##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 000-50066
 HARRINGTON WEST FINANCIAL GROUP, INC.
  Delaware
(State or other jurisdiction of incorporation or organization)
    
    48-1175170
(I.R.S. Employer Identification No.)
 
 
 
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
  o o þ
 o þ




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##### 



HARRINGTON WEST FINANCIAL GROUP, INC.
 TABLE OF CONTENTS
 PagePart I    Financial InformationItem 1.Condensed Consolidated Financial Statements (Unaudited)
    
    
    2Condensed Consolidated Statements of Financial Condition as of
June 30, 2007 and December 31, 2006
    
    
    2Condensed Consolidated Statements of Income and Comprehensive Income
for the Three and Six Months Ended June 30, 2007 and 2006
    
    
    3Condensed Consolidated Statements of Stockholders Equity and Comprehensive
Income for the Six Months Ended June 30, 2007
and Year Ended December 31, 2006
    
    
    4Condensed Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2007 and 2006
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9Item 3.Quantitative and Qualitative Disclosures about Market Risk
    
    
    23Item 4.Controls and Procedures
    
    
    24Part II  Other InformationItem 1.Legal Proceedings
    
    
    25Item 1A.Risk Factors
    
    
    25Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 3.Defaults upon Senior Securities
    
    
    25Item 4.Submission of Matters to a Vote of Security Holders
    
    
    25Item 5.Other Information
    
    
    25Item 6.Exhibits
    
    
    26Signatures
    
    
    26EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 31.3EXHIBIT 32
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##### Table of Contents



PART 1-FINANCIAL INFORMATION
 
 Item 1: Condensed Consolidated Financial Statements
 
 HARRINGTON WEST FINANCIAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
 (Dollars in thousands, except per share data)
 June 30, 2007
    
    
    December 31, 2006ASSETSCash and cash equivalents
    
    $
    18,524
    
    
    $
    21,178Trading account assets
    
    
    865
    
    
    
    837Securities available-for-sale at fair value
    
    
    286,430
    
    
    
    309,729Securities held to maturity (fair value of $64 at June 30, 2007 and $71 at
December 31, 2006)
    
    
    62
    
    
    
    69Loans receivable, (net of allowance for loan losses of $6,113
and $5,914 at June 30, 2007 and December 31,
2006, respectively)
    
    
    759,393
    
    
    
    757,033Accrued interest receivable
    
    
    5,244
    
    
    
    5,315Premises and equipment, net
    
    
    15,210
    
    
    
    15,581Due from broker
    
    
    
    
    
    
    142Prepaid expenses and other assets
    
    
    4,551
    
    
    
    4,959Investment in FHLB stock, at cost
    
    
    13,207
    
    
    
    14,615Income tax receivable
    
    
    813
    
    
    
    112Bank owned life insurance
    
    
    18,831
    
    
    
    18,472Deferred taxes
    
    
    1,069
    
    
    
    Goodwill
    
    
    5,496
    
    
    
    5,496Core deposit intangible, net
    
    
    811
    
    
    
    935TOTAL ASSETS
    
    $
    1,130,506
    
    
    $
    1,154,473LIABILITIES & STOCKHOLDERS EQUITYLIABILITIES:Deposits:Interest bearing
    
    $
    723,652
    
    
    $
    677,665Non-interest bearing
    
    
    47,248
    
    
    
    55,092Total Deposits
    
    
    770,900
    
    
    
    732,757FHLB advances
    
    
    207,000
    
    
    
    257,000Securities sold under repurchase agreements
    
    
    50,157
    
    
    
    65,141Subordinated debt
    
    
    25,774
    
    
    
    25,774Accrued interest payable and other liabilities
    
    
    5,487
    
    
    
    5,005Income taxes payable
    
    
    52
    
    
    
    Deferred income taxes
    
    
    2,266
    
    
    
    1,098TOTAL LIABILITIES
    
    
    1,061,636
    
    
    
    1,086,775STOCKHOLDERS EQUITY:Preferred stock, $.01 par value: 1,200,000 shares authorized: none
issued and outstandingCommon stock, $.01 par value; 10,800,000 shares authorized: 5,546,653
shares issued and outstanding as of June 30,
2007 and 5,460,393 shares issued and outstanding December
31, 2006
    
    
    55
    
    
    
    55Additional paid-in capital
    
    
    34,197
    
    
    
    33,332Retained earnings
    
    
    34,950
    
    
    
    34,964Accumulated other comprehensive loss
    
    
    (332
    )
    
    
    (653
    )Total Stockholders Equity
    
    
    68,870
    
    
    
    67,698TOTAL LIABILITIES & STOCKHOLDERS EQUITY
    
    $
    1,130,506
    
    
    $
    1,154,473
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##### Table of Contents



HARRINGTON WEST FINANCIAL GROUP, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
 Dollars in thousands, except per share data)
 
 Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006INTEREST INCOMEInterest on loans
    
    $
    15,080
    
    
    $
    13,286
    
    
    $
    30,073
    
    
    $
    25,939Interest and dividends on securities
    
    
    4,234
    
    
    
    4,921
    
    
    
    8,560
    
    
    
    9,929Total interest income
    
    
    19,314
    
    
    
    18,207
    
    
    
    38,633
    
    
    
    35,868INTEREST EXPENSEInterest on deposits
    
    
    7,799
    
    
    
    6,119
    
    
    
    15,377
    
    
    
    11,367Interest on FHLB advances and other borrowings
    
    
    3,891
    
    
    
    4,391
    
    
    
    7,953
    
    
    
    9,002Total interest expense
    
    
    11,690
    
    
    
    10,510
    
    
    
    23,330
    
    
    
    20,369NET INTEREST INCOME BEFORE
PROVISION FOR LOAN LOSSES
    
    
    7,624
    
    
    
    7,697
    
    
    
    15,303
    
    
    
    15,499PROVISION FOR LOAN LOSSES
    
    
    100
    
    
    
    150
    
    
    
    200
    
    
    
    290NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES
    
    
    7,524
    
    
    
    7,547
    
    
    
    15,103
    
    
    
    15,209OTHER INCOMENet (loss) on sale of available-for-sale securities
    
    
    (1,004
    )
    
    
    (147
    )
    
    
    (1,004
    )
    
    
    (613
    )Income from trading assets
    
    
    1
    
    
    
    113
    
    
    
    6
    
    
    
    833Other income (loss)
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    (3
    )Increase in cash surrender value of life insurance
    
    
    206
    
    
    
    191
    
    
    
    407
    
    
    
    382Banking fee income and other income
    
    
    924
    
    
    
    1,003
    
    
    
    1,797
    
    
    
    1,729Total other income
    
    
    127
    
    
    
    1,162
    
    
    
    1,206
    
    
    
    2,328OTHER EXPENSESSalaries & employee benefits
    
    
    3,235
    
    
    
    3,055
    
    
    
    6,511
    
    
    
    6,061Premises & equipment
    
    
    969
    
    
    
    960
    
    
    
    1,918
    
    
    
    1,814Insurance premiums
    
    
    86
    
    
    
    88
    
    
    
    171
    
    
    
    220Marketing
    
    
    117
    
    
    
    109
    
    
    
    231
    
    
    
    214Computer services
    
    
    228
    
    
    
    205
    
    
    
    448
    
    
    
    397Professional fees
    
    
    204
    
    
    
    257
    
    
    
    466
    
    
    
    560Office expenses & supplies
    
    
    205
    
    
    
    210
    
    
    
    418
    
    
    
    452Other
    
    
    703
    
    
    
    676
    
    
    
    1,281
    
    
    
    1,228Total other expenses
    
    
    5,747
    
    
    
    5,560
    
    
    
    11,444
    
    
    
    10,946INCOME BEFORE INCOME TAXES
    
    
    1,904
    
    
    
    3,149
    
    
    
    4,865
    
    
    
    6,591INCOME TAXES
    
    
    708
    
    
    
    1,076
    
    
    
    1,813
    
    
    
    2,418NET INCOME
    
    $
    1,196
    
    
    $
    2,073
    
    
    $
    3,052
    
    
    $
    4,173TOTAL COMPREHENSIVE INCOME
    
    $
    1,954
    
    
    $
    2,520
    
    
    $
    3,373
    
    
    $
    5,710BASIC EARNINGS PER SHARE
    
    $
    0.22
    
    
    $
    0.38
    
    
    $
    0.55
    
    
    $
    0.77DILUTED EARNINGS PER SHARE
    
    $
    0.21
    
    
    $
    0.37
    
    
    $
    0.54
    
    
    $
    0.75BASIC WEIGHTED AVERAGE SHARES OUTSTANDING
    
    
    5,546,653
    
    
    
    5,446,100
    
    
    
    5,531,530
    
    
    
    5,428,334DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING
    
    
    5,653,321
    
    
    
    5,588,019
    
    
    
    5,643,337
    
    
    
    5,567,063
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HARRINGTON WEST FINANCIAL GROUP, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
AND COMPREHENSIVE INCOME (Unaudited)
(Dollars in thousands, except share and per share data)
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Amt
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    Loss
    
    
    EquityBalance, January 1, 2006
    
    
    5,384,843
    
    
    $
    54
    
    
    $
    32,059
    
    
    $
    29,458
    
    
    
    
    
    
    
    ($1,997
    )
    
    $
    59,574Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,228
    
    
    $
    8,228
    
    
    
    
    
    
    
    8,228Other comprehensive income,
net of taxUnrealized gains on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,008
    
    
    
    1,008
    
    
    
    1,008Effective portion in change in
fair value of cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    336
    
    
    
    336
    
    
    
    336Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    9,572Stock options, exercised, including
tax benefit of $397
    
    
    75,550
    
    
    
    1
    
    
    
    825
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    826Stock options earned
    
    
    
    
    
    
    
    
    
    
    448
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    448Dividends on Common Stock at
$.50 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,722
    )
    
    
    
    
    
    
    
    
    
    
    (2,722
    )Balance, December 31, 2006
    
    
    5,460,393
    
    
    
    55
    
    
    
    33,332
    
    
    
    34,964
    
    
    
    
    
    
    
    (653
    )
    
    
    67,698Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,052
    
    
    $
    3,052
    
    
    
    
    
    
    
    3,052Other comprehensive income,
net of taxUnrealized losses on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (184
    )
    
    
    (184
    )
    
    
    (184
    )Effective portion in change in
fair value of cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    505
    
    
    
    505
    
    
    
    505Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,373Stock options exercised, including
tax benefit of $135
    
    
    86,260
    
    
    
    
    
    
    
    661
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    661Stock options earned
    
    
    
    
    
    
    
    
    
    
    204
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    204Dividends on common stock at $.55
per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,066
    )
    
    
    
    
    
    
    
    
    
    
    (3,066
    )Balance, June 30, 2007
    
    
    5,546,653
    
    
    $
    55
    
    
    $
    34,197
    
    
    $
    34,950
    
    
    
    
    
    
    $
    (332
    )
    
    $
    68,870
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HARRINGTON WEST FINANCIAL GROUP, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 (Dollars in thousands)
 Six months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    3,052
    
    
    $
    4,173Adjustments to reconcile net income
to net cash provided by operating activities:Accretion of deferred loan fees and costs
    
    
    (228
    )
    
    
    (172
    )Depreciation and amortization
    
    
    768
    
    
    
    686Amortization of premiums and discounts on loans
receivable and securities
    
    
    720
    
    
    
    1,115Provision for loan losses
    
    
    200
    
    
    
    290Loss on sale of available-for-sale securities
    
    
    1,004
    
    
    
    613Activity in trading account assets
    
    
    (25
    )
    
    
    192(Gain) on securities held for trading
    
    
    (3
    )
    
    
    (3
    )FHLB stock dividend
    
    
    (391
    )
    
    
    (395
    )Earnings on bank owned life insurance
    
    
    (407
    )
    
    
    (382
    )Decrease (increase) in accrued interest receivable
    
    
    71
    
    
    
    (217
    )Increase in income taxes receivable
    
    
    (649
    )
    
    
    (314
    )Stock options expensed
    
    
    204
    
    
    
    222Deferred income taxes
    
    
    (66
    )
    
    
    277(Increase) decrease in prepaid expenses and other assets
    
    
    1,059
    
    
    
    (1,505
    )(Decrease) increase in accounts payable, accrued expenses,
and other liabilities
    
    
    (829
    )
    
    
    (1,616
    )Net cash provided by operating activities
    
    
    4,480
    
    
    
    2,964CASH FLOWS FROM INVESTING ACTIVITIES:Net increase in loans receivable
    
    
    (2,341
    )
    
    
    (44,454
    )Proceeds from sales of securities available for sale
    
    
    35,999
    
    
    
    44,327Principal paydowns on securities available for sale
    
    
    62,681
    
    
    
    44,334Principal paydowns on securities held to maturity
    
    
    7
    
    
    
    7Purchases of securities available for sale
    
    
    (77,433
    )
    
    
    (28,542
    )Net purchase of premises and equipment
    
    
    (272
    )
    
    
    (3,614
    )Redemption of FHLB Stock
    
    
    1,799
    
    
    
    1,151Net cash provided by investing activities
    
    
    20,440
    
    
    
    13,209CASH FLOWS FROM FINANCING ACTIVITIES:Net increase in deposits
    
    
    38,143
    
    
    
    41,977(Decrease) increase in securities sold under agreements to repurchase
    
    
    (14,984
    )
    
    
    69Decrease in FHLB advances
    
    
    (50,000
    )
    
    
    (60,000
    )Exercise of stock options on common stock, including tax benefits
    
    
    661
    
    
    
    336Dividends paid on common stock
    
    
    (1,394
    )
    
    
    (1,359
    )Net cash (used in) financing activities
    
    
    (27,574
    )
    
    
    (18,977
    )NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (2,654
    )
    
    
    (2,804
    )CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    21,178
    
    
    
    19,312CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    18,524
    
    
    $
    16,508SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -Cash paid during the period for:Interest
    
    $
    23,864
    
    
    $
    20,613Income Taxes
    
    $
    2,663
    
    
    $
    2,240
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HARRINGTON WEST FINANCIAL GROUP, INC.
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Business of the Company
 Basis of Presentation
  Allowance for Loan Losses
  Accounting by Creditors for Impairment of a Loan
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Effect of Newly Issued, But Not Yet Effective Accounting Standards Fair Value Measurements
  Accounting
for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life
Insurance Arrangements
 Adoption of new accounting standards
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2. EARNINGS PER SHARE
  Three months ended June 30, 2007
    
    Six months ended June 30, 2007(net income amounts
    
    Income
    
    Shares
    
    Per-Share
    
    Income
    
    Shares
    
    Per-Sharein thousands)
    
    (Numerator)
    
    (Denominator)
    
    Amount
    
    (Numerator)
    
    (Denominator)
    
    AmountBasic EPS
    
    $
    1,196
    
    
    
    5,546,653
    
    
    $
    0.22
    
    
    $
    3,052
    
    
    
    5,531,530
    
    
    $
    0.55Effect of dilutive
stock options
    
    
    
    
    
    
    106,668
    
    
    
    (0.01
    )
    
    
    
    
    
    
    111,807
    
    
    
    (0.01
    )Diluted EPS
    
    $
    1,196
    
    
    
    5,653,321
    
    
    $
    0.21
    
    
    $
    3,052
    
    
    
    5,643,337
    
    
    $
    0.54
 Three months ended June 30, 2006
    
    Six months ended June 30, 2006Income
    
    Shares
    
    Per-Share
    
    Income
    
    Shares
    
    Per-Share(Numerator)
    
    (Denominator)
    
    Amount
    
    (Numerator)
    
    (Denominator)
    
    AmountBasic EPS
    
    $
    2,073
    
    
    
    5,446,100
    
    
    $
    0.38
    
    
    $
    4,173
    
    
    
    5,428,334
    
    
    $
    0.77Effect of dilutive
stock options
    
    
    
    
    
    
    141,919
    
    
    
    (0.01
    )
    
    
    
    
    
    
    138,729
    
    
    
    (0.02
    )Diluted EPS
    
    $
    2,073
    
    
    
    5,588,019
    
    
    $
    0.37
    
    
    $
    4,173
    
    
    
    5,567,063
    
    
    $
    0.75
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##### Table of Contents



Item 2: Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Corporate Profile
  Mission and Philosophy
  Multiple Market Strategy
   1.
    
    Diversify its loan portfolio and thus economic and credit risk2.
    
    Capitalize on the most favorable growth markets3.
    
    Deploy elements of our diverse product mix that are best suited for
each market4.
    
    Price products strategically among the markets to maximize
profitability.
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Product Line Diversification
  Modern Financial and Investment Management Skills
   Control Banking Risks
  Concentrate on Selected Performance Measures
  - 10 -




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Profitability Drivers
  1.
    
    Steady development and growth of loans, deposits, and investment management and
trust accounts in all of our markets.2.
    
    Changing the loan mix to higher risk-adjusted spread earning categories such as
business lending, commercial real estate lending, small tract construction and
construction-to-permanent loan lending, and selected consumer lending activities such
as home equity lines of credit.3.
    
    Growing our non-interest bearing consumer and commercial deposits and
continuing to change the overall deposit mix toward core deposit accounts.4.
    
    Diversifying and increasing our banking fee income through existing and new
sources such as our overdraft protection program and other deposit fees, loan fee
income from mortgage banking and prepayment penalties, Harrington Wealth Management
trust and investment fees, and other retail banking fees.5.
    
    Achieving a high level of performance on our investment portfolio by earning a
pre-tax total return interest income plus net gains and losses on securities and
related total return swaps over one month LIBOR of approximately .75% to 1.00% per
annum.6.
    
    Controlling interest rate risk of the institution to a lower level and seeking
high credit quality of the loan and investment portfolios.
  Results of Operations
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Three months ended
    
    Three months ended(In thousands)
    
    June 30, 2007
    
    June 30, 2006Balance
    
    
    Income
    
    
    Rate (6)
    
    
    Balance
    
    
    Income
    
    
    Rate (6)Interest earning assets:Loans receivable (1)
    
    $
    760,855
    
    
    $
    15,080
    
    
    
    7.94
    %
    
    $
    697,804
    
    
    $
    13,286
    
    
    
    7.62
    %FHLB stock
    
    
    13,689
    
    
    
    149
    
    
    
    4.37
    %
    
    
    15,849
    
    
    
    208
    
    
    
    5.26
    %Securities and trading account assets (2)
    
    
    287,358
    
    
    
    4,011
    
    
    
    5.58
    %
    
    
    357,127
    
    
    
    4,643
    
    
    
    5.20
    %Cash and cash equivalents (3)
    
    
    12,353
    
    
    
    74
    
    
    
    2.40
    %
    
    
    11,420
    
    
    
    70
    
    
    
    2.46
    %Total interest earning assets
    
    
    1,074,255
    
    
    
    19,314
    
    
    
    7.20
    %
    
    
    1,082,200
    
    
    
    18,207
    
    
    
    6.73
    %Non-interest-earning assets
    
    
    52,823
    
    
    
    
    
    
    
    
    
    
    
    49,325Total assets
    
    $
    1,127,078
    
    
    
    
    
    
    
    
    
    
    $
    1,131,525Interest bearing liabilities:Deposits:NOW and money market accounts
    
    $
    100,540
    
    
    $
    665
    
    
    
    2.65
    %
    
    $
    100,212
    
    
    $
    548
    
    
    
    2.19
    %Passbook accounts and certificates
of deposit
    
    
    589,713
    
    
    
    7,134
    
    
    
    4.85
    %
    
    
    547,729
    
    
    
    5,571
    
    
    
    4.08
    %Total deposits
    
    
    690,253
    
    
    
    7,799
    
    
    
    4.53
    %
    
    
    647,941
    
    
    
    6,119
    
    
    
    3.79
    %FHLB advances (4)
    
    
    233,363
    
    
    
    2,946
    
    
    
    5.06
    %
    
    
    282,692
    
    
    
    3,450
    
    
    
    4.90
    %Reverse repurchase agreements
    
    
    54,467
    
    
    
    373
    
    
    
    2.71
    %
    
    
    59,116
    
    
    
    442
    
    
    
    2.96
    %Other borrowings (5)
    
    
    25,774
    
    
    
    572
    
    
    
    8.78
    %
    
    
    25,774
    
    
    
    499
    
    
    
    7.66
    %Total interest-bearing liabilities
    
    
    1,003,857
    
    
    
    11,690
    
    
    
    4.65
    %
    
    
    1,015,523
    
    
    
    10,510
    
    
    
    4.13
    %Non-interest-bearing deposits
    
    
    47,420
    
    
    
    
    
    
    
    
    
    
    
    46,285Non-interest-bearing liabilities
    
    
    5,842
    
    
    
    
    
    
    
    
    
    
    
    5,936Total liabilities
    
    
    1,057,119
    
    
    
    
    
    
    
    
    
    
    
    1,067,744Stockholders equity
    
    
    69,959
    
    
    
    
    
    
    
    
    
    
    
    63,781Total liabilities and stockholders equity
    
    $
    1,127,078
    
    
    
    
    
    
    
    
    
    
    $
    1,131,525Net interest-earning assets (liabilities)
    
    $
    70,398
    
    
    
    
    
    
    
    
    
    
    $
    66,677Net interest income/interest rate spread
    
    
    
    
    
    $
    7,624
    
    
    
    2.55
    %
    
    
    
    
    
    $
    7,697
    
    
    
    2.60
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    2.85
    %
    
    
    
    
    
    
    
    
    
    
    2.85
    %Ratio of average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    107.01
    %
    
    
    
    
    
    
    
    
    
    
    106.57
    %
 
 1)
    
    Balance includes non-accrual loans. Income includes fees earned on loans originated and
accretion of deferred loan fees.2)
    
    Consists of securities classified as available for sale, held to maturity and trading account
assets. Excludes SFAS 115 adjustments to fair value, which are included in other non-interest
earning assets.3)
    
    Consists of cash and due from banks and federal funds sold.4)
    
    Interest on FHLB advances is net of hedging costs. Hedging costs include interest income and
expense
and ineffectiveness adjustments for cash flow hedges. The Company uses pay-fixed, receive floating
LIBOR swaps to hedge the short term repricing characteristics of the floating FHLB advances.5)
    
    Consists of other debt and a note payable under a revolving line of credit.6)
    
    Annualized. - 13 -




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##### Table of Contents



Six Months Ended
    
    
    Six Months Ended(In thousands)
    
    June 30, 2007
    
    June 30, 2006Balance
    
    
    Income
    
    
    Rate (6)
    
    
    Balance
    
    
    Income
    
    
    Rate (6)Interest earning assets:Loans receivable (1)
    
    $
    760,559
    
    
    $
    30,073
    
    
    
    7.93
    %
    
    $
    691,032
    
    
    $
    25,939
    
    
    
    7.53
    %FHLB stock
    
    
    14,166
    
    
    
    367
    
    
    
    5.22
    %
    
    
    16,121
    
    
    
    402
    
    
    
    5.03
    %Securities and trading account assets (2)
    
    
    295,095
    
    
    
    8,043
    
    
    
    5.45
    %
    
    
    372,763
    
    
    
    9,407
    
    
    
    5.05
    %Cash and cash equivalents (3)
    
    
    12,222
    
    
    
    150
    
    
    
    2.47
    %
    
    
    11,431
    
    
    
    120
    
    
    
    2.12
    %Total interest earning assets
    
    
    1,082,042
    
    
    
    38,633
    
    
    
    7.16
    %
    
    
    1,091,347
    
    
    
    35,868
    
    
    
    6.59
    %Non-interest-earning assets
    
    
    53,913
    
    
    
    
    
    
    
    
    
    
    
    47,954Total assets
    
    $
    1,135,955
    
    
    
    
    
    
    
    
    
    
    $
    1,139,301Interest bearing liabilities:Deposits:NOW and money market accounts
    
    $
    102,259
    
    
    $
    1,350
    
    
    
    2.66
    %
    
    $
    105,417
    
    
    $
    1,097
    
    
    
    2.10
    %Passbook accounts and certificates
of deposit
    
    
    584,238
    
    
    
    14,027
    
    
    
    4.84
    %
    
    
    531,380
    
    
    
    10,270
    
    
    
    3.90
    %Total deposits
    
    
    686,497
    
    
    
    15,377
    
    
    
    4.52
    %
    
    
    636,797
    
    
    
    11,367
    
    
    
    3.60
    %FHLB advances (4)
    
    
    238,674
    
    
    
    6,005
    
    
    
    5.07
    %
    
    
    302,287
    
    
    
    7,162
    
    
    
    4.78
    %Reverse repurchase agreements
    
    
    59,533
    
    
    
    810
    
    
    
    2.71
    %
    
    
    59,109
    
    
    
    878
    
    
    
    2.95
    %Other borrowings (5)
    
    
    25,774
    
    
    
    1,138
    
    
    
    8.78
    %
    
    
    25,774
    
    
    
    962
    
    
    
    7.42
    %Total interest-bearing liabilities
    
    
    1,010,478
    
    
    
    23,330
    
    
    
    4.63
    %
    
    
    1,023,967
    
    
    
    20,369
    
    
    
    3.99
    %Non-interest-bearing deposits
    
    
    48,407
    
    
    
    
    
    
    
    
    
    
    
    47,433Non-interest-bearing liabilities
    
    
    7,647
    
    
    
    
    
    
    
    
    
    
    
    5,652Total liabilities
    
    
    1,066,532
    
    
    
    
    
    
    
    
    
    
    
    1,077,052Stockholders equity
    
    
    69,423
    
    
    
    
    
    
    
    
    
    
    
    62,249Total liabilities and stockholders equity
    
    $
    1,135,955
    
    
    
    
    
    
    
    
    
    
    $
    1,139,301Net interest-earning assets (liabilities)
    
    $
    71,564
    
    
    
    
    
    
    
    
    
    
    $
    67,380Net interest income/interest rate spread
    
    
    
    
    
    $
    15,303
    
    
    
    2.53
    %
    
    
    
    
    
    $
    15,499
    
    
    
    2.60
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    2.84
    %
    
    
    
    
    
    
    
    
    
    
    2.85
    %Ratio of average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    107.08
    %
    
    
    
    
    
    
    
    
    
    
    106.58
    %
 
 1)
    
    Balance includes non-accrual loans. Income includes fees earned on loans originated and
accretion of deferred loan fees.2)
    
    Consists of securities classified as available for sale, held to maturity and trading
account assets. Excludes SFAS 115 adjustments to fair value, which are included in other
non-interest earning assets.3)
    
    Consists of cash and due from banks and federal funds sold.4)
    
    Interest on FHLB advances is net of hedging costs. Hedging costs include interest income
and expense and ineffectiveness adjustments for cash flow hedges. The Company uses pay-fixed,
receive floating LIBOR swaps to hedge the short term repricing characteristics of the floating FHLB
advances.5)
    
    Consists of other debt and a note payable under a revolving line of credit.6)
    
    Annualized.  - 14 -




---



##### Table of Contents



For the Quarter Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in thousands)
    
    
    (Dollars in thousands)Balance at beginning of period
    
    $
    6,013
    
    
    $
    5,800
    
    
    $
    5,914
    
    
    $
    5,661Charge-offs:Real Estate LoansSingle-family Residential
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Multi-family Residential
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial & Industrial
    
    
    
    
    
    
    (336
    )
    
    
    
    
    
    
    (336
    )Consumer and Other Loans
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Total Charge-offs
    
    
    
    
    
    
    (336
    )
    
    
    (1
    )
    
    
    (337
    )Recoveries:Net Recoveries (Charge-offs)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Provision (credit) for Losses on Loans
    
    
    100
    
    
    
    150
    
    
    
    200
    
    
    
    290Balance at end of period
    
    $
    6,113
    
    
    $
    5,614
    
    
    $
    6,113
    
    
    $
    5,614Allowance for Loan Losses as a percent
of total loans outstanding
    
    
    0.80
    %
    
    
    0.78
    %
    
    
    0.80
    %
    
    
    0.78
    %Ratio of Net Charge-offs to Average Loans
outstanding
    
    
    0.00
    %
    
    
    0.05
    %
    
    
    0.00
    %
    
    
    0.05
    %
  - 15 -




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##### Table of Contents



Banking Fee & Other Income
 June 2007
    
    
    June 2006
    
    
    %
    
    
    June 2007
    
    
    June 2006
    
    
    %Quarter
    
    
    Quarter
    
    
    Change
    
    
    YTD
    
    
    YTD
    
    
    ChangeBanking Fee TypeMortgage Brokerage Fee,
Prepayment Penalties & Other
Loan Fees
    
    $
    270
    
    
    $
    166
    
    
    
    62.7
    %
    
    $
    510
    
    
    $
    375
    
    
    
    36.0
    %Deposit, Other Retail Banking
Fees & Other Fee Income
    
    
    413
    
    
    
    335
    
    
    
    23.3
    %
    
    
    809
    
    
    
    655
    
    
    
    23.5
    %Harrington Wealth Management Fees
    
    
    241
    
    
    
    207
    
    
    
    16.4
    %
    
    
    478
    
    
    
    404
    
    
    
    18.3
    %BOLI Income, net
    
    
    206
    
    
    
    191
    
    
    
    7.9
    %
    
    
    407
    
    
    
    382
    
    
    
    6.5
    %Subtotal
    
    
    1,130
    
    
    
    899
    
    
    
    25.7
    %
    
    
    2,204
    
    
    
    1,816
    
    
    
    21.4
    %Lease Termination Income (1)
    
    
    0
    
    
    
    295
    
    
    
    
    
    
    
    0
    
    
    
    295Total Banking Fee & Other Income
    
    $
    1,130
    
    
    $
    1,194
    
    
    
    -5.4
    %
    
    $
    2,204
    
    
    $
    2,111
    
    
    
    4.4
    %
 
 
  - 16 -




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##### Table of Contents



Financial Condition
     - 17 -




---



##### Table of Contents



HWFG Net Loan Growth and Mix
 June 30, 2007
    
    
    December 31, 2006
    
    
    June 30, 2006% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofLoan Type
    
    Total
    
    
    Total
    
    
    Total
    
    
    Total
    
    
    Total
    
    
    TotalCommercial Real Estate
    
    $
    249.7
    
    
    
    32.6
    %
    
    $
    264.9
    
    
    
    34.7
    %
    
    $
    254.0
    
    
    
    35.1
    %Multi-family Real Estate
    
    
    81.6
    
    
    
    10.6
    %
    
    
    79.9
    
    
    
    10.4
    %
    
    
    80.8
    
    
    
    11.2
    %Construction (1)
    
    
    126.1
    
    
    
    16.4
    %
    
    
    112.6
    
    
    
    14.7
    %
    
    
    95.0
    
    
    
    13.1
    %Single-family Real Estate
    
    
    114.4
    
    
    
    14.9
    %
    
    
    106.7
    
    
    
    13.9
    %
    
    
    113.5
    
    
    
    15.6
    %Commercial and Industrial Loans
    
    
    119.3
    
    
    
    15.5
    %
    
    
    119.1
    
    
    
    15.6
    %
    
    
    99.8
    
    
    
    13.8
    %Land Acquisition and Development
    
    
    49.4
    
    
    
    6.4
    %
    
    
    54.7
    
    
    
    7.1
    %
    
    
    51.2
    
    
    
    7.1
    %Consumer Loans
    
    
    24.5
    
    
    
    3.2
    %
    
    
    25.3
    
    
    
    3.3
    %
    
    
    27.8
    
    
    
    3.8
    %Other Loans (2)
    
    
    2.8
    
    
    
    0.4
    %
    
    
    2.2
    
    
    
    0.3
    %
    
    
    2.4
    
    
    
    0.3
    %Total Gross Loans
    
    $
    767.8
    
    
    
    100.0
    %
    
    $
    765.4
    
    
    
    100.0
    %
    
    $
    724.5
    
    
    
    100.0
    %Allowance for loan loss
    
    
    (6.1
    )
    
    
    
    
    
    
    (5.9
    )
    
    
    
    
    
    
    (5.6
    )Deferred fees
    
    
    (1.9
    )
    
    
    
    
    
    
    (2.1
    )
    
    
    
    
    
    
    (2.3
    )Discounts/Premiums
    
    
    (0.4
    )
    
    
    
    
    
    
    (0.4
    )
    
    
    
    
    
    
    (0.4
    )Net Loans Receivable
    
    $
    759.4
    
    
    
    
    
    
    $
    757.0
    
    
    
    
    
    
    $
    716.2
 
 (1)
    
    Includes loans secured by residential, land and commercial properties. At June 30,
2007, we had $47.6 million of construction loans secured by single-family residential
properties, $38.1 million secured by commercial properties, $34.9 million for land
development and $5.5 million secured by multi-family residential properties.(2)
    
    Includes loans collateralized by deposits and consumer line of credit loans.
   Amortized Cost
    
    
    Fair ValueJune 30, 2007Mortgage-backed securities  pass throughs
    
    $
    80,450
    
    
    $
    80,072Collateralized mortgage obligations
    
    
    95,517
    
    
    
    95,367Asset-backed securities (underlying securities mortgages)
    
    
    110,137
    
    
    
    108,768Asset-backed securities
    
    
    2,238
    
    
    
    2,223Total
    
    $
    288,342
    
    
    $
    286,430
 - 18 -




---



##### Table of Contents



Amortized Cost
    
    
    Fair ValueDecember 31, 2006Mortgage-backed securities  pass throughs
    
    $
    98,244
    
    
    $
    96,945Collateralized mortgage obligations
    
    
    76,182
    
    
    
    75,795Commercial mortgate-backed securities
    
    
    31,312
    
    
    
    31,081Asset-backed securities (underlying securities mortgages)
    
    
    102,815
    
    
    
    103,159Asset-backed securities
    
    
    2,747
    
    
    
    2,749Total
    
    $
    311,300
    
    
    $
    309,729
       - 19 -




---



##### Table of Contents



Liquidity and Capital Resources
 Liquidity.
    Capital Resources.
 - 20 -




---



##### Table of Contents



Asset and Liability Management
      - 21 -




---



##### Table of Contents



i.e.,
    Accounting for Derivative Instruments and Hedging
Activities,
  - 22 -




---



##### Table of Contents



Critical Accounting Policies
  Cautionary Statement Regarding Forward-Looking Statements.
    
 Item 3: Quantitative and Qualitative Disclosures about Market Risk
   - 23 -




---



##### Table of Contents



Change In Interest Rates (In Basis Points)-300
    
    
    
    -200
    
    
    
    -100
    
    
    Base
    
    
    +100
    
    
    
    +200
    
    
    
    +300Market value gain (loss) in assets
    
    $
    36,796
    
    
    $
    28,428
    
    
    $
    15,912
    
    
    
    
    
    
    
    ($18,681
    )
    
    
    ($38,950
    )
    
    
    ($59,958
    )Market value gain (loss) of liabilities
    
    
    (22,894
    )
    
    
    (14,856
    )
    
    
    (7,153
    )
    
    
    
    
    
    
    6,837
    
    
    
    14,873
    
    
    
    23,565Market value gain (loss) of net assets
before interest rate contracts
    
    
    13,902
    
    
    
    13,572
    
    
    
    8,759
    
    
    
    
    
    
    
    (11,844
    )
    
    
    (24,077
    )
    
    
    (36,393
    )Market value gain (loss) of interest
rate contracts
    
    
    (10,277
    )
    
    
    (6,681
    )
    
    
    (3,259
    )
    
    
    
    
    
    
    3,106
    
    
    
    6,066
    
    
    
    8,891Total change in MVPE (2)
    
    $
    3,625
    
    
    $
    6,891
    
    
    $
    5,500
    
    
    
    
    
    
    
    ($8,738
    )
    
    
    ($18,011
    )
    
    
    ($27,502
    )Change in MVPE as a percent of:MV of total assets of Bank
    
    
    3.70
    %
    
    
    7.04
    %
    
    
    5.62
    %
    
    
    
    
    
    
    -8.93
    %
    
    
    -18.40
    %
    
    
    -28.10
    %Total assets of the Bank
    
    
    0.03
    %
    
    
    0.38
    %
    
    
    0.36
    %
    
    
    
    
    
    
    -0.65
    %
    
    
    -1.35
    %
    
    
    -2.11
    %
 
 (1)
    
    Assumes an instantaneous parallel change in interest rates at all maturities.(2)
    
    Based on the Companys pre-tax tangible MVPE of $105.6 million at June 30, 2007.(3)
    
    Pre-tax tangible MVPE as a percentage of tangible assets.
  
 Item 4: Controls and Procedures
   - 24 -




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##### Table of Contents



PART II - OTHER INFORMATION
 
 Item 1:
  
 Item 1A.
  
 Item 2:
  
 Item 3:
  
 Item 4:
    NAME
    
    
    FOR
    
    
    
    WITHHELDPaul O. Halme
    
    
    4,967,576
    
    
    
    97,134William W. Phillips
    
    
    4,958,676
    
    
    
    106,034
  FOR
    
    
    AGAINST
    
    
    
    ABSTAIN4,948,570
    
    
    107,627
    
    
    
    8,513
 
 Item 5:
  - 25 -




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##### Table of Contents



Item 6:
 EXHIBIT NO.
    
    DESCRIPTION31.1
    
    Section 302 Certification by Chief Executive Officer filed herewith.31.2
    
    Section 302 Certification by Chief Operating Officer filed herewith.31.3
    
    Section 302 Certification by Chief Financial Officer filed herewith.32
    
    Section 906 Certification by Chief Executive Officer, Chief Operating Officer
and Chief Financial Officer furnished herewith.
 
 SIGNATURES
  HARRINGTON WEST FINANCIAL GROUP, INC.August 10, 2007
    By:
    /s/ Craig J. CernyCraig J. CernyChairman of the Board
and Chief Executive Officer
(Principal Executive Officer)August 10, 2007
    By:
    /s/ William W. Phillips, jr.William W. Phillips, Jr.President, Chief Operating Officer
(Principal Executive Officer)August 10, 2007
    By:
    /s/ Kerril   SteeleKerril SteeleSr. Vice-President, Chief Financial Officer
(Principle Financial and Accounting Officer) - 26 -