Exhibit 99.1
Harrington West Announces Record Earnings for the March 2005 Quarter
and Declares a Regular Quarterly Dividend of 11 Cents Per Share
SOLVANG, Calif.--(BUSINESS WIRE)--April 25, 2005--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 a record $2.2 million or 40 cents per share
on a fully diluted basis in the March 2005 quarter compared to $2.1
million or 37 cents per share in the March 2004 quarter. Return on
average equity was 16.5% in the March 2005 quarter compared to 16.9%
in the same quarter a year ago. Book value per share was $10.47 at
March 31, 2005, rising 4.9% in the quarter due to the record earnings
and favorable changes in other comprehensive income from the Company's
interest rate risk management and investment activities. Given the
earnings performance, the Board of Directors declared a regular
quarterly dividend of 11 cents per share payable on May 18, 2005 to
holders of record on May 6, 2005.
Total assets grew $11.9 million in the quarter to $1.1 billion at
March 31, 2005. Net loan balances increased $23.0 million or 3.8%
since year-end to $621.4 million at March 31, 2005, while the
investment portfolio declined by $9.2 million or 2.1% to $422.1
million. Loan demand remained relatively strong within all of the
Company's markets leading to the favorable loan growth. With the
tighter spreads on mortgage and related investments in recent
quarters, management has become more selective and has reduced
investment purchases.
Financial Performance Analysis
The financial performance for the Company continues to be driven
by comparable period growth in net interest income, fee income, and
favorable investment portfolio performance, while expenses have grown
at a controlled pace with the expansion of new banking offices in its
markets.
Net interest income before the provision for loan losses was $7.6
million in the March 2005 quarter compared to $7.0 million in March
2004 quarter, growing 7.4%. Net interest margin was 2.84% in the March
2005 quarter compared to 2.89% and 2.95% in the December 2004 and
March 2004 quarters, respectively. The margin has declined slightly as
a result of the lag in the repricing of some floating rate loans,
investments (lagging prime based and COFI loans), and 3 month LIBOR
based interest rate swap hedges relative to the repricing of the
Company's daily floating rate borrowings. This lag is generally one to
three months. HWFG's net interest margin is expected to be positively
influenced in future quarters by the acquisition of approximately
$44.0 million in deposits in the Thousand Oaks, California market. It
is expected that these deposits will have a total cost of funds that
is less than the Company's short-term borrowing cost. Furthermore, the
premium paid on loans acquired in the Company's 2001 purchase of the
Harrington Bank branch in Mission, Kansas will be fully amortized by
the end of May 2005.
Banking fee income was $858 thousand in the March 2005 quarter
compared to $760 thousand in the March 2004 quarter, a 12.9% increase.
Shown in the following chart are the components of banking fee income
and comparisons for the March 2005, December 2004, and March 2004
quarters.
(Dollars in thousands)
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March December March
2005 2004 2004
Banking Fee Type Quarter Quarter % Change Quarter % Change
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Mortgage Brokerage
Fee, Prepayment
Penalties & Other
Loan Fees $377 $354 6.5% $376 0.3%
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Deposit, Other Retail
Banking Fees & Other
Fee Income 317 289 9.7% 239 32.6%
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Harrington Wealth
Management Fees 164 163 0.6% 145 13.1%
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Total $858 $806 6.5% $760 12.9%
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General and administrative expenses were $5.2 million in the March
2005 quarter compared to $5.0 million in the December 2004 quarter and
$4.7 million in the March 2004 quarter. The growth in operating
expenses has largely resulted from two areas: (1) the cost to
implement, support, and operate new banking offices in the Company's
markets and (2) the increased cost of new corporate governance
regulations. The Company estimates that each new office adds
approximately $400 thousand in operating expenses per year and the
profitability attainment takes from 6 to 18 months. The new corporate
governance regulations, including SOX 404, are expected to add
approximately $500 thousand in incremental annual expenditures to the
Company's operating expenses.
Community Banking Update
Both loans and deposits continued to grow in the quarter. Net
loans were $621.4 million at March 31, 2005, growing $23.0 million in
the quarter. The growth in loans continued to emanate from most loan
categories, and the mix of loans continued to improve to higher spread
nonresidential sectors as shown in the following table:
HWFG Net Loan Growth and Mix
(Dollars in millions)
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December 31,
March 31, 2005 2004 March 31, 2004
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% of % of % of
Loan Type Total Total Total Total Total Total
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Commercial Real Estate $269.5 42.8% $260.8 43.1% $254.0 47.1%
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Multi-family Real Estate 83.3 13.3% 84.9 14.0% 83.6 15.5%
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Construction (1) 38.5 6.1% 35.0 5.8% 25.1 4.7%
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Single-family Real Estate 105.7 16.8% 100.5 16.6% 97.3 18.1%
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Commercial and industrial
loans 72.8 11.6% 72.2 11.9% 49.0 9.1%
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Land acquisition and
development 33.8 5.4% 27.5 4.5% 10.9 2.0%
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Consumer loans 24.2 3.8% 23.7 3.9% 18.1 3.3%
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Other loans (2) 1.2 .2% 1.0 .2% 1.0 .2%
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Allowance, Deferred Fees &
Discounts/Premiums (7.6) (7.2) (5.9)
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Net loans receivable $621.4 100.0% $598.4 100.0% $533.1 100.0%
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(1) Includes loans collateralized by residential, commercial and
land properties.
(2) Includes loans collateralized by deposits and consumer line of
credit loans.
Asset quality remained favorable with $112 thousand of
non-performing loans as of March 31, 2005 compared to $95 thousand and
$154 thousand at December 31, 2004 and March 31, 2004, respectively.
With the loan growth in the quarter, the Company added $150 thousand
to its allowance for loan losses. At March 31, 2005, this allowance
was $5.4 million or .85% of total loans.
Deposits grew in the March 2005 quarter by $3.3 million or 1.0% to
$601.5 million at March 31, 2005. The Company continued to emphasize
reducing its deposit cost relative to borrowing rates and increasing
its low and non-interest bearing deposits. Non-interest bearing
deposits were $38.8 million at March 31, 2005, growing 15.4% in the
quarter. With the successful opening of the Company's second banking
office in the Scottsdale, Arizona area in late March 2005 and the
planned acquisition of the Thousand Oaks, California deposits on May
23, 2005, the Company anticipates accelerated growth in its deposit
balances.
Investment Portfolio Update
The Company's investment portfolio was $422.1 million at March 31,
2005 compared with $431.3 and $422.8 million at December 31, 2004 and
March 31, 2004, respectively. With tighter market spreads and less
favorable opportunities over the last year, the portfolio balances
remained relatively stable. This portfolio continued to perform above
the Company's expectations for a 1.25% to 1.5% total return (interest
income plus gains and losses on investments and related hedges) spread
over one month LIBOR. The trading portfolio, consisting largely of
"AAA" rated commercial mortgage security (CMBS) and an "A" rated home
equity asset-backed total return swaps, continued to perform favorably
adding $673 thousand in pre-tax gains in the quarter due to tighter
hedged spreads between CMBS yields and comparable duration LIBOR
yields.
Closing Comments
In commenting on the March 2005 quarter results, Craig J. Cerny,
Chairman and CEO of HWFG, stated, "We are pleased with the overall
performance of the Company in the March quarter throughout its
business lines. Our loan production was above our long-term targeted
growth rates, and we continue to make progress on changing our loan
mix to commercial and consumer related categories. Deposit growth was
lower than expected but we continue to work on increasing our
non-interest bearing deposits and lowering our overall deposit cost
relative to borrowing rates to improve profitability. Our net interest
margin declined slightly in the March 2005 quarter, but we believe
this decline is attributed to a short-term repricing lag of certain
floating rate loans and investments relative to our borrowings and
hedges. We expect this lag to catch-up over time, and the margin to be
positively influenced by our upcoming deposit acquisition and the full
amortization of the premium on loans acquired in the Harrington Bank
transaction in 2001. Our investment portfolio performance has been
consistently favorable, adding to profits over the last several years.
Although our de-novo banking office expansion in all markets has a
short-term impact on our profitability, we believe it will contribute
well to our future franchise valuation. We are excited about the
recent opening of our Scottsdale, Arizona Airpark office and the
progress with the plans for our third office in the Kansas City metro
in Johnson County, Kansas. We have several more opportunities we are
evaluating, principally in the Phoenix metro area, to enhance our
banking franchise."
Harrington West Financial Group, Inc. is a $1.1 billion,
diversified, financial institution holding company for Los Padres Bank
and its division Harrington Bank. HWFG will operate 15 full service
banking offices on the central coast of California, Scottsdale,
Arizona, and the Kansas City metro, when it completes the acquisition
of a banking office in Thousand Oaks, California in May 2005. The
Company also owns Harrington Wealth Management Company, a trust and
investment management company with $137.8 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 and (v) 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.
Harrington West Financial Group, Inc.
(Dollars in thousands, except share and per share data)
At At At
March 31, Dec. 31, March 31,
2005 2004 2004
----------- ----------- -----------
Selected Financial Condition Data:
Total assets $1,093,245 $1,081,330 $1,004,930
Loans receivable, net 621,420 598,442 533,118
Securities available for sale 421,961 431,206 422,599
Securities held to maturity 91 93 215
Trading account assets 911 1,046 1,950
Deposits 601,513 598,182 584,765
Federal Home Loan Bank advances 325,000 316,000 256,500
Securities sold under repurchase
agreements 79,479 79,689 65,699
Subordinated debt 25,774 25,774 15,464
Stockholders' equity 55,902 52,660 49,261
Number of shares outstanding 5,337,828 5,278,934 5,257,484
At or for the Three Months Ended
--------------------------------
March 31, Dec. 31, March 31,
2005 2004 2004
---------- ---------- ----------
Selected Income Statement Data:
Interest income $14,308 $14,021 $12,247
Interest expense 6,747 6,432 5,208
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Net interest income 7,561 7,589 7,039
Provision for loan losses 150 100 90
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Net interest income after provision
for loan losses 7,411 7,489 6,949
Other income:
Income (loss) from trading account
assets 712 386 338
Other Gain (loss) (7) (10) (10)
Banking fee income (1) 858 806 760
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Total other income 1,563 1,182 1,088
Other expenses:
Salaries and employee benefits 2,811 2,545 2,683
Premises and equipment 904 877 724
Other expenses (2) 1,495 1,557 1,332
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Total other expenses 5,210 4,979 4,739
Income before income taxes 3,764 3,692 3,298
Income taxes 1,529 1,501 1,239
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Net income $2,235 $2,191 $2,059
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Common Stock Summary:
Diluted earnings per share $0.40 $0.39 $0.37
Dividends per share 0.11 0.10 0.08
Stockholders' equity per share 10.47 9.98 9.37
Diluted weighted average shares
outstanding 5,616,246 5,644,904 5,545,816
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,
2005 2004 2004
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Selected Operating Data (3):
Performance Ratios and Other Data:
Return on average assets 0.82% 0.84% 0.83%
Return on average equity 16.47 17.20 16.92
Equity to assets 5.11 4.87 4.90
Interest rate spread (4) 2.65 2.72 2.79
Net interest margin (4) 2.84 2.89 2.95
Average interest-earning assets to
average interest-bearing
liabilities 107.13 107.05 107.27
Total noninterest expenses to average
total assets 1.91 1.82 1.94
Efficiency ratio (5) 61.88 59.31 60.76
Asset Quality Ratios (6):
Non-performing assets and troubled debt
restructurings
to total assets - - -
Non-performing loans and troubled debt
restructurings
to total loans 0.02 0.02 -
Allowance for loan losses to total
loans 0.85 0.87 0.88
Net charge-offs to average loans
outstanding - - -
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(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, corporate
governance, 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 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.
Craig J. Cerny, 913-663-0180
or
For share transfer information:
Lisa F. Watkins, 805-688-6644