EXHIBIT 99.1
Harrington West Announces Earnings for the March 2006 Quarter and
Declares a Regular Quarterly Dividend of 12.5 Cents Per Share
SOLVANG, Calif.--(BUSINESS WIRE)--April 25, 2006--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 $2.1 million or 38 cents per share on a fully
diluted basis in the March 2006 quarter compared to $2.2 million or 40
cents per share in the March 2005 quarter. The earnings per share for
the March 2006 quarter included a charge of 1 cent per share for the
implementation of FAS 123(R) for the expensing of stock option grants.
Lower net gains on trading assets and investments accounted for the
decline in net earnings in the comparable quarters; however, core
banking income on an after tax basis (net earnings excluding
securities and other gains and losses) increased to 35 cents per share
on a fully diluted basis in the March 2006 quarter versus 32 cents in
the March 2005 quarter.
Return on average equity was 14.0% in the March 2006 quarter
compared to 16.7% in the same quarter a year ago. Book value per share
was $11.51 at March 31, 2006, rising 4.1% in the quarter due to the
favorable earnings and changes in other comprehensive income from the
Company's interest rate risk management and investment activities.
Given the financial performance, the Board of Directors declared a
regular quarterly dividend of 12.5 cents per share payable on May 16,
2006 to holders of record on May 5, 2006.
Total assets at March 31, 2006 decreased $6.7 million to $1.1
billion compared to year end 2005. Net loan balances increased $11.0
million since December 31, 2005 to $683.9 million at March 31, 2006,
while the investment portfolio declined by $21.3 million to $367.1
million over the same period. Loan demand remained relatively strong
within all of the Company's markets leading to the loan growth, but
with the larger loan portfolio and more construction and revolving
commercial lines of credit, payoffs were also higher. With the much
tighter spreads on mortgage and related investments in recent
quarters, management has reduced the investment portfolio. Deposit
balances at March 31, 2006 were up $27.6 million from December 31,
2005 to $696.8 million.
Financial Performance Analysis
HWFG seeks to manage the interest rate risk of the institution to
a low level, maintain relatively stable net interest margins, and grow
net interest income primarily from the growth in loan balances and
core deposits. As such, net interest income before the provision for
loan losses was $7.8 million in the March 2006 quarter compared to
$7.6 million in March 2005 quarter, growing 3.2%, in line with the
growth in average earning assets over the period. Net interest margin
improved to 2.83% in the March 2006 quarter compared to 2.81% and
2.84% in the December 2005 and March 2005 quarters, respectively. The
lag in the repricing of some floating rate instruments (COFI and
lagging PRIME and Treasury based loans and securities and 3 month
LIBOR swaps relative to daily borrowings) and some competitive
pressure on deposit cost have been offset by the mix change of the
earning assets to higher spread earning, PRIME based loans with fees
from growth in HWFG's business and construction lending.
Banking fee income was $915 thousand in the March 2006 quarter
compared to $858 thousand in the March 2005 quarter, a 6.6% increase.
With the higher rate environment, early prepayment penalties were
lower by $96 thousand and $238 thousand in the March 2006 quarter
versus the December 2005 and March 2005 quarters, respectively.
Conversely, less volatile Harrington Wealth Management, BOLI, mortgage
brokerage, and deposit fees continued to grow in the March 2006
quarter over the March 2005 quarter. Shown in the following chart are
the components of banking fee income and comparisons for the March
2006, December 2005, and March 2005 quarters.
(Dollars in thousands)
- ----------------------------------------------------------------------
March December March
2006 2005 2005
Banking Fee Type Quarter Quarter % Change Quarter % Change
- ---------------------- --------- -------- --------- -------- ---------
Mortgage Brokerage
Fee, Prepayment
Penalties & Other
Loan Fees $207 $270 -23.3% $377 -45.1%
- ---------------------- --------- -------- --------- -------- ---------
Deposit, Other Retail
Banking Fees & Other
Fee Income 320 325 -1.5% 317 .9%
- ---------------------- --------- -------- --------- -------- ---------
Harrington Wealth
Management Fees 197 188 4.8% 164 20.1%
- ---------------------- --------- -------- --------- -------- ---------
BOLI Income, net 191 174 9.8% n/a
- ---------------------- --------- -------- --------- -------- ---------
Total $915 $957 -4.4% $858 6.6%
- ---------------------- --------- -------- --------- -------- ---------
General and administrative expenses were $5.4 million in the March
2006 quarter compared to $5.3 million in the December 2005 quarter and
$5.2 million in the March 2005 quarter. The growth in operating
expenses has largely resulted from three areas: (1) the cost to
implement, support, and operate new banking offices in the Company's
markets, (2) the increase in lending officers, and (3) the
implementation of FAS 123(R) related to the expensing of stock option
grants. The expensing of stock options added $109 thousand in
additional expense in the March 2006 quarter over the March 2005
quarter. These increases have been somewhat offset by lower SOX 404
implementation expense.
Community Banking Update
Both loans and deposits continued to grow in the March 2006
quarter. Net loans were $683.9 million at March 31, 2006, growing
$62.4 million or 10.1% since March 31, 2005. The growth in loans
continued to emanate largely from construction and commercial loan
categories, as shown in the following table:
HWFG Net Loan Growth and Mix
- ----------------------------------------------------------------------
March 31, December 31, March 31,
(Dollars in millions) 2006 2005 2005
- ------------------------- -------------- -------------- --------------
% of % of % of
Loan Type Total Total Total Total Total Total
- ------------------------- ------- ------ ------- ------ ------- ------
Commercial Real Estate $252.7 36.5% $253.2 37.2% $269.5 42.8%
- ------------------------- ------- ------ ------- ------ ------- ------
Multi-family Real Estate 82.4 11.9% 80.9 11.9% 83.3 13.3%
- ------------------------- ------- ------ ------- ------ ------- ------
Construction(1) 83.5 12.0% 70.9 10.4% 38.5 6.1%
- ------------------------- ------- ------ ------- ------ ------- ------
Single-family Real Estate 111.5 16.1% 115.9 17.0% 105.7 16.8%
- ------------------------- ------- ------ ------- ------ ------- ------
Commercial and industrial
loans 95.3 13.8% 96.5 14.1% 72.8 11.6%
- ------------------------- ------- ------ ------- ------ ------- ------
Land acquisition and
development 39.3 5.7% 36.1 5.3% 33.8 5.4%
- ------------------------- ------- ------ ------- ------ ------- ------
Consumer loans 26.3 3.8% 26.7 3.9% 24.2 3.8%
- ------------------------- ------- ------ ------- ------ ------- ------
Other loans(2) 1.4 .2% 1.3 0.2% 1.2 .2%
- ------------------------- ------- ------ ------- ------ ------- ------
Total gross loans 692.4 100.0% 681.5 100.0% 629.0 100.0%
- ------------------------- ------- ------ ------- ------ ------- ------
Allowance, Deferred Fees
& Discounts/Premiums (8.5) (8.6) (7.6)
- ------------------------- ------- ------ ------- ------ ------- ------
Net loans receivable $683.9 $672.9 $621.4
- ------------------------- ------- ------ ------- ------ ------- ------
(1) Includes loans collateralized by residential, commercial and
land properties.
(2) Includes loans collateralized by deposits and consumer line of
credit loans.
HWFG added $140 thousand to its allowance for loan losses in the
March 2006 quarter. Total specific and general allowances for loan
losses equaled $5.8 million or 0.85% of net loan balances at March 31,
2006. After virtually no non-performing loans over the last several
quarters, one business loan and its related owner-occupied real estate
loan in the Kansas City market became non-performing in the quarter
due to a severe weakness in the operating fundamentals of the
business. At March 31, 2006, HWFG had $466 thousand of non-performing
loans and $1.1 million of real estate owned at fair market value,
virtually all related to this business credit. Specific reserves of
$260 thousand have been provided against the non-performing loans.
Deposit balances were $696.8 million at March 31, 2006 and were
15.8% higher than March 31, 2005. The Company continued to manage its
deposit cost relative to borrowing rates and increase its low and
non-interest bearing deposits. Non-interest bearing deposits were
$51.4 million at March 31, 2006 compared to $38.8 million at March 31,
2005. HWFG is emphasizing non costing deposit development through
incentives to lenders and business developers, cross selling deposit
services to commercial customers that do not have a deposit
relationship, and promoting its Ultimate free checking account for
retail customers. HWFG has been promoting its Diamond Certificate of
Deposit account with liquidity features, which was very successful in
the March 2006 quarter.
HWFG continues to focus on organic franchise growth through new
full service banking offices in its primary markets. HWFG's sixteenth
office and third in Johnson County, Kansas of the Kansas City metro is
scheduled to open in the third quarter of 2006. In the Phoenix,
Arizona metro, the Surprise office is in the development stage and is
planned to open in the first quarter of 2007, a parcel was acquired in
early April 2006 for an office in the Deer Valley Airpark, and the
Company is seeking a site in the Southeast Valley, bringing the
planned offices to five in this market by 2008. HWFG continues to seek
fill-in offices along the Central Coast of California.
Investment Portfolio Update
The Company's investment portfolio was $367.1 million at March 31,
2006 compared to $388.4 and $423.0 million at December 31, 2005 and
March 31, 2005, respectively. With tighter market spreads and less
favorable opportunities over the last year, the portfolio balances
have been reduced by $55.8 million from March 31, 2005 to March 31,
2006. The trading portfolio, consisting largely of investment grade
rated commercial mortgage security (CMBS) and home equity asset-backed
total return swaps, continued to perform very favorably in the quarter
due to tighter spreads between CMBS and ABS yields and their
comparable duration LIBOR yields. These gains were partially offset by
selling some of the very tight spread mortgage backed securities in
the available-for-sale portfolio at losses due to interest rate
increases, resulting in a net gain of $255 thousand for the March 2006
quarter.
Closing Comments
In commenting on the March 2006 quarter results, Craig J. Cerny,
Chairman and CEO of HWFG, stated, "We are generally pleased with our
results for the quarter, highlighted by a slightly improving net
interest margin from the December 2005 quarter in a flat yield curve
and tight spread environment, growth in the less volatile fee income
sources, favorable operating expense control, and strong book value
growth. We expect to grow our loans and deposits within our target
range of 8-12% per year and have plans to grow our banking offices in
our primary markets from 15 today to approximately 20 by 2008. We have
acquired some excellent banking talent to bolster our loan production
and core deposit gathering and are steadfastly committed to growing on
a controlled basis a profitable franchise in an attempt to enhance
shareholder value."
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 operates 15 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 $145.2 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.
Consolidated Financial Data - Harrington West Financial Group, Inc.
(Unaudited)
(In thousands, except per share data) Quarter ended
Mar. 31, Mar. 31,
2006 2005
- ----------------------------------------------------------------------
Interest income $17,664 $14,308
Interest expense 9,858 6,747
----------- -----------
Net interest income 7,806 7,561
Provision for loan losses 140 150
----------- -----------
Net interest income after provision for
loan losses 7,666 7,411
Non-interest income:
Income (loss) from trading assets 255 712
Other gain (loss) (4) (7)
Banking fee income 915 858
----------- -----------
Non-interest income 1,166 1,563
Non-interest expense 5,392 5,210
----------- -----------
Income before income taxes 3,440 3,764
Provision for income taxes 1,342 1,529
----------- -----------
Net income $2,098 $2,235
=========== ===========
Quarter ended
Mar. 31, Mar. 31,
2006 2005
----------- -----------
Per share:
Net income - basic $0.39 $0.42
Net income - diluted $0.38 $0.40
Weighted average shares used
in Basic EPS calculation 5,410,370 5,291,640
Weighted average shares used
in Diluted EPS calculation 5,564,236 5,616,246
Cash dividends $0.13 $0.11
Book value at period-end $11.51 $10.47
Tangible book value at period-end $10.29 $9.56
Ending shares 5,418,843 5,337,828
Financial ratios
Return on average assets 0.74% 0.83%
Return on average equity 14.02% 16.70%
Average equity to average
assets (leverage ratio) 5.29% 4.98%
Net interest margin 2.83% 2.84%
Efficiency ratio 61.83% 61.88%
Period averages
Total assets $1,147,547 $1,090,606
Total loans, net of allowance 684,183 614,185
Total earning assets 1,100,599 1,064,977
Total deposits 674,124 603,755
Total equity 60,700 54,286
Quarter Ended
-------------------------------------------------------
(In thousands,
except per Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
share data) 2006 2005 2005 2005 2005
- ----------------------------------------------------------------------
Interest income $17,664 $16,738 $15,847 $15,163 $14,308
Interest expense 9,858 9,186 8,285 7,680 6,747
-------------------------------------------------------
Net interest
income 7,806 7,552 7,562 7,483 7,561
Provision for
loan losses 140 85 - 200 150
-------------------------------------------------------
Net interest
income after
provision for
loan losses 7,666 7,467 7,562 7,283 7,411
Non-interest income:
Income (loss) from
trading assets 255 64 89 71 712
Other gain (loss) (4) (2) (7) 1 (7)
Banking fee income 915 957 1,159 974 858
-------------------------------------------------------
1,166 1,019 1,241 1,046 1,563
Non-interest
expense 5,392 5,349 5,379 5,138 5,210
-------------------------------------------------------
Income before
income taxes 3,440 3,137 3,424 3,191 3,764
Provision for
income taxes 1,342 1,085 1,326 1,240 1,529
-------------------------------------------------------
Net income $2,098 $2,052 $2,098 $1,951 $2,235
=======================================================
Per share:
Net income -
basic $0.39 $0.38 $0.39 $0.36 $0.42
Net income -
diluted $0.38 $0.36 $0.37 $0.35 $0.40
Weighted average
shares used in
Basic EPS
calculation 5,410,370 5,373,936 5,364,077 5,360,331 5,291,640
Weighted average
shares used in
Diluted EPS
calculation 5,564,236 5,642,716 5,649,134 5,639,756 5,616,246
Cash dividends
per share $0.13 $0.13 $0.12 $0.11 $0.11
Book value at
period-end $11.51 $11.06 $10.85 $10.46 $10.47
Tangible book
value at
period-end $10.29 $9.82 $9.61 $9.19 $9.56
Ending shares 5,418,843 5,384,843 5,364,498 5,363,853 5,337,828
Financial ratios
Return on average
assets 0.74% 0.72% 0.75% 0.71% 0.82%
Return on average
equity 14.02% 13.76% 14.68% 13.94% 16.47%
Average equity
to average
assets (leverage
ratio) 5.29% 5.23% 5.24% 5.06% 4.98%
Net interest
margin 2.83% 2.81% 2.84% 2.82% 2.84%
Efficiency ratio 61.83% 62.86% 61.68% 60.76% 61.88%
Period averages
Total assets 1,147,547 1,132,138 1,113,282 1,106,249 1,090,606
Total loans,
net of
allowance 684,183 659,093 641,446 631,198 614,185
Total earning
assets 1,100,599 1,086,463 1,067,568 1,065,574 1,064,977
Total deposits 674,124 672,020 662,787 608,855 603,755
Total equity 60,700 59,181 56,002 56,002 54,286
Balance sheet at period-end
Cash and due
from banks $18,540 $19,312 $18,314 $14,271 $11,589
Investments and
fed funds sold 367,127 388,407 391,671 402,085 422,963
Loans, before
allowance for
loan losses 689,668 678,551 656,822 640,466 626,797
Allowance for
loan losses (5,800) (5,661) (5,576) (5,576) (5,377)
Goodwill and
core deposit
intangibles 6,620 6,683 6,686 6,783 4,856
Other assets 57,312 52,895 53,730 51,237 32,418
-------------------------------------------------------
Total assets $1,133,467 $1,140,187 $1,121,647 $1,109,266 $1,093,246
=======================================================
Interest bearing
deposits $645,390 $619,213 $622,961 $605,259 $562,713
Non-interest
bearing
deposits 51,373 49,932 48,741 40,056 38,800
Other
borrowings 369,908 403,787 377,939 400,954 430,253
Other
liabilities 4,438 7,681 13,783 6,895 5,585
Shareholders'
equity 62,358 59,574 58,223 56,102 55,895
-------------------------------------------------------
Total liabilities
and shareholders'
equity $1,133,467 $1,140,187 $1,121,647 $1,109,266 $1,093,246
=======================================================
Asset quality and capital
- at period-end
Non-accrual loans $- $- $20 $608 $112
Loans past due
90 days or more 466 - - - -
Other real
estate owned 1,050 - - - -
-------------------------------------------------------
Total non performing
assets $1,516 $- $20 $608 $112
=======================================================
Allowance for
losses to loans 0.85% 0.84% 0.85% 0.87% 0.85%
Non-accrual loans
to total loans 0.00% 0.00% 0.00% 0.10% 0.02%
Non-performing
assets total
assets 0.13% 0.00% 0.00% 0.05% 0.01%
Three months ended Three months ended
(In thousands) March 31, 2006 March 31, 2005
---------------------------- -------------------------
Balance Income Rate(6) Balance Income Rate(6)
---------------------------- -------------------------
Interest earning assets:
Loans
receivable(1) $684,183 $12,654 7.43% $614,185 $9,908 6.45%
FHLB stock 16,396 194 4.80% 15,388 145 3.78%
Securities and
trading account
assets(2) 388,578 4,765 4.91% 426,506 4,220 3.96%
Cash and cash
equivalents(3) 11,442 51 1.81% 8,898 35 1.57%
----------- -------- ----------- -------
Total interest
earning
assets 1,100,599 17,664 6.44% 1,064,977 14,308 5.37%
-------- -------
Non-interest-
earning assets 46,948 25,629
----------- -----------
Total assets $1,147,547 $1,090,606
=========== ===========
Interest bearing liabilities:
Deposits:
NOW and money
market accounts $110,680 $549 2.01% $119,486 $386 1.29%
Passbook accounts
and certificates
of deposit 514,849 4,698 3.70% 449,105 2,699 2.40%
----------- -------- ----------- -------
Total deposits 625,529 5,247 3.40% 568,591 3,085 2.17%
FHLB advances(4) 322,100 3,712 4.67% 320,900 2,812 3.51%
Reverse
repurchase
agreements 59,102 436 2.95% 79,611 514 2.58%
Other
borrowings(5) 25,774 463 7.19% 25,000 336 5.38%
----------- -------- ----------- -------
Total interest-
bearing
liabilities 1,032,505 9,858 3.85% 994,102 6,747 2.71%
-------- -------
Non-interest-
bearing
deposits 48,595 35,164
Non-interest-
bearing
liabilities 5,747 7,054
----------- -----------
Total
liabilities 1,086,847 1,036,320
Stockholders'
equity 60,700 54,286
----------- -----------
Total liabilities
and stockholders'
equity $1,147,547 $1,090,606
=========== ===========
Net interest-
earning assets
(liabilities) $68,094 $70,875
=========== ===========
Net interest
income/interest
rate spread $7,806 2.59% $7,561 2.66%
======== ======= ======= =======
Net interest
margin 2.83% 2.84%
======= =======
Ratio of average
interest-earning
assets to average
interest-bearing
liabilities 106.60% 107.13%
======= =======
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.
3) Consists of cash and 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 debt and a note payable under a revolving
line of credit.
6) Annualized.
CONTACT: Harrington West Financial Group, Inc.
Craig J. Cerny, 480-596-6555
or
For share transfer information contact:
Lisa F. Watkins, 805-688-6644