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�
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