HBTC

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). -0- *T 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 % *T