Harrington Financial Group

Case Solution

Alberto Moel, Robert C. Merton
Harvard Business School ()

In early 1997, Harrington Bank, a small savings and loan company based in Indiana, wondered what its next step would be. Harrington was acquired in 1988 by the directors of Smith Breeden Associates, an asset management and advisory firm that specializes in the application of advanced financial technology to the pricing, hedging and risk management of mortgage securities. Smith Breeden’s clients had entered into a standard market contract with Harrington in which Smith Breeden advised Harrington on the pricing, hedging, active management and risk management of Harrington’s assets and liabilities. The bank has developed very well since the acquisition. Net worth had increased from $ 75 million in 1988 to more than $ 520 million at the end of 1996. Net interest margin had more than tripled, primary operating income increased by more than 400%, and return on equity increased significantly. Still, Harrington in 1996 was not your average frugal. 80% of his assets were in mortgage-backed securities (versus 30% for median savings) and most of his liabilities were not deposits but other forms of wholesale financing.

We don‘t have the case solution, but we pay up to $50 for yours!

  • Set a reminder to receive an email after your university‘s case study deadline.
  • Upload your case study solution. We will review it for quality.
  • Get your money via PayPal or to your bank account.