##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 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
  Large accelerated filer
o
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company
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, 2008 and December 31, 2007
    
    
    2Condensed Consolidated Statements of Income (Loss)
for the Three and Nine Months Ended September 30, 2008 and 2007
    
    
    3Condensed Consolidated Statements of Stockholders Equity and Comprehensive
Income (Loss) for the Nine Months Ended September 30, 2008
and Year Ended December 31, 2007
    
    
    4Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2008 and 2007
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3.Quantitative and Qualitative Disclosures about Market Risk
    
    
    28Item 4T.Controls and Procedures
    
    
    29Part II  Other InformationItem 1.Legal Proceedings
    
    
    30Item 1A.Risk Factors
    
    
    30Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 3.Defaults upon Senior Securities
    
    
    31Item 4.Submission of Matters to a Vote of Security Holders
    
    
    31Item 5.Other Information
    
    
    31Item 6.Exhibits
    
    
    31Signatures
    
    
    32EX-31.1EX-31.2EX-31.3EX-32
  - 1 -




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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,
    
    December 31,2008
    
    2007Assets:Cash and cash equivalents
    
    $
    24,549
    
    
    $
    14,433Trading account assets
    
    
    933
    
    
    
    2,307Securities, available-for-sale
    
    
    285,099
    
    
    
    351,466Securities
held to maturity (fair value of $40 at September 30, 2008 and $58 at December
31, 2007)
    
    
    38
    
    
    
    56Loans receivable, net of
allowance for loan losses
of $7,035 at September 30,
2008 and $6,446 at December
31, 2007
    
    
    811,372
    
    
    
    782,626Accrued interest receivable
    
    
    3,874
    
    
    
    5,168Real estate owned
    
    
    8,841
    
    
    
    Premises, equipment and other long-term assets
    
    
    17,750
    
    
    
    16,917Due from broker
    
    
    43
    
    
    
    1Prepaid expenses and other assets
    
    
    2,607
    
    
    
    2,848Investment in FHLB stock, at cost
    
    
    13,301
    
    
    
    12,474Income taxes receivable
    
    
    4,065
    
    
    
    Cash surrender value of life insurance
    
    
    20,943
    
    
    
    20,524Deferred tax asset
    
    
    12,823
    
    
    
    8,384Goodwill
    
    
    5,496
    
    
    
    5,496Other intangible assets
    
    
    591
    
    
    
    702Total assets
    
    $
    1,212,325
    
    
    $
    1,223,402Liabilities:Deposits:Interest-bearing deposits
    
    $
    856,822
    
    
    $
    786,263Non-interest-bearing demand deposits
    
    
    45,805
    
    
    
    50,070Total Deposits
    
    
    902,627
    
    
    
    836,333FHLB advances
    
    
    203,000
    
    
    
    247,000Securities sold under repurchase agreements
    
    
    20,146
    
    
    
    49,981Subordinated debt
    
    
    25,774
    
    
    
    25,774Accrued interest payable and other liabilities
    
    
    8,280
    
    
    
    8,769Income taxes payable
    
    
    
    
    
    
    503Total liabilities
    
    
    1,159,827
    
    
    
    1,168,360Shareholders equityPreferred stock, $ .01 par value; 8% non-cumulative,
1,000,000 shares authorized; 118,757 shares issued and
outstanding as of September 30, 2008 with no shares issued
and outstanding December 31, 2007
    
    
    1
    
    
    
    Common stock, $.01 par value;
9,000,000 shares authorized;
6,590,011 shares issued and
outstanding as of September 30,
2008 and 5,554,003 shares
issued and outstanding December
31, 2007
    
    
    66
    
    
    
    56Additional paid-in capital  Common
    
    
    42,043
    
    
    
    34,424Additional paid-in capital  Preferred
    
    
    2,968
    
    
    
    Retained earnings
    
    
    27,672
    
    
    
    35,368Accumulated other comprehensive loss
    
    
    (20,252
    )
    
    
    (14,806
    )Total shareholders equity
    
    
    52,498
    
    
    
    55,042Total liabilities
and shareholders
equity
    
    $
    1,212,325
    
    
    $
    1,223,402
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##### Table of Contents



HARRINGTON WEST FINANCIAL GROUP, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited)
 (Dollars in thousands, except per share data)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Interest income:Loans
    
    $
    13,745
    
    
    $
    15,130
    
    
    $
    41,616
    
    
    $
    45,202Securities
    
    
    3,838
    
    
    
    5,112
    
    
    
    13,989
    
    
    
    13,674Total interest income
    
    
    17,583
    
    
    
    20,242
    
    
    
    55,605
    
    
    
    58,876Interest expense:Deposits
    
    
    6,497
    
    
    
    8,700
    
    
    
    22,809
    
    
    
    24,077Interest on FHLB advances, repos & other debt
    
    
    3,401
    
    
    
    3,500
    
    
    
    10,134
    
    
    
    11,452Total interest expense
    
    
    9,898
    
    
    
    12,200
    
    
    
    32,943
    
    
    
    35,529Net interest income
    
    
    7,685
    
    
    
    8,042
    
    
    
    22,662
    
    
    
    23,347Provision for loan losses
    
    
    1,565
    
    
    
    200
    
    
    
    2,465
    
    
    
    400Net interest income after provision for loan losses
    
    
    6,120
    
    
    
    7,842
    
    
    
    20,197
    
    
    
    22,947Non-interest income:Gain (loss) on sale of available for sale securities
    
    
    
    
    
    
    
    
    
    
    1,107
    
    
    
    (1,004
    )Loss from trading assets
    
    
    (28
    )
    
    
    (378
    )
    
    
    (8,693
    )
    
    
    (372
    )Other-than-temporary loss
    
    
    (5,575
    )
    
    
    (1,906
    )
    
    
    (8,057
    )
    
    
    (1,906
    )Gain on termination of cash flow hedge
    
    
    
    
    
    
    
    
    
    
    2,338
    
    
    
    Loss on write-down of real estate owned
    
    
    (393
    )
    
    
    
    
    
    
    (2,996
    )
    
    
    Other income
    
    
    
    
    
    
    
    
    
    
    1,049
    
    
    
    Increase in cash surrender value of life insurance
    
    
    180
    
    
    
    209
    
    
    
    421
    
    
    
    616Banking fee and other income
    
    
    879
    
    
    
    787
    
    
    
    2,605
    
    
    
    2,582Total non-interest income
    
    
    (4,937
    )
    
    
    (1,288
    )
    
    
    (12,226
    )
    
    
    (84
    )Non-interest expense:Salaries and employee benefits
    
    
    3,428
    
    
    
    3,308
    
    
    
    10,225
    
    
    
    9,817Premises and equipment
    
    
    1,025
    
    
    
    975
    
    
    
    3,041
    
    
    
    2,893Insurance premiums
    
    
    247
    
    
    
    83
    
    
    
    685
    
    
    
    254Marketing
    
    
    143
    
    
    
    84
    
    
    
    383
    
    
    
    314Computer services
    
    
    235
    
    
    
    239
    
    
    
    781
    
    
    
    687Professional fees
    
    
    198
    
    
    
    162
    
    
    
    503
    
    
    
    628Office expenses and supplies
    
    
    192
    
    
    
    195
    
    
    
    620
    
    
    
    613Other
    
    
    801
    
    
    
    703
    
    
    
    2,223
    
    
    
    1,987Total non-interest expense
    
    
    6,269
    
    
    
    5,749
    
    
    
    18,461
    
    
    
    17,193Income (loss) before income taxes
    
    
    (5,086
    )
    
    
    805
    
    
    
    (10,490
    )
    
    
    5,670Provision for income tax expense (benefit)
    
    
    (1,908
    )
    
    
    307
    
    
    
    (3,935
    )
    
    
    2,121Net income (loss)
    
    $
    (3,178
    )
    
    $
    498
    
    
    $
    (6,555
    )
    
    $
    3,549Basic earnings/(loss) per share
    
    $
    (0.52
    )
    
    $
    0.09
    
    
    $
    (1.10
    )
    
    $
    0.64Diluted earnings/(loss) per share
    
    $
    (0.52
    )
    
    $
    0.09
    
    
    $
    (1.10
    )
    
    $
    0.63Basic weighted-average shares outstanding
    
    
    6,141,216
    
    
    
    5,550,353
    
    
    
    5,954,914
    
    
    
    5,537,873Diluted weighted-average shares outstanding
    
    
    6,141,216
    
    
    
    5,642,512
    
    
    
    5,954,914
    
    
    
    5,641,914
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##### Table of Contents



HARRINGTON WEST FINANCIAL GROUP, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY 
AND COMPREHENSIVE INCOME (LOSS) (Unaudited)
 (Dollars in thousands, except share and per share data)
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    TotalPreferred Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Loss
    
    
    Loss
    
    
    EquityBALANCE, JANUARY 1, 2007
    
    
    
    
    
    $
    
    
    
    
    5,460,393
    
    
    $
    55
    
    
    $
    33,332
    
    
    $
    34,964
    
    
    
    
    
    
    $
    (653
    )
    
    $
    67,698Comprehensive income/(loss)Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,168
    
    
    
    4,168
    
    
    
    
    
    
    
    4,168Other comprehensive loss, net of taxUnrealized losses on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,757
    )
    
    
    (10,757
    )
    
    
    (10,757
    )Effective portion of change in fair
value of cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,396
    )
    
    
    (3,396
    )
    
    
    (3,396
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (9,985
    )Stock options exercised including
tax benefit of $125
    
    
    
    
    
    
    
    
    
    
    93,610
    
    
    
    1
    
    
    
    719
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    720Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    373
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    373Dividends on Common Stk at $.675/Shr
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,764
    )
    
    
    
    
    
    
    
    
    
    
    (3,764
    )BALANCE, DECEMBER 31, 2007
    
    
    
    
    
    
    
    
    
    
    5,554,003
    
    
    
    56
    
    
    
    34,424
    
    
    
    35,368
    
    
    
    
    
    
    
    (14,806
    )
    
    
    55,042Comprehensive lossNet loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,555
    )
    
    $
    (6,555
    )
    
    
    
    
    
    
    (6,555
    )Other comprehensive loss, net of taxUnrealized losses on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,736
    )
    
    
    (5,736
    )
    
    
    (5,736
    )Effective portion of change in fair
value of cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    290
    
    
    
    290
    
    
    
    290Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (12,001)Stock options exercised including
tax benefit of $25
    
    
    
    
    
    
    
    
    
    
    27,240
    
    
    
    
    
    
    
    233
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    233Shares issued in private offering at $7.75
    
    
    
    
    
    
    
    
    
    
    550,000
    
    
    
    5
    
    
    
    4,257
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,262Shares issued in private offering at $6.25
    
    
    
    
    
    
    
    
    
    
    458,768
    
    
    
    5
    
    
    
    2,862
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,867Shares issued in private offering at $25.00
    
    
    118,757
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    2,968
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,969Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    267
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    267Dividends on Common Stk at $.195/Shr
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,141
    )
    
    
    
    
    
    
    
    
    
    
    (1,141
    )BALANCE, SEPTEMBER 30, 2008
    
    
    118,757
    
    
    $
    1
    
    
    
    6,590,011
    
    
    $
    66
    
    
    $
    45,011
    
    
    $
    27,672
    
    
    
    
    
    
    $
    (20,252
    )
    
    $
    52,498
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##### Table of Contents



HARRINGTON WEST FINANCIAL GROUP, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 (Dollars in thousands)
 Nine Months EndedSeptember 302008
    
    2007Cash flows from operating activities:Net (loss) income
    
    $
    (6,555
    )
    
    $
    3,549Adjustments to reconcile net income (loss) to net cash provided by
operating activities:Accretion of deferred loan fees and costs
    
    
    (429
    )
    
    
    (192
    )Depreciation and amortization
    
    
    1,038
    
    
    
    1,141Amortization of premiums and discounts on loans receivable and securities
    
    
    (649
    )
    
    
    797Provision for loan losses
    
    
    2,465
    
    
    
    400Activity in trading account assets
    
    
    (1,305
    )
    
    
    (13
    )Loss (gain) on sale of trading securities
    
    
    2,679
    
    
    
    (454
    )Loss (gain) on sale of available-for-sale securities
    
    
    (1,107
    )
    
    
    2,910Gain on termination of cash flow swaps
    
    
    (2,338
    )
    
    
    Loss on other-than-temporary impairment
    
    
    8,057
    
    
    
    Loss on write-down of real estate owned
    
    
    2,996
    
    
    
    FHLB stock dividend
    
    
    (565
    )
    
    
    (566
    )Earnings on bank owned life insurance
    
    
    (421
    )
    
    
    (616
    )Decrease in accrued interest receivable
    
    
    1,294
    
    
    
    69Increase in income tax receivable, net of payable
    
    
    (4,568
    )
    
    
    (359
    )Decrease in prepaid expenses and other assets
    
    
    723
    
    
    
    697Stock compensation expense
    
    
    267
    
    
    
    288Decrease in accounts payable, accrued expenses,
and other liabilities
    
    
    (187
    )
    
    
    (354
    )Net cash provided by operating activities
    
    
    1,395
    
    
    
    7,297Cash flows from investing activities:Net increase in loans receivable
    
    
    (58,793
    )
    
    
    (9,258
    )Proceeds from sale of loans
    
    
    16,133
    
    
    
    Proceeds from sales of securities available for sale
    
    
    171,925
    
    
    
    35,999Purchases of securities available for sale
    
    
    (162,501
    )
    
    
    (175,892
    )Principal paydowns on securities available for sale
    
    
    41,466
    
    
    
    83,522Principal paydowns on securities held to maturity
    
    
    18
    
    
    
    10Proceeds from sale of real estate acquired through foreclosure
    
    
    53
    
    
    
    Purchase of bank owned life insurance
    
    
    
    
    
    
    (2,000
    )Net purchase of premises and equipment
    
    
    (2,067
    )
    
    
    (1,083
    )Proceeds from sale of fixed assets
    
    
    1,100
    
    
    
    Redemption (purchase) of FHLB Stock
    
    
    (262
    )
    
    
    3,377Net cash provided by (used in) investing activities
    
    
    7,072
    
    
    
    (65,325
    )Cash flows from financing activities:Net increase in deposits
    
    
    66,294
    
    
    
    92,930Decrease in securities sold under agreements to repurchase
    
    
    (29,835
    )
    
    
    (15,414
    )Decrease in FHLB advances
    
    
    (44,000
    )
    
    
    (21,000
    )Proceeds from exercise of stock options, including tax benefits
    
    
    233
    
    
    
    731Proceeds from shares issued in private offering
    
    
    10,098
    
    
    
    Dividends paid on common stock
    
    
    (1,141
    )
    
    
    (3,066
    )Net cash provided by financing activities
    
    
    1,649
    
    
    
    54,181Net increase (decrease) in cash and cash equivalents
    
    
    10,116
    
    
    
    (3,847
    )Cash and cash equivalents at beginning of period
    
    
    14,433
    
    
    
    21,178Cash and cash equivalents at end of period
    
    $
    24,549
    
    
    $
    17,331
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##### Table of Contents



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
  - 6 -




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##### Table of Contents



Accounting by Creditors for Impairment of a Loan
   Real Estate Owned
 Adoption of new accounting standards Fair Value Measurements Effective Date of FASB Statement No.
157
 The Fair Value Option for Financial
Assets and Financial Liabilities
  - 7 -




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##### Table of Contents



Business Combinations.
 2. FAIR VALUE
     Fair Value
Measurements
  - 8 -




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##### Table of Contents



Fair Value Measurements at September 30, 2008Quoted Prices inActive Markets
    
    
    
    
    
    Significantfor Identical
    
    Significant Other
    
    UnobservableAssets
    
    Observable Inputs
    
    InputsTotal
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:Trading securities
    
    $
    933
    
    
    
    
    
    
    $
    933
    
    
    
    Available for sale securities
    
    $
    285,099
    
    
    
    
    
    
    $
    185,258
    
    
    $
    99,842Liabilities:Interest rate swaps
    
    $
    4,723
    
    
    
    
    
    
    $
    4,723
    
    
    
    
  Fair ValueMeasurementsUsing SignificantUnobservableInputs(Level 3)Available for salesecuritiesTransfers in to Level 3
    
    $
    80,471Total gains or losses (realized / unrealized)Recognized in earnings:Other than temporary impairment
    
    
    (5,575
    )Unrealized in other comprehensive income:Reclassification adjustment for losses
recognized in earnings
    
    
    5,575Level 3 fair value adjustment
    
    
    19,371Ending balance, September 30, 2008
    
    $
    99,842
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##### Table of Contents



Fair Value Measurements at September 30, 2008Quoted Prices inActive Markets
    
    
    
    
    
    Significantfor Identical
    
    Significant Other
    
    UnobservableAssets
    
    Observable Inputs
    
    InputsTotal
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:Impaired loans
    
    $
    10,657
    
    
    
    
    
    
    $
    10,657
    
    
    
    
 Loans
 3. REAL ESTATE OWNED
  September 30,
    
    September 30,2008
    
    2007Beginning balance real estate owned
    
    $
    
    
    
    $
    Transfer of loans to real estate owned
    
    
    11,837
    
    
    
    Provision for real estate owned
    
    
    (2,996
    )
    
    
    Ending balance real estate owned
    
    $
    8,841
    
    
    $
    
 - 10 -




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##### Table of Contents



September 30,
    
    September 30,2008
    
    2007Beginning valuation on real estate owned
    
    $
    
    
    
    $
    Provision charged to operations
    
    
    2,996
    
    
    
    Amounts related to properties disposed
    
    
    
    
    
    
    Ending valuation on real estate owned
    
    $
    2,996
    
    
    $
    
 4. EARNINGS (LOSS) PER SHARE
  Three months ended September 30, 2008
    
    Nine months ended September 30, 2008(net income/(loss) amounts
    
    Income/(Loss)
    
    Shares
    
    Per-Share
    
    Income/(Loss)
    
    Shares
    
    Per-Sharein thousands)
    
    (Numerator)
    
    (Denominator)
    
    Amount
    
    (Numerator)
    
    (Denominator)
    
    AmountBasic EPS
    
    $
    (3,178
    )
    
    
    6,141,216
    
    
    $
    (0.52
    )
    
    $
    (6,555
    )
    
    
    5,954,914
    
    
    $
    (1.10
    )Effect of dilutive
stock options & preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Diluted EPS
    
    $
    (3,178
    )
    
    
    6,141,216
    
    
    $
    (0.52
    )
    
    $
    (6,555
    )
    
    
    5,954,914
    
    
    $
    (1.10
    )
 Three months ended September 30, 2007
    
    Nine months ended September 30, 2007Income/(Loss)
    
    Shares
    
    Per-Share
    
    Income/(Loss)
    
    Shares
    
    Per-Share(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
    
    
    
    
    
    
    
    
    
    
    
    104,041
    
    
    
    (0.01
    )Diluted EPS
    
    $
    498
    
    
    
    5,642,512
    
    
    $
    0.09
    
    
    $
    3,549
    
    
    
    5,641,914
    
    
    $
    0.63
  5. OTHER-THAN-TEMPORARY IMPAIRMENT
  - 11 -




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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.
    
    Diversification of the loan portfolio and economic and credit risk.2.
    
    Options to capitalize on the most favorable growth markets.3.
    
    The capability to deploy the Companys diversified product mix and
emphasize those products that are best suited for the market.4.
    
    The ability to price products strategically among the markets in an attempt
to maximize profitability.
  - 12 -




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##### Table of Contents



Product Line Diversification
  Modern Financial and Investment Management Skills
   Control Banking Risks
  Concentrate on Selected Performance Measures
  - 13 -




---



##### Table of Contents



Profitability Drivers
  1.
    
    Growing our low and non-costing consumer and commercial deposits and continuing
to change the mix of deposits to fewer time based certificates of deposit. This
strategy is expected to lower our deposit cost and increase our net interest margin
over time. We have emphasized the development of low cost business accounts and our
full-service, free checking and money market accounts for consumers.2.
    
    Changing the mix of our loans 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
focused on home equity line of credit loans, using prudent underwriting guidelines and
procedures.3.
    
    Diversifying and growing our banking fee income through existing and new fee
income sources such as our overdraft protection program and other deposit fees, loan
fee income from mortgage banking, prepayment penalty fees and other loan fees,
Harrington Wealth Management trust and investment fees, and other retail banking fees.4.
    
    Achieving a higher level of performance on our investment portfolio by earning
a pre-tax total return consisting of interest income plus net gains and losses on
securities and related total return swaps relative to one month LIBOR over 1.00% per
annum. With our skills in investment and risk management, we have utilized excess
equity capital by investing in a high credit quality, mortgage and related securities
portfolio managed to a short duration of three to six months. In recent quarters,
with the extremely volatile investments spreads and prices and the on going credit
crisis, HWFG has allowed the investment portfolio to pay-down to increase capital
levels and reduce risk.5.
    
    Controlling the interest rate risk of the institution and seeking high credit
quality of the loan and investment portfolios. The Bank seeks to hedge the
marked-to-market value of equity and net interest income to changes in interest rates
by matching the effective duration of our assets to our liabilities using risk
management tools and practices. The company maintains rigorous loan underwriting
standards and credit risk management and review process.
  Results of Operations
  - 14 -




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##### Table of Contents



1.
    
    $1.5 million of after-tax core banking income (net interest income before provision for
loan loss plus banking fee income minus operating expenses).2.
    
    $3.5 million after-tax other-than-temporary impairment on $10.3 million of securities
available for sale. This loss was transferred from equity to earnings upon determination of
the impairment and, therefore, has no effect on book value per share.3.
    
    $1.2 million in after-tax addition to reserves and write-downs on loans and real estate
owned. On a pre-tax basis, this expense includes $1.6 million of provision for loan losses
and $400 thousand of write-downs on real estate owned.
  1.
    
    $4.5 million of after-tax core banking income (net interest income before provision for loan
loss plus total banking fee income minus operating expenses).2.
    
    $2.7 million after tax net loss on sales of CMBS, other assets and securities, CMBS total
rate of return swaps and hedges, and cash flow hedges of borrowings. All CMBS related securities
were eliminated in the June 2008 quarter.3.
    
    $5.0 million after-tax other-than-temporary impairment on $17.0 million book value of
mortgage securities.4.
    
    $1.5 million in after-tax specific and general allowances for loan losses.5.
    
    $1.9 million after-tax write-downs on real estate owned.
   - 15 -




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##### Table of Contents



Three Months Ended
    
    
    
    
    
    
    Three Months EndedSeptember 30, 2008
    
    
    
    
    
    
    September 30, 2007(In thousands)
    
    Balance
    
    
    Income
    
    
    Rate (6)
    
    
    Balance
    
    
    Income
    
    
    Rate (6)Interest earning assets:Loans receivable (1)
    
    $
    812,145
    
    
    $
    13,745
    
    
    
    6.76
    %
    
    $
    763,000
    
    
    $
    15,130
    
    
    
    7.91
    %FHLB stock
    
    
    13,549
    
    
    
    207
    
    
    
    6.08
    %
    
    
    12,081
    
    
    
    161
    
    
    
    5.29
    %Securities and trading account assets (2)


    326,455
    
    
    
    3,614
    
    
    
    4.43
    %
    
    
    317,215
    
    
    
    4,890
    
    
    
    6.17
    %Cash and cash equivalents (3)
    
    
    13,886
    
    
    
    17
    
    
    
    0.49
    %
    
    
    11,552
    
    
    
    61
    
    
    
    2.09
    %Total interest earning assets
    
    
    1,166,035
    
    
    
    17,583
    
    
    
    6.03
    %
    
    
    1,103,848
    
    
    
    20,242
    
    
    
    7.32
    %Non-interest-earning assets
    
    
    37,177
    
    
    
    
    
    
    
    
    
    
    
    51,388Total assets
    
    $
    1,203,212
    
    
    
    
    
    
    
    
    
    
    $
    1,155,236Interest bearing liabilities:Deposits:NOW and money market accounts
    
    $
    174,341
    
    
    $
    1,095
    
    
    
    2.50
    %
    
    $
    97,757
    
    
    $
    642
    
    
    
    2.61
    %Passbook accounts and certificates
of deposit
    
    
    628,823
    
    
    
    5,402
    
    
    
    3.42
    %
    
    
    651,325
    
    
    
    8,058
    
    
    
    4.91
    %Total deposits
    
    
    803,164
    
    
    
    6,497
    
    
    
    3.22
    %
    
    
    749,082
    
    
    
    8,700
    
    
    
    4.61
    %FHLB advances (4)
    
    
    261,946
    
    
    
    2,896
    
    
    
    4.40
    %
    
    
    209,752
    
    
    
    2,570
    
    
    
    4.86
    %Reverse repurchase agreements
    
    
    19,999
    
    
    
    159
    
    
    
    3.11
    %
    
    
    50,330
    
    
    
    405
    
    
    
    3.15
    %Other borrowings (5)
    
    
    25,774
    
    
    
    346
    
    
    
    5.25
    %
    
    
    25,774
    
    
    
    525
    
    
    
    7.97
    %Total interest-bearing liabilities
    
    
    1,110,883
    
    
    
    9,898
    
    
    
    3.53
    %
    
    
    1,034,938
    
    
    
    12,200
    
    
    
    4.66
    %Non-interest-bearing deposits
    
    
    40,901
    
    
    
    
    
    
    
    
    
    
    
    45,164Non-interest-bearing liabilities
    
    
    9,379
    
    
    
    
    
    
    
    
    
    
    
    8,704Total liabilities
    
    
    1,161,163
    
    
    
    
    
    
    
    
    
    
    
    1,088,806Stockholders equity
    
    
    42,049
    
    
    
    
    
    
    
    
    
    
    
    66,430Total liabilities and stockholders equity
    
    $
    1,203,212
    
    
    
    
    
    
    
    
    
    
    $
    1,155,236Net interest-earning assets (liabilities)
    
    $
    55,152
    
    
    
    
    
    
    
    
    
    
    $
    68,910Net interest income/interest rate spread
    
    
    
    
    
    $
    7,685
    
    
    
    2.50
    %
    
    
    
    
    
    $
    8,042
    
    
    
    2.66
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    2.67
    %
    
    
    
    
    
    
    
    
    
    
    2.95
    %Ratio of average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    104.96
    %
    
    
    
    
    
    
    
    
    
    
    106.66
    %
 
 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 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 subordinated debt.6)
    
    Annualized. - 16 -




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##### Table of Contents



Nine Months Ended
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedSeptember 30, 2008
    
    
    
    
    
    
    
    
    
    
    September 30, 2007(In thousands)
    
    Balance
    
    
    Income
    
    
    Rate (6)
    
    
    Balance
    
    
    Income
    
    Rate (6)Interest earning assets:Loans receivable (1)
    
    $
    802,401
    
    
    $
    41,616
    
    
    
    6.92
    %
    
    $
    761,381
    
    
    $
    45,202
    
    
    
    7.92
    %FHLB stock
    
    
    13,421
    
    
    
    582
    
    
    
    5.79
    %
    
    
    13,463
    
    
    
    528
    
    
    
    5.24
    %Securities and trading account assets (2)
    
    
    360,233
    
    
    
    13,268
    
    
    
    4.91
    %
    
    
    302,550
    
    
    
    12,934
    
    
    
    5.70
    %Cash and cash equivalents (3)
    
    
    17,277
    
    
    
    139
    
    
    
    1.07
    %
    
    
    11,996
    
    
    
    212
    
    
    
    2.36
    %Total interest earning assets
    
    
    1,193,332
    
    
    
    55,605
    
    
    
    6.22
    %
    
    
    1,089,390
    
    
    
    58,876
    
    
    
    7.21
    %Non-interest-earning assets
    
    
    38,126
    
    
    
    
    
    
    
    
    
    
    
    52,822Total assets
    
    $
    1,231,458
    
    
    
    
    
    
    
    
    
    
    $
    1,142,212Interest bearing liabilities:Deposits:NOW and money market accounts
    
    $
    154,912
    
    
    $
    2,965
    
    
    
    2.56
    %
    
    $
    100,742
    
    
    $
    1,992
    
    
    
    2.64
    %Passbook accounts and certificates
of deposit
    
    
    667,020
    
    
    
    19,844
    
    
    
    3.97
    %
    
    
    606,846
    
    
    
    22,085
    
    
    
    4.87
    %Total deposits
    
    
    821,932
    
    
    
    22,809
    
    
    
    3.71
    %
    
    
    707,588
    
    
    
    24,077
    
    
    
    4.55
    %FHLB advances (4)
    
    
    247,326
    
    
    
    8,151
    
    
    
    4.40
    %
    
    
    228,927
    
    
    
    8,574
    
    
    
    5.01
    %Reverse repurchase agreements
    
    
    37,253
    
    
    
    858
    
    
    
    3.03
    %
    
    
    56,432
    
    
    
    1,320
    
    
    
    2.73
    %Other borrowings (5)
    
    
    25,774
    
    
    
    1,125
    
    
    
    5.73
    %
    
    
    25,774
    
    
    
    1,558
    
    
    
    8.75
    %Total interest-bearing liabilities
    
    
    1,132,285
    
    
    
    32,943
    
    
    
    3.87
    %
    
    
    1,018,721
    
    
    
    35,529
    
    
    
    4.65
    %Non-interest-bearing deposits
    
    
    43,428
    
    
    
    
    
    
    
    
    
    
    
    47,315Non-interest-bearing liabilities
    
    
    11,101
    
    
    
    
    
    
    
    
    
    
    
    7,761Total liabilities
    
    
    1,186,814
    
    
    
    
    
    
    
    
    
    
    
    1,073,797Stockholders equity
    
    
    44,644
    
    
    
    
    
    
    
    
    
    
    
    68,415Total liabilities and stockholders
equity
    
    $
    1,231,458
    
    
    
    
    
    
    
    
    
    
    $
    1,142,212Net interest-earning assets (liabilities)
    
    $
    61,047
    
    
    
    
    
    
    
    
    
    
    $
    70,669Net interest income/interest rate spread
    
    
    
    
    
    $
    22,662
    
    
    
    2.35
    %
    
    
    
    
    
    $
    23,347
    
    
    
    2.56
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    2.55
    %
    
    
    
    
    
    
    
    
    
    
    2.86
    %Ratio of average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    105.39
    %
    
    
    
    
    
    
    
    
    
    
    106.94
    %
 
 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 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 subordinated debt.6)
    
    Annualized.  - 17 -




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in Thousands)
    
    
    (Dollars in Thousands)Balance at beginning of period
    
    $
    6,847
    
    
    
    6113
    
    
    $
    6,446
    
    
    $
    5,914Charge-offs:Real estate loans:Commercial
    
    
    (1,315
    )
    
    
    
    
    
    
    (1,315
    )
    
    
    Consumer and other loans
    
    
    (62
    )
    
    
    (5
    )
    
    
    (586
    )
    
    
    (6
    )Total charge-offs
    
    
    (1,377
    )
    
    
    (5
    )
    
    
    (1,901
    )
    
    
    (6
    )Recoveries
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    Net charge-offs
    
    
    (1,377
    )
    
    
    (5
    )
    
    
    (1,876
    )
    
    
    (6
    )Provision for losses on loans
    
    
    1,565
    
    
    
    200
    
    
    
    2,465
    
    
    
    400Balance at end of period
    
    $
    7,035
    
    
    $
    6,308
    
    
    $
    7,035
    
    
    $
    6,308Allowance for loan losses as a percent of
total loans outstanding at the end of the
period
    
    
    0.86
    %
    
    
    0.82
    %
    
    
    0.86
    %
    
    
    0.82
    %Ratio of net charge-offs to average loans
outstanding during the period
    
    
    0.17
    %
    
    
    0.00
    %
    
    
    0.23
    %
    
    
    0.00
    %
   - 18 -




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##### Table of Contents



Banking Fee & Other Income(Dollars in thousands)September
    
    
    June
    
    
    September
    
    
    September
    
    
    June
    
    
    September2008
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2008
    
    
    2007Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    YTD
    
    
    YTD
    
    
    YTDBanking Fee TypeMortgage Brokerage Fee, PrepaymentPenalties & Other Loan Fees
    
    $
    125
    
    
    $
    188
    
    
    $
    119
    
    
    $
    460
    
    
    $
    335
    
    
    $
    628Deposit, Other Retail Banking Fees & Other
Fee Income
    
    
    520
    
    
    
    442
    
    
    
    430
    
    
    
    1,402
    
    
    
    882
    
    
    
    1,239Harrington Wealth Management Fees
    
    
    234
    
    
    
    256
    
    
    
    238
    
    
    
    743
    
    
    
    509
    
    
    
    715Increase in Cash Surrender Value of LifeInsurance, net
    
    
    180
    
    
    
    49
    
    
    
    209
    
    
    
    421
    
    
    
    242
    
    
    
    616Total Banking Fee & Other Income
    
    $
    1,059
    
    
    $
    935
    
    
    $
    996
    
    
    $
    3,026
    
    
    $
    1,968
    
    
    $
    3,198
  1.
    
    With lower loan volumes as HWFG sought to build capital levels, the deferral of loan
origination costs has been reduced, thus increasing expenses about $200 thousand on a
quarterly basis
 - 19 -




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##### Table of Contents



2.
    
    With higher levels of real estate owned, the cost to stabilize and maintain the real
estate has increased expenses about $120 thousand per quarter, especially considering
initial acquisition and refurbishment, when necessary.3.
    
    Deposit insurance premium expense was initiated in the June 2008 quarter after the
HWFGs FDIC insurance credit was fully exhausted, adding about $160 thousand in expense per
quarter.
  Financial Condition
  Securities and Investment Activities
   - 20 -




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##### Table of Contents



AmortizedCost
    
    
    Fair ValueSeptember 30, 2008Mortgage-backed securities  pass throughs
    
    $
    52,630
    
    
    $
    52,741Collateralized mortgage obligations
    
    
    87,210
    
    
    
    78,337Asset-backed securities (underlying securities mortgages)
    
    
    171,576
    
    
    
    152,905Asset-backed securities
    
    
    1,690
    
    
    
    1,116$
    313,106
    
    
    $
    285,099
 AmortizedCost
    
    
    Fair ValueDecember 31, 2007Mortgage-backed securities  pass throughs
    
    $
    69,570
    
    
    $
    69,101Collateralized mortgage obligations
    
    
    114,101
    
    
    
    111,805Asset-backed securities (underlying securities mortgages)
    
    
    184,724
    
    
    
    168,822Asset-backed securities
    
    
    1,900
    
    
    
    1,738$
    370,295
    
    
    $
    351,466
  AmortizedCost
    
    
    Fair ValueSeptember 30, 2008Agency
    
    $
    52,630
    
    
    $
    52,741AAA
    
    
    99,887
    
    
    
    90,591AA
    
    
    87,981
    
    
    
    77,904A
    
    
    33,990
    
    
    
    30,066BBB
    
    
    19,960
    
    
    
    17,831Below investment grade
    
    
    18,658
    
    
    
    15,966$
    313,106
    
    
    $
    285,099
 - 21 -




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AmortizedCost
    
    
    Fair ValueDecember 31, 2007Agency
    
    $
    69,570
    
    
    $
    69,101AAA
    
    
    139,890
    
    
    
    138,744AA
    
    
    115,084
    
    
    
    106,090A
    
    
    41,621
    
    
    
    34,691BBB
    
    
    170
    
    
    
    170Below investment grade
    
    
    3,960
    
    
    
    2,670$
    370,295
    
    
    $
    351,466
  AmortizedCost
    
    
    Fair ValueSeptember 30, 2008Agency MBS
    
    $
    52,630
    
    
    $
    52,741Non-agency mortgage securities
    
    
    85,740
    
    
    
    77,596Subprime mortgage securities
    
    
    170,836
    
    
    
    151,962Other securities
    
    
    3,900
    
    
    
    2,800$
    313,106
    
    
    $
    285,099
 AmortizedCost
    
    
    Fair ValueDecember 31, 2007Agency MBS
    
    $
    69,570
    
    
    $
    69,101Non-agency mortgage securities
    
    
    113,412
    
    
    
    111,677Subprime mortgage securities
    
    
    183,065
    
    
    
    166,715Other securities
    
    
    4,248
    
    
    
    3,973$
    370,295
    
    
    $
    351,466
  - 22 -




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Loans
    HWFG Net Loan Growth and Mix(Dollars in millions)September 30, 2008
    
    
    December 31, 2007
    
    
    September 30, 2007% of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    % ofTotal
    
    
    Total
    
    
    Total
    
    
    % of Total
    
    
    Total
    
    
    TotalLoan TypeCommercial Real Estate
    
    $
    263.6
    
    
    
    32.1
    %
    
    $
    266.3
    
    
    
    33.6
    %
    
    $
    249.4
    
    
    
    32.2
    %Multi-family Real Estate
    
    
    89.2
    
    
    
    10.9
    %
    
    
    82.7
    
    
    
    10.4
    %
    
    
    79.1
    
    
    
    10.2
    %Construction (1)
    
    
    129.2
    
    
    
    15.8
    %
    
    
    126.5
    
    
    
    16.0
    %
    
    
    135.9
    
    
    
    17.5
    %Single-family Real Estate
    
    
    137.8
    
    
    
    16.8
    %
    
    
    125.5
    
    
    
    15.9
    %
    
    
    119.6
    
    
    
    15.4
    %Commercial and Industrial Loans
    
    
    120.7
    
    
    
    14.7
    %
    
    
    117.8
    
    
    
    14.9
    %
    
    
    114.8
    
    
    
    14.8
    %Unimproved Land
    
    
    48.6
    
    
    
    5.9
    %
    
    
    45.3
    
    
    
    5.7
    %
    
    
    48.5
    
    
    
    6.3
    %Consumer Loans
    
    
    28.0
    
    
    
    3.4
    %
    
    
    24.5
    
    
    
    3.1
    %
    
    
    24.6
    
    
    
    3.2
    %Other Loans (2)
    
    
    3.2
    
    
    
    0.4
    %
    
    
    2.8
    
    
    
    0.4
    %
    
    
    2.8
    
    
    
    0.4
    %Total Gross Loans
    
    
    820.3
    
    
    
    100.0
    %
    
    
    791.4
    
    
    
    100.0
    %
    
    
    774.7
    
    
    
    100.0
    %Allowance for loan loss
    
    
    (7.0
    )
    
    
    
    
    
    
    (6.4
    )
    
    
    
    
    
    
    (6.3
    )Deferred fees
    
    
    (1.4
    )
    
    
    
    
    
    
    (1.9
    )
    
    
    
    
    
    
    (1.9
    )Discounts/Premiums
    
    
    (0.5
    )
    
    
    
    
    
    
    (0.5
    )
    
    
    
    
    
    
    (0.5
    )Net Loans Receivable
    
    $
    811.4
    
    
    
    
    
    
    $
    782.6
    
    
    
    
    
    
    $
    766.0
 
 (1)
    
    Includes loans secured by residential, land and commercial properties. At September
30, 2008, we had $32.4 million of construction loans secured by single-family residential
properties, $70.5 million secured by commercial properties, $25.6 million for land
development and $691 thousand secured by multi-family residential properties.(2)
    
    Includes loans collateralized by deposits and consumer line of credit loans. - 23 -




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Deposits
  FHLB Advances
  Stockholders Equity
   - 24 -




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1.
    
    On September 29, Concordia purchased 458,768 shares of common stock and 61,757 of the
preferred stock for proceeds of $4.4 million.2.
    
    Within 5 days of Concordia receiving regulatory approval and HWFG shareholder approval
(expected by mid-December 2008), Concordia will purchase 581,232 shares of common stock and
78,243 shares of preferred stock on the same terms or $5.6 million in proceeds.
  Liquidity and Capital Resources
 Liquidity 
   Capital Resources.
 - 25 -




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Asset and Liability Management
     - 26 -




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i.e.,
    Accounting for Derivative Instruments and Hedging
Activities,
  Critical Accounting Policies
  - 27 -




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Cautionary Statement Regarding Forward-Looking Statements.
    
 Item 3: Quantitative and Qualitative Disclosures about Market Risk
    - 28 -




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Change In Interest Rates (In Basis Points) (1)-300
    
    -200
    
    -100
    
    Base
    
    +100
    
    +200
    
    +300Market value gain (loss) in assets
    
    $
    31,583
    
    
    $
    20,900
    
    
    $
    11,668
    
    
    
    
    
    
    $
    (15,855
    )
    
    $
    (33,632
    )
    
    $
    (52,193
    )Market value gain (loss) of liabilities
    
    
    (27,427
    )
    
    
    (16,741
    )
    
    
    (7,813
    )
    
    
    
    
    
    
    7,197
    
    
    
    14,580
    
    
    
    22,453Market value gain (loss) of net assets
before interest rate contracts
    
    
    4,156
    
    
    
    4,159
    
    
    
    3,855
    
    
    
    
    
    
    
    (8,658
    )
    
    
    (19,052
    )
    
    
    (29,740
    )Market value gain (loss) of interest
rate contracts
    
    
    (10,972
    )
    
    
    (7,158
    )
    
    
    (3,506
    )
    
    
    
    
    
    
    3,369
    
    
    
    6,607
    
    
    
    9,719Total change in MVPE (2)
    
    $
    (6,816
    )
    
    $
    (2,999
    )
    
    $
    349
    
    
    
    
    
    
    $
    (5,289
    )
    
    $
    (12,445
    )
    $
    
    (20,021
    )Change in MVPE as a percent of:MVPE (2)
    
    
    -8.16
    %
    
    
    -3.59
    %
    
    
    0.42
    %
    
    
    
    
    
    
    -6.33
    %
    
    
    -14.90
    %
    
    
    -23.98
    %Total assets of the Bank (3)
    
    
    -0.72
    %
    
    
    -0.36
    %
    
    
    -0.04
    %
    
    
    
    
    
    
    -0.35
    %
    
    
    -0.86
    %
    
    
    -1.42
    %
 
 (1)
    
    Assumes an instantaneous parallel change in interest rates at all maturities.(2)
    
    Based on the Companys pre-tax tangible MVPE of $83.5 million at September 30, 2008.(3)
    
    Pre-tax tangible MVPE as a percentage of tangible assets.  
 Item 4(T). Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
 ,
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PART
II  OTHER INFORMATION
 
 Item 1:
  
 Item 1A.
  
 Item 2:
  Number ofPrice
    
    
    Shares
    
    
    AmountDate
    
    Title of Security
    
    Per Share
    
    
    (In thousands)
    
    
    (In thousands)September 29, 2008
    
    Common
    
    $
    6.25
    
    
    
    459
    
    
    $
    2,867September 29, 2008
    
    Preferred
    
    
    25.00
    
    
    
    119
    
    
    
    2,969Total
    
    
    
    
    
    
    
    
    578
    
    
    $
    5,836
   - 30 -




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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.
 - 31 -




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SIGNATURES
  HARRINGTON WEST FINANCIAL GROUP, INC.November 12, 2008
    By:
    /s/ Craig J. CernyCraig J. CernyChairman of the Board
and Chief Executive Officer

(Principal Executive Officer)November 12, 2008
    By:
    /s/ William W. Phillips, Jr.William W. Phillips, Jr.President, Chief Operating Officer

(Principal Executive Officer)November 12, 2008
    By:
    /s/ KERRIL STEELEKerril SteeleSr. Vice-President, Chief Financial Officer
(Principle Financial and Accounting Officer) - 32 -