[HAWTHORNE GRAPHIC]
HAWTHORNE FINANCIAL CORPORATION
PRESS RELEASE
JANUARY 30, 2003
IMMEDIATE RELEASE
Contact: Ms. Simone Lagomarsino, President and Chief Executive Officer (310)
725-5631 Mr. David Rosenthal, Chief Financial Officer (310) 725-1890
HAWTHORNE FINANCIAL REPORTS RECORD 35% INCREASE IN NET INCOME FOR 2002
(El Segundo, CA) Hawthorne Financial Corporation (the "Company"), (NASDAQ:HTHR),
parent company of Hawthorne Savings, F.S.B. (the "Bank"), today announced that
2002 net income was the highest in the 51 year history of the Company. The
Company's record 2002 net income of $22.7 million represented an increase of
34.85%, compared to $16.8 million a year earlier. Diluted earnings per share for
the year were $2.88, representing an increase of 29.15% compared to earnings per
share for 2001 of $2.23. Net income includes the financial impact since August
23, 2002, of the Company's acquisition of First Fidelity Bancorp, Inc. ("First
Fidelity"), which the Company discussed in a press release issued on October 8,
2002.
"By nearly every key performance measurement, this past year was the most
successful in the Company's history," said Simone Lagomarsino, the Company's
President and Chief Executive Officer. "We are exceedingly proud of our team of
employees for the successful acquisition and integration of First Fidelity and
the many other accomplishments throughout the year, culminating in a year of
record earnings, strong loan originations, continued improvement in asset
quality, significant progress in growing core deposits, and most importantly,
growth in shareholder value," Ms. Lagomarsino commented.
During 2002, the Company repurchased the balance of its 12.5% Senior Notes, the
majority of which were redeemed on December 31, 2002 at the call premium of
106.25%. The repurchases resulted in an extraordinary item, net of tax, of $1.1
million, or $0.13 per diluted share during the fourth quarter, and $1.2 million,
or $0.15 per diluted share during the year. "We were very pleased to have
restructured and retired our debt, which will have a significant impact on
future earnings, by reducing our interest expense by approximately $2.1 million
per year, if interest rates remain at current levels," commented Ms.
Lagomarsino. The Company used a combination of cash and trust preferred
securities to fund the repurchases.
Net income for the full year 2002 before the extraordinary item was $23.9
million, or $3.03 per diluted share, representing an increase of 38.15% over net
income of $17.3 million, or $2.29 per diluted share in 2001. Fourth quarter 2002
income before extraordinary item was $7.0 million, or $0.83 per diluted share,
compared with $5.7 million, or $0.75 per diluted share, for the fourth quarter
of 2001. Net income for the fourth quarter of 2002 was $5.9 million, or $0.70
per diluted share after extraordinary item, compared with net income of $5.5
million, or $0.72 per diluted, for the same quarter of 2001.
RETURN ON ASSETS/RETURN ON EQUITY
Net income for the three and twelve months ended December 31, 2002, resulted in
a return on average assets before extraordinary item ("ROA") of 1.15% and 1.15%,
respectively, compared with a ROA of 1.22% and 0.96%, during the same periods in
2001. Return on average equity before extraordinary item ("ROE") was 17.63% and
17.80%, respectively, for the three and twelve months ended December 31, 2002,
compared with a ROE of 19.35% and 15.55% during the same periods in 2001.
HAWTHORNE FINANCIAL CORPORATION
2002 RESULTS
JANUARY 30, 2003
PAGE 2 OF 11
NET INTEREST INCOME
The Company's net interest income increased 25.42% to $21.4 million ($17.1
million for 2001) and 17.88% to $73.1 million ($62.0 million for 2001), during
the three and twelve months ended December 31, 2002, respectively. The Company's
net interest margin for the three and twelve months ended December 31, 2002, was
3.55% and 3.57%, respectively, compared with 3.66% and 3.45% during the same
periods in 2001. The Company's net interest margin for the last half of 2002 was
3.46%, which is slightly above previous guidance.
The Company said a number of significant items contributed to the year-over-year
increase in net interest income: 1) a more stable interest rate environment in
2002, as the Federal Reserve lowered rates once in 2002, compared with eleven
times during 2001; 2) inclusion of First Fidelity net assets as of August 23,
2002; 3) the average cost of interest-bearing liabilities decreased faster than
the yield earned on average earning-assets; 4) the majority of adjustable rate
loans reached their contractual floors; 5) the initiation of treasury activities
which resulted in incremental income from investment securities; and 6) the
collection of $1.0 million in interest on real estate loans that were brought
current.
The average cost of funds for the Company decreased to 3.08% (4.35% for 2001)
and 3.41% (5.21% for 2001) during the three and twelve months ended December 31,
2002, respectively. The reduction in the cost of funds is the result of the
combination of the continued downward pressure on interest rates, maturing
certificates of deposit, which were higher than current market rates, and the
shift in the deposit mix during 2002.
During 2002, the Company was liability sensitive as the majority of its ARM
loans reached their contractual floors. As of December 31, 2002, 91.28% of the
loans in the Company's loan portfolio were adjustable rate, of which
approximately 62.75%, or $1.22 billion, have reached their internal interest
rate floors and thus have taken on fixed rate characteristics. As borrowers
refinanced loans, the Company continued to experience prepayments of $163.7
million with a weighted average interest rate of 7.40% and $668.0 million with a
weighted average interest rate of 7.61%, for the three and twelve months ended
December 31, 2002, respectively. The negative impact of prepayments was
partially mitigated by new loan production of $755.8 million with a weighted
average rate of 6.00%, for the twelve months ended December 31, 2002. As a
result, the yield on interest-earning assets was 6.42% (7.64% for 2001) and
6.69% (8.20% for 2001) during the three and twelve months ended December 31,
2002, respectively.
Assuming a flat interest rate environment, previously announced guidance that
the net interest margin will be in the range of 3.35% to 3.45% for 2003, remains
unchanged.
NONINTEREST REVENUES
Noninterest revenues increased 63.36% and 13.45% to $2.2 million and $6.4
million for the three and twelve months ended December 31, 2002, respectively,
compared with $1.3 million and $5.6 million during the same periods in 2001.
Loan and other related fees constituted 65.43% of noninterest revenues and were
comprised primarily of prepayment fees resulting from the high level of
refinancings. Fee income on deposits increased 12.78% for the year ended
December 31, 2002, compared with the same period in 2001, resulting from the
growth in core transaction deposits.
In July 2002, the Bank's subsidiary, HS Financial Services Corporation,
commenced operations, its primary business being the sale of non-deposit
investment and insurance products. This alternative investment program further
expands the array of products offered in the Bank's branches and is expected to
contribute to increasing the cross-sell ratio, the Company said. The ratio of
products per household was 2.44 at December 31, 2002, for the combined Bank,
compared with 2.37 at December 31, 2001.
The Company expects noninterest revenues for 2003 to increase in excess of 10%,
from a combination of increases in other loan related fees and deposit related
fees, despite an expected decrease in prepayment fees as refinancings are
anticipated to slow in 2003.
HAWTHORNE FINANCIAL CORPORATION
2002 RESULTS
JANUARY 30, 2003
PAGE 3 OF 11
NONINTEREST EXPENSE
Total general and administrative expenses ("G&A") were $12.0 million and $38.5
million, for the three and twelve months ended December 31, 2002, respectively,
compared with $8.2 million and $34.5 million of G&A incurred during the same
periods in 2001. Although G&A (excluding Other/legal settlements) for the year
ended 2002 reflected a 10.99% increase, compared with G&A for the same period in
2001, G&A to average assets decreased from 1.88% to 1.82%. The increase in G&A
was primarily attributable to the acquisition of First Fidelity. The Company's
efficiency ratios were 50.44% and 48.07% for the three and twelve months ended
December 31, 2002, respectively, compared with 44.80% and 50.89% during the same
periods in 2001. The Company is pleased with the continued improvements in the
efficiency ratio as a result of a strong focus on cost containment. The Company
remains focused on its goal to reduce the efficiency ratio to 45% or less in
2003.
INCOME TAXES
The effective tax rate was 40.48% for the year ended 2002, compared with 42.16%
for 2001. The lower effective tax rate in 2002 was primarily the result of a
$0.6 million nonrecurring tax benefit in the third quarter as a result of a
change in state tax law related to the treatment of bad debts, which impacted
all California financial institutions with assets in excess of $500.0 million.
LOANS
Average loans increased to $1.8 billion in 2002, an increase of 8.08% over the
prior year, primarily due to the First Fidelity acquisition. The composition of
the loan portfolio also changed in 2002 as a result of the acquisition of First
Fidelity. For the year ended 2002, single family residential loans comprised
39.81% of the portfolio, down from 52.68% a year earlier. The loans for income
producing properties, including multi-family residential loans, comprised 50.33%
of the portfolio at December 31, 2002, compared with 28.25% a year earlier.
Construction and land loans comprised 9.64% of the portfolio, compared with
18.69% a year earlier. "The change in our loan portfolio mix, which reflects the
Bank's emphasis on increasing its income producing property lending, will lead
to increasing the portfolio yields in the future," Ms. Lagomarsino said. "At the
same time, we expect that by diversifying the portfolio and reducing average
loan size, we will be able to maintain asset quality at our current strong
levels," Ms. Lagomarsino added.
During the fourth quarter of 2002, average loans included the full impact of the
First Fidelity acquisition, totaling $2.1 billion, a 22.92% increase over the
fourth quarter of 2001. New loan originations, were $227.9 million for the
fourth quarter of 2002, an increase of 44.75%, compared with the fourth quarter
of 2001.
"We substantially strengthened our management team last year, as a direct result
of the acquisition, and most recently with the addition of Bob Quinn, our new
Chief Lending Officer," Ms. Lagomarsino said. "This added strength leads us to
expect double digit growth in net loans in 2003," she commented.
DEPOSITS
Transaction accounts increased $262.9 million, to $637.4 million at December 31,
2002, from $374.5 million at December 31, 2001. Transaction accounts comprised
38.33% of total deposits at December 31, 2002, compared with 31.21% at December
31, 2001. Certificates of deposit totaled $1.03 billion, or 61.67% of total
deposits at December 31, 2002, compared with 68.79% of total deposits, or $825.2
million, at December 31, 2001. As of December 31, 2002, the Bank had 66,105
total retail deposit accounts, 39,851 total households and 20,952 checking
accounts, which reflects increases from the prior year of 9.83%, 14.65% and
6.16%, respectively.
HAWTHORNE FINANCIAL CORPORATION
2002 RESULTS
JANUARY 30, 2003
PAGE 4 OF 11
"We look forward to initiating new retail products, to improving the range of
value added services offered to our customers, and continuing to offer our
highly successful "extreme service" in all of our branches," said Ms.
Lagomarsino. "The Company's plan to reposition First Fidelity's deposit
customers into core Hawthorne Savings' customers is well underway, having
completed the move of two of our four newly acquired branches to more desirable
retail locations. Management anticipates opening two new branches in 2003 and
continuing to implement our branching strategy in Orange and San Diego Counties
similar to the strategy we have implemented in the South Bay area of Los Angeles
County during the past three years, which is designed to place us in the top
five institutions in the markets we serve," Ms. Lagomarsino added.
ASSET QUALITY
Nonaccrual loans totaled $7.7 million (or 0.31% of total assets) at December 31,
2002, compared with $20.7 million (or 1.11% of total assets) at December 31,
2001. Total classified loans were $23.7 million at December 31, 2002, compared
with $58.0 million at December 31, 2001. The Company held no other real estate
owned properties at December 31, 2002, compared with $1.3 million at December
31, 2001. Net loan charge-offs were $3.4 million (0.16% of loans, net of
specific allowance) and $2.2 million (0.13% of loans, net of specific allowance)
for the years ended 2002 and 2001, respectively. Net loan charge-offs for the
fourth quarter of 2002 and 2001 were $0.6 million and $0.0 million,
respectively. "Classified assets, nonaccrual loans and real estate owned
properties continue to be at the lowest levels in over fifteen years," Ms.
Lagomarsino said. "The Bank's specific valuation allowance decreased from $3.6
million at December 31, 2001 to $0.2 million at December 31, 2002, as a result
of current year charge-offs, which were anticipated and specifically reserved in
the 2001 allowance," she added.
Provisions for credit losses totaled $0.1 million and $0.9 million for the three
and twelve months ended December 31, 2002, respectively, compared with $0.5
million and $3.4 million, during the same periods in 2001. The decrease in the
provision for credit losses was due to an overall significant improvement in
asset quality. At December 31, 2002, the ratio of total allowance for credit
losses to loans receivable, net of specific allowance and deferred fees and
costs, was 1.64%, compared with 1.76% at December 31, 2001.
Based on the current assessment of asset quality and economic indicators,
management currently anticipates that the provision for credit losses for 2003
will not require any significant specific allowances and will be based primarily
on loan growth.
STOCK REPURCHASES
During the fourth quarter of 2002, there were 127,581 shares repurchased at an
average price of $28.44. As of December 31, 2002, cumulative repurchases were
1,182,983 shares at an average price of $20.88. There were 1,188,383 treasury
shares at December 31, 2002. Currently, $5.9 million is available for additional
share repurchases under existing authorizations.
LEGAL PROCEEDINGS
The Company also announced that, on January 17, 2003, it was awarded a judgment
of $954,000 in damages by a federal court jury against Reliance Insurance
Company. The case stemmed from Reliance's failure to indemnify the Bank under
its directors' and officers' liability policy for the 1999 settlement of a
lawsuit against the Bank's former president and chief executive officer.
Reliance Insurance Company is in liquidation in the State of Pennsylvania.
Eileen Lyon, General Counsel of Hawthorne Financial, said, "Once Reliance's
financial condition began to deteriorate, the Bank was able to require Reliance
to post a bond for the full amount of any judgment against it." Ms. Lyon further
commented that, "Reliance has stated that it intends to appeal on various legal
grounds." Accordingly, the Company will not recognize income related to the
judgment until the amount is collected.
HAWTHORNE FINANCIAL CORPORATION
2002 RESULTS
JANUARY 30, 2003
PAGE 5 OF 11
CAPITAL LEVELS
At December 31, 2002, the Bank is categorized as well-capitalized with core,
tier 1 and risk-based capital ratios of 7.46%, 10.42% and 11.68%, respectively.
The minimum ratios for well-capitalized banks are 5%, 6% and 10% for core
capital, tier 1 and risk-based capital, respectively.
ABOUT HAWTHORNE SAVINGS
Hawthorne Savings, F.S.B., with total assets of $2.5 billion, operates thirteen
branches in the coastal counties of Southern California. The Company specializes
in real estate secured loans in the niche markets that it serves, including: 1)
permanent loans collateralized by single family residential property, 2)
permanent loans secured by multi-family residential and commercial real estate,
3) loans for the construction of multi-family residential, commercial and
individual single family residential properties and the acquisition and
development of land for the construction of such projects. The Company funds its
loans predominantly with retail deposits generated through its thirteen full
service retail offices and FHLB advances.
* * * * *
When used in this press release or in future press releases, filings by
Hawthorne Financial Corporation ("Company") with the Securities and Exchange
Commission ("SEC"), or other public or stockholder communications, or in oral
statements made with the approval of an authorized executive officer, the words
or phrases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project", "believe" or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. The Company wishes to caution
readers that all forward-looking statements are necessarily speculative and not
to place undue reliance on any such forward-looking statements, which speak only
as of the date made. Also, the Company wishes to advise readers that various
risks and uncertainties could affect the Company's financial performance and
cause actual results for future periods to differ materially from those
anticipated or projected. Specifically, the Company cautions readers that
important factors could affect the Company's business and cause actual results
to differ materially from those expressed in any forward-looking statement made
by, or on behalf of, the Company, including: general economic conditions in its
market area, particularly changes in economic conditions in the real estate
industry or real estate values in our market, changes in market interest rates,
increased loan prepayments, risk associated with credit quality, outcome of
pending litigation, inherent market risk associated with treasury activities,
the Company's ability to successfully implement new strategic initiatives and
other risks with respect to its business and/or financial results detailed in
the Company's press releases and filings with the SEC. Stockholders are urged to
review the risks described in such releases and filings. The risks highlighted
herein should not be assumed to be the only factors that could affect future
performance of the Company. The Company does not undertake, and specifically
disclaims any obligation, to publicly release the result of any revisions that
may be made to any forward-looking statements to reflect the occurrence of
anticipated or unanticipated events or circumstances after the date of such
statements.
HAWTHORNE FINANCIAL CORPORATION
2002 RESULTS
JANUARY 30, 2003
PAGE 6 OF 11
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
(Dollars in thousands)
DECEMBER 31, DECEMBER 31,
2002 2001
---- ----
Assets:
Cash and cash equivalents $ 21,849 $ 98,583
Investment securities available for sale, at fair value 267,596 --
Loans receivable (net of allowance for credit losses
of $35,309 in 2002 and $30,602 in 2001) 2,114,255 1,709,283
Real estate owned -- 1,312
Accrued interest receivable 11,512 9,677
Investment in capital stock of Federal Home Loan Bank, at cost 34,705 24,464
Office property and equipment at cost, net 5,106 4,237
Deferred tax asset, net 11,482 4,363
Goodwill 22,970 --
Intangible assets 1,388 --
Other assets 5,521 4,278
----------- -----------
Total assets $ 2,496,384 $ 1,856,197
=========== ===========
Liabilities and Stockholders' Equity:
Liabilities:
Deposits:
Noninterest-bearing $ 39,818 $ 35,634
Interest-bearing:
Transaction accounts 597,528 338,829
Certificates of deposit 1,025,464 825,182
----------- -----------
Total deposits 1,662,810 1,199,645
FHLB advances 600,190 484,000
Senior notes -- 25,778
Capital securities 51,000 14,000
Accounts payable and other liabilities 19,318 12,325
----------- -----------
Total liabilities 2,333,318 1,735,748
----------- -----------
Stockholders' Equity:
Common stock -- $0.01 par value; authorized 20,000,000 shares; issued,
8,576,048 shares (2002) and
5,920,266 shares (2001) 86 59
Capital in excess of par value-- common stock 81,087 44,524
Retained earnings 105,134 82,435
Accumulated other comprehensive income 1,504 --
Less:
Treasury stock, at cost-- 1,188,383 shares (2002) and
560,719 shares (2001) (24,745) (6,569)
----------- -----------
Total stockholders' equity 163,066 120,449
----------- -----------
Total liabilities and stockholders' equity $ 2,496,384 $ 1,856,197
=========== ===========
HAWTHORNE FINANCIAL CORPORATION
2002 RESULTS
JANUARY 30, 2003
PAGE 7 OF 11
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------ ------------
2002 2001 2002 2001
---- ---- ---- ----
Interest revenues:
Loans $ 36,239 $ 34,832 $ 130,628 $ 143,249
Investments and other securities 1,937 -- 3,155 --
Fed funds and other 476 793 3,411 4,437
--------- --------- --------- ---------
Total interest revenues 38,652 35,625 137,194 147,686
--------- --------- --------- ---------
Interest costs:
Deposits 9,753 12,181 36,755 60,022
FHLB advances 6,028 5,258 21,931 20,956
Senior notes 708 852 3,120 3,970
Capital securities 745 257 2,281 722
--------- --------- --------- ---------
Total interest costs 17,234 18,548 64,087 85,670
--------- --------- --------- ---------
Net interest income 21,418 17,077 73,107 62,016
Provision for credit losses 100 500 870 3,400
--------- --------- --------- ---------
Net interest income after provision for credit losses 21,318 16,577 72,237 58,616
Noninterest revenues:
Loan related and other fees 1,416 968 4,179 4,268
Deposit fees 392 353 1,536 1,362
Other 350 -- 672 --
--------- --------- --------- ---------
Total noninterest revenues 2,158 1,321 6,387 5,630
Income/(loss) from real estate operations, net -- (4) 71 205
Noninterest expenses:
General and administrative expenses:
Employee 6,974 4,772 22,389 18,320
Operating 2,177 1,361 7,259 6,409
Occupancy 1,227 1,031 4,109 4,015
Professional 768 481 2,132 2,857
Technology 571 372 1,734 1,897
SAIF premiums and OTS assessments 175 225 588 929
Other/legal settlements 105 -- 323 110
--------- --------- --------- ---------
Total general and administrative expenses 11,997 8,242 38,534 34,537
--------- --------- --------- ---------
Income before income taxes and extraordinary item 11,479 9,652 40,161 29,914
Income tax provision 4,499 3,975 16,259 12,612
--------- --------- --------- ---------
Income before extraordinary item 6,980 5,677 23,902 17,302
Extraordinary item, related to early extinguishment of debt (1,078) (203) (1,203) (469)
--------- --------- --------- ---------
Net income $ 5,902 $ 5,474 $ 22,699 $ 16,833
========= ========= ========= =========
Basic earnings per share before extraordinary item $ 0.94 $ 1.06 $ 3.75 $ 3.27
========= ========= ========= =========
Basic earnings per share after extraordinary item $ 0.79 $ 1.02 $ 3.56 $ 3.18
========= ========= ========= =========
Diluted earnings per share before extraordinary item $ 0.83 $ 0.75 $ 3.03 $ 2.29
========= ========= ========= =========
Diluted earnings per share after extraordinary item $ 0.70 $ 0.72 $ 2.88 $ 2.23
========= ========= ========= =========
Weighted average basic shares outstanding 7,424 5,360 6,382 5,291
========= ========= ========= =========
Weighted average diluted shares outstanding 8,427 7,583 7,891 7,565
========= ========= ========= =========
HAWTHORNE FINANCIAL CORPORATION
2002 RESULTS
JANUARY 30, 2003
PAGE 8 OF 11
SUPPLEMENTAL INFORMATION - CLASSIFIED ASSETS (UNAUDITED)
(Dollars in thousands)
DECEMBER 31, DECEMBER 31,
2002 2001
---- ----
Risk elements:
Nonaccrual loans $ 7,675 $ 20,666
Real estate owned, net -- 1,312
---------- ----------
7,675 21,978
Performing loans classified substandard or lower (1) 16,002 37,341
---------- ----------
Total classified assets $ 23,677 $ 59,319
========== ==========
Total classified loans $ 23,677 $ 58,007
========== ==========
Loans restructured and paying in accordance with modified terms (2) $ 2,468 $ 4,506
========== ==========
Gross loans before allowance for credit losses $2,149,564 $1,739,885
========== ==========
Loans receivable, net of specific allowance and deferred (fees) and costs $2,149,376 $1,736,310
========== ==========
Delinquent loans:
30 - 89 days $ 5,357 $ 2,742
90+ days 7,175 4,982
---------- ----------
Total delinquent loans $ 12,532 $ 7,724
========== ==========
Allowance for credit losses:
General $ 35,121 $ 27,027
Specific 188 3,575
---------- ----------
Total allowance for credit losses $ 35,309 $ 30,602
========== ==========
Net loan charge-offs:
Net charge-offs (3) $ 3,352 $ 2,248
Percent to loans receivable, net of specific allowance and
deferred (fees) and costs 0.16% 0.13%
Percent to beginning of period allowance for credit losses 10.95% 7.63%
Selected asset quality ratios at period end:
Total nonaccrual loans to total assets 0.31% 1.11%
Total allowance for credit losses to loans receivable, net of
specific allowance and deferred (fees) and costs 1.64% 1.76%
Total general allowance for credit losses to loans receivable,
net of specific allowance and deferred (fees) and costs 1.63% 1.56%
Total allowance for credit losses to nonaccrual loans 460.05% 148.08%
Total classified assets to Bank core capital and general 10.83% 32.59%
allowance for credit losses
(1) Excludes nonaccrual loans.
(2) Troubled debt restructured loans not classified and not on nonaccrual.
(3) During the course of the year, charge-offs are anticipated and reflected
as valuation allowances.
HAWTHORNE FINANCIAL CORPORATION
2002 RESULTS
JANUARY 30, 2003
PAGE 9 OF 11
NET INTEREST INCOME (UNAUDITED)
(Dollars in thousands)
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
2002 2001
---- ----
WEIGHTED WEIGHTED
AVERAGE REVENUES/ AVERAGE AVERAGE REVENUES/ AVERAGE
BALANCE COSTS YIELD/COST BALANCE COSTS YIELD/COST
------- ----- ---------- ------- ----- ----------
Assets:
Interest-earning assets:
Loans receivable (1) $ 2,143,543 $ 36,239 6.74% $ 1,743,897 $ 34,832 7.96%
Cash, Fed funds and other 11,238 47 1.66 89,016 484 2.16
Investment securities 211,006 1,937 3.64 - - -
Investment in capital stock of
Federal Home Loan Bank 34,456 430 4.95 23,351 309 5.25
---------- ------- ----------- --------
Total interest-earning assets 2,400,243 38,653 6.42 1,856,264 35,625 7.64
------- ----- -------- -----
Noninterest-earning assets 30,002 314
---------- -----------
Total assets $2,430,245 $ 1,856,578
========== ===========
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposits $ 1,561,422 $ 9,753 2.48% $ 1,187,632 $ 12,181 4.07%
FHLB advances 579,847 6,027 4.07 459,272 5,258 4.48
Senior notes 22,578 708 12.50 27,230 852 12.52
Capital securities 45,946 745 6.49 10,848 257 9.48
----------- ------- ----------- --------
Total interest-bearing liabilities 2,209,793 17,233 3.08 1,684,982 18,548 4.35
------- ----- -------- -----
Noninterest-bearing checking 38,255 33,894
Noninterest-bearing liabilities 23,828 20,346
Stockholders' equity 158,369 117,356
---------- -----------
Total liabilities and stockholders'
equity $2,430,245 $ 1,856,578
========== ===========
Net interest income $ 21,420 $ 17,077
======== ========
Interest rate spread 3.34% 3.29%
===== =====
Net interest margin 3.55% 3.66%
===== =====
(1) Includes the interest on nonaccrual loans only to the extent it was paid
and recognized as interest income.
HAWTHORNE FINANCIAL CORPORATION
2002 RESULTS
JANUARY 30, 2003
PAGE 10 OF 11
NET INTEREST INCOME (UNAUDITED)
(Dollars in thousands)
TWELVE MONTHS ENDED DECEMBER 31,
--------------------------------
2002 2001
---- ----
WEIGHTED WEIGHTED
AVERAGE REVENUES/ AVERAGE AVERAGE REVENUES/ AVERAGE
BALANCE COSTS YIELD/COST BALANCE COSTS YIELD/COST
------- ----- ---------- ------- ----- ----------
Assets:
Interest-earning assets:
Loans receivable (1) $1,833,856 130,628 7.12% $1,696,785 $ 143,249 8.44%
Cash, Fed funds and other 109,178 1,818 1.67 81,446 3,231 3.97
Investment securities 77,988 3,155 4.05 - - -
Investment in capital stock of
Federal Home Loan Bank 28,281 1,593 5.63 21,754 1,206 5.54
----------- -------- ----------- ---------
Total interest-earning assets 2,049,303 137,194 6.69 1,799,985 147,686 8.20
-------- ----- --------- -----
Noninterest-earning assets 23,888 2,845
----------- -----------
Total assets $ 2,073,191 $ 1,802,830
=========== ===========
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposits $ 1,300,177 $ 36,755 2.83% $ 1,191,618 $ 60,022 5.04%
FHLB advances 511,614 21,931 4.23 407,836 20,956 5.07
Senior notes 24,819 3,120 12.50 31,714 3,970 12.52
Capital securities 32,540 2,281 7.01 7,345 722 9.83
----------- -------- ----------- ---------
Total interest-bearing liabilities 1,869,150 64,087 3.41 1,638,513 85,670 5.21
-------- ----- --------- -----
Noninterest-bearing checking 37,258 32,956
Noninterest-bearing liabilities 32,477 20,098
Stockholders' equity 134,306 111,263
----------- -----------
Total liabilities and stockholders'
equity $ 2,073,191 $ 1,802,830
=========== ===========
Net interest income $ 73,107 $ 62,016
======== =========
Interest rate spread 3.28% 2.99%
===== =====
Net interest margin 3.57% 3.45%
====== =====
(1) Includes the interest on nonaccrual loans only to the extent it was paid
and recognized as interest income.
HAWTHORNE FINANCIAL CORPORATION
2002 RESULTS
JANUARY 30, 2003
PAGE 11 OF 11
NET LOAN PORTFOLIO COMPOSITION (UNAUDITED)
(Dollars in thousands)
DECEMBER 31, 2002 DECEMBER 31, 2001
----------------- -----------------
BALANCE PERCENT BALANCE PERCENT
------- ------- ------- -------
Single family residential $ 851,268 39.81% $ 913,255 52.68%
Income property:
Multi-family 689,100 32.22% 254,530 14.68%
Commercial 387,354 18.11% 235,156 13.57%
Development:
Multi-family 57,037 2.67% 102,682 5.92%
Commercial 41,168 1.93% 68,431 3.95%
Single family construction:
Single family residential 75,218 3.52% 104,158 6.01%
Land 32,612 1.52% 48,719 2.81%
Other 4,738 0.22% 6,617 0.38%
---------- ------ ---------- ------
Total loan principal (1) $2,138,495 100.00% $1,733,548 100.00%
========== ====== ========== ======
(1) Excludes net deferred fees and costs.
THREE MONTHS ENDED TWELVE MONTHS ENDED
SELECTED FINANCIAL DATA (UNAUDITED) (1) DECEMBER 31, DECEMBER 31,
------------ ------------
(Dollars in thousands) 2002 2001 2002 2001
---- ---- ---- ----
PERFORMANCE RATIOS
Return on average assets (2) 0.97% 1.18% 1.09% 0.93%
Return on average equity (2) 14.91% 18.66% 16.90% 15.13%
Efficiency ratio (3) 50.44% 44.80% 48.07% 50.89%
GROWTH RATIOS
Total assets 34.49% 5.86%
Loans receivable, net 23.69% 6.30%
Total deposits 38.61% -1.25%
DECEMBER 31, DECEMBER 31,
2002 2001
---- ----
BANK CAPITAL RATIOS
Core capital $ 183,942 $154,981
Ratio 7.46% 8.36%
Tier 1 capital $ 183,942 $154,981
Ratio 10.42% 11.63%
Risk-based capital $ 206,175 $169,278
Ratio 11.68% 12.70%
BOOK VALUE PER SHARE AS OF DECEMBER 31, 2002
Basic $22.07
Diluted $19.41
Tangible diluted $16.40 (4)
(1) All ratios were calculated based on net income, after extraordinary item.
(2) Annualized for the three months ended December 31, 2002.
(3) Represents total general and administrative expenses (excluding
other/legal settlements) divided by net interest income before provision
for credit losses and noninterest revenues.
(4) Excludes Statement of Financial Accounting Standards ("SFAS") No. 115,
unrealized gain on available-for-sale securities, net of tax.