Exhibit 99.1
Harrington West Announces Record Results in the March 2004 Quarter
and Increases Its Regular Quarterly Cash Dividend by 20%
SOLVANG, Calif.--(BUSINESS WIRE)--April 19, 2004--Harrington West
Financial Group, Inc. (Nasdaq:HWFG), the holding company for Los
Padres Bank, FSB and its division Harrington Bank, today announced
that it earned $2.1 million or 37 cents per share on a fully diluted
basis in the March 2004 quarter compared to $1.6 million or 30 cents
per share in the same quarter a year ago. The growth in net income was
28.4% in the March 2004 quarter over the March 2003 quarter.
Harrington West's return on average equity in the March 2004 quarter
was 16.9% compared to 14.9% in the same quarter a year ago. The March
2004 quarter results include a net after-tax gain on investments,
assets and related borrowings of $205 thousand or 4 cents per share
compared to net gains of $225 thousand or 4 cents per share in the
December 2003 quarter and $78 thousand or 1 cent per share in the
December 2003 and March 2003 quarters, respectively. The total tax
rate for the Company declined to 37.6% in the March 2004 quarter from
41.5% in 2003 due to the benefit in 2003 of taxable income being
apportioned to states with lower tax rates. The Company expects the
total tax rate in future quarters to be approximately 40.7%.
Based on the favorable earnings trend, the Board of Directors
declared a regular quarterly cash dividend of 10 cents per share
payable on May 12, 2004 to holders of record on April 28, 2004. The
regular quarterly cash dividend per share was boosted 20% over the
payment last quarter and represents the third increase in this
dividend during the last 12 months, equaling a 150.0% total increase
over that period.
Total assets reached $1.0 billion as of March 31, 2004 compared to
$974.8 million at December 31, 2003 and $835.0 million at March 31,
2003. In the March 2004 quarter, net loans grew $14.6 million to
$533.1 million or 2.8% and investments increased $23.9 million to
$422.8 million. Book value per share was $9.37 at March 31, 2004
compared to $8.46 at March 31, 2003.
Financial Performance Analysis
Net revenue, which is comprised of net interest income after the
provision for loan losses plus banking fee income, was $7.7 million in
the March 2004 quarter, growing 11.7% over the March 2003 quarter. Net
interest income after provision for loan losses reached $7.0 million
in the March 2004 quarter, increasing 18.2% over the $5.9 million in
the March 2003 quarter. This performance was attributed to the growth
in average earning loans and investments, while the Company's net
interest margin has remained relatively stable at approximately 3.0%
over the last six quarters.
Banking fee income was $760 thousand in the March 2004 quarter,
down $264 thousand from the March 2003 quarter. The decline in fee
income is entirely attributed to a slowdown in mortgage brokerage and
prepayment penalty fees with seasonality and the higher market
interest rates, resulting in lower mortgage financings. Although
mortgage brokerage fees slowed from the levels of 2003, the Company is
making progress in generating purchase loan originations through Los
Padres Mortgage Company (LPMC), its joint venture with the largest
RE/MAX franchise in the Phoenix, Arizona metro. The loan pipeline for
the entire institution started to increase in March 2004 with this
penetration and somewhat lower mortgage rates. The Company showed
improvement in the diversification of fee revenue sources with
Harrington Wealth Management (HWM) fees growing by $28 thousand, or
23.6%, to $145 thousand in the March 2004 quarter. Deposit fees were
$140 thousand in the March 2004 quarter, up 3.1% over the March 2003
quarter, and other (non-loan) banking fees were $51 thousand in the
March 2004 quarter. The Company is in the process of launching a new
overdraft protection program and expects to offer insurance and
brokerage services through an alliance in the second half of the year
to further develop and grow fee revenue.
General and administrative expenses were $4.7 million in the March
2004 quarter compared with $4.3 million in the March 2003 quarter. The
increase in operating expenses is attributed to the start-up of the
second Harrington Bank office in December 2003 and initial expenses
for the Ventura, California banking office, expected to open in May
2004. Management projects that profitability of these new banking
offices will be attained in approximately 12 to 18 months from their
opening. Also, costs to comply with new corporate governance
regulations, the Company's public status, and higher costs for almost
all insurance coverages contributed to the operating expense increase.
Asset Quality
Asset quality remained favorable with $154 thousand of
non-performing loans at March 31, 2004 compared to $12 thousand at
December 31, 2003 and $197 thousand at March 31, 2003. In the March
2004 quarter, $90 thousand was added to the allowance for loan losses
based on the growth in loans. The total allowance for loan losses was
$4.7 million at March 31, 2004 or .88% of loan balances.
Community Banking Update
Both net loans and deposits grew in the March quarter on a
sequential and comparative basis. Loans grew to $533.1 million at
March 31, 2004 from $518.5 million at December 31, 2003 and $475.2
million at March 31, 2003. The mix of loans that are other than
single-family residential loans continued to expand, reaching 81.9% of
the loan portfolio at March 31, 2004 compared to 78.4% at the same
date a year ago. Total loan originations were $104.7 million in the
March 2004 quarter compared with $92.6 million and $118.7 million in
the December 2003 and March 2003 quarters, respectively. Approximately
76.5% of the loan production in the March 2004 quarter was for the
Bank's portfolio, with the remainder brokered to others for fee
income.
Total deposits were $584.8 million at March 31, 2004 compared to
$570.7 million at December 31, 2003 and $525.1 million at March 31,
2004. Non-costing deposits were $29.0 million at March 31, 2004, up
from $20.0 million a year ago or 44.7%. With the opening of the new
Harrington banking office within the Kansas City metro, the deposit
growth largely emanated from this market in the March 2004 quarter.
Our Arizona banking office has contributed the majority of deposit
growth over the last 12 months. Management continues to pursue the
controlled growth of banking offices in all of its markets and is
targeting the Phoenix metro for its next expansion in late 2004 or
early 2005.
Investment Portfolio Performance
The investment portfolio was $422.8 million at March 31, 2004
compared with $398.9 million and $316.3 million at December 31, 2003
and March 31, 2003 respectively. This portfolio, comprised largely of
investment grade mortgage securities and managed to a low duration of
less than 6 months, continued to perform well with a 3.1% annualized
total return (which equals net gains and losses on investment
securities and hedges plus interest income) over one month LIBOR
versus a 1.25% to 1.5% goal. The Company considers its core competency
the pricing, selection, and interest rate risk management of its
assets and liabilities.
Closing Comments
In commenting on the March 31, 2004 quarterly results, Chairman
and CEO of Harrington West, Craig J. Cerny, stated "We are pleased
with our financial results for the first quarter of 2004, highlighted
by a record level of revenue on a quarterly basis driven by higher net
interest income, while operating expenses increased at a lower growth
rate than revenue. Although mortgage brokerage and prepayment penalty
fee income did decline on a sequential and comparative quarter basis
due to the slowdown in mortgage refinancings, our Company is making
additional efforts to further diversify fee income sources and
generate a larger portion of mortgage banking income from purchase
loans through Los Padres Mortgage Company and Bank originations.
Furthermore, our investment portfolio performance results continue to
exceed our expectations. We remain focused on growing our loans,
deposits, and banking offices in each of our markets to improve
franchise value, as we balance this investment spending against our
earnings performance."
Harrington West Financial Group, Inc., is a $1.0 billion financial
institution holding company for Los Padres Bank and its division
Harrington Bank. It will operate 13 full service banking operations on
the central coast of California, Scottsdale, Arizona, and the Kansas
City metro when it opens the Ventura, California office in May of
2004. It also owns Harrington Wealth Management Company, a trust and
investment management company with $126.1 million in assets under
management or custody, and 51% of Los Padres Mortgage Company, LLC, a
joint venture mortgage origination company, with Resource Marketing,
Inc., the largest RE/MAX realty franchise in Arizona, holding the
remaining 49%.
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 and (iv) the Company's
beliefs and expectations concerning future operating results.
Additional information on these and other factors that could affect
financial results are included in the Company's Securities and
Exchange Commission filings. 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.
Harrington West Financial Group, Inc.
(Dollars in thousands, except share and per share data)
At At At
March 31, Dec. 31, March 31,
2004 2003 2003
----------- ---------- ----------
Selected Financial Condition Data:
Total assets $1,004,930 $974,799 $834,991
Loans receivable, net 533,118 518,496 475,241
Securities available for sale 422,599 398,691 313,965
Securities held to maturity 215 222 2,334
Trading account assets 1,950 2,111 2,061
Deposits 584,765 570,697 525,120
Federal Home Loan Bank advances 256,500 262,500 239,000
Securities sold under repurchase
agreements 65,699 65,728 1,056
Note payable - - 11,600
Other debt 15,464 15,464 -
Stockholders' equity 49,266 48,076 43,933
At or for the Three Months Ended
---------------------------------
March 31, Dec. 31, March 31,
2004 2003 2003
----------- ---------- ----------
Selected Income Statement Data:
Interest income $12,247 $11,919 $11,358
Interest expense 5,208 5,173 5,121
----------- ---------- ----------
Net interest income 7,039 6,746 6,237
Provision for loan losses 90 80 360
----------- ---------- ----------
Net interest income after provision
for loan losses 6,949 6,666 5,877
Other income:
Income from trading account assets 338 398 576
Loss on extinguishment of debt - - (531)
Other gain (loss) (10) (17) 89
Banking fee income (1) 760 847 1,024
----------- ---------- ----------
Total other income 1,088 1,228 1,158
Other expenses:
Salaries and employee benefits 2,683 2,541 2,391
Premises and equipment 724 719 652
Other expenses (2) 1,332 1,245 1,250
----------- ---------- ----------
Total other expenses 4,739 4,505 4,293
Income before income taxes 3,298 3,389 2,742
Income taxes 1,239 1,389 1,138
----------- ---------- ----------
Net income $2,059 $2,000 $1,604
=========== ========== ==========
Common Stock Summary:
Diluted earnings per share $0.37 $0.36 $0.30
Dividends per share 0.08 0.08 0.03
Stockholders' equity per share 9.37 9.23 8.46
Diluted weighted average shares
outstanding 5,545,636 5,527,722 5,385,490
Harrington West Financial Group, Inc.
(Dollars in thousands, except share and per share data)
At or for the Three Months Ended
---------------------------------
March 31, Dec. 31, March 31,
2004 2003 2003
----------- ---------- ----------
Selected Operating Data (3):
Performance Ratios and Other Data:
Return on average assets 0.83% 0.85% 0.77%
Return on average equity 16.92 16.96 14.85
Equity to assets 4.90 4.93 5.26
Interest rate spread (4) 2.79 2.83 2.90
Net interest margin (4) 2.95 3.00 3.06
Average interest-earning assets to
average interest-bearing liabilities 107.27 107.46 106.36
Total noninterest expenses to average
total assets 1.94 1.93 2.06
Efficiency ratio (5) 61.47 59.96 62.21
Asset Quality Ratios (6):
Non-performing assets and troubled
debt restructurings to total assets 0.02 0.00 0.02
Non-performing loans and troubled debt
restructurings to total loans 0.03 0.00 0.04
Allowance for loan losses to total
loans 0.88 0.88 0.87
Net charge-offs to average loans
outstanding 0.00 0.00 0.00
(1) Consists of service charges, wholesale mortgage banking income,
trust income, other commissions and fees and other miscellaneous
noninterest income.
(2) Consists of computer services, consulting fees, marketing and
other miscellaneous noninterest expenses.
(3) With the exception of return on average assets and return on
average equity (which are based on month-end balances), all ratios are
based on average daily balances. All ratios are annualized where
appropriate.
(4) Interest rate spread represents the difference between the
weighted average yield on interest-earning assets and the weighted
average rate on interest-bearing liabilities. Net interest margin
represents net interest income as a percentage of average
interest-earning assets.
(5) Efficiency ratio represents noninterest expenses as a percentage
of the aggregate of net interest income after provision for loan
losses and noninterest income, excluding gains and losses on
securities, deposits and loans.
(6) Non-performing loans generally consist of non-accrual loans and
non-performing assets generally consist of non-performing loans and
real estate acquired by foreclosure or deed-in-lieu thereof.
CONTACT: Harrington West Financial Group, Inc.
For information contact:
Craig J. Cerny, 913-663-0180
or
For share transfer information contact:
Lisa Watkins, 805-688-6644