Harbourton Capital Group, Inc. ("Harbourton" or the "Company") (OTC:HBTC) today reported a net after tax loss of $2,781,513 or $0.55 per common share, for the three months ended December 31, 2005, compared with net income after tax of $2,220.2, or $0.44 per common share, for the same period in 2004. The Company reported a loss for the twelve months ended December 31, 2005 of $2,159,614, or $0.43 per common share, as compared with net income of $3,642,823, or $0.72 per common share, for the respective period in 2004. Total shareholders' equity at December 31, 2005 was $25.0 million, with a corresponding book value of $4.93 per share, as compared with total shareholders' equity at December 31, 2004 of $27.1 million, or $5.35 per share. There were 5,061,375 shares of common stock outstanding during the three and twelve months ended December 31, 2005 and 2004. The company's results for the quarter were significantly impacted by Harbourton Mortgage Investment Corporation ("HMIC"), the Company's wholesale mortgage subsidiary, as it continued to cope during the period with significant interest rate increases and turmoil in the secondary market in which it sells all the loans it funds. For the quarter ended December 31, 2005, HMIC originated $189.2 million of loans, a 33% decline as compared with fundings for the previous quarter of $280.6 million, reflecting the general slowdown in the national real estate market. Sales of loans during the quarter ended December 31, 2005 were $202.7 million, with an average gain on sale of 2.07%, as compared with sales in the prior quarter of $250.5 million with a comparable gain on sale of 2.53%. Harbourton Financial Corporation (HFC), the Company's mezzanine lending subsidiary, reported a loss for the fourth quarter after recording a one time charge to adjust the carrying value of selected mezzanine loans and acquired real estate. The non-recurring charge reflects management's assessment of the change in valuation for the specific projects, including two residential condominium projects on which the Company foreclosed in 2005. To date the Company has subsequently sold 23 of the original 26 units received in the first foreclosure and is completing the construction of the 8 units received in the second foreclosure, with delivery expected in the third quarter 2006. Never the less the Company's investment in real estate owned negatively impacted HFC's interest revenue during the fourth quarter 2005. J. Kenneth McLendon, president and CEO stated, "Regarding HMIC, the national mortgage market was difficult in the fourth quarter, as increased interest rates led to subdued real estate activity. The turmoil in the secondary market, combined with an unusually large supply of loans offered for sale, led to the decline in the gain on sale received by HMIC during the quarter from investors in the secondary market." He continued, "The board and management acknowledge and regret the company's poor operating performance during the fourth quarter, however we are committed to achieving profitable growth in both business segments during 2006. The board and management are dedicated to the goal of accomplishing efficiencies in all areas of our business, and adjusting operating expenses where necessary to provide maximum return for our shareholders." 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 foreclosures and charge-offs) of the Company, changes in the Company's markets, changes in the economy (particularly in the markets served by The Company) and changes in interest rate. -0- *T Selected Financial Data: (000's except per share data) December 31, 2005 December 31, 2004 ----------------- ----------------- Total Assets $122,805.0 $ 90,430.3 Total Liabilities 87,852.2 63,327.9 Shareholders' Equity 24,952.8 27,102.3 Book Value Per Share $ 4.93 $ 5.35 Common Shares Outstanding 5,061.4 5,061.4 Three Months Ended Twelve Months Ended December 31, December 31, ------------------------------------------- 2005 2004 2005 2004 ---------- ---------- ---------- ---------- Revenues: Interest income $ 2,368.4 $ 1,789.6 $ 8,425.8 $ 6,029.7 Interest expense (1,573.3) (769.6) (5,070.3) (2,233.5) ---------- ---------- ---------- ---------- Net interest income before provision 795.1 1,020.0 3,355.6 3,796.2 Provision for loss (1,351.8) (476.5) (2,263.0) (1,085.6) ---------- ---------- ---------- ---------- Net interest income after provision (556.7) 543.4 1,092.6 2,710.6 Fees and other income 1,521.5 4,971.2 12,799.1 13,227.2 ---------- ---------- ---------- ---------- Total net revenues 964.8 5,514.6 13,891.7 15,937.8 Expenses Compensation and benefits 2,750.3 2,795.6 11,509.7 8,460.2 General & administrative 1,050.2 406.5 570.9 2,237.0 Professional fees 175.7 189.7 603.7 344.2 Depreciation 139.4 79.6 367.0 202.0 ---------- ---------- ---------- ---------- Total Expenses 4,115.6 3,471.5 16,051.3 11,243.4 Income (loss) before income tax (3,150.8) 2,043.1 (2,159.6) 4,694.4 Income tax expense (benefit) (369.1) (177.0) - 1,051.6 ---------- ---------- ---------- ---------- Net income (loss) ($2,781.7) $ 2,220.2 $(2,159.6) $ 3,642.8 ========== ========== ========== ========== Income (loss) per common share ($0.55) $ 0.44 ($0.43) $ 0.72 Weighted average shares outstanding 5,061.4 5,061.4 5,061.4 5,061.4 Return on average equity ("ROAE") (42.2%) 33.9% (8.0%) 14.8% *T