##### 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 September 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 September 30, 2007 and December 31, 2006
    
    
    2Condensed Consolidated Statements of Income and Comprehensive Income for the Three and Nine Months Ended September 30, 2007 and 2006
    
    
    3Condensed Consolidated Statements of Stockholders Equity and Comprehensive Income for the Nine Months Ended September 30, 2007 and Year Ended December 31, 2006
    
    
    4Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2007 and 2006
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    8Item 3.Quantitative and Qualitative Disclosures about Market Risk
    
    
    27Item 4.Controls and Procedures
    
    
    28Part II  Other InformationItem 1.Legal Proceedings
    
    
    29Item 1A.Risk Factors
    
    
    29Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3.Defaults upon Senior Securities
    
    
    29Item 4.Submission of Matters to a Vote of Security Holders
    
    
    29Item 5.Other Information
    
    
    29Item 6.Exhibits
    
    
    29Signatures
    
    
    30EXHIBIT 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)
 September 30, 2007
    
    
    December 31, 2006ASSETSCash and cash equivalents
    
    $
    17,331
    
    
    $
    21,178Trading account assets
    
    
    1,304
    
    
    
    837Securities available-for-sale at fair value
    
    
    355,314
    
    
    
    309,729Securities held to maturity (fair value of $61 at September
30, 2007 and
$71 at December 31, 2006)
    
    
    59
    
    
    
    69Loans receivable, (net of allowance for loan losses of $6,308
and $5,914 at September 30, 2007 and December 31,
2006, respectively)
    
    
    766,032
    
    
    
    757,033Accrued interest receivable
    
    
    5,246
    
    
    
    5,315Premises and equipment, net
    
    
    15,710
    
    
    
    15,581Due from broker
    
    
    138
    
    
    
    142Prepaid expenses and other assets
    
    
    3,165
    
    
    
    4,959Investment in FHLB stock, at cost
    
    
    11,804
    
    
    
    14,615Income tax receivable
    
    
    719
    
    
    
    112Bank owned life insurance
    
    
    21,043
    
    
    
    18,472Deferred taxes
    
    
    4,184
    
    
    
    Goodwill
    
    
    5,496
    
    
    
    5,496Core deposit intangible, net
    
    
    748
    
    
    
    935TOTAL ASSETS
    
    $
    1,208,293
    
    
    $
    1,154,473LIABILITIES & STOCKHOLDERS EQUITY
LIABILITIES:Deposits:Interest bearing
    
    $
    778,465
    
    
    $
    677,665Non-interest bearing
    
    
    47,222
    
    
    
    55,092Total Deposits
    
    
    825,687
    
    
    
    732,757FHLB advances
    
    
    236,000
    
    
    
    257,000Securities sold under repurchase agreements
    
    
    49,727
    
    
    
    65,141Subordinated debt
    
    
    25,774
    
    
    
    25,774Accrued interest payable and other liabilities
    
    
    5,771
    
    
    
    5,005Income taxes payable
    
    
    248
    
    
    
    Deferred income taxes
    
    
    1,648
    
    
    
    1,098TOTAL LIABILITIES
    
    
    1,144,855
    
    
    
    1,086,775STOCKHOLDERS EQUITY:Preferred stock, $.01 par value: 1,200,000 shares
authorized: none issued and outstanding as of September 30,2007 and
December 31, 2006
    
    
    
    
    
    
    Common stock, $.01 par value; 10,800,000
shares authorized: 5,552,803 shares issued and
outstanding as of September
30, 2007 and 5,460,393 shares issued and outstanding
December 31, 2006
    
    
    56
    
    
    
    55Additional paid-in capital
    
    
    34,350
    
    
    
    33,332Retained earnings
    
    
    35,447
    
    
    
    34,964Accumulated other comprehensive loss, net of tax
    
    
    (6,415
    )
    
    
    (653
    )TOTAL STOCKHOLDERS EQUITY
    
    
    63,438
    
    
    
    67,698TOTAL LIABILITIES & STOCKHOLDERS EQUITY
    
    $
    1,208,293
    
    
    $
    1,154,473
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HARRINGTON WEST FINANCIAL GROUP, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 (Unaudited)
 Dollars in thousands, except per share data)
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006INTEREST INCOMEInterest on loans
    
    $
    15,130
    
    
    $
    14,317
    
    
    $
    45,202
    
    
    $
    40,256Interest and dividends on securities
    
    
    5,112
    
    
    
    4,661
    
    
    
    13,674
    
    
    
    14,590Total interest income
    
    
    20,242
    
    
    
    18,978
    
    
    
    58,876
    
    
    
    54,846INTEREST EXPENSEInterest on deposits
    
    
    8,700
    
    
    
    6,866
    
    
    
    24,077
    
    
    
    18,232Interest on FHLB advances and other borrowings
    
    
    3,500
    
    
    
    4,409
    
    
    
    11,452
    
    
    
    13,410Total interest expense
    
    
    12,200
    
    
    
    11,275
    
    
    
    35,529
    
    
    
    31,642NET INTEREST INCOME BEFORE
PROVISION FOR LOAN LOSSES
    
    
    8,042
    
    
    
    7,703
    
    
    
    23,347
    
    
    
    23,204PROVISION FOR LOAN LOSSES
    
    
    200
    
    
    
    200
    
    
    
    400
    
    
    
    490NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES
    
    
    7,842
    
    
    
    7,503
    
    
    
    22,947
    
    
    
    22,714OTHER INCOMENet (loss) on sale of available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    (1,004
    )
    
    
    (613
    )Income from trading assets
    
    
    (378
    )
    
    
    150
    
    
    
    (372
    )
    
    
    983Other-than-temporary loss
    
    
    (1,906
    )
    
    
    
    
    
    
    (1,906
    )
    
    
    Other income (loss)
    
    
    
    
    
    
    (26
    )
    
    
    
    
    
    
    (28
    )Increase in cash surrender value of life insurance
    
    
    209
    
    
    
    185
    
    
    
    616
    
    
    
    567Banking fee income and other income
    
    
    787
    
    
    
    746
    
    
    
    2,582
    
    
    
    2,471Total other income
    
    
    (1,288
    )
    
    
    1,055
    
    
    
    (84
    )
    
    
    3,380OTHER EXPENSESSalaries & employee benefits
    
    
    3,308
    
    
    
    3,104
    
    
    
    9,817
    
    
    
    9,166Premises & equipment
    
    
    975
    
    
    
    960
    
    
    
    2,893
    
    
    
    2,772Insurance premiums
    
    
    83
    
    
    
    104
    
    
    
    254
    
    
    
    324Marketing
    
    
    84
    
    
    
    122
    
    
    
    314
    
    
    
    336Computer services
    
    
    239
    
    
    
    213
    
    
    
    687
    
    
    
    610Professional fees
    
    
    162
    
    
    
    199
    
    
    
    628
    
    
    
    759Office expenses & supplies
    
    
    195
    
    
    
    231
    
    
    
    613
    
    
    
    684Other
    
    
    703
    
    
    
    610
    
    
    
    1,987
    
    
    
    1,836Total other expenses
    
    
    5,749
    
    
    
    5,543
    
    
    
    17,193
    
    
    
    16,487INCOME BEFORE INCOME TAXES
    
    
    805
    
    
    
    3,015
    
    
    
    5,670
    
    
    
    9,607INCOME TAXES
    
    
    307
    
    
    
    913
    
    
    
    2,121
    
    
    
    3,332NET INCOME
    
    $
    498
    
    
    $
    2,102
    
    
    $
    3,549
    
    
    $
    6,275TOTAL COMPREHENSIVE INCOME (LOSS)
    
    
    ($5,586
    )
    
    $
    1,718
    
    
    
    ($2,213
    )
    
    $
    7,428BASIC EARNINGS PER SHARE
    
    $
    0.09
    
    
    $
    0.39
    
    
    $
    0.64
    
    
    $
    1.15DILUTED EARNINGS PER SHARE
    
    $
    0.09
    
    
    $
    0.38
    
    
    $
    0.63
    
    
    $
    1.13BASIC WEIGHTED AVERAGE SHARES OUTSTANDING
    
    
    5,550,353
    
    
    
    5,448,820
    
    
    
    5,537,873
    
    
    
    5,435,238DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING
    
    
    5,642,512
    
    
    
    5,585,527
    
    
    
    5,641,914
    
    
    
    5,563,214
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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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,549
    
    
    $
    3,549
    
    
    
    
    
    
    
    3,549Other comprehensive income,
net of taxUnrealized losses on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,431
    )
    
    
    (4,431
    )
    
    
    (4,431
    )Effective portion in change in
fair value of cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,331
    )
    
    
    (1,331
    )
    
    
    (1,331
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ($2,213
    )Stock options exercised, including
tax benefit of $147
    
    
    92,410
    
    
    
    1
    
    
    
    730
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    731Stock options earned
    
    
    
    
    
    
    
    
    
    
    288
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    288Dividends on common stock at $.55
per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,066
    )
    
    
    
    
    
    
    
    
    
    
    (3,066
    )Balance, September 30, 2007
    
    
    5,552,803
    
    
    $
    56
    
    
    $
    34,350
    
    
    $
    35,447
    
    
    
    
    
    
    $
    (6,415
    )
    
    $
    63,438
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HARRINGTON WEST FINANCIAL GROUP, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 (Dollars in thousands)
 Nine months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    3,549
    
    
    $
    6,275Adjustments to reconcile net income
to net cash provided by operating activities:Accretion of deferred loan fees and costs
    
    
    (192
    )
    
    
    (390
    )Depreciation and amortization
    
    
    1,141
    
    
    
    1,070Amortization of premiums and discounts on loans
receivable and securities
    
    
    797
    
    
    
    1,609Provision for loan losses
    
    
    400
    
    
    
    490Loss on sale of available-for-sale securities and
other than temporary loss
    
    
    2,910
    
    
    
    613Activity in trading account assets
    
    
    (13
    )
    
    
    128(Gain) on securities held for trading
    
    
    (454
    )
    
    
    (3
    )FHLB stock dividend
    
    
    (566
    )
    
    
    (602
    )Earnings on bank owned life insurance
    
    
    (616
    )
    
    
    (567
    )Decrease (increase) in accrued interest receivable
    
    
    69
    
    
    
    (438
    )Increase (decrease) in income taxes receivable, net of payable
    
    
    (359
    )
    
    
    37Stock options expensed
    
    
    288
    
    
    
    335Deferred income taxes
    
    
    (80
    )
    
    
    1,392(Increase) decrease in prepaid expenses and other assets
    
    
    777
    
    
    
    (1,581
    )(Decrease) in accrued expenses and other liabilities
    
    
    (354
    )
    
    
    (2,442
    )Net cash provided by operating activities
    
    
    7,297
    
    
    
    5,926CASH FLOWS FROM INVESTING ACTIVITIES:Net increase in loans receivable
    
    
    (9,258
    )
    
    
    (71,590
    )Proceeds from sales of securities available for sale
    
    
    35,999
    
    
    
    44,327Principal paydowns on securities available for sale
    
    
    83,522
    
    
    
    67,497Principal paydowns on securities held to maturity
    
    
    10
    
    
    
    9Purchases of securities available for sale
    
    
    (175,892
    )
    
    
    (45,333
    )Purchase of bank owned life insurance
    
    
    (2,000
    )
    
    
    Net purchase of premises and equipment
    
    
    (1,083
    )
    
    
    (5,034
    )Redemption of FHLB Stock
    
    
    3,377
    
    
    
    2,557Net cash used in investing activities
    
    
    (65,325
    )
    
    
    (7,567
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net increase in deposits
    
    
    92,930
    
    
    
    39,314(Decrease) increase in securities sold under agreements to repurchase
    
    
    (15,414
    )
    
    
    875Decrease in FHLB advances
    
    
    (21,000
    )
    
    
    (40,000
    )Exercise of stock options on common stock, including tax benefits
    
    
    731
    
    
    
    361Dividends paid on common stock
    
    
    (3,066
    )
    
    
    (2,040
    )Net cash provided by (used in) financing activities
    
    
    54,181
    
    
    
    (1,490
    )NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (3,847
    )
    
    
    (3,131
    )CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    21,178
    
    
    
    19,312CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    17,331
    
    
    $
    16,181SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONCash paid during the period for:Interest
    
    $
    36,297
    
    
    $
    32,053Income Taxes
    
    $
    2,672
    
    
    $
    2,904
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HARRINGTON WEST FINANCIAL GROUP, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Business of the Company
 Basis of Presentation
   Allowance for Loan Losses
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Accounting by Creditors for Impairment of a Loan
   Adoption of new accounting standards
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2. EARNINGS PER SHARE
  Three months ended September 30, 2007
    
    Nine months ended September 30, 2007Per-
    
    
    
    
    
    
    
    
    
    Per-(net income amounts
    
    Income
    
    Shares
    
    Share
    
    Income
    
    Shares
    
    Sharein thousands)
    
    (Numerator)
    
    (Denominator)
    
    Amount
    
    (Numerator)
    
    (Denominator)
    
    AmountBasic EPS
    
    $
    498
    
    
    
    5,550,353
    
    
    $
    0.09
    
    
    $
    3,549
    
    
    
    5,537,873
    
    
    $
    0.64Effect of dilutive
stock options
    
    
    
    
    
    
    92,159
    
    
    
    (0.00
    )
    
    
    
    
    
    
    104,041
    
    
    
    (0.01
    )Diluted EPS
    
    $
    498
    
    
    
    5,642,512
    
    
    $
    0.09
    
    
    $
    3,549
    
    
    
    5,641,914
    
    
    $
    0.63
 Three months ended September 30, 2006
    
    Nine months ended September 30, 2006Per-
    
    
    
    
    
    
    
    
    
    Per-Income
    
    Shares
    
    Share
    
    Income
    
    Shares
    
    Share(Numerator)
    
    (Denominator)
    
    Amount
    
    (Numerator)
    
    (Denominator)
    
    AmountBasic EPS
    
    $
    2,102
    
    
    
    5,448,820
    
    
    $
    0.39
    
    
    $
    6,275
    
    
    
    5,435,238
    
    
    $
    1.15Effect of dilutive
stock options
    
    
    
    
    
    
    136,707
    
    
    
    (0.01
    )
    
    
    
    
    
    
    127,976
    
    
    
    (0.02
    )Diluted EPS
    
    $
    2,102
    
    
    
    5,585,527
    
    
    $
    0.38
    
    
    $
    6,275
    
    
    
    5,563,214
    
    
    $
    1.13
  3. OTHER-THAN-TEMPORARY IMPAIRMENT
  
 Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
 Corporate Profile
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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
   Product Line Diversification
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Modern Financial and Investment Management Skills
   Control Banking Risks
  Concentrate on Selected Performance Measures
  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.
 -10-




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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 endedSeptember 30, 2007
    
    
    September 30, 2006(In thousands)
    
    Balance
    
    
    Income
    
    
    Rate (6)
    
    
    Balance
    
    
    Income
    
    
    Rate (6)Interest earning assets:Loans receivable (1)
    
    $
    763,000
    
    
    $
    15,130
    
    
    
    7.91
    %
    
    $
    730,840
    
    
    $
    14,317
    
    
    
    7.82
    %FHLB stock
    
    
    12,081
    
    
    
    161
    
    
    
    5.29
    %
    
    
    14,806
    
    
    
    205
    
    
    
    5.49
    %Securities and trading account assets (2)
    
    
    317,215
    
    
    
    4,890
    
    
    
    6.17
    %
    
    
    329,143
    
    
    
    4,384
    
    
    
    5.33
    %Cash and cash equivalents (3)
    
    
    11,552
    
    
    
    61
    
    
    
    2.09
    %
    
    
    10,469
    
    
    
    72
    
    
    
    2.73
    %Total interest earning assets
    
    
    1,103,848
    
    
    
    20,242
    
    
    
    7.32
    %
    
    
    1,085,258
    
    
    
    18,978
    
    
    
    6.98
    %Non-interest-earning assets
    
    
    51,388
    
    
    
    
    
    
    
    
    
    
    
    50,544Total assets
    
    $
    1,155,236
    
    
    
    
    
    
    
    
    
    
    $
    1,135,802Interest bearing liabilities:Deposits:NOW and money market accounts
    
    $
    97,757
    
    
    $
    642
    
    
    
    2.61
    %
    
    $
    89,650
    
    
    $
    506
    
    
    
    2.24
    %Passbook accounts and certificates
of deposit
    
    
    651,325
    
    
    
    8,058
    
    
    
    4.91
    %
    
    
    567,142
    
    
    
    6,360
    
    
    
    4.45
    %Total deposits
    
    
    749,082
    
    
    
    8,700
    
    
    
    4.61
    %
    
    
    656,792
    
    
    
    6,866
    
    
    
    4.15
    %FHLB advances (4)
    
    
    209,752
    
    
    
    2,570
    
    
    
    4.86
    %
    
    
    274,185
    
    
    
    3,425
    
    
    
    4.96
    %Reverse repurchase agreements
    
    
    50,330
    
    
    
    357
    
    
    
    2.78
    %
    
    
    59,439
    
    
    
    447
    
    
    
    2.94
    %Other borrowings (5)
    
    
    25,774
    
    
    
    573
    
    
    
    8.70
    %
    
    
    25,774
    
    
    
    537
    
    
    
    8.15
    %Total interest-bearing liabilities
    
    
    1,034,938
    
    
    
    12,200
    
    
    
    4.66
    %
    
    
    1,016,190
    
    
    
    11,275
    
    
    
    4.38
    %Non-interest-bearing deposits
    
    
    45,164
    
    
    
    
    
    
    
    
    
    
    
    47,852Non-interest-bearing liabilities
    
    
    8,704
    
    
    
    
    
    
    
    
    
    
    
    6,658Total liabilities
    
    
    1,088,806
    
    
    
    
    
    
    
    
    
    
    
    1,070,700Stockholders equity
    
    
    66,430
    
    
    
    
    
    
    
    
    
    
    
    65,102Total liabilities and stockholders equity
    
    $
    1,155,236
    
    
    
    
    
    
    
    
    
    
    $
    1,135,802Net interest-earning assets (liabilities)
    
    $
    68,910
    
    
    
    
    
    
    
    
    
    
    $
    69,068Net interest income/interest rate spread
    
    
    
    
    
    $
    8,042
    
    
    
    2.66
    %
    
    
    
    
    
    $
    7,703
    
    
    
    2.60
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    2.95
    %
    
    
    
    
    
    
    
    
    
    
    2.88
    %Ratio of average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    106.66
    %
    
    
    
    
    
    
    
    
    
    
    106.80
    %
 
 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. -12-




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##### Table of Contents



Nine Months Ended
    
    
    Nine Months EndedSeptember 30, 2007
    
    
    September 30, 2006(In thousands)
    
    Balance
    
    
    Income
    
    
    Rate (6)
    
    
    Balance
    
    
    Income
    
    
    Rate (6)Interest earning assets:Loans receivable (1)
    
    $
    761,381
    
    
    $
    45,202
    
    
    
    7.92
    %
    
    $
    704,447
    
    
    $
    40,256
    
    
    
    7.62
    %FHLB stock
    
    
    13,463
    
    
    
    528
    
    
    
    5.24
    %
    
    
    15,678
    
    
    
    607
    
    
    
    5.18
    %Securities and trading account assets (2)
    
    
    302,550
    
    
    
    12,934
    
    
    
    5.70
    %
    
    
    358,064
    
    
    
    13,790
    
    
    
    5.14
    %Cash and cash equivalents (3)
    
    
    11,996
    
    
    
    212
    
    
    
    2.36
    %
    
    
    11,107
    
    
    
    193
    
    
    
    2.32
    %Total interest earning assets
    
    
    1,089,390
    
    
    
    58,876
    
    
    
    7.21
    %
    
    
    1,089,296
    
    
    
    54,846
    
    
    
    6.72
    %Non-interest-earning assets
    
    
    52,822
    
    
    
    
    
    
    
    
    
    
    
    48,773Total assets
    
    $
    1,142,212
    
    
    
    
    
    
    
    
    
    
    $
    1,138,069Interest bearing liabilities:Deposits:NOW and money market accounts
    
    $
    100,742
    
    
    $
    1,992
    
    
    
    2.64
    %
    
    $
    100,103
    
    
    $
    1,603
    
    
    
    2.14
    %Passbook accounts and certificates
of deposit
    
    
    606,846
    
    
    
    22,085
    
    
    
    4.87
    %
    
    
    543,431
    
    
    
    16,629
    
    
    
    4.09
    %Total deposits
    
    
    707,588
    
    
    
    24,077
    
    
    
    4.55
    %
    
    
    643,534
    
    
    
    18,232
    
    
    
    3.79
    %FHLB advances (4)
    
    
    228,927
    
    
    
    8,574
    
    
    
    5.01
    %
    
    
    292,817
    
    
    
    10,587
    
    
    
    4.83
    %Reverse repurchase agreements
    
    
    56,432
    
    
    
    1,167
    
    
    
    2.73
    %
    
    
    59,220
    
    
    
    1,325
    
    
    
    2.95
    %Other borrowings (5)
    
    
    25,774
    
    
    
    1,711
    
    
    
    8.75
    %
    
    
    25,774
    
    
    
    1,498
    
    
    
    7.66
    %Total interest-bearing liabilities
    
    
    1,018,721
    
    
    
    35,529
    
    
    
    4.65
    %
    
    
    1,021,345
    
    
    
    31,642
    
    
    
    4.12
    %Non-interest-bearing deposits
    
    
    47,315
    
    
    
    
    
    
    
    
    
    
    
    47,575Non-interest-bearing liabilities
    
    
    7,761
    
    
    
    
    
    
    
    
    
    
    
    5,938Total liabilities
    
    
    1,073,797
    
    
    
    
    
    
    
    
    
    
    
    1,074,858Stockholders equity
    
    
    68,415
    
    
    
    
    
    
    
    
    
    
    
    63,211Total liabilities and stockholders equity
    
    $
    1,142,212
    
    
    
    
    
    
    
    
    
    
    $
    1,138,069Net interest-earning assets (liabilities)
    
    $
    70,669
    
    
    
    
    
    
    
    
    
    
    $
    67,951Net interest income/interest rate spread
    
    
    
    
    
    $
    23,347
    
    
    
    2.56
    %
    
    
    
    
    
    $
    23,204
    
    
    
    2.60
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    2.86
    %
    
    
    
    
    
    
    
    
    
    
    2.86
    %Ratio of average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    106.94
    %
    
    
    
    
    
    
    
    
    
    
    106.65
    %
 
 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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For the Quarter Ended
    
    
    For the Nine Months EndedSeptember
    
    
    September2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in thousands)
    
    
    (Dollars in thousands)Balance at beginning of period
    
    $
    6,113
    
    
    $
    5,614
    
    
    $
    5,914
    
    
    $
    5,661Charge-offs:Real Estate LoansSingle-family Residential
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Multi-family Residential
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial & Industrial
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    (369
    )Consumer and Other Loans
    
    
    (5
    )
    
    
    
    
    
    
    (6
    )
    
    
    (1
    )Total Charge-offs
    
    
    (5
    )
    
    
    (13
    )
    
    
    (6
    )
    
    
    (370
    )Recoveries:
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    64Net Recoveries (Charge-offs)
    
    
    (5
    )
    
    
    31
    
    
    
    (6
    )
    
    
    (306
    )Provision (credit) for Losses on Loans
    
    
    200
    
    
    
    200
    
    
    
    400
    
    
    
    490Balance at end of period
    
    $
    6,308
    
    
    $
    5,845
    
    
    $
    6,308
    
    
    $
    5,845Allowance for Loan Losses as a percent
of total loans outstanding
    
    
    0.82
    %
    
    
    0.78
    %
    
    
    0.82
    %
    
    
    0.78
    %Ratio of Net Charge-offs to Average Loans
outstanding
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.04
    %
  -14-




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Banking Fee & Other Income(Dollars in thousands)September
    
    
    SeptemberSeptember
    
    
    September
    
    
    %
    
    
    2007
    
    
    2006
    
    
    %2007 Quarter
    
    
    2006 Quarter
    
    
    Change
    
    
    YTD
    
    
    YTD
    
    
    ChangeBanking Fee TypeMortgage Brokerage Fee, Prepayment Penalties & Other Loan Fees
    
    $
    119
    
    
    $
    176
    
    
    
    -32.4
    %
    
    $
    628
    
    
    $
    551
    
    
    
    14.0
    %Deposit, Other Retail Banking Fees & Other Fee Income
    
    
    430
    
    
    
    356
    
    
    
    20.8
    %
    
    
    1,239
    
    
    
    1,302
    
    
    
    -4.8
    %Harrington Wealth Management Fees
    
    
    238
    
    
    
    214
    
    
    
    11.2
    %
    
    
    715
    
    
    
    618
    
    
    
    15.7
    %BOLI Income, net
    
    
    209
    
    
    
    185
    
    
    
    13.0
    %
    
    
    616
    
    
    
    567
    
    
    
    8.6
    %Total Banking Fee & Other Income
    
    $
    996
    
    
    $
    931
    
    
    
    7.0
    %
    
    $
    3,198
    
    
    $
    3,038
    
    
    
    5.3
    %
   -15-




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Financial Condition
  Securities
      -16-




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-17-




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##### Table of Contents



-18-




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-19-




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-20-




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##### Table of Contents



Amortized Cost
    
    
    Fair ValueSeptember 30, 2007Mortgage-backed securities  pass throughs
    
    $
    74,397
    
    
    $
    74,108Collateralized mortgage obligations
    
    
    111,316
    
    
    
    110,610Asset-backed securities (underlying securities mortgages)
    
    
    176,292
    
    
    
    168,675Asset-backed securities
    
    
    2,017
    
    
    
    1,921Total
    
    $
    364,022
    
    
    $
    355,314
 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
  Loans
  -21-




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##### Table of Contents



HWFG Net Loan Growth and Mix
 September 30, 2007
    
    
    December 31, 2006
    
    
    September 30, 2006% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofLoan Type
    
    Total
    
    
    Total
    
    
    Total
    
    
    Total
    
    
    Total
    
    
    TotalCommercial Real Estate
    
    $
    249.4
    
    
    
    32.2
    %
    
    $
    264.9
    
    
    
    34.7
    %
    
    $
    260.5
    
    
    
    34.7
    %Multi-family Real Estate
    
    
    79.1
    
    
    
    10.2
    %
    
    
    79.9
    
    
    
    10.4
    %
    
    
    78.7
    
    
    
    10.5
    %Construction (1)
    
    
    135.9
    
    
    
    17.5
    %
    
    
    112.6
    
    
    
    14.7
    %
    
    
    106.9
    
    
    
    14.2
    %Single-family Real Estate
    
    
    119.6
    
    
    
    15.4
    %
    
    
    106.7
    
    
    
    13.9
    %
    
    
    115.1
    
    
    
    15.3
    %Commercial and Industrial Loans
    
    
    114.8
    
    
    
    14.8
    %
    
    
    119.1
    
    
    
    15.6
    %
    
    
    112.1
    
    
    
    14.9
    %Land Acquisition and Development
    
    
    48.5
    
    
    
    6.3
    %
    
    
    54.7
    
    
    
    7.1
    %
    
    
    50.5
    
    
    
    6.7
    %Consumer Loans
    
    
    24.6
    
    
    
    3.2
    %
    
    
    25.3
    
    
    
    3.3
    %
    
    
    25.7
    
    
    
    3.4
    %Other Loans (2)
    
    
    2.8
    
    
    
    0.4
    %
    
    
    2.2
    
    
    
    0.3
    %
    
    
    2.2
    
    
    
    0.3
    %Total Gross Loans
    
    $
    774.7
    
    
    
    100.0
    %
    
    $
    765.4
    
    
    
    100.0
    %
    
    $
    751.7
    
    
    
    100.0
    %Allowance for loan loss
    
    
    (6.3
    )
    
    
    
    
    
    
    (5.9
    )
    
    
    
    
    
    
    (5.9
    )Deferred fees
    
    
    (1.9
    )
    
    
    
    
    
    
    (2.1
    )
    
    
    
    
    
    
    (2.1
    )Discounts/Premiums
    
    
    (0.5
    )
    
    
    
    
    
    
    (0.4
    )
    
    
    
    
    
    
    (0.4
    )Net Loans Receivable
    
    $
    766.0
    
    
    
    
    
    
    $
    757.0
    
    
    
    
    
    
    $
    743.3
 -22-




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##### Table of Contents



(1)
    
    Includes loans secured by residential, land and commercial properties. At September
30, 2007, we had $49.2 million of construction loans secured by single-family residential
properties, $47.5 million secured by commercial properties, $34.4 million for land
development and $4.8 million secured by multi-family residential properties.(2)
    
    Includes loans collateralized by deposits and consumer line of credit loans. Deposits
   FHLB Advances
  Stockholders Equity
  Liquidity and Capital Resources
 Liquidity -
 -23-




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Capital Resources.
  -24-




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##### Table of Contents



Asset and Liability Management
     i.e.,
  -25-




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##### Table of Contents



Accounting for Derivative Instruments and Hedging
Activities,
  Critical Accounting Policies
  Cautionary Statement Regarding Forward-Looking Statements.
  -26-




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Item 3: Quantitative and Qualitative Disclosures about Market Risk
    -27-




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##### Table of Contents



Change In Interest Rates (In Basis Points)-300
    
    -200
    
    -100
    
    Base
    
    +100
    
    +200
    
    +300Market value gain (loss) in assets
    
    $
    40,834
    
    
    $
    29,966
    
    
    $
    16,461
    
    
    
    
    
    
    $
    (18,215
    )
    
    $
    (38,018
    )
    
    $
    (58,895
    )Market value gain (loss) of liabilities
    
    
    (23,055
    )
    
    
    (14,495
    )
    
    
    (7,100
    )
    
    
    
    
    
    
    6,430
    
    
    
    13,009
    
    
    
    20,851Market value gain (loss) of net assets
before interest rate contracts
    
    
    17,779
    
    
    
    15,471
    
    
    
    9,361
    
    
    
    
    
    
    
    (11,785
    )
    
    
    (25,009
    )
    
    
    (38,044
    )Market value gain (loss) of interest
rate contracts
    
    
    (15,463
    )
    
    
    (10,072
    )
    
    
    (4,922
    )
    
    
    
    
    
    
    4,708
    
    
    
    9,212
    
    
    
    13,522Total change in MVPE (2)
    
    $
    2,316
    
    
    $
    5,399
    
    
    $
    4,439
    
    
    
    
    
    
    $
    (7,077
    )
    
    $
    (15,797
    )
    
    $
    (24,522
    )Change in MVPE as a percent of:MV of total assets of Bank
    
    
    1.00
    %
    
    
    2.34
    %
    
    
    1.92
    %
    
    
    
    
    
    
    -3.07
    %
    
    
    -6.85
    %
    
    
    -10.63
    %Total assets of the Bank
    
    
    -0.34
    %
    
    
    0.02
    %
    
    
    0.12
    %
    
    
    
    
    
    
    -0.30
    %
    
    
    -0.71
    %
    
    
    -1.12
    %
 
 (1)
    
    Assumes an instantaneous parallel change in interest rates at all maturities.(2)
    
    Based on the Companys pre-tax tangible MVPE of $91.9 million at September 30, 2007.(3)
    
    Pre-tax tangible MVPE as a percentage of tangible assets.  
 Item 4: Controls and Procedures
   -28-




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##### Table of Contents



PART II OTHER INFORMATION
 
 Item 1:
 The Company is involved in various legal proceedings occurring in the ordinary course of
business, which, in the aggregate, are believed by management to be immaterial to the
financial condition and results of operations of the Company.
 
 Item 1A.
 There were no material changes in the third quarter of 2007 to the risk factors
discussed in the Companys 10-K for the year ended December 31, 2006
 
 Item 2:
  
 Item 3:
  
 Item 4:
  
 Item 5:
  
 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.
 -29-




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##### Table of Contents



SIGNATURES
  HARRINGTON WEST FINANCIAL GROUP, INC.November 9, 2007
    By:
    /s/ Craig J. CernyCraig J. CernyChairman of the Board
and Chief Executive Officer

(Principal Executive Officer)November 9, 2007
    By:
    /s/ William W. Phillips, jr.William W. Phillips, Jr.President, Chief Operating Officer

(Principal Executive Officer)November 9, 2007
    By:

/s/
Kerril SteeleKerril SteeleSr. Vice-President, Chief Financial Officer
(Principle Financial and Accounting Officer) -30-