(USOTC:HBTC)
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Harbourton Capital Group, Inc. (“Harbourton”
or the “Company”)
(OTC:HBTC) today reported a loss of $3.6 million, or $0.71 per common
share, for the three months ended September 30, 2006, compared with net
income after tax of $42,977, or $0.01 per common share, for the
comparable period in 2005. The loss for the nine months ended September
30, 2006 was $7.3 million, or $1.45 per common share, compared with net
income of $621,899, or $0.11 per common share, for the comparable 2005
period. There were 5,061,375 shares of common stock outstanding during
the three and nine months ended September 30, 2006 and 2005. Common
shareholders’ equity at September 30, 2006
was $17.7 million, with a corresponding book value of $3.49 per common
share, as compared with $25.0 million at December 31, 2005, or $4.93 per
common share.
The Company completed the acquisition of Molton Allen Williams Mortgage
Company, LLC (“MAW”),
headquartered in Fairfax, Virginia on August 31, 2006. In connection
with the acquisition, the Company issued $2.1 million in preferred stock
and a note payable in the amount of $300,000. The assets and liabilities
acquired in the MAW transaction were contributed to the Company’s
wholly owned subsidiary Harbourton Mortgage Investment Corporation (“HMIC”),
increasing the capital position of HMIC. The transaction was recorded
using purchase accounting and accordingly the results for the quarter
ended September 30, 2006 include the results of operations for HMIC only
for July and August and the consolidated results of both HMIC and MAW
operations for the month of September.
The Company’s results for the quarter were
again negatively impacted by HMIC, the Company’s
wholesale mortgage subsidiary. For the quarter ended September 30, 2006,
HMIC recorded a provision for losses of $954,000 in response to a
significant increase in the loans sold to investors that experienced an
early payment default, under which HMIC may have liability to the
investor. HMIC recorded a loss for the quarter ended September 30 of
$1.19 million excluding the provision for losses and approximately
$260,000 of one time expenses directly related to the MAW acquisition.
Harbourton Financial Corporation (“HFC”),
the Company’s mezzanine lending subsidiary,
established additional loan loss reserves of $750,000 related to three
of its projects to reflect the recent decline in real estate market
values.
President and CEO of Harbourton, J. Kenneth McLendon stated, “The
recent decline in both real estate activity and market values
significantly impacted the Company in the quarter ended September 30,
2006. Furthermore, the significant rise in early payment defaults on
loans that HMIC sold to investors on which it may have liability for
losses will continue to pressure earnings in the fourth quarter of 2006.
Additionally, he noted the integration expenses related to the MAW
acquisition would negatively impact the fourth quarter results.”
Harbourton is a holding company comprising two 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 rates.
Selected Financial Data:
(000’s except per share data)
Assets:
September 30, 2006
December 31, 2005
September 30, 2005
Cash & Cash Equivalents
$ 1,735.0
$ 2,043.2
$ 2,221.1
Loans Receivable, Net
7,276.9
8,574.6
11,564.1
Loans Held for Sale, Net
121,104.5
81,378.0
97,348.2
Investment in Real Estate, Net
7,234.2
12,952.3
12,126.0
Other Assets
15,065.2
7,857.0
8,324.7
Total Assets
$152,415.8
$112,805.0
$131,584.2
Liabilities:
Notes Payable
5,816.4
7,073.3
7,675.4
Warehouse Line Payable
123,091.9
78,081.2
92,682.4
Accounts Payable
3,743.9
2,697.6
3,510.6
Total Liabilities
132,652.2
87,852.2
103,868.3
Preferred Stock
2,108.0
-
-
Common Shareholders’ Equity
17,655.6
24,952.8
27,715.9
Total Liabilities and Shareholders Equity
$152,415.8
$112,805.0
$131,584.2
Book Value Per Common Share
$3.49
$4.93
$5.48
Common Shares Outstanding
5,061.4
5,061.4
5,061.4
Three Months Ended
Nine Months Ended
September 30,
September 30,
Revenues:
2006
2005
2006
2005
Interest income
$2,998.9
$2,487.2
$ 6,574.9
$ 6,057.4
Interest expense
(2,093.6)
(1,567.1)
(4,447.1)
(3,496.9)
Net interest income before provision
905.3
920.1
2,127.8
2,560.4
Provision for loss
(1,802.8)
(286.1)
(2,324.0)
(911.2)
Net interest income after provision
(897.5)
634.0
(196.1)
1,649.2
Fees and other income
2,447.5
3,724.0
6,055.8
11,277.6
Total net revenues
1,550.0
4,358.0
5,859.6
12,926.8
Expenses:
Compensation and benefits
3,709.9
3,180.3
9,307.0
8,759.4
General & administrative
1,206.1
861.9
2,823.6
2,281.2
Loan expenses
(166.7)
92.0
150.3
239.6
Professional fees
148.1
177.3
402.3
428.0
Depreciation
184.6
(21.0)
503.3
227.6
Total Expenses
5,082.1
4,290.5
13,186.5
11,935.8
Income (loss) before income tax
(3,532.0)
67.5
(7,326.9)
991.1
Income tax (credit)
53.9
24.5
(2.8)
(369.1)
Net income (loss)
($3,586.0)
$ 43.0
($7,329.7)
$ 621.9
Net Income (loss) available per common share
($0.71)
$0.01
($1.45)
$0.11
Weighted average shares outstanding
5,061.4
5,061.4
5,061.4
5,061.4