Harbourton Capital Group, Inc. Reports 2005 Second Quarter E.P.S. of $0.01 and Year to Date E.P.S. of $0.16
November 04 2005 - 8:30AM
Business Wire
Harbourton Capital Group, Inc. ("Harbourton" or the "Company")
(OTC: HBTC) today reported net income after tax of $42,977, or
$0.01 per common share, for the three months ended September 30,
2005, compared with net income after tax of $792,973, or $0.16 per
common share, for the same period in 2004. Net income after tax for
the nine months ended September 30, 2005 was $621,899, or $0.12 per
common share, as compared with $1,885,434, or $0.37 per common
share, for the respective period in 2004. The return on average
equity for the quarter and nine months ended September 30, 2005 was
0.6% and 3.0%, respectively, as compared with 12.7% and 10.3% for
the same periods in 2004. Total shareholders' equity at September
30, 2005 increased to $27.7 million, with a corresponding book
value of $5.48 per share, as compared with total shareholders'
equity at December 31, 2004 of $27.1 million, or $5.35 per share.
There were 5,061,388 shares of common stock outstanding during the
three and nine months ended September 30, 2005 and 2004. The
results for the quarter reflect the significant margin and
competitive pressures existing in the national mortgage market in
which Harbourton Mortgage Investment Corporation ("HMIC"), the
Company's wholesale mortgage subsidiary, operates. The impact from
the increase in short term interest rates and the surge of negative
news and public commentary directed at specific mortgage products
associated with the sub-prime market contributed to the lower
prices received by HMIC on loans sold in the secondary market.
During the quarter HMIC's income was negatively impacted by a
significant decline in its net sales margin (gain on sale of loans
less costs to produce the loans), additional costs resulting from
its plan to aggressively increase loan fundings in the eastern
United States, and operating costs associated with implementing the
company's new automated underwriting and loan operating platform
"HELPS" (Harbourton Electronic Loan Processing Solution). The
effort to increase funding on the east coast, thereby diversifying
our production of loans, is proving successful as indicated by the
increasing ratio of HMIC's loans closed in this region. HMIC
introduced the first stage of HELPS on November 1, with the rollout
of the full platform expected prior to year-end. HELPS will enable
HMIC clients to submit loans via the Internet and receive an
underwriting decision immediately. Management believes HELPS will
be a major contributor to increased operating efficiencies in 2006
based on its advanced technology to receive loan submissions,
access third party vendor requirements (credit report and
appraisal), provide automated underwriting, and efficiently process
loans to final sale in the secondary market. During the quarter
ended September 30, 2005, HMIC recorded loan fundings of $280.4
million and loan sales of $251.4 million, as compared with loan
fundings of $219.2 million and loan sales of $222.4 million during
the previous quarter ended June 30, 2005. Third quarter revenue of
Harbourton Financial Corporation (HFC), the Company's mezzanine
lending subsidiary, was hindered by the higher level of non-earning
assets principally resulting from the foreclosure of two projects
related to the same builder/borrower. A 26-unit project was
acquired at the end of the first quarter, completed by the end of
the second quarter, with 15 of the units currently sold. The second
project of eight units was on non-accrual during the quarter, was
acquired September 30, 2005, and will follow a similar process of
completion and marketing to the buying public. During the quarter,
demand for our mezzanine loan product was strong, with HFC closing
on two new mezzanine transactions, in Washington D.C. and Dallas,
Texas. J. Kenneth McLendon, president and CEO stated, "Regarding
HMIC, the national mortgage market continues to be difficult,
facing a decline in the mortgage activity resulting from rising
interest rates and a reduction in prices paid by investors in the
secondary market for mortgage loans. The Company raised its
underwriting and performance benchmarks for HFC's mezzanine lending
activities and believes the markets will continue to produce
excellent opportunities in this arena, despite a moderation in
residential price inflation." He continued, "Our board and
management are committed to (1) achieving growth in both business
segments even in the difficult markets that exists, (2)
accomplishing efficiencies in all areas of our business, and (3)
adjusting operating expenses where necessary to provide maximum
return for our shareholders. These markets will undoubtedly present
the Company with opportunities for significant profits in both
business segments." Harbourton is a holding company comprising two
main financial businesses, mezzanine lending conducted by the HFC
subsidiary and mortgage banking by HMIC. HFC's primary business is
originating loans to builders and developers of residential
projects. The loans include financing for acquisition, development
and construction of residential single-family homes, townhouses,
and condominiums. HMIC's primary business consists of originating
and purchasing both conforming and non-conforming mortgage loans
and the subsequent sale of these loans servicing released to
investors in the secondary market. This press release may contain
various "forward-looking statements," within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended, that
represent the Company's expectations or beliefs concerning future
events. Such forward-looking statements are about matters that are
inherently subject to risks and uncertainties. Factors that could
cause actual results or performance to differ from the expectations
expressed or implied in such forward-looking statements include
changes in the timing and amount of earning assets which may be
originated by the Company, changes in revenue and expense trends
(including trends affecting charge-offs) of the Company, changes in
the Company's markets and changes in the economy (particularly in
the markets served by the Company). -0- *T Selected Financial Data:
(000's except per share data) September December September 30, 2005
31, 2004 30, 2004 --------------------------------- Total Assets
$131,584.2 $90,430.3 $91,327.5 Total Liabilities 103,868.3 63,327.9
66,051.7 Shareholders' Equity 27,715.9 27,102.4 25,275.8 Book Value
Per Share $5.48 $5.35 $4.99 Common Shares Outstanding 5,061.4
5,061.4 5,061.4 Three Months Ended Nine Months Ended September 30,
September 30, ------------------- ------------------- 2005 2004
2005 2004 --------- --------- --------- --------- Revenues:
Interest income $2,487.2 $1,760.7 $6,057.3 $4,240.0 Interest
expense (1,567.1) (658.3) (3,496.9) (1,463.8) --------- ---------
--------- --------- Net interest income before provision 920.1
1,102.4 2,560.4 2,776.2 Provision for loss (286.1) (372.0) (911.2)
(609.1) --------- --------- --------- --------- Net interest income
after provision 634.0 730.4 1,649.2 2,167.1 Fees and other income
3,724.0 3,853.0 11,277.6 8,718.8 --------- --------- ---------
--------- Total net revenues 4,358.0 4,583.4 12,926.8 10,885.9
Expenses Compensation and benefits 3,180.2 2,486.7 8,759.4 5,664.5
General & administrative 862.1 607.2 2,281.3 1,583.4 Loan
Expenses 91.9 93.6 239.6 247.2 Professional fees 177.3 39.7 427.9
154.4 Depreciation (21.0) 48.7 227.6 122.4 --------- ---------
--------- --------- Total Expenses 4,290.5 3,275.9 11,935.8 7,771.9
Income before income tax 67.5 1,307.5 991.0 3,114.0 Income tax 24.5
514.5 369.1 1,228.6 --------- --------- --------- --------- Net
income $43.0 $793.0 $621.9 $1,885.4 ========= ========= =========
========= Income per common share $0.01 $0.16 $0.12 $0.37 Weighted
average shares outstanding 5,061.4 5,061.4 5,061.4 5,061.4 Return
on average equity ("ROAE") 0.6% 12.7% 3.0% 10.3% *T