurance premium expense was initiated in the June 2008 quarter after the HWFG’s FDIC insurance credit was fully exhausted, adding about $160 thousand in expense per quarter.
These increases were offset somewhat by lower incentive pay and computer services.
Loans
Net loans grew $8.8 million in the September 2008 quarter to $811.4 million as prepayments slowed markedly with the adverse credit conditions, while HWFG made selected loans based on its disciplined underwriting policies. HWFG has curtailed land and land development loans until the real estate markets show signs of recovery. The trends and the mix of the loan portfolio are shown in the following table:
| HWFG Net Loan Growth and Mix |
| (Dollars in millions) |
| | |
| September 30, 2008 | | December 31, 2007 | | September 30, 2007 |
| Loan Type | Total | | % of Total | | Total | | % of Total | | Total | | % of Total |
| Commercial Real Estate | $263.6 | | 32.1% | | $266.3 | | 33.6% | | $249.4 | | 32.2% |
| Multi-family Real Estate | 89.2 | | 10.9% | | 82.7 | | 10.4% | | 79.1 | | 10.2% |
| Construction (1) | 129.2 | | 15.8% | | 126.5 | | 16.0% | | 135.9 | | 17.5% |
| Single-family Real Estate | 137.8 | | 16.8% | | 125.5 | | 15.9% | | 119.6 | | 15.4% |
| Commercial and Industrial Loans | 120.7 | | 14.7% | | 117.8 | | 14.9% | | 114.8 | | 14.8% |
| Unimproved Land | 48.6 | | 5.9% | | 45.3 | | 5.7% | | 48.5 | | 6.3% |
| Consumer Loans | 28.0 | | 3.4% | | 24.5 | | 3.1% | | 24.6 | | 3.2% |
| Other Loans (2) | 3.2 | | 0.4% | | 2.8 | | 0.4% | | 2.8 | | 0.4% |
| Total Gross Loans | 820.3 | | 100.0% | | 791.4 | | 100.0% | | 774.7 | | 100.0% |
| Allowance for loan loss | (7.0) | | | | (6.4) | | | | (6.3) | | |
| Deferred fees | (1.4) | | | | (1.9) | | | | (1.9) | | |
| Discounts/Premiums | (0.5) | | | | (0.5) | | | | (0.5) | | |
| Net Loans Receivable | $811.4 | | | | $782.6 | | | | $766.0 | | |
(1) Includes loans collateralized by residential, commercial and land properties.
(2) Includes loans collateralized by deposits and consumer line of credit loans.
Asset Quality
The credit quality of the loan portfolio remained relatively stable in the September 2008 quarter with $10.3 million of non-accrual loans and real estate owned (net of reserves) at September 30, 2008 compared with $11.0 million at June 30, 2008 and $2.2 million at September 30, 2007. HWFG is continuing to manage the portfolio with a heightened concern and attention given the very adverse credit conditions and the extremely weak housing market putting considerable stress on borrowers. In the September quarter, a non-performing loan on entitled land for a single family residential development in California became real estate owned, and based on a recent appraisal, a specific reserve of $965 thousand was recorded, reducing its book value to $4.9 million. Furthermore, a participation loan in a high end residential development, which became REO in the June 2008 quarter, was also written down further by $584 thousand to $863 thousand based on recent valuation information. As previously mentioned, the general reserve for loan losses was increased by $1.6 million to $7.0 million or .86% of loans.
Deposits
Retail and commercial deposits (net of brokered CD deposits of $132.6 million), declined by $24.0 million in the September 2008 quarter or 3.0%, as depositors became increasingly concerned about the safety of their deposits with the failure of several banks and thrifts, the worsening credit crisis, and the headline reports of deposit withdrawals by consumers and businesses. HWFG took steps in the quarter to further educate its staff on all aspects of FDIC insurance coverage and related changes, to provide information on HWFG’s well capitalized levels, and to initiate further deposit promotions of its Power-up checking/MMDA relationship account by adding a Certificate of Deposit feature. In October 2008, with the legislatively mandated increase in FDIC insurance levels and HWFG’s deposit promotions, the Bank is experiencing a stabilization of deposit out-flows. Net of California CD deposits and brokered CD deposits, the cost of retail and commercial deposits decreased 29 bps in the quarter from 3.18% at June 30, 2008 to 2.89% at September 30, 2008.
Investments
The available for sale investment portfolio continues to decrease from principal repayments and prepayments and is now $285.1 million. These principal reductions continue to be approximately $13 million per quarter. The portfolio remains performing and largely highly-rated with 78% rated AA or higher by all rating agencies rating the securities. Securities with a fair value of $16.0 million have been downgraded by at least one rating agency to below investment grade as of September 30, 2008 compared with $14.1 million at June 30, 2008. Based on HWFG’s policy for other-than-temporary impairment, $10.3 million of these below investment grade mortgage backed securities were written down by $5.6 million before-tax in the September 2008 quarter. HWFG continues to believe that the after-tax mark-to-market loss on available for sale securities of $17.5 million recorded in HWFG’s equity will be recovered to a material extent as the credit markets stabilize and the Treasury implements its Troubled Asset Relief Program to buy mortgage loans and securities, or as principal on these securities is returned to HWFG at par over their average 4 year life.
Closing Comments
In commenting on the results and developments of the September 2008 quarter, Craig J. Cerny, Chairman and CEO of HWFG stated: “We are disappointed to report a net loss for the quarter and the year to date period. Although we are working hard to maintain a high level of asset quality, the extremely weak real estate markets combined with poor economic and credit conditions have had substantial negative effects on borrowers and the value of housing, causing the write-downs in the period on real estate owned and selected securities. We believe we have isolated the problem securities and loans to a manageable level and look forward to improved results in future quarters. We are extremely pleased to have raised $11.4 million in equity capital in the September 2008 quarter and look forward to working with Concordia on opportunities to improve earnings, capital, and franchise value in the years to come.“
Harrington West Financial Group, Inc. is a $1.2 billion, diversified, financial institution holding company for Los Padres Bank and its division Harrington Bank. HWFG operates 17 full service banking offices on the central coast of California, Scottsdale, Arizona, and the Kansas City metro. The Company also owns Harrington Wealth Management Company, a trust and investment management company with $182.7 million in assets under management or custody.
This Release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act. All of the statements contained in the Release, other than statements of historical fact, should be considered forward-looking statements, including, but not limited to, those concerning (i) the Company's strategies, objectives and plans for expansion of its operations, products and services, and growth of its portfolio of loans, investments and deposits, (ii) the Company's beliefs and expectations regarding actions that may be taken by regulatory authorities having oversight of the operation, (iii) the Company's beliefs as to the adequacy of its existing and anticipated allowances for loan and real estate losses, (iv) the Company's beliefs and expectations concerning future operating results, (v) the Company’s beliefs and expectations regarding the future performance of the real estate or mortgage markets and its securities portfolio, and (vi) other factors referenced in the Company’s filings with the Securities and Exchange Commission. Although the Company believes the expectations reflected in those forward-looking statements are reasonable, it can give no assurance that those expectations will prove to have been correct. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are not intended to give any assurance as to future results. The Company undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
| Consolidated Financial Data - Harrington West Financial Group, Inc. |
| (unaudited) |
| | | | |
| (In thousands, except per | | Quarter Ended | | Nine Months Ended |
| | share data) | | Sep. 30, 2008 | | Sep. 30, 2007 | | Sep. 30, 2008 | | Sep. 30, 2007 |
| | | | | | | | | | | | |
| Interest income | | $ | 17,583 | | | $ | 20,242 | | | $ | 55,605 | | | $ | 58,876 | |
| Interest expense | | | 9,898 | | | | 12,200 | | | | 32,943 | | | | 35,529 | |
| Net interest income | | | 7,685 | | | | 8,042 | | | | 22,662 | | | | 23,347 | |
| Provision for loan losses | | | 1,565 | | | | 200 | | | | 2,465 | | | | 400 | |
| Net interest income after provision for | | | | | | |
| loan losses | | | 6,120 | | | | 7,842 | | | | 20,197 | | | | 22,947 | |
| Non-interest income: | | | | | | | | |
| Gain/loss on sale of AFS | | | - | | | | - | | | | 1,107 | | | | (1,004 | ) |
| Income (loss) from trading assets | | (28 | ) | | | (378 | ) | | | (8,693 | ) | | | (372 | ) |
| Other-than-temporary loss | | | (5,575 | ) | | | (1,906 | ) | | | (8,057 | ) | | | (1,906 | ) |
| Gain on termination of cash flow hedge | | - | | | | - | | | | 2,338 | | | | - | |
| Loss on write-down of real estate owned | | (393 | ) | | | - | | | | (2,996 | ) | | | - | |
| Other gain | | | - | | | | - | | | | 1,049 | | | | - | |
| Increase in cash surrender | | | | | | | | |
| | value of insurance | | | 180 | | | | 209 | | | | 421 | | | | 616 | |
| Banking fee & other income | | | 879 | | | | 787 | | | | 2,605 | | | | 2,582 | |
| | Non-interest income | | | (4,937 | ) | | | (1,288 | ) | | | (12,226 | ) | | | (84 | ) |
| Non-interest Expense: | | | | | | | | |
| Salaries and employee benefits | | | 3,428 | | | | 3,308 | | | | 10,225 | | | | 9,817 | |
| Premises and equipment | | | 1,025 | | | | 975 | | | | 3,041 | | | | 2,893 | |
| Insurance premiums | | | 247 | | | | 83 | | | | 685 | | | | 254 | |
| Marketing | | | | 143 | | | | 84 | | | | 383 | | | | 314 | |
| Computer services | | | 235 | | | | 239 | | | | 781 | | | | 687 | |
| Professional fees | | | 198 | | | | 162 | | | | 503 | | | | 628 | |
| Office expenses and supplies | | | 192 | | | | 195 | | | | 620 | | | | 613 | |
| Other | | | | 801 | | | | 703 | | | | 2,223 | | | | 1,987 | |
| Non-interest expense | | | 6,269 | | | | 5,749 | | | | 18,461 | | | | 17,193 | |
| Income (loss) before income taxes | | | (5,086 | ) | | | 805 | | | | (10,490 | ) | | | 5,670 | |
| Provision for income tax expense (benefit) | | (1,908 | ) | | | 307 | | | | (3,935 | ) | | | 2,121 | |
| Net income (loss) | | $ | (3,178 | ) | | $ | 498 | | | $ | (6,555 | ) | | $ | 3,549 | |
| | | | | | | | | | | |
Per share: | | | | | | | | | |
| Net income - basic | | $ | (0.52 | ) | | $ | 0.09 | | | $ | (1.10 | ) | | $ | 0.64 | |
| Net income - diluted | | $ | (0.52 | ) | | $ | 0.09 | | | $ | (1.10 | ) | | $ | 0.63 | |
| Weighted average shares used | | | | | | | | |
| in Basic EPS calculation | | | 6,141,216 | | | | 5,550,353 | | | | 5,954,914 | | | | 5,537,873 | |
| Weighted average shares used | | | | | | | | |
| in Diluted EPS calculation | | | 6,141,216 | | | | 5,642,512 | | | | 5,954,914 | | | | 5,641,914 | |
| Cash dividends common per share paid | $ | - | | | $ | - | | | $ | 0.20 | | | $ | 0.55 | |
| Cash dividends preferred per share paid | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Book value of common at period-end | $ | 7.52 | | | $ | 11.42 | | | $ | 7.52 | | | $ | 11.42 | |
| Tangible book value of common at period end | $ | 6.59 | | | $ | 10.30 | | | $ | 6.59 | | | $ | 10.30 | |
| Book value of preferred at period-end | $ | 25.00 | | | $ | - | | | $ | 25.00 | | | $ | - | |
| Ending common shares | | | 6,590,011 | | | | 5,552,803 | | | | 6,590,011 | | | | 5,552,803 | |
| Ending preferred shares | | | 118,757 | | | | - | | | | 118,757 | | | | - | |
| | | | | | | | | | | |
| Financial ratios | | | | | | | | |
| Return on average assets | | | (1.05 | %) | | | 0.17 | % | | | (0.71 | %) | | | 0.42 | % |
| Return on average equity | | | (30.07 | %) | | | 2.97 | % | | | (19.61 | %) | | | 6.94 | % |
| Average equity to average | | | | | | | | |
| assets (leverage ratio) | | | 3.49 | % | | | 5.75 | % | | | 3.63 | % | | | 5.99 | % |
| Net interest margin | | | 2.67 | % | | | 2.95 | % | | | 2.55 | % | | | 2.86 | % |
| Efficiency ratio | | | 71.69 | % | | | 63.61 | % | | | 71.87 | % | | | 64.77 | % |
| | | | | | | | |
| Period averages | | | | | | | | |
| Total assets | | | $ | 1,203,212 | | | $ | 1,155,236 | | | $ | 1,231,458 | | | $ | 1,142,212 | |
| Securities and trading assets | | $ | 284,709 | | | $ | 311,510 | | | $ | 325,776 | | | $ | 299,645 | |
| Total loans, net of allowance | | $ | 812,145 | | | $ | 763,000 | | | $ | 802,401 | | | $ | 761,381 | |
| Total earning assets | | $ | 1,166,035 | | | $ | 1,103,848 | | | $ | 1,193,332 | | | $ | 1,089,390 | |
| Total deposits | | $ | 844,065 | | | $ | 794,246 | | | $ | 865,360 | | | $ | 754,903 | |
| Total equity | | | $ | 42,049 | | | $ | 66,430 | | | $ | 44,644 | | | $ | 68,415 | |
| | | | | Quarter Ended |
| (In thousands, except per | | Sep. 30, | | Jun. 30, | | Mar. 31, | | Dec. 31, | Sep. 30, |
| | share data) | | | 2008 | | | | 2008 | | | | 2008 | | | | 2007 | | | 2007 | |
| | | | | | | | | | | |
| Interest income | | $ | 17,583 | | | $ | 18,457 | | | $ | 19,565 | | | $ | 21,249 | | $ | 20,242 | |
| Interest expense | | | 9,898 | | | | 11,195 | | | | 11,850 | | | | 12,740 | | | 12,200 | |
| Net interest income | | | 7,685 | | | | 7,262 | | | | 7,715 | | | | 8,509 | | | 8,042 | |
| Provision for loan losses | | | 1,565 | | | | 400 | | | | 500 | | | | 250 | | | 200 | |
| Net interest income after provision for loan losses | | | | | | | | | |
| | 6,120 | | | | 6,862 | | | | 7,215 | | | | 8,259 | | | 7,842 | |
| Non-interest income: | | | | | | | | | |
| Gain/(loss) on sale of AFS | | | - | | | | (295 | ) | | | 1,402 | | | | - | | | - | |
| Income (loss) from trading assets | | | (28 | ) | | | 6 | | | | (8,670 | ) | | | (2,424 | ) | | (378 | ) |
| Other-than-temporary loss | | | (5,575 | ) | | | (2,412 | ) | | | (70 | ) | | | (247 | ) | | (1,906 | ) |
| Gain on termination of cash flow hedge | | | - | | | | 2,338 | | | | - | | | | - | | | - | |
| Loss on write-down of real estate owned | | | (393 | ) | | | (2,603 | ) | | | - | | | | - | | | - | |
| Other gain (loss) | | | - | | | | 1,048 | | | | 1 | | | | (1 | ) | | - | |
| Increase in cash surrender | | | | | | | | | |
| | value of insurance | | | 180 | | | | 49 | | | | 193 | | | | 257 | | | 209 | |
| Banking fee & other income | | | 879 | | | | 886 | | | | 840 | | | | 870 | | | 787 | |
| | Non-interest income | | | (4,937 | ) | | | (983 | ) | | | (6,304 | ) | | | (1,545 | ) | | (1,288 | ) |
| Non-interest Expense: | | | | | | | | | |
| Salaries and employee benefits | | | 3,428 | | | | 3,261 | | | | 3,536 | | | | 3,341 | | | 3,308 | |
| Premises and equipment | | | 1,025 | | | | 1,023 | | | | 993 | | | | 983 | | | 975 | |
| Insurance premiums | | | 247 | | | | 227 | | | | 212 | | | | 83 | | | 83 | |
| Marketing | | | 143 | | | | 143 | | | | 96 | | | | 105 | | | 84 | |
| Computer services | | | 235 | | | | 290 | | | | 256 | | | | 263 | | | 239 | |
| Professional fees | | | 198 | | | | 170 | | | | 135 | | | | 132 | | | 162 | |
| Office expenses and supplies | | | 192 | | | | 218 | | | | 209 | | | | 178 | | | 195 | |
| Other | | | 801 | | | | 752 | | | | 673 | | | | 649 | | | 703 | |
| Non-interest expense | | | 6,269 | | | | 6,084 | | | | 6,110 | | | | 5,734 | | | 5,749 | |
| Income (loss) before income taxes | | | (5,086 | ) | | | (205 | ) | | | (5,199 | ) | | | 980 | | | 805 | |
| Provision for income tax expense (benefit) | | | (1,908 | ) | | | (74 | ) | | | (1,953 | ) | | | 361 | | | 307 | |
| Net income (loss) | | $ | (3,178 | ) | | $ | (131 | ) | | $ | (3,246 | ) | | $ | 619 | | $ | 498 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Per share: | | | | | | | | | |
| Net income - basic | | $ | (0.52 | ) | | $ | (0.02 | ) | | $ | (0.58 | ) | | $ | 0.11 | | $ | 0.09 | |
| Net income - diluted | | $ | (0.52 | ) | | $ | (0.02 | ) | | $ | (0.58 | ) | | $ | 0.11 | | $ | 0.09 | |
| Weighted average shares used | | | | | | | | | |
| in Basic EPS calculation | | | 6,141,216 | | | | 6,131,243 | | | | 5,590,236 | | | | 5,553,612 | | | 5,550,353 | |
| Weighted average shares used | | | | | | | | | |
| in Diluted EPS calculation | | | 6,141,216 | | | | 6,131,243 | | | | 5,590,236 | | | | 5,618,784 | | | 5,642,512 | |
| Cash dividends common per share paid | | $ | - | | | $ | 0.07 | | | $ | 0.13 | | | $ | 0.13 | | $ | - | |
| Cash dividends preferred per share paid | | $ | - | | | $ | - | | | $ | - | | | $ | - | | $ | - | |
| Book value common at period-end | | $ | 7.52 | | | $ | 6.83 | | | $ | 6.96 | | | $ | 9.91 | | $ | 11.42 | |
| Tangible book value of common at period-end | | $ | 6.59 | | | $ | 5.84 | | | $ | 5.96 | | | $ | 8.79 | | $ | 10.30 | |
| Book value preferred at period-end | | $ | 25.00 | | | $ | - | | | $ | - | | | $ | - | | $ | - | |
| Ending common shares | | | 6,590,011 | | | | 6,131,243 | | | | 6,131,243 | | | | 5,554,003 | | | 5,552,803 | |
| Ending preferred shares | | | 118,757 | | | | - | | | | - | | | | - | | | - | |
| Financial ratios | | | | | | | | | |
| Return on average assets | | | (1.05 | %) | | | (0.04 | %) | | | (1.06 | %) | | | 0.20 | % | | 0.17 | % |
| Return on average equity | | | (30.07 | %) | | | (1.16 | %) | | | (28.14 | %) | | | 4.09 | % | | 2.97 | % |
| Average equity to average | | | | | | | | | |
| assets (leverage ratio) | | | 3.49 | % | | | 3.60 | % | | | 3.78 | % | | | 4.93 | % | | 5.75 | % |
| Net interest margin | | | 2.67 | % | | | 2.37 | % | | | 2.60 | % | | | 2.94 | % | | 2.95 | % |
| Efficiency ratio | | | 71.69 | % | | | 74.22 | % | | | 69.84 | % | | | 59.51 | % | | 63.61 | % |
| | | | Quarter Ended |
| (In thousands, except per | Sep. 30, | Jun. 30, | Mar. 31, | Dec. 31, | Sep. 30, |
| | share data) | | 2008 | | | 2008 | | | 2008 | | | 2007 | | | 2007 | |
| | | | | | | |
| Period averages | | | | | |
| Total assets | $ | 1,203,212 | | $ | 1,264,534 | | $ | 1,226,937 | | $ | 1,217,491 | | $ | 1,155,236 | |
Securities and trading assets | $ | 284,709 | | $ | 351,089 | | $ | 341,984 | | $ | 360,894 | | $ | 311,510 | |
| Total loans, net of allowance | $ | 812,145 | | $ | 805,870 | | $ | 789,079 | | $ | 771,991 | | $ | 763,000 | |
| Total earning assets | $ | 1,166,035 | | $ | 1,227,326 | | $ | 1,186,936 | | $ | 1,169,141 | | $ | 1,103,848 | |
| Total deposits | $ | 844,065 | | $ | 895,029 | | $ | 857,215 | | $ | 819,257 | | $ | 794,246 | |
| Total equity | $ | 42,049 | | $ | 45,503 | | $ | 46,402 | | $ | 60,000 | | $ | 66,430 | |
| | | | | | | |
| Balance sheet at period-end | | | | | |
| Cash and due from banks | $ | 24,549 | | $ | 18,636 | | $ | 24,599 | | $ | 14,433 | | $ | 17,331 | |
| Investments and fed funds sold | | 286,070 | | | 291,022 | | | 335,206 | | | 353,829 | | | 356,677 | |
| Loans held for sale | | - | | | - | | | 16,654 | | | - | | | - | |
| Loans before allowance for loan losses | | 818,407 | | | 809,385 | | | 789,366 | | | 789,072 | | | 772,340 | |
| Allowance for loan losses | | (7,035 | ) | | (6,847 | ) | | (6,945 | ) | | (6,446 | ) | | (6,308 | ) |
| Goodwill and core deposit intangibles | | 6,087 | | | 6,074 | | | 6,136 | | | 6,198 | | | 6,244 | |
| Other assets | | 84,247 | | | 83,405 | | | 79,052 | | | 66,316 | | | 62,009 | |
| Total assets | $ | 1,212,325 | | $ | 1,201,675 | | $ | 1,244,068 | | $ | 1,223,402 | | $ | 1,208,293 | |
| | | | | | | |
| Interest bearing deposits | $ | 856,822 | | $ | 855,900 | | $ | 831,033 | | $ | 786,263 | | $ | 778,465 | |
| Non-interest bearing deposits | | 45,805 | | | 43,813 | | | 49,000 | | | 50,070 | | | 47,222 | |
| Other borrowings | | 248,920 | | | 252,125 | | | 308,148 | | | 322,755 | | | 311,501 | |
| Other liabilities | | 8,280 | | | 7,939 | | | 13,237 | | | 9,272 | | | 7,667 | |
| Shareholders' equity | | 52,498 | | | 41,898 | | | 42,650 | | | 55,042 | | | 63,438 | |
| Total liabilities and shareholders' | | | | | |
| equity | $ | 1,212,325 | | $ | 1,201,675 | | $ | 1,244,068 | | $ | 1,223,402 | | $ | 1,208,293 | |
| | | | | | | |
| Asset quality and capital - at period-end | | | | | |
| Non-accrual loans &/or past due 90 days | $ | 1,506 | | $ | 6,891 | | $ | 12,032 | | $ | 3,283 | | $ | 2,162 | |
| Other real estate owned, net | | 8,841 | | | 4,135 | | | - | | | - | | | - | |
| Total non-performing assets | $ | 10,347 | | $ | 11,026 | | $ | 12,032 | | $ | 3,283 | | $ | 2,162 | |
| | | | | | | |
| Allowance for losses to loans | | 0.86 | % | | 0.85 | % | | 0.86 | % | | 0.82 | % | | 0.82 | % |
| Non-performing loans to total loans | | 1.26 | % | | 1.36 | % | | 1.49 | % | | 0.42 | % | | 0.28 | % |
| Non-performing assets to total assets | | 0.85 | % | | 0.92 | % | | 0.97 | % | | 0.27 | % | | 0.18 | % |
| | | | | | | | | | | | | | | |
| | | | Three Months Ended | | Three Months Ended |
| (In thousands) | September 30, 2008 | | September 30, 2007 |
| | | | Balance | | Income | | Rate (6) | | Balance | | Income | | Rate (6) |
| Interest earning assets: | | | | | | | | | | | |
| Loans receivable (1) | $ | 812,145 | | $ | 13,745 | | 6.76 | % | | $ | 763,000 | | $ | 15,130 | | 7.91 | % |
| FHLB stock | | 13,549 | | | 207 | | 6.08 | % | | | 12,081 | | | 161 | | 5.29 | % |
| Securities and trading account assets (2) | | 326,455 | | | 3,614 | | 4.43 | % | | | 317,215 | | | 4,890 | | 6.17 | % |
| Cash and cash equivalents (3) | | 13,886 | | | 17 | | 0.49 | % | | | 11,552 | | | 61 | | 2.09 | % |
| | Total interest earning assets | | 1,166,035 | | | 17,583 | | 6.03 | % | | | 1,103,848 | | | 20,242 | | 7.32 | % |
| Non-interest-earning assets | | 37,177 | | | | | | | 51,388 | | | | |
| | | Total assets | $ | 1,203,212 | | | | | | $ | 1,155,236 | | | | |
| | | | | | | | | | | | | | |
| Interest bearing liabilities: | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | |
| | NOW and money market accounts | $ | 174,341 | | $ | 1,095 | | 2.50 | % | | $ | 97,757 | | $ | 642 | | 2.61 | % |
| | Passbook accounts and certificates | | | | | | | | | | | |
| | | of deposit | | 628,823 | | | 5,402 | | 3.42 | % | | | 651,325 | | | 8,058 | | 4.91 | % |
| | | Total deposits | | 803,164 | | | 6,497 | | 3.22 | % | | | 749,082 | | | 8,700 | | 4.61 | % |
| | | | | | | | | | | | | | |
| FHLB advances (4) | | 261,946 | | | 2,896 | | 4.40 | % | | | 209,752 | | | 2,570 | | 4.86 | % |
| Reverse repurchase agreements | | 19,999 | | | 159 | | 3.11 | % | | | 50,330 | | | 405 | | 3.15 | % |
| Other borrowings (5) | | 25,774 | | | 346 | | 5.25 | % | | | 25,774 | | | 525 | | 7.97 | % |
| | | Total interest-bearing liabilities | | 1,110,883 | | | 9,898 | | 3.53 | % | | | 1,034,938 | | | 12,200 | | 4.66 | % |
| Non-interest-bearing deposits | | 40,901 | | | | | | | 45,164 | | | | |
| Non-interest-bearing liabilities | | 9,379 | | | | | | | 8,704 | | | | |
| | | Total liabilities | | 1,161,163 | | | | | | | 1,088,806 | | | | |
| Stockholders' equity | | 42,049 | | | | | | | 66,430 | | | | |
| Total liabilities and stockholders' equity | $ | 1,203,212 | | | | | | $ | 1,155,236 | | | | |
| Net interest-earning assets (liabilities) | $ | 55,152 | | | | | | $ | 68,910 | | | | |
| | | | | | | | | | | | | | |
| Net interest income/interest rate spread | | | $ | 7,685 | | 2.50 | % | | | | $ | 8,042 | | 2.66 | % |
| Net interest margin | | | | | 2.67 | % | | | | | | 2.95 | % |
| Ratio of average interest-earning assets to | | | | | | | | | | |
| average interest-bearing liabilities | | | | | 104.96 | % | | | | | | 106.66 | % |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| 1 | ) | | Balance includes non-accrual loans. Income includes fees earned on loans originated and accretion of deferred loan fees. |
| 2 | ) | | Consists of securities classified as available for sale, held to maturity and trading account assets. Excludes SFAS 115 |
| | | adjustments to fair value, which are included in other non-interest earning assets. | | | | |
| 3 | ) | | Consists of cash due from banks and federal funds sold. | | | | | | | | |
| 4 | ) | | Interest on FHLB advances is net of hedging costs. Hedging costs include interest income and expense |
| | | and ineffectiveness adjustments for cash flow hedges. The Company uses pay-fixed, receive floating | | |
| | | LIBOR swaps to hedge the short term repricing characteristics of the floating FHLB advances. | | |
| 5 | ) | | Consists of other subordinated debt. | | | | | | | | | | |
| 6 | ) | | Annualized. | | | | | | | | | | | |
| | | | | Nine Months Ended | | Nine Months Ended |
| (In thousands) | September 30, 2008 | | September 30, 2007 |
| | | | Balance | | Income | | Rate (6) | | Balance | | Income | | Rate (6) |
| Interest earning assets: | | | | | | | | | | | |
| Loans receivable (1) | $ | 802,401 | | $ | 41,616 | | 6.92 | % | | $ | 761,381 | | $ | 45,202 | | 7.92 | % |
| FHLB stock | | 13,421 | | | 582 | | 5.79 | % | | | 13,463 | | | 528 | | 5.24 | % |
| Securities and trading account assets (2) | | 360,233 | | | 13,268 | | 4.91 | % | | | 302,550 | | | 12,934 | | 5.70 | % |
| Cash and cash equivalents (3) | | 17,277 | | | 139 | | 1.07 | % | | | 11,996 | | | 212 | | 2.36 | % |
| | Total interest earning assets | | 1,193,332 | | | 55,605 | | 6.22 | % | | | 1,089,390 | | | 58,876 | | 7.21 | % |
| Non-interest-earning assets | | 38,126 | | | | | | | 52,822 | | | | |
| | | Total assets | $ | 1,231,458 | | | | | | $ | 1,142,212 | | | | |
| | | | | | | | | | | | | | |
| Interest bearing liabilities: | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | |
| | NOW and money market accounts | $ | 154,912 | | $ | 2,965 | | 2.56 | % | | $ | 100,742 | | $ | 1,992 | | 2.64 | % |
| | Passbook accounts and certificates | | | | | | | | | | | |
| | | of deposit | | 667,020 | | | 19,844 | | 3.97 | % | | | 606,846 | | | 22,085 | | 4.87 | % |
| | | Total deposits | | 821,932 | | | 22,809 | | 3.71 | % | | | 707,588 | | | 24,077 | | 4.55 | % |
| | | | | | | | | | | | | | |
| FHLB advances (4) | | 247,326 | | | 8,151 | | 4.40 | % | | | 228,927 | | | 8,574 | | 5.01 | % |
| Reverse repurchase agreements | | 37,253 | | | 858 | | 3.03 | % | | | 56,432 | | | 1,320 | | 2.73 | % |
| Other borrowings (5) | | 25,774 | | | 1,125 | | 5.73 | % | | | 25,774 | | | 1,558 | | 8.75 | % |
| | | Total interest-bearing liabilities | | 1,132,285 | | | 32,943 | | 3.87 | % | | | 1,018,721 | | | 35,529 | | 4.65 | % |
| Non-interest-bearing deposits | | 43,428 | | | | | | | 47,315 | | | | |
| Non-interest-bearing liabilities | | 11,101 | | | | | | | 7,761 | | | | |
| | | Total liabilities | | 1,186,814 | | | | | | | 1,073,797 | | | | |
| Stockholders' equity | | 44,644 | | | | | | | 68,415 | | | | |
| Total liabilities and stockholders' equity | $ | 1,231,458 | | | | | | $ | 1,142,212 | | | | |
| Net interest-earning assets (liabilities) | $ | 61,047 | | | | | | $ | 70,669 | | | | |
| | | | | | | | | | | | | | |
| Net interest income/interest rate spread | | | $ | 22,662 | | 2.35 | % | | | | $ | 23,347 | | 2.56 | % |
| Net interest margin | | | | | 2.55 | % | | | | | | 2.86 | % |
| Ratio of average interest-earning assets to | | | | | | | | | | |
| average interest-bearing liabilities | | | | | 105.39 | % | | | | | | 106.94 | % |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| 1 | ) | | Balance includes non-accrual loans. Income includes fees earned on loans originated and accretion of deferred loan fees. |
| 2 | ) | | Consists of securities classified as available for sale, held to maturity and trading account assets. Excludes SFAS 115 |
| | | adjustments to fair value, which are included in other non-interest earning assets. | | | | |
| 3 | ) | | Consists of cash due from banks and federal funds sold. | | | | | | | | |
| 4 | ) | | Interest on FHLB advances is net of hedging costs. Hedging costs include interest income and expense | |
| | | and ineffectiveness adjustments for cash flow hedges. The Company uses pay-fixed, receive floating | | |
| | | LIBOR swaps to hedge the short term repricing characteristics of the floating FHLB advances. | | |
| 5 | ) | | Consists of other subordinated debt. | | | | | | | | | | |
| 6 | ) | | Annualized. | | | | | | | | | | | |
CONTACT:
Harrington West Financial Group, Inc.
For information contact:
Craig J. Cerny 480/596-6555
or
For share transfer information contact:
Lisa F. Watkins 805/688-6644
