[HAWTHORNE LOGO]
HAWTHORNE FINANCIAL CORPORATION
PRESS RELEASE
MARCH 20, 2002
IMMEDIATE RELEASE
Contact: Hawthorne Financial Corporation
Ms. Simone Lagomarsino, President and Chief Executive Officer
(310) 725-5631
Ms. Karen Abajian, Chief Financial Officer (310) 725-1890
First Fidelity Bancorp, Inc.
Charles W. Thomas, President & Chief Operating Officer
(949) 936-3253
Maria Arakaki, Chief Financial Officer (949) 936-3235
HAWTHORNE FINANCIAL CORPORATION TO ACQUIRE
FIRST FIDELITY BANCORP, INC., EXPAND INTO ORANGE
AND SAN DIEGO COUNTIES
EL SEGUNDO, California, March 20, 2002 - Hawthorne Financial Corporation
(NASDAQ: HTHR), parent company of Hawthorne Savings, F.S.B. ("Hawthorne"), and
First Fidelity Bancorp, Inc., parent of First Fidelity Investment and Loan
("First Fidelity"), today announced a definitive agreement in which Hawthorne
Financial Corporation will acquire First Fidelity Bancorp, Inc. in a transaction
currently valued at $68 million, representing a multiple of 6.97 of First
Fidelity's 2001 net income and 158% of tangible book value of First Fidelity
Bancorp, Inc.
First Fidelity is a privately-owned real estate secured lender with $500 million
in loan assets secured primarily by Southern California real estate, and
approximately $413 million in deposits generated from its four branches, two in
Orange County and two in San Diego County. Hawthorne is a real estate secured
lender with $1.8 billion in assets, and $1.2 billion in deposits generated from
its nine branches in Southern California, primarily in the South Bay region of
Los Angeles County.
Hawthorne anticipates that the transaction will close in the third quarter of
2002, and that it will be accretive to its GAAP and cash earnings per share in
2002, excluding one-time charges attributable to the merger. Hawthorne expects
to achieve pre-tax cost savings of approximately $1.3 million, which represents
11% of estimated total non-interest expense of First Fidelity, in the first full
year of combined operations.
HAWTHORNE EXPANDING INTO ORANGE AND SAN DIEGO COUNTIES
During the past two years, Hawthorne has been increasing its presence in Orange
and San Diego counties by lending in this region. Currently, 25% or $500
million, of Hawthorne's loan portfolio is secured by real estate in these two
counties. "The addition of four branches in these dynamic counties will give
Hawthorne the opportunity to convert these borrowing customers into deposit
customers as well," said Simone Lagomarsino, president and chief executive
officer of Hawthorne. "In effect, we will be expanding our coastal presence
southward, providing a solid platform for growth in two counties with very
strong demographics."
HAWTHORNE FINANCIAL CORPORATION
ACQUISITION MERGER
MARCH 20, 2002
PAGE 2 OF 5
FIRST FIDELITY'S MANAGEMENT TEAM TO JOIN HAWTHORNE
"We are very excited that First Fidelity's talented management team and
exceptional employees will be joining Hawthorne," added Ms. Lagomarsino. "We
recognize that First Fidelity's superior results are largely due to the
dedication of its people. We believe that the cultures of the two organizations
fit well together," she said.
"This is an excellent fit for two service-oriented financial institutions,"
agreed Mr. Charles W. Thomas, president and chief executive officer of First
Fidelity. "We are enthusiastic about the benefit our clients will receive as a
result of the broader array of products and services that this combination will
provide. Over one-half of First Fidelity's loan portfolio is secured by
multi-family real estate, which complements Hawthorne's portfolio nicely," he
added.
"First Fidelity has very strong asset quality ratios, which will further
enhance Hawthorne's success in achieving its strategy of lowering the risk
profile of its balance sheet," said Ms. Lagomarsino. "First Fidelity's asset
generation capabilities complement our strategic goals. Also, First Fidelity is
a very efficient operation, which is reflected by its efficiency ratio of 33.85%
in 2001," Ms. Lagomarsino commented.
Ms. Lagomarsino expects Hawthorne's proven success in transforming its core
deposit base to provide one of the key opportunities in the First Fidelity
acquisition. "We have increased transaction accounts to 31% of our deposits from
13% just four years ago, and our cross-sell ratio to 2.37 products per household
from just over one product," Ms. Lagomarsino explained. "First Fidelity has
already initiated a similar strategy of growing its core deposit base, and we
see tremendous opportunities for additional growth," she concluded.
TERMS OF THE TRANSACTION
Under the terms of the agreement, Hawthorne Financial Corporation will issue
1,266,555 shares of Hawthorne Financial Corporation stock and $37.4 million in
cash for the 1,815,115 shares of First Fidelity Bancorp, Inc. stock and 88,000
options outstanding. First Fidelity Bancorp, Inc.'s shareholders will have the
opportunity to indicate a preference for cash, stock, or a combination of the
two. Based on an exchange ratio of 1.5151 shares of Hawthorne Financial
Corporation stock, it is contemplated that the transaction will be comprised of
55% cash and 45% stock, and will qualify as a tax-deferred reorganization.
The transaction is subject to regulatory approval and approval by the
stockholders of Hawthorne Financial Corporation and First Fidelity Bancorp, Inc.
ABOUT FIRST FIDELITY
First Fidelity, a subsidiary of First Fidelity Bancorp, Inc., serves the Orange
and San Diego counties through their four branch offices. First Fidelity is a
real estate secured lender with 55% of its loans being secured by multi-family
residential properties and 45% of its loans secured by commercial properties.
For more information, including recent financial statements, please visit First
Fidelity's website at: www.1stfidelity.com.
ABOUT HAWTHORNE FINANCIAL CORPORATION
Hawthorne Financial Corporation is traded on NASDAQ and has $1.8 billion in
total assets. The company's wholly owned subsidiary Hawthorne Savings, F.S.B.,
operates nine branches in Southern
HAWTHORNE FINANCIAL CORPORATION
ACQUISITION MERGER
MARCH 20, 2002
PAGE 3 OF 5
California and is a real estate secured lender. For more information, please
visit Hawthorne Financial Corporation's website at: www.hawthornesavings.com.
CONFERENCE CALL
A call with analysts and investors will be held at 10:30 a.m., PST, 1:30 p.m.,
EST, on Monday, March 25, 2002, to review this announcement. A live webcast of
this call may be accessed through a link on Hawthorne Financial Corporation's
website at www.hawthornesavings.com, or First Fidelity's website at
www.1stfidelity.com. The call will be archived on the websites and available for
replay beginning approximately one hour after the live call ends.
***
Except for historical information, all other information in this news release
consists of forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
include, but are not limited to, (i) statements about the benefits of the merger
between Hawthorne Financial Corporation and First Fidelity Bancorp, Inc.,
including future financial and operating results, cost savings, enhancements to
revenue and accretion to reported earnings that may be realized from the merger;
(ii) statements about Hawthorne Financial Corporation's and First Fidelity
Bancorp, Inc.'s plans, objectives, expectations and intentions and other
statements that are not historical facts; and (iii) other statements identified
by words such as "expects," "anticipates," "intends," "plans," "believes,"
"seeks," "estimates," or words of similar meaning. These forward-looking
statements are based upon the current beliefs and expectations of Hawthorne
Financial Corporation's and First Fidelity Bancorp, Inc.'s management and are
inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control. In
addition, these forward-looking statements are subject to assumptions with
respect to future business strategies and decisions that are subject to change.
The following factors, among others, could cause actual results to differ
materially from the anticipated results or other expectations expressed in the
forward-looking statements: (1) the business of Hawthorne Financial Corporation
and First Fidelity Bancorp, Inc. may not be combined successfully, or such
combination may take longer, be more difficult, time-consuming or costly to
accomplish than expected; (2) the expected growth opportunities and cost savings
from the merger may not be fully realized or may take longer to realize than
expected; (3) operating costs, customer losses and business disruption following
the merger, including adverse effects on relationships with employees, may be
greater than expected; (4) governmental approvals of the merger may not be
obtained, or adverse regulatory conditions may be imposed in connection with
governmental approvals of the merger; (5) the stockholders of either Hawthorne
Financial Corporation or First Fidelity Bancorp, Inc. may fail to approve the
merger; (6) adverse governmental or regulatory policies may be enacted; (7) the
interest rate environment may change so as to further compress margins and
adversely affect net interest income; (8) the risk of adverse changes to credit
quality; (9) competition from other financial services companies in Hawthorne
Financial Corporation's and First Fidelity Bancorp, Inc.'s markets; (10) the
concentration of Hawthorne Financial Corporation's and First Fidelity Bancorp,
Inc.'s operations in California may adversely affect results if the California
economy or real estate market declines; and (11) the risk of an economic
slowdown that would adversely affect credit quality and loan originations.
Additionally, factors that could cause actual results to differ materially from
those expressed in the forward-looking statements are discussed in Hawthorne
Financial Corporation's reports (such as Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K) filed with the Securities
and Exchange Commission and available at the SEC's Internet site
(http://www.sec.gov).
All written and oral forward-looking statements contained in this news release
concerning the proposed transaction or other matters attributable to Hawthorne
Financial Corporation, First Fidelity Bancorp, Inc. or
HAWTHORNE FINANCIAL CORPORATION
ACQUISITION MERGER
MARCH 20, 2002
PAGE 4 OF 5
any person acting on their behalf are expressly qualified in their entirety by
the cautionary statements above. Hawthorne Financial Corporation and First
Fidelity Bancorp, Inc. do not undertake any obligation to update any
forward-looking statement to reflect circumstances or events that occur after
the date the forward-looking statements are made.
The proposed transaction will be submitted to Hawthorne Financial Corporation's
and First Fidelity Bancorp, Inc.'s stockholders for their consideration.
Hawthorne Financial Corporation and First Fidelity Bancorp, Inc. will file a
registration statement, a proxy statement/prospectus and other relevant
documents concerning the proposed transaction with the SEC. Stockholders are
urged to read the registration statement and the proxy statement/prospectus when
it becomes available and any other relevant documents filed with the SEC, as
well as any amendments or supplements to those documents, because they will
contain important information. You will be able to obtain a free copy of the
proxy statement/prospectus, as well as other filings containing information
about Hawthorne Financial Corporation and First Fidelity Bancorp, Inc., at the
SEC's Internet site (http://www.sec.gov). Copies of the proxy
statement/prospectus and the SEC filings that will be incorporated by reference
in the proxy statement/prospectus can be obtained, without charge, by directing
a request to Finance Department, Hawthorne Financial Corporation, 2381 Rosecrans
Avenue, Suite 200, El Segundo, California 90245 (310-725-5000) or to Secretary,
First Fidelity Investment & Loan, 3061 Edinger Avenue, Tustin, CA 92780,
(800-660-0585).
Hawthorne Financial Corporation and First Fidelity Bancorp, Inc. and their
directors and executive officers may be deemed to be participants in the
solicitation of proxies from their respective stockholders in connection with
the merger. Additional information regarding the interests of these participants
may be obtained by reading the proxy statement/prospectus regarding the proposed
transaction when it becomes available.
HAWTHORNE FINANCIAL CORPORATION
ACQUISITION MERGER
MARCH 20, 2002
PAGE 5 OF 5
HAWTHORNE FINANCIAL CORPORATION,
FIRST FIDELITY BANCORP, INC. &
FIRST FIDELITY INVESTMENT AND LOAN
OVERVIEW
AT OR FOR THE PERIOD ENDED 12/31/01
FIRST
HAWTHORNE FIRST FIDELITY
FINANCIAL FIDELITY INVESTMENT
CORPORATION BANCORP* AND LOAN
----------- -------- ----------
($ in millions)
Total Assets $1,856 $ 621 $ 617
Equity $ 120 $ 39 $ 41
Net Income $ 16.8 $ 7.8 $ 9.8
Total Deposits $1,200 $ 413 $ 413
Total Loans-Net $1,709 $ 498 $ 498
SFR 53% 0% 0%
Multi-Family Permanent 15% 55% 55%
Commercial Permanent 13% 45% 45%
SFR Construction 6% -- --
Multi-Family Construction 6% -- --
Commercial Construction 4% -- --
Other 3% -- --
Non-Accrual Loans/Total Loans 1.19% 0.08% 0.08%
Reserves/Loans 1.76% 1.15% 1.15%
Reserves/Non-Accrual Loans 148.08% 1391.39% 1391.39%
Net Interest Margin 3.45% 4.45% 3.97%
Efficiency Ratio 50.89% 50.50% 33.85%
ROE 15.13% 21.11% 22.71%
ROA 0.93% 1.29% 1.62%
Total Branch Offices 9 4 4
* Results for First Fidelity Bancorp, Inc. reflect losses incurred through the
wholesale mortgage operations of its former subsidiary, PSP Financial
Services, Inc., which was dissolved in February 2002.