Exhibit 99.1
[HAWTHORNE LOGO]
HAWTHORNE FINANCIAL CORPORATION
PRESS RELEASE
JULY 24, 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 STRONG SECOND QUARTER EARNINGS FOR 2003
(El Segundo, CA) Hawthorne Financial Corporation, (NASDAQ:HTHR), parent company
of Hawthorne Savings, F.S.B., today announced that second quarter 2003 net
income increased 30.7% to $6.9 million, compared to $5.3 million a year earlier.
Diluted earnings per share for the quarter were $0.83, representing an increase
of 20.3%, compared to $0.69 for the second quarter of 2002.
Year-to-date net income for 2003 grew to $13.6 million, an increase of 21.9%,
compared with net income of $11.2 million, for the six months ended June 30,
2002. Net income resulted in diluted earnings per share, for the six months
ended June 30, 2003 of $1.64, a 12.3% increase, compared to the $1.46 earned in
the same period in 2002.
QUARTERLY HIGHLIGHTS
- The Company's net income of $6.9 million during the quarter and
$13.6 million during the six months ended June 30, 2003 is evidence
of Hawthorne's solid earnings power.
- Loan originations increased 56.7% and 45.1% during the three and six
months ended June 30, 2003, respectively, compared to the same
periods in 2002, a reflection of the Bank's successful integration
of its first acquisition.
- During the six months ended June 30, 2003, non-interest bearing
checking account balances increased 25.9% on an annualized basis,
while annualized deposit growth was 12.3%, an indication of the
Company's focus on building franchise value.
- Deposit fee income increased 25.3% during the six months ended June
30, 2003, compared to the same period in 2002 as a result of new
initiatives, including the Bank's new courtesy overdraft program.
- The ratio of general and administrative expense ("G&A") (excluding
other/legal settlement) to average assets improved to 1.65% for the
six months ended June 30, 2003, compared with 1.84% for the year
ended December 31, 2002, reflecting the Company's continued emphasis
on efficiency.
- Importantly, asset quality measurements remain at historically
strong levels.
- The Company's positive results were achieved in an environment
characterized by: unprecedented low and volatile interest rates,
significant volumes of prepayments of loans, aggressive competition
for loan originations and a high demand for fixed rate loan
products. This environment poses challenges relative to growing
assets that provide acceptable yields.
"Thanks to our superb team of employees, the Bank has gained additional strength
in a challenging environment," said Simone Lagomarsino, the Company's President
and Chief Executive Officer. "More importantly, we will not implement short-term
initiatives, in the current volatile interest rate environment, that will
compromise our underwriting standards or the firm foundation that we have
established. We remain focused on the Company's long-term success," she said.
"Accordingly, we are proactively evaluating strategies to protect against
possible future increases in interest rates, including initiatives that will
reduce our cost of funds in the future. Implementation of these strategies may
result in somewhat slower deposit growth," added Ms. Lagomarsino.
HAWTHORNE FINANCIAL CORPORATION
SECOND QUARTER 2003 RESULTS
JULY 24, 2003
PAGE 2 OF 11
RETURN ON ASSETS/RETURN ON EQUITY
Key performance measurements for the second quarter were consistent with the
first quarter of 2003. Net income for the three months ended June 30, 2003
resulted in an annualized return on average assets ("ROA") of 1.08%, compared
with a ROA of 1.06% for the first quarter of 2003. The annualized return on
average equity ("ROE") was 16.34% for the three months ended June 30, 2003,
compared with 16.46% for the first quarter of 2003.
NET INTEREST INCOME
Net interest income (after provision for credit losses) of $19.7 million, for
the current quarter, reflected an increase of 20.7% compared to the $16.3
million of net interest income earned in the second quarter of 2002. Net
interest income (after provision for credit losses) earned in the six months
ended June 30, 2003 was $40.9 million reflecting an increase of 22.3% compared
to the same period in 2002. Net interest income was positively impacted
year-over-year by: 1) inclusion of the net assets from the acquisition of First
Fidelity in August 2002, 2) continued strong origination volume of $485.2
million, 3) the majority of ARM loans ($1.4 billion) reaching their contractual
floors and 4) income from the investment securities portfolio.
The Company's net interest income (after provision for credit losses) was $19.7
million for the second quarter of 2003, which was lower than the prior quarter
of $21.1 million. This decrease was primarily due to the Company's yield on
earning assets reducing faster than the Company's cost of funds. This is a
result of the significant prepayments of higher yielding loans and to the fact
that 67.6% of the Company's funding sources have rates that are contractually
fixed.
The average cost of funds for the Company decreased to 2.71% during the second
quarter of 2003, and to 2.76% year-to-date compared to 3.57% and 3.67%, during
the same periods in 2002. 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 with higher than current market rates, and the shift in
the deposit mix. During the last half of 2003, approximately $447.7 million of
CDs are scheduled to mature. The weighted average cost of these CDs is 2.33%
which is approximately 1.00% higher than the current 6 month CD rate. The Bank
believes this represents an opportunity to further lower the overall cost of
deposits by year end.
The Company's net interest margin for the three and six months ended June 30,
2003 was 3.18% and 3.31%, respectively, compared with 3.56% and 3.68% during the
same periods in 2002.
During 2003, both net interest income and net interest margin continued to be
adversely impacted as borrowers refinanced loans, which resulted in $381.8
million in prepayments with a weighted average interest rate of 7.08% for the
six months ended June 30, 2003, while new loan originations had a weighted
average yield of 5.44% during the same period. As a result, the yield on loans
receivable was 6.14% and 6.27% during the three and six months ended June 30,
2003, respectively, compared to 6.40% during the prior quarter and 7.35% and
7.48% during the same periods in 2002.
Ms. Lagomarsino commented, "In light of initiatives that we have implemented to
lower the cost of funds, and assuming a slowing of loan prepayments, we
reiterate the previously announced guidance for 2003 net interest margin of
3.25% to 3.35%."
NONINTEREST REVENUES
Noninterest revenues were $2.2 million for the quarter representing an 80.1%
increase compared to the same period in 2002. For the six months ended June 30,
2003, noninterest revenues were $3.7 million, a 48.3% increase, compared to the
$2.5 million earned during the same period in 2002. Loan and other related fees
constituted 53.2% of noninterest revenues for the six months ended June 30,
2003, compared to 65.8% during the same period in 2002. During both periods,
these fees were comprised primarily of prepayment fees resulting from the high
level of refinancings. Fee income on deposits increased 28.4% during the second
quarter 2003, compared with the same period in 2002, as a result of the growth
in core transaction deposits and other fee generating initiatives.
HAWTHORNE FINANCIAL CORPORATION
SECOND QUARTER 2003 RESULTS
JULY 24, 2003
PAGE 3 OF 11
The Company continues to expand its customer product array, which includes a new
courtesy overdraft program, designed to enhance customer retention and
satisfaction while increasing income. As a result of the cross selling efforts
by the Company's employees, the ratio of products per household increased to
2.64 at June 30, 2003, compared with 2.46 for the prior quarter.
The Bank reiterates prior guidance that noninterest income will increase by 10%
during 2003 compared to 2002.
NONINTEREST EXPENSE
Total G&A was $10.2 million and $21.4 million for the three and six months ended
June 30, 2003, respectively, compared with $8.3 million and $16.3 million
incurred in the same periods of 2002. "Improving efficiency remains a top
priority and the results reflect our continued success in this regard, evidenced
by the fact that G&A (excluding other/legal settlements) to average assets
decreased to 1.65% for the six months ended June 30, 2003, compared with 1.84%
for the year ended December 31, 2002," commented Ms. Lagomarsino. "In fact, the
Company has been successful in significantly reducing G&A as a percentage of
average assets in each of the last five years," she concluded. The Company's
efficiency ratio was 46.99% for the six months ended June 30, 2003, which was
better than the 47.62% achieved during the first quarter of 2003 and the 48.07%
achieved during the year ended 2002. The Company remains committed to reducing
the efficiency ratio to 45% in 2003 and reducing G&A (excluding other/legal
settlements) to average assets to 1.60%.
LOANS
Loans receivable averaged $2.1 billion during the second quarter of 2003, which
was relatively flat compared to the prior quarter, while reflecting a 28.5%
increase compared to average loans outstanding during the second quarter of
2002. New loan originations were $248.7 million and $485.2 million for the three
and six months ended June 30, 2003, respectively, which represented increases of
56.7% and 45.1%, compared to originations during the same periods in 2002. Ms.
Lagomarsino said, "While loan originations remain at record levels, we are
revising our guidance for loan growth for 2003 down to between flat and 5%, due
to the high level of loan prepayments that we have experienced in the current
volatile rate environment."
DEPOSITS
Total deposits increased to $1.8 billion at June 30, 2003, from $1.7 billion at
December 31, 2002, a 12.3% annualized increase. As of June 30, 2003, the Bank
had 68,505 total retail deposit accounts, 40,240 total households and 22,375
checking accounts, which reflected annualized increases from the year ended
December 31, 2002 of 7.2%, 2.0% and 13.6%, respectively.
The Bank's integration process is on track for the four branches it acquired
last year in Orange and San Diego Counties. As planned, two of the four have
been moved to new locations. The Tustin office was relocated to Irvine Northpark
and the Del Mar office was moved to a more desirable location within Del Mar.
The Orange and San Diego locations remain the same. The goal to increase core
customers in these offices is being realized. From December 31, 2002 to June 30,
2003, the percentage of transaction accounts to total deposits in these four
offices has increased from approximately 23.3% to 25.1%, respectively.
In June, the Company opened two branches, increasing the total number of
branches to fifteen. The Baldwin Hills branch, in Los Angeles County, through a
strategic alliance with Operation HOPE, Inc., offers a full range of services
for the residents of Central Los Angeles. The second full-service retail office
is located in the Irvine Oak Creek corridor of Orange County.
ASSET QUALITY
Management is pleased to report that classified assets remain at historically
low levels. At June 30, 2003, classified assets totaled $18.6 million, or 0.71%
of total Bank assets, compared to $45.1 million, or 2.41% of total Bank assets,
a year earlier. Year-to-date, classified assets have decreased $5.1 million, or
approximately 21.6%. During the second quarter, nonaccrual loans increased by
$1.3 million as a result of the addition of one new loan, however, the
HAWTHORNE FINANCIAL CORPORATION
SECOND QUARTER 2003 RESULTS
JULY 24, 2003
PAGE 4 OF 11
ratio of nonaccrual loans to total loans of 0.37% remains lower than the Bank's
peer group. At June 30, 2003, the ratio of total allowance for credit losses to
loans receivable, net of specific valuation allowance, was 1.65%, compared with
1.64% at December 31, 2002 and 1.77% at June 30, 2002.
Based on the current assessment of asset quality and economic indicators, the
Bank anticipates that the provision for credit losses for the remainder of the
year will be consistent with the first half of 2003.
STOCK REPURCHASES
During the second quarter of 2003, 20,409 shares were repurchased at an average
price of $32.86. As of June 30, 2003, cumulative repurchases were 1,326,392
shares at an average price of $21.87. Currently, $1.6 million remains available
for additional share repurchases under existing board approved authorizations.
CAPITAL LEVELS
At June 30, 2003, the Bank remained well-capitalized with core, tier 1 and
risk-based capital ratios of 7.56%, 10.91% and 12.17%, respectively. The minimum
ratios for well-capitalized banks are 5%, 6% and 10% for core capital, tier 1
and risk-based capital, respectively.
CONFERENCE CALL
The Company will host a telephone conference call today, July 24, 2003, to
discuss the results of the second quarter and to answer questions of
participants. The call is scheduled to begin at 1:00 p.m. Eastern time (10:00
a.m. Pacific). The teleconference dial in number is (800) 901-5226, reference
"Hawthorne Savings - ID#65205732". Please call at least 10 minutes before the
call is scheduled to begin. Audio access to the conference call will also be
available through a live Webcast over the Internet at www.hawthornesavings.com.
The Webcast of this conference call will be available for replay through August
22, 2003 by accessing the same link.
ABOUT HAWTHORNE SAVINGS
Hawthorne Savings, F.S.B., with total assets of $2.6 billion, operates fifteen
branches in the coastal counties of Southern California, from Westlake Village
at the western edge of Los Angeles to Mission Bay in San Diego. The Company
specializes in real estate secured loans within the markets it serves,
including: 1) permanent loans collateralized by single family residential
property, 2) permanent loans secured by multi-family residential and commercial
real estate and 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
fifteen full service retail offices and FHLB advances.
Hawthorne Savings, F.S.B., continues to keep pace with the changing face of
banking by regularly introducing its customers to new products, such as the
Global Access Check Card, online banking and investments. For more information,
please call 888-TRUE-411 or visit the Bank online at www.hawthornesavings.com.
* * * * *
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 period to differ materially from those
anticipated or projected. Specifically, the Company cautions readers that
important factors could affect the Company's business and cause
HAWTHORNE FINANCIAL CORPORATION
SECOND QUARTER 2003 RESULTS
JULY 24, 2003
PAGE 5 OF 11
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, loan prepayments increasing or continuing at the current pace,
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
SECOND QUARTER 2003 RESULTS
JULY 24, 2003
PAGE 6 OF 11
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
(Dollars in thousands)
JUNE 30, DECEMBER 31,
2003 2002
----------- -----------
Assets:
Cash and cash equivalents $ 16,415 $ 21,849
Investment securities available-for-sale, at fair value 348,154 267,596
Loans receivable (net of allowance for credit losses
of $35,341 in 2003 and $35,309 in 2002) 2,103,105 2,114,255
Accrued interest receivable 10,883 11,512
Investment in capital stock of Federal Home Loan Bank, at cost 33,238 34,705
Office property and equipment at cost, net 5,722 5,106
Deferred tax asset, net 8,521 10,068
Goodwill 22,970 22,970
Intangible assets 1,183 1,388
Investment securities awaiting settlement 30,354 --
Other assets 32,743 5,521
----------- -----------
Total assets $ 2,613,288 $ 2,494,970
=========== ===========
Liabilities and Stockholders' Equity:
Liabilities:
Deposits:
Noninterest-bearing $ 44,970 $ 39,818
Interest-bearing:
Transaction accounts 649,037 597,528
Certificates of deposit 1,070,722 1,025,464
----------- -----------
Total deposits 1,764,729 1,662,810
FHLB advances 576,736 600,190
Capital securities 51,000 51,000
Investment securities awaiting settlement 30,354 --
Accounts payable and other liabilities 17,184 17,904
----------- -----------
Total liabilities 2,440,003 2,331,904
----------- -----------
Stockholders' Equity:
Common stock -- $0.01 par value; authorized 20,000,000
shares; issued, 9,015,102 shares (2003) and
8,576,048 shares (2002) 90 86
Capital in excess of par value-- common stock 82,027 81,087
Retained earnings 118,774 105,134
Accumulated other comprehensive income 1,374 1,504
Less:
Treasury stock, at cost-- 1,331,792 shares (2003)
and 1,188,383 shares (2002) (28,980) (24,745)
----------- -----------
Total stockholders' equity 173,285 163,066
----------- -----------
Total liabilities and stockholders' equity $ 2,613,288 $ 2,494,970
=========== ===========
HAWTHORNE FINANCIAL CORPORATION
SECOND QUARTER 2003 RESULTS
JULY 24, 2003
PAGE 7 OF 11
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Interest revenues:
Loans $ 32,627 $ 30,385 $ 66,800 $ 62,893
Investments securities 2,603 69 5,555 69
Investment in capital stock of FHLB, fed funds and other 331 1,089 795 1,950
---------- ---------- ---------- ----------
Total interest revenues 35,561 31,543 73,150 64,912
---------- ---------- ---------- ----------
Interest costs:
Deposits 9,403 8,493 18,972 18,027
FHLB advances 5,584 5,141 11,397 10,293
Senior notes -- 805 -- 1,611
Capital securities 755 599 1,528 903
---------- ---------- ---------- ----------
Total interest costs 15,742 15,038 31,897 30,834
---------- ---------- ---------- ----------
Net interest income 19,819 16,505 41,253 34,078
Provision for credit losses 100 170 400 670
---------- ---------- ---------- ----------
Net interest income after provision for credit losses 19,719 16,335 40,853 33,408
Noninterest revenues:
Loan related and other fees 1,078 790 1,964 1,638
Deposit fees 466 363 922 736
Other 608 42 803 114
---------- ---------- ---------- ----------
Total noninterest revenues 2,152 1,195 3,689 2,488
Income from real estate operations, net (4) -- (3) 69
Noninterest expenses:
General and administrative expense:
Employee 5,475 4,700 11,665 9,732
Operating 2,278 1,516 4,679 3,019
Occupancy 1,390 941 2,576 1,855
Professional 339 599 786 706
Technology 535 371 1,084 740
SAIF premiums and OTS assessments 165 132 330 268
Other/legal settlements 38 -- 264 20
---------- ---------- ---------- ----------
Total general and administrative expense 10,220 8,259 21,384 16,340
---------- ---------- ---------- ----------
Income before income taxes 11,647 9,271 23,155 19,625
Income tax provision 4,743 3,987 9,515 8,439
---------- ---------- ---------- ----------
Net income $ 6,904 $ 5,284 $ 13,640 $ 11,186
========== ========== ========== ==========
Basic earnings per share $ 0.90 $ 0.91 $ 1.79 $ 2.00
========== ========== ========== ==========
Diluted earnings per share $ 0.83 $ 0.69 $ 1.64 $ 1.46
========== ========== ========== ==========
Weighted average basic shares outstanding 7,690 5,821 7,633 5,597
========== ========== ========== ==========
Weighted average diluted shares outstanding 8,322 7,665 8,331 7,646
========== ========== ========== ==========
HAWTHORNE FINANCIAL CORPORATION
SECOND QUARTER 2003 RESULTS
JULY 24, 2003
PAGE 8 OF 11
SUPPLEMENTAL INFORMATION - CLASSIFIED ASSETS (UNAUDITED)
(Dollars in thousands)
JUNE 30, DECEMBER 31, JUNE 30,
2003 2002 2002
---------- ---------- ----------
Risk elements:
Nonaccrual loans $ 9,649 $ 7,675 $ 6,081
Real estate owned, net -- -- --
---------- ---------- ----------
9,649 7,675 6,081
Performing loans classified substandard or lower (1) 8,904 16,002 38,984
---------- ---------- ----------
Total classified assets $ 18,553 $ 23,677 $ 45,065
========== ========== ==========
Total classified loans $ 18,553 $ 23,677 $ 45,065
========== ========== ==========
Loans restructured and paying in accordance with modified terms (2) $ 2,351 $ 2,468 $ 2,317
========== ========== ==========
Gross loans before allowance for credit losses $2,138,446 $2,149,564 $1,620,857
========== ========== ==========
Loans receivable, net of specific valuation allowance $2,138,070 $2,149,376 $1,619,807
========== ========== ==========
Delinquent loans:
30 - 89 days $ 6,469 $ 5,357 $ 9,920
90+ days 6,989 7,175 1,931
---------- ---------- ----------
Total delinquent loans $ 13,458 $ 12,532 $ 11,851
========== ========== ==========
Allowance for credit losses:
General valuation allowance ("GVA") $ 34,965 $ 35,121 $ 27,607
Specific valuation allowance ("SVA") 376 188 1,050
---------- ---------- ----------
Total allowance for credit losses $ 35,341 $ 35,309 $ 28,657
========== ========== ==========
Net loan charge-offs:
Net charge-offs for the quarter ended (3) $ 265 $ 664 $ 189
Percent to loans receivable, net of SVA (annualized) 0.05% 0.12% 0.05%
Percent to beginning of period allowance for credit losses (annualized) 2.99% 7.40% 2.64%
Selected asset quality ratios at period end:
Total nonaccrual loans to total assets 0.37% 0.31% 0.32%
Total allowance for credit losses to loans receivable, net of SVA 1.65% 1.64% 1.77%
Total GVA to loans receivable, net of SVA 1.64% 1.63% 1.70%
Total allowance for credit losses to nonaccrual loans 366.27% 460.05% 471.25%
Total classified assets to Bank core capital and GVA 8.05% 10.81% 23.04%
- -------------------------------------
(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 generally
reflected as specific valuation allowances.
HAWTHORNE FINANCIAL CORPORATION
SECOND QUARTER 2003 RESULTS
JULY 24, 2003
PAGE 9 OF 11
NET INTEREST INCOME (UNAUDITED)
(Dollars in thousands)
THREE MONTHS ENDED JUNE 30,
-------------------------------------------------------------------------
2003 2002
----------------------------------- -----------------------------------
WEIGHTED WEIGHTED
AVERAGE REVENUES/ AVERAGE AVERAGE REVENUES/ AVERAGE
BALANCE COSTS YIELD/COST BALANCE COSTS YIELD/COST
----------- --------- ---------- ----------- --------- ----------
Assets:
Interest-earning assets:
Loans receivable (1) $ 2,126,756 $ 32,627 6.14 % $ 1,654,830 $ 30,385 7.35 %
Investment securities 331,474 2,603 3.14 8,722 69 3.17
Investment in capital stock of
Federal Home Loan Bank 33,792 321 3.81 25,001 382 6.13
Cash, fed funds and other 2,169 10 1.85 169,220 707 1.68
----------- --------- ----------- ---------
Total interest-earning assets 2,494,191 35,561 5.71 1,857,773 31,543 6.80
--------- -------- --------- --------
Noninterest-earning assets 69,247 3,846
----------- -----------
Total assets $ 2,563,438 $ 1,861,619
=========== ===========
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposits $ 1,718,063 $ 9,403 2.20 % $ 1,151,892 $ 8,493 2.96 %
FHLB advances 549,508 5,584 4.02 468,615 5,141 4.34
Senior notes - - - 25,778 805 12.50
Capital securities 51,000 755 5.92 33,824 599 7.08
----------- --------- ----------- ---------
Total interest-bearing liabilities 2,318,571 15,742 2.71 1,680,109 15,038 3.57
--------- -------- --------- --------
Noninterest-bearing checking 44,596 37,130
Noninterest-bearing liabilities 31,236 20,258
Stockholders' equity 169,035 124,122
----------- -----------
Total liabilities and stockholders' equity $ 2,563,438 $ 1,861,619
=========== ===========
Net interest income $ 19,819 $ 16,505
========= =========
Interest rate spread 3.00 % 3.23 %
========== ==========
Net interest margin 3.18 % 3.56 %
========== ==========
- -------------------------------------
(1) Includes the interest on nonaccrual loans only to the extent it was paid
and recognized as interest income.
HAWTHORNE FINANCIAL CORPORATION
SECOND QUARTER 2003 RESULTS
JULY 24, 2003
PAGE 10 OF 11
NET INTEREST INCOME (UNAUDITED)
(Dollars in thousands)
SIX MONTHS ENDED JUNE 30,
--------------------------------------------------------------------------
2003 2002
----------------------------------- ------------------------------------
WEIGHTED WEIGHTED
AVERAGE REVENUES/ AVERAGE AVERAGE REVENUES/ AVERAGE
BALANCE COSTS YIELD/COST BALANCE COSTS YIELD/COST
----------- --------- ---------- ------------ --------- ----------
Assets:
Interest-earning assets:
Loans receivable (1) $ 2,135,362 $ 66,800 6.27 % $ 1,686,078 $ 62,893 7.48 %
Investment securities 324,270 5,555 3.43 4,385 69 3.17
Investment in capital stock of
Federal Home Loan Bank 34,323 767 4.51 24,805 756 6.15
Cash, fed funds and other 4,046 28 1.40 144,078 1,194 1.67
----------- --------- ------------ ---------
Total interest-earning assets 2,498,001 73,150 5.87 1,859,346 64,912 7.00
--------- --------- --------- ------
Noninterest-earning assets 60,362 2,438
----------- ------------
Total assets $ 2,558,363 $ 1,861,784
=========== ============
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposits $ 1,696,931 $ 18,972 2.25 % $ 1,156,907 $ 18,027 3.14 %
FHLB advances 566,329 11,397 4.00 476,265 10,293 4.30
Senior notes - - - 25,778 1,611 12.50
Capital securities 51,000 1,528 5.99 23,967 903 7.54
----------- --------- ------------ ---------
Total interest-bearing liabilities 2,314,260 31,897 2.76 1,682,917 30,834 3.67
--------- --------- --------- ------
Noninterest-bearing checking 42,959 36,546
Noninterest-bearing liabilities 34,775 19,864
Stockholders' equity 166,369 122,457
----------- ------------
Total liabilities and stockholders' equity $ 2,558,363 $ 1,861,784
=========== ============
Net interest income $ 41,253 $ 34,078
========= =========
Interest rate spread 3.11 % 3.33 %
========== =========
Net interest margin 3.31 % 3.68 %
========== =========
- -------------------------------------
(1) Includes the interest on nonaccrual loans only to the extent it was paid
and recognized as interest income.
HAWTHORNE FINANCIAL CORPORATION
SECOND QUARTER 2003 RESULTS
JULY 24, 2003
PAGE 11 OF 11
NET LOAN PORTFOLIO COMPOSITION (UNAUDITED)
(Dollars in thousands)
JUNE 30, 2003 DECEMBER 31, 2002
------------------------- ------------------------
BALANCE PERCENT BALANCE PERCENT
------------ --------- ------------ --------
Single family residential $ 836,421 39.33% $ 851,268 39.81%
Income property:
Multi-family 731,983 34.42% 689,100 32.22%
Commercial 381,423 17.93% 387,354 18.11%
Development:
Multi-family 47,381 2.23% 57,037 2.67%
Commercial 25,972 1.22% 41,168 1.93%
Single family construction:
Single family residential 73,217 3.44% 75,218 3.52%
Land 26,659 1.25% 32,612 1.52%
Other 3,826 0.18% 4,738 0.22%
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Total loan principal (1) $ 2,126,882 100.00% $ 2,138,495 100.00%
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(1) Excludes net deferred fees and costs.
SELECTED FINANCIAL DATA (UNAUDITED) (1) THREE MONTHS ENDED SIX MONTHS ENDED
(Dollars in thousands) JUNE 30, JUNE 30,
-------------------- --------------------------
2003 2002 2003 2002
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PERFORMANCE RATIOS
Return on average assets (2) 1.08% 1.14% 1.07% 1.20%
Return on average equity (2) 16.34% 17.03% 16.40% 18.27%
Efficiency ratio (3) 46.34% 46.66% 46.99% 44.63%
G&A to average assets (4) 1.65% 1.75%
GROWTH RATIOS (2)
Total assets 9.48% 1.95%
Loans receivable, net -1.05% -13.70%
Total deposits 12.26% -1.29%
JUNE 30, JUNE 30,
2003 2002
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BANK CAPITAL RATIOS
Core capital $ 195,449 $ 167,964
Ratio 7.56% 8.98%
Tier 1 capital $ 195,449 $ 167,964
Ratio 10.91% 13.23%
Risk-based capital $ 218,004 $ 183,990
Ratio 12.17% 14.49%
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(1) All ratios were calculated based on net income.
(2) Annualized.
(3) Represents total general and administrative expense (excluding
other/legal settlements) divided by net interest income before provision
for credit losses and noninterest revenues.
(4) Represents annualized total general and administrative expense
(excluding other/legal settlements) divided by average assets.