Exhibit 99.1
Harrington West Announces Results for the June 2004 Quarter and
Declares Regular Quarterly Cash Dividend of 10 Cents Per Share
SOLVANG, Calif.--(BUSINESS WIRE)--July 21, 2004--Harrington West
Financial Group, Inc. (Nasdaq:HWFG), the holding company for Los
Padres Bank, FSB (LPB) and its division, Harrington Bank, today
announced that it earned $2.0 million or 35 cents per share on a fully
diluted basis in the June 2004 quarter compared to $1.8 million or 33
cents per share in the same quarter a year ago. Net income in the June
2004 quarter increased 9.3% over the net income of the June 2003
quarter. For the first 6 months of 2004, HWFG earned $4.0 million or
72 cents per share on a fully diluted basis, an 18.3% increase over
the $3.4 million and 63 cents per share earned in the same period in
2003. Return on average equity was 16.1% and 16.7% in the June quarter
and year-to-date periods compared to 16.3% and 15.6% in the same
periods in 2003, respectively. Based on the favorable earnings, the
Board of Directors declared a regular quarterly dividend of 10 cents
per share payable on August 10, 2004 to holders of record on July 30,
2004.
The diluted earnings per share in the June 2004 quarter and
year-to-date periods include after-tax net gains on trading account
assets, other gains (losses), and debt extinguishment costs of 1 and 4
cents, respectively, compared to after-tax net gains per share of 4
and 5 cents in the same periods in 2003. Excluding these net gains,
HWFG earned after-tax core operating net income in the June 2004
quarter and year-to-date periods of $1.9 million or 34 cents per share
and $3.8 million or 68 cents per share, compared to $1.6 million or 29
cents per share and $3.1 million or 58 cents per share in the same
periods for 2003, respectively. After-tax core operating net income
per share increased 17.2% in both the June 2004 quarter and
year-to-date periods over the same periods in 2003.
Total assets were $1.1 billion at June 30, 2004, compared to $1.0
billion at March 31, 2004 and $864.1 million at June 30, 2003. The
growth in assets of $45.5 million in the June quarter was largely
attributed to net loans increasing by $32.3 million or 6.0%, and
investments increasing by $4.1 million or 1.0%. For the year-to-date
2004, loans grew by $46.9 million or 9.0%, and investments have
increased by $28.0 million or 7.0%. Book value per share was $9.29 at
June 30, 2004 compared with $8.64 at June 30, 2003, reflecting the
growth in earnings, the dividends paid of 78 cents, and changes in
other comprehensive income during the period.
Financial Performance Analysis
Net revenue, which is comprised of net interest income after the
provision for loan losses plus banking fee income, was $8.1 million in
the June 2004 quarter, growing 12.6% over the June 2003 quarter. For
the year-to-date 2004, net revenue was $15.8 million compared to $14.1
million in the same period last year, a 12.1% increase.
The revenue growth has been driven by expansion in net interest
income from the growth in average assets, while HWFG's net interest
margin has remained relatively stable at approximately 3%. Net
interest margin was 3.1% in the June 2004 quarter and 3.0% in the
first 6 months of 2004, compared to 3.0% and 3.1% in the comparable
periods in 2003. Net interest income after the provision for loan
losses was $7.3 million in the June 2004 quarter and $14.2 million for
the 2004 year-to-date compared to $6.0 million and $11.9 million in
the same periods last year, respectively.
Banking fee income includes mortgage brokerage fees from the
origination of mortgage loans, prepayment penalty fees on commercial
and multifamily real estate loans, other loan fees, deposit and retail
banking fees, and investment management and trust fees through
Harrington Wealth Management Company (HWMC). Banking fee income
declined in the comparable 2004 over 2003 periods due primarily to the
slowdown in mortgage brokerage and prepayment penalty income, as
interest rates reached 40 year lows in the first 6 months of 2003, and
refinancings of residential mortgages were at all time highs. Shown in
the following chart are the fees generated from each of these segments
for the June 2004 quarter compared to the March 2004 quarter and the
first six months of 2004 compared to the same period in 2003.
(Dollars in thousands)
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June March June June
2004 2004 2004 2003
Banking Fee Type Quarter Quarter % Change YTD YTD % Change
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Mortgage Brokerage
Fees $335 $283 18.4% $618 $1,161 (46.7%)
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Prepayment Penalties
and other Loan Fees 165 146 13.0% 311 479 (35.1%)
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Deposit & Other
Retail Banking Fees 198 186 6.5% 384 354 8.5%
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HWMC Fees 150 145 3.4% 295 230 28.2%
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Total $848 $760 11.6% $1,608 $2,224 (27.7%)
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Although banking fee income did decline for the 2004 over 2003
comparisons, fee income is becoming more diversified and showed growth
in the June 2004 quarter over the March 2004 quarter, as Los Padres
Mortgage Company, LLC (LPMC), the joint venture with the largest
RE/MAX franchise in Arizona to originate residential and commercial
real estate loans for fee income, showed improved results, and fee
income from HWMC showed steady growth. HWFG's strategic goal is to
further diversify and grow its banking fee income. In the September
quarter 2004, LPB will launch an overdraft protection program for its
retail customers and offer insurance and brokerage products on a
limited basis.
General and administrative expenses were $4.9 million in the June
2004 quarter and $9.6 million for the first six months of 2004
compared to $4.5 million and $8.8 million in the same periods of 2003,
respectively. The growth in expenses has been primarily attributed to
the opening of the new banking operation in Overland Park, Kansas in
December 2003 under the Harrington Bank division and the opening of
LPB's new office in Ventura, California in May 2004. Furthermore, the
cost of compliance with new corporate governance regulations and the
increasing cost of insurance for almost all coverages have contributed
to the expense growth.
Asset Quality
Asset quality remained favorable with $5 thousand of
non-performing loans at June 30, 2004 compared to $154 thousand at
March 31, 2004 and none at June 30, 2003. With the strong loan growth
in the June 2004 quarter, $230 thousand was added to allowance for
loan losses based on LPB's methodology for risk grading and adding
reserves for these loans. The total allowance for loan losses was $4.9
million at June 30, 2004 or .87% of net loans.
Community Banking Update
Both net loans and deposits grew in the June 2004 quarter on a
sequential and comparative basis. Net loans grew to $565.4 million at
June 30, 2004 from $533.1 million at March 31, 2004 and $497.3 million
at June 30, 2003. Total loan originations and commitments were $151.7
million in the June 2004 quarter and $256.4 million for the 2004
year-to-date compared with $148.8 million and $267.5 million in the
same periods a year ago. Approximately $202.1 million of the loan
originations and commitments for the first six months of 2004 have
been for LPB's portfolio with the remainder brokered for fee income.
The loan portfolio mix and balances are shown in the following table:
Loans Receivable
(Dollars in millions)
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June 30, 2004 March 31, 2004 June 30, 2003
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% of % of % of
Loan Type Total Total Total Total Total Total
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Commercial Real Estate $264.0 46.1% $254.0 47.2% $241.1 48.1%
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Multi-family Real Estate 86.7 15.2% 83.6 15.5% 78.6 15.6%
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Construction (1) 20.0 3.5% 25.1 4.6% 30.6 6.1%
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Single-family Real Estate 98.2 17.2% 97.3 18.1% 93.7 18.6%
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Commercial and industrial
loans 68.0 11.9% 49.0 9.1% 33.4 6.6%
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Land acquisition and
development 12.7 2.2% 10.9 2.0% 6.6 1.3%
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Consumer loans 21.1 3.7% 18.1 3.3% 17.8 3.5%
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Other loans (2) 1.0 0.2% 1.0 0.2% 1.0 0.2%
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Allowance, Deferred Fees &
Discounts/Premiums (6.3) (5.9) (5.5)
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Net loans receivable $565.4 100.0% $533.1 100.0% $497.3 100.0%
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(1) Includes loans collateralized by residential, commercial and
land properties.
(2) Includes loans collateralized by deposits and consumer lines
of credit loans.
Total deposits grew at a slower pace than loans with total
deposits reaching $589.8 million at June 30, 2004 compared to $584.8
million at March 31, 2004 and $538.9 million at June 30, 2003. The new
banking office in Overland Park, Kansas in the Kansas City metro and
the successful opening of the Ventura, California office contributed
$13.0 million of deposits in the quarter, while the more mature
offices lost $8.5 million in deposits, as the Company continued to
execute its strategy to modify its deposit mix and run-off some of the
high cost and highly rate sensitive deposits in an effort to reduce
its funding cost versus comparable market rates. Non-interest bearing
deposits were $33.2 million at June 30, 2004, $29.0 at March 31, 2004
compared with $30.7 million at June 30, 2003. Competition remained
very aggressive in LPB's north central coast markets as some of the
larger institutions attempt to buy market share with high CD and money
market rates. Management is pursuing the controlled growth of its
franchise in its primary markets and expects the opening of two new
offices every 12-15 months, with the Phoenix metro being the immediate
priority target. LPB is currently in the final stages of negotiation
to acquire an existing 3,500 square foot office building in the
Scottsdale, Arizona Airpark area, which will be converted to a full
service banking office.
Investment Portfolio Performance
The investment portfolio was $426.9 million at June 30, 2004
compared to $422.8 million at March 31, 2004 and $320.8 million at
June 30, 2003. This portfolio is comprised of primarily investment
grade mortgage securities and is managed to a 3 to 6 month effective
duration. During the first 6 months of 2004, the portfolio has
returned an annualized total return (interest income plus the net
gains and losses on investments and related hedges) over one month
LIBOR, the related funding benchmark, of 1.6% versus a goal of 1.25%
to 1.5%. The Company's strategy is to deploy excess capital in a
low-duration investment portfolio until the capital can be redeployed
in the growth of the core community banking assets.
Closing Comments
In commenting on the June 2004 quarterly results, Chairman and CEO
of Harrington West, Craig J. Cerny stated, "The financial results for
the June 2004 quarter and the year- to-date continue to meet or exceed
our expectations for our business segments in the current environment.
We are very pleased with the growth of our loans and our favorable
asset quality, while our net interest margin has remained stable. Our
banking fee income, although below the record levels of 2003,
continues to become more diversified. We are excited about our new
fee-based businesses of overdraft protection and insurance and
brokerage services coming on stream in the second half of the year.
The performance of our investment portfolio, too, has been favorable
despite the changing interest rate environment. We remain fully
focused on building-out our community banking franchises (loans,
deposits, and fee income producing businesses) in our main markets,
with the Phoenix metro market providing the near-term expansion
opportunity."
Harrington West Financial Group, Inc, is a $1.1 billion,
diversified, financial institution holding company for Los Padres Bank
and its division Harrington Bank. It operates 13 full service banking
operations on the central coast of California, Scottsdale Arizona, and
the Kansas City metro. It also owns Harrington Wealth Management
Company, a trust and investment management company with $124.0 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. 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
June 30, March 31, June 30,
2004 2004 2003
----------- ----------- ----------
Selected Financial Condition Data:
Total assets $1,050,420 $1,004,930 $864,121
Loans receivable, net 565,369 533,118 497,254
Securities available for sale 426,738 422,599 318,479
Securities held to maturity 163 215 2,312
Trading account assets 1,915 1,950 2,127
Deposits 589,789 584,765 538,877
Federal Home Loan Bank advances 295,000 256,500 224,000
Securities sold under repurchase
agreements 79,510 65,699 16,076
Note payable - - 12,000
Other debt 15,464 15,464 -
Stockholders' equity 48,971 49,261 44,892
Number of shares outstanding 5,269,184 5,257,484 5,193,541
At or for the For the
Three Months Ended Six Months Ended
-------------------------------- ---------------------
June 30, March 31, June 30, June 30, June 30,
2004 2004 2003 2004 2003
---------- ---------- ---------- ---------- ----------
Selected Income
Statement Data:
Interest income $12,727 $12,247 $11,306 $24,974 $22,664
Interest expense 5,232 5,208 5,049 10,440 10,170
---------- ---------- ---------- ---------- ----------
Net interest
income 7,495 7,039 6,257 14,534 12,494
Provision for
loan losses 230 90 250 320 610
---------- ---------- ---------- ---------- ----------
Net interest
income after
provision for
loan losses 7,265 6,949 6,007 14,214 11,884
Other income:
Income from
trading
account assets 273 338 1,294 611 1,870
Loss on
extinguishment
of debt (189) - (892) (189) (1,423)
Other gain
(loss) (2) (10) (40) (12) 50
Banking fee
income (1) 848 760 1,200 1,608 2,224
---------- ---------- ---------- ---------- ----------
Total other
income 930 1,088 1,562 2,018 2,721
Other expenses:
Salaries and
employee
benefits 2,704 2,683 2,555 5,387 5,024
Premises and
equipment 741 724 671 1,465 1,324
Other expenses(2) 1,425 1,332 1,246 2,757 2,418
---------- ---------- ---------- ---------- ----------
Total other
expenses 4,870 4,739 4,472 9,609 8,766
Income before
income taxes 3,325 3,298 3,097 6,623 5,839
Income taxes 1,345 1,239 1,286 2,584 2,424
---------- ---------- ---------- ---------- ----------
Net income $1,980 $2,059 $1,811 $4,039 $3,415
========== ========== ========== ========== ==========
Common Stock
Summary:
Diluted earnings
per share $0.35 $0.37 $0.33 $0.72 $0.63
Dividends per
share (7) 0.60 0.08 0.03 0.68 0.07
Stockholders'
equity per
share (8) 9.29 9.37 8.64 9.29 8.64
Diluted weighted
average shares
outstanding 5,613,093 5,545,816 5,411,472 5,576,272 5,398,831
At or for the For the
Three Months Ended Six Months Ended
-------------------------- ------------------
June 30, March 31, June 30, June 30, June 30,
2004 2004 2003 2004 2003
------- --------- --------- -------- --------
Selected Operating Data (3):
Performance Ratios and
Other Data:
Return on average assets 0.77% 0.83% 0.85% 0.78% 0.81%
Return on average equity 16.12 16.92 16.31 16.65 15.63
Equity to assets 4.66 4.90 5.20 4.66 5.20
Interest rate spread (4) 2.90 2.79 2.87 2.84 2.90
Net interest margin (4) 3.05 2.95 3.04 3.00 3.06
Average interest-earning
assets to average
interest-bearing
liabilities 107.12 107.27 106.83 107.20 106.60
Total noninterest expenses
to average total assets 1.93 1.94 2.11 1.93 2.09
Efficiency ratio (5) 58.37 60.76 59.97 59.53 59.56
Asset Quality Ratios (6):
Non-performing assets and
troubled debt restructurings
to total assets 0.00 0.02 0.00 0.00 0.02
Non-performing loans and
troubled debt restructurings
to total loans 0.00 0.03 0.00 0.00 0.03
Allowance for loan
losses to total loans 0.87 0.88 0.89 0.87 0.88
Net charge-offs to average
loans outstanding 0.00 0.00 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 and noninterest
income, excluding gains and losses on securities, deposits, borrowings
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.
(7) A six for five stock split in the form of a stock dividend
occurred on March 11, 2004, and a special dividend of 50 cents a share
was declared on June 16, 2004 payable on July 12, 2004.
(8) Calculation is based on number of outstanding shares at the
end of each period.
CONTACT: Harrington West Financial Group, Inc.
Craig J. Cerny, 913-663-0180
or
For share transfer information:
Gina L. Ast, 805-688-6644