Powerful Synergies
February 24, 2004
This presentation may include forward-looking statements (related to the
plans, beliefs and goals of CCBI and its subsidiaries), which involve certain
risks and uncertainties that could cause actual results to differ materially from
those in the forward-looking statements. Such risks and uncertainties include,
but are not limited to, the following factors: competitive pressure in the
banking industry; changes in the interest rate environment; the health of the
economy, either nationally or regionally; the deterioration of credit quality,
which would cause an increase in the provision for possible loan and lease
losses; changes in the regulatory environment; changes in business conditions,
particularly in California real estate; volatility of rate sensitive deposits;
asset/liability matching risks and liquidity risks; and changes in the securities
markets. CCBI undertakes no obligation to revise or publicly release any
revision to these forward-looking statements.
Regulation FD
2
Forward Looking Statements
This presentation contains forward-looking statements regarding CCBI's acquisition of
Hawthorne. These forward-looking statements involve certain risks and uncertainties.
Factors that may cause actual results to differ materially from those contemplated by such
forward-looking statements include, among others, the following possibilities: (1)
governmental approvals of the merger may not be obtained or adverse regulatory
conditions may be imposed in connection with governmental approvals of the merger; (2)
the stockholders of CCBI and Hawthorne may fail to provide the required approvals to
consummate the merger; (3) estimated cost savings from the acquisition cannot be fully
realized within the expected time frame or to the extent estimated; (4) revenues following
the acquisition are lower than expected; (5) competitive pressure among depository
institutions increases significantly; (6) costs or difficulties related to the integration of the
businesses of CCBI and Hawthorne are greater than expected; (7) changes in the interest
rate environment reduce interest margins; (8) general economic conditions, either
nationally or in the markets in which CCBI will be doing business, are less favorable than
expected; (9) legislation or changes in regulatory requirements adversely affect the
businesses in which CCBI is engaged; or (10) other factors or events occur which would
result in a condition to the transaction not being met.
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CCBI Highlights
4
Financial Position
December 31, 2003
Total Assets
$1.72 billion
Loans Held for Investment
$1.05 billion
Deposits
$646 million
Equity
$102 million
Tangible Equity
$89 million
Quarter Ended
Quarter Ended
Financial Results
12/31/2003
12/30/2002
Net Income
$6.2 million
$3.2 million
Return on Average Equity
24.83%
29.03%
Return on Average Assets
1.56%
1.59%
Net Interest Margin
3.22%
3.27%
Efficiency Ratio
25.82%
30.62%
Core Loan Originations
$275 million
$192 million
Summary of the Proposed Transaction
5
Fixed Exchange Ratio:
1.933 shares of CCBI for each share of HTHR
Purchase price per HTHR share:
$37.92 (based on 1/27/04 closing price of CCBI)
Aggregate purchase price:
$493 million, fully diluted
Structure:
100% Stock – tax free exchange
Anticipated closing:
Middle of 2004
Approvals:
Regulatory and shareholders
Termination fee:
$18 million
Due diligence:
Completed
Ownership Composition:
CCBI 56%
HTHR 44%
Board representatives:
3 Board members of Hawthorne to join CCBI Board
Management:
CCBI Executive and management team remains intact
Strategically Compelling
CCBI
Hawthorne
Franchise positioned for stronger growth
6
Leading statewide lender
High quality asset generator
Fastest growing bank in CA, with
very efficient deposit franchise(1)
Third largest originator of multi-
family loans in CA(2)
Amongst the most efficient
operations in the industry
Strong and consistent culture of
high performance with continuity
of talent
Leading independent So. CA
banking franchise
Providing service for over 50
years
Strong community-based retail
deposit franchise
Lending strengths include:
Single Family
Construction
Income Property
Strong middle level and front line
infrastructure
(1)
36 months ended 9/30/03 (www.fdic.com)
(2)
12 months ended 12/31/03 (DataQuick Info. Sys.)
Pro Forma Impact – Key Assumptions
7
CCBI earnings based on First Call estimates
2004 GAAP EPS of $1.06 for CCBI
2005 GAAP EPS of $1.62 for CCBI
Hawthorne earnings based on First Call estimates
2004 GAAP EPS of $2.43 for HTHR
2005 GAAP EPS of $2.68 for HTHR
Upfront transaction charges of approximately $24 mm pre-tax
Cost savings of 25% of HTHR’s forecasted operating expense, or
approximately $11 mm pre-tax
Phased in 25% in Q3 2004, 50% in Q4 2004 and 100% thereafter
Core deposit intangible equivalent to 3.00% of Hawthorne’s core deposits
Amortized straight-line over 10 years
No revenue enhancements assumed
Estimated mark-to-market results in net write downs of approximately
$23 mm after tax
Acquisition Benefits
(1)
Assumptions and calculations for the pro forma GAAP and cash EPS for 2004 are
outlined in our presentation on the Hawthorne acquisition, dated January 27, 2004.
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Immediately accretive to CCBI Pro Forma GAAP (12%) and cash
(13%) EPS(1)
Immediately accretive to CCBI Pro Forma Book (213%) and
Tangible Book (31%) Value per Share (1)
Hawthorne provides CCBI with
$2.7 billion in assets
$1.7 billion in deposits
15 banking offices serving approximately 40,000 households
$161 million in Tangible Stockholders’ Equity
$31 million in Net Income for 2004 (Street estimate)
$34 million in Net Income for 2005 (Street estimate)
Low Risk Transaction
9
CCBI team has significant acquisition and
integration experience
Hawthorne team successfully integrated First
Fidelity
No expected branch consolidations
CCBI to migrate to majority of HTHR systems
CCBI’s Growing Franchise Presence
Northern California
Loan Offices
Sacramento
Corte Madera (Marin County)
Burlingame
Oakland
Southern California
Loan Offices
Woodland Hills
Encino
West Los Angeles
Banking Offices
Rancho Santa Margarita
Riverside
Beverly Hills (Summer 2004)
Banking & Loan Offices
Irvine (Headquarters)
La Jolla
10
CCBI and HTHR Deposit Franchise
Hawthorne's South Bay Deposit Strength
as of June 30, 2003 (dollars in thousands)
Institution
Ranking
Deposits
% of
Total
Bank of America
1
3,518,813
$
21.8%
WAMU
2
2,451,676
15.2%
Wells Fargo
3
1,561,296
9.7%
Union Bank
4
1,258,488
7.8%
Hawthorne Savings
5
986,421
6.1%
Citigroup
6
789,538
4.9%
World Savings Bank, FSB
7
572,904
3.5%
California National Bank
8
359,750
2.2%
First Federal Bank of CA
9
355,945
2.2%
Bank of the West
10
339,643
2.1%
All others *
3,961,521
24.5%
Total
16,155,995
$
100.0%
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CCBI Beverly Hills
(opens Summer ’04)
Combined Statewide Presence
9 Loan Offices
17 Banking Offices
(#18 in Beverly Hills scheduled
to open in Summer 2004)
2 Banking & Loan Offices
12
(1) AGR – Annual Growth Rate: 12/02 to 12/03
(2)Does not reflect potential purchase accounting adjustments.
($ in millions)
Balance Sheet Growth
13
Balance Sheet Growth Generated Internally
($ in millions)
14
Historic Driver of Balance Sheet Growth
15
($ in millions)
Balance Sheet Growth
(1) AGR – Annual Growth Rate: 12/02 to 12/03
(2)Does not reflect potential purchase accounting adjustments.
16
Loan Portfolio Mix
CCBI
at 12/31/2003
HTHR
at 12/31/2003
17
Loan Portfolio Mix
CCBI & HTHR Combined (1)
at 12/31/2003
(1)Does not reflect potential purchase accounting adjustments.
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Strategically Compelling
More diversified loan portfolio with core multi-family driver
- Reserve coverage remains very strong
Loan Portfolio
($ in millions)
$
%
$
%
$
%
Loans
Single Family
$3.2
0.3%
$864.5
39.8%
$867.7
26.9%
Multi-Family
935.1
88.8%
764.1
35.1%
1,699.2
52.7%
Commercial Real Estate
108.5
10.3%
315.0
14.5%
423.5
13.1%
Construction and Development(3)
-
-
228.5
10.5%
228.5
7.1%
Commercial, Consumer & Other
5.7
0.5%
2.0
0.1%
7.7
0.2%
Total Loans
$1,052.5
100.0%
$2,174.1
100.0%
$3,226.6
100.0%
Reserves
(3.9)
(33.5)
(37.4)
Other Adjustments
(1.0)
13.5
12.5
Loans, Net
$1,047.6
$2,154.1
3,201.7
$
NPLs
0.1
$
8.9
$
9.0
$
Reserves / NPLs
30.6x
3.8x
4.2x
Reserves / Loans
0.37%
1.54%
1.16%
(1) CCBI and HTHR financial data as of 12/31/2003.
(2) Does not reflect potential purchase accounting adjustments.
(3) Includes SFR construction, Multi-Family and Commercial Development and Land Loans.
CCBI
(1)
HTHR
(1)
Combined
(2)
19
Consistent Underwriting
20
Multi-Family
Loan to Value 69.2%
Debt Coverage Ratio 1.29:1
Commercial RE
Loan to Value 65.6%
Debt Coverage Ratio 1.35:1
Values are weighted average ratios, at origination
LTV and DCR of December 31, 2003 Portfolio
~ CCBI Only ~
21
Noncurrent Loans/
Nationwide
Total Loans
(1)
Multi-family
0.16%
Single family
0.85%
Commercial Real Estate
1.03%
Construction and Land Loans
1.14%
Business Loans
1.52%
Consumer
0.69%
Multi-family Loans
CCBI
0.00%
Western Region Thrifts
0.07%
Nationwide Thrifts
0.16%
(1) Based upon 9/30/03 Thrift Financial Reports for nationwide savings institutions
22
Asset Quality of Multi-family Loans
($ in millions)
Funding Asset Growth
(1) AGR – Annual Growth Rate: 12/02 to 12/03
(2) Does not reflect potential purchase accounting adjustments.
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Strategically Compelling
Funding Structure
($ in millions)
$
%
$
%
$
%
Deposits
Noninterest-bearing Demand
$13.1
2.0%
$51.7
3.0%
$64.8
2.7%
Interest-bearing Demand, Savings, MMDA
375.0
58.1%
668.1
38.8%
1,043.1
44.1%
Time Deposits
257.5
39.9%
1,002.8
58.2%
1,260.3
53.2%
Total Deposits
$645.6
100.0%
$1,722.6
100.0%
$2,368.2
100.0%
Borrowings
FHLB
$822.5
85.4%
$697.2
93.2%
$1,519.7
88.8%
Other Borrowings
88.3
9.2%
-
-
88.3
5.2%
Trust Preferred
52.5
5.4%
51.0
6.8%
103.5
6.0%
Total Borrowings
$963.3
100.0%
$748.2
100.0%
$1,711.5
100.0%
Total Funding
$1,608.9
$2,470.8
$4,079.7
Deposits / Funding
40%
70%
58%
(1) CCBI financial data as of 12/31/2003
(2) HTHR financial data as of 12/31/2003
(3) Does not reflect potential purchase accounting adjustments
HTHR
(2)
CCBI
(1)
Combined
(3)
24
Capital Ratios
25
Bank Capital Ratio
26
Operating Performance
($ in millions)
(1) AGR – Annual Growth Rate: 12/02 to 12/03
(2) Combination of HTHR and CCBI results from the fourth quarter of 2003. Does not
reflect potential purchase accounting adjustments.
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($ in millions)
Operating Performance
(1) AGR – Annual Growth Rate: 12/02 to 12/03
(2) Combination of HTHR and CCBI results from the fourth quarter of 2003. Does not
reflect potential purchase accounting adjustments.
28
Operating Performance
(1) Combination of HTHR and CCBI results from the fourth quarter of 2003. Does not reflect potential purchase
accounting adjustments.
29
Operating Performance Ratios
30
Operating Performance Ratios
31
($ in millions)
Earnings Performance
32
(1) AGR – Annual Growth Rate: 12/02 to 12/03
(2) Combination of HTHR and CCBI results from the fourth quarter of 2003. Does not
reflect potential purchase accounting adjustments.
Operating Performance
33
Profitability Ratios
34
Profitability Ratios
35
Earnings Performance
36
Transaction Summary
37
Financially Attractive
One of the Few Statewide Franchises in California
Stronger Foundation for Continued Growth
Upside Potential
This presentation may be deemed to be solicitation material with respect to the proposed acquisition of Hawthorne and the issuance of shares of common stock by CCBI pursuant to the merger. In connection with the proposed transaction, a registration statement on Form S-4 will be filed with the SEC. The registration statement will contain a joint proxy statement/prospectus to be distributed to the respective shareholders of CCBI and Hawthorne in connection with their vote on the merger. SHAREHOLDERS OF CCBI AND OF HAWTHORNE ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE JOINT PROXY STATEMENT/PROSPECTUS THAT WILL BE PART OF THE REGISTRATION STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. The final joint proxy statement/prospectus will be mailed to shareholders of CCBI and shareholders of Hawthorne. Investors and security holders will be able to obtain the documents free of charge at the SEC's website, www.sec.gov . In addition, investors may obtain free copies of the documents filed with the SEC by CCBI by contacting Investor Relations, Commercial Capital Bancorp, Inc., One Venture, 3rd Floor Irvine, CA 92618, telephone: 949-585-7500 or by visiting CCBI’s website at www.commercialcapital.com , or from Hawthorne by contacting Investor Relations, Hawthorne Financial Corporation, 2381 Rosecrans Avenue, El Segundo, CA 90245, telephone: 310-725-5631 or by visiting Hawthorne’s website at www.hawthornesavings.com.
CCBI, Hawthorne and their respective directors and executive officers and other members of management and employees may be deemed to participate in the solicitation of proxies in respect of the proposed transactions. Information regarding CCBI’s directors and executive officers is available in CCBI’s proxy statement for its 2003 annual meeting of shareholders, which was filed with the SEC on April 4, 2003, and information regarding Hawthorne’s directors and executive officers is available in Hawthorne’s proxy statement for its 2003 annual meeting of shareholders, which was filed with the SEC on April 11, 2003. Additional information regarding the interests of such potential participants (including the addition of the three Hawthorne Board of Directors’ members to the Board of Directors of CCBI following the merger) will be included in the joint proxy statement/prospectus and the other relevant documents filed with the SEC when they become available.
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