(USOTC:HBTC)
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Harbourton Capital Group, Inc. ("Harbourton" or the
"Company") (OTC:HBTC) today reported net income after tax of $59,459,
or $0.01 per common share, for the three months ended June 30, 2005,
compared to net income after tax of $640,536, or $0.11 per common
share, for the comparable period in 2004. Net income after tax for the
six months ended June 30, 2005 was $578,921, or $0.11 per common
share, as compared with $1,092,461, or $0.22 per common share, for the
respective period in 2004. The return on average equity for the
quarter and six months ended June 30, 2005 was 0.9 % and 4.2 %,
respectfully, as compared with 10.6% and 9.1%, for the comparable
periods in 2004.
Total shareholders' equity at June 30, 2005 increased to $27.7
million, with a corresponding book value of $5.47 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 six months ended June 30, 2005
and 2004.
The results for the quarter were negatively impacted by increased
fees for audit and accounting expenses, as well as lower earnings in
both of the Company's subsidiaries, Harbourton Mortgage Investment
Corporation ("HMIC") and Harbourton Financial Corporation "HFC".
HMIC implemented an aggressive campaign to grow its presence in
the eastern United States with the addition of 40 account executives.
The costs associated with this initiative as well as the
administrative expenses associated with the final development and
testing of HMIC's new automated underwriting and loan origination
system, "HELPS" (Harbourton Electronic Loan Processing System),
materially impacted HMIC's results for the period. Mortgage activity
in the quarter mirrored that of the national market, including intense
interest rate competition and compressed margins. Nonetheless, during
the quarter ended June 30, 2005, HMIC increased loan fundings to
$219.6 million with corresponding loan sales of $213.7 million, as
compared to loan fundings of $202.4 million and loan sales of $192.6
million during the prior quarter ended March 31, 2005.
HFC revenue was negatively impacted by the foreclosure of a major
project at the end of the first quarter. Although the project's
residential condominium units were principally complete, the sales
process was delayed pending receipt of final occupancy permits from
the local governmental agency. Currently 40% of the units are sold
with the remainder listed for sale. HFC continues to experience strong
demand for mezzanine financing, with a significant pipeline of future
transactions. HFC intends to redeploy the proceeds from former
projects to satisfy existing demand.
J. Kenneth McLendon, president and CEO, stated, "Both the board of
directors and management were disappointed with the results for the
second quarter. Still, we recognize that in the mezzanine business it
may be necessary to proceed with a foreclosure to protect HFC's
investment. Moreover, HFC expects to recover all of its principal from
the project." He continued, "HMIC's strategic investment in systems
and staff during a challenging period in the industry creates an
opportunity for consistent growth in a cost efficient manner, which in
turn should lead to superior financial returns."
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 ("AD&C") 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 27A 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).
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Selected Financial Data:
(000's except per share data)
June 30, December 31, June 30,
2005 2004 2004
------------ ------------ ----------
Total Assets $ 107,715.4 $ 90,430.3 $75,863.9
Total Liabilities 80,049.3 63,327.9 51,386.7
Shareholders' Equity 27,666.1 27,102.4 24,477.2
Book Value Per Share $ 5.47 $ 5.35 $ 4.84
Common Shares Outstanding 5,061.4 5,061.4 5,061.4
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Revenues:
Interest income $1,763.1 $1,386.2 $3,570.1 $2,479.3
Interest expense (1,069.2) (485.5) (1,929.8) (805.5)
--------- --------- --------- ---------
Net interest income before
provision 693.9 900.7 1,640.3 1,673.8
Provision for loss (251.3) (100.7) (625.1) (237.2)
--------- --------- --------- ---------
Net interest income after
provision 442.6 800.0 1,015.2 1,436.7
Fees and other income 3,650.5 2,442.8 7,406.0 4,712.2
--------- --------- --------- ---------
Total net revenues 4,093.1 3,242.8 8,421.2 6,148.9
Expenses
Compensation and benefits 2,822.0 1,641.4 5,579.2 3,177.9
General & administrative 865.7 474.9 1,419.3 976.2
Professional fees 170.4 15.7 250.6 114.7
Depreciation 134.8 38.7 248.6 73.6
--------- --------- --------- ---------
Total Expenses 3,992.9 2,170.7 7,497.7 4,342.4
Income before income tax 100.2 1,072.1 923.5 1,806.5
Income tax 40.7 431.6 344.6 714.0
--------- --------- --------- ---------
Net income $ 59.5 $ 640.5 $ 578.9 $1,092.5
========= ========= ========= =========
Income per common share $ 0.01 $ 0.13 $ 0.11 $ 0.22
Weighted average shares
outstanding 5,061.4 5,061.4 5,061.4 5,061.4
Return on average equity
"ROAE" 0.9 % 10.6 % 4.2 % 9.1 %
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