EXHIBIT 99.1
[HAWTHORNE LOGO]
HAWTHORNE FINANCIAL CORPORATION
PRESS RELEASE
OCTOBER 23, 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 CONTINUED STRONG EARNINGS FOR THIRD QUARTER OF 2003
(El Segundo, CA) Hawthorne Financial Corporation, (NASDAQ:HTHR), parent company
of Hawthorne Savings, F.S.B., today announced that third quarter 2003 net income
increased 27.9% to $7.2 million, compared to $5.6 million a year earlier.
Diluted earnings per share for the quarter were $0.57, representing an increase
of 23.9%, compared to $0.46 for the third quarter of 2002, after adjustment for
the previously announced 50% stock dividend.
Year-to-date net income for 2003 grew to $20.8 million, an increase of 23.9%,
compared with net income of $16.8 million, for the nine months ended September
30, 2002. Net income resulted in diluted earnings per share, for the nine months
ended September 30, 2003 of $1.66, a 14.5% increase, compared to the $1.45
earned in the same period in 2002.
Earnings per share computations in all periods have been adjusted for the impact
of the Company's 3-for-2 stock split in the form of a 50% stock dividend
announced on September 25, 2003. The stock dividend to shareholders of record as
of October 6, 2003 will be distributed on or about October 27, 2003. Cash will
be paid in lieu of fractional shares based on the closing stock price on the
record date. In addition, shares reserved under the Company's stock incentive
plan and warrants outstanding on the record date were adjusted to reflect the
stock dividend.
Prior to the distribution of the stock dividend, there were approximately 7.7
million shares of common stock outstanding. Following distribution of the stock
dividend, the number of shares outstanding increased to 11.6 million.
QUARTERLY HIGHLIGHTS
- - The Company's net income of $7.2 million during the quarter and $20.8
million during the nine months ended September 30, 2003 reflect Hawthorne's
consistent earnings performance.
- - The Bank achieved record loan originations during the first nine months of
2003 of $773.0 million, compared to $527.9 million during 2002, an increase
of 46%, a continued confirmation of the Bank's solid lending franchise and
the successful integration of its first acquisition.
- - During the nine months ended September 30, 2003, non-interest bearing
checking account balances increased 20% on an annualized basis,
demonstrating the Company's commitment to increasing franchise value.
- - Deposit fee income increased 29% during the nine months ended September 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 (excluding other/legal
settlement) ("G&A") to average assets improved to 1.64% for the nine months
ended September 30, 2003, compared with 1.82% for the nine months ended
September 30, 2002, reflecting the Company's commitment to improve
efficiency.
- - Asset quality measurements remain at historically strong levels.
HAWTHORNE FINANCIAL CORPORATION
THIRD QUARTER 2003 RESULTS
OCTOBER 23, 2003
PAGE 2 OF 11
"Quarter after quarter, our employees have delivered impressive results despite
the difficult interest rate environment in which we have operated, and continue
to face today," said Simone Lagomarsino, President and Chief Executive Officer
of Hawthorne Financial. "This record of success fortifies our conviction that
strategic decisions based on long-term objectives will best serve the interest
of our shareholders," she added. "To that end, we actively evaluate all
opportunities including acquisitions that are attractive strategically and
financially. Our projections for EPS growth for 2004 without an acquisition are
in the 7 - 12% range currently, based upon our projection for net loan growth,"
she concluded.
RETURN ON ASSETS/RETURN ON EQUITY
Key performance measurements for the third quarter improved in comparison with
the second quarter of 2003. Net income for the three months ended September 30,
2003 resulted in an annualized return on average assets ("ROA") of 1.12%,
compared with a ROA of 1.08% for the second quarter of 2003. The annualized
return on average equity ("ROE") was 16.51% for the three months ended September
30, 2003, compared with 16.34% for the second quarter of 2003.
NET INTEREST INCOME
Net interest income of $19.6 million, for the current quarter, reflected an
increase of 11.6% compared to the $17.6 million of net interest income earned in
the third quarter of 2002. Net interest income earned in the nine months ended
September 30, 2003 was $60.9 million reflecting an increase of 17.8% 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 $773.0
million, 3) the majority of ARM loans ($1.4 billion) reaching their contractual
floors and 4) income from the investment securities portfolio.
Although net interest income for the third quarter of 2003 was relatively
consistent with the prior quarter, net interest margin compressed by 5 basis
points compared to the prior quarter, primarily due to the differential in rates
on new loans, compared to the higher rates on loans that paid off, as well as
67.4% of the Company's funding sources having rates that are contractually
fixed. The Company's net interest margin for the three and nine months ended
September 30, 2003 was 3.13% and 3.25%, respectively, compared with 3.38% and
3.57% 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 $614.7 million in prepayments with a weighted average
interest rate of 7.00% for the nine months ended September 30, 2003, while new
loan originations had a weighted average yield of 5.27% during the same period.
As a result, the yield on loans receivable was 5.81% and 6.13% during the three
and nine months ended September 30, 2003, respectively, compared to 6.92% and
7.28% during the same periods in 2002.
The reduction in the net interest margin was slightly mitigated by the Company's
ability to reduce the overall cost of funds. The average cost of funds for the
Company decreased to 2.41% during the third quarter of 2003, and to 2.65%
year-to-date compared to 3.34% and 3.55%, during the same periods in 2002. The
reduction in the cost of funds is due to the combination of the continued
downward pressure on interest rates, maturing certificates of deposit with
higher than current market rates, and the planned shift in the deposit mix. As a
result, the overall cost of funds for the third quarter was 30 basis points
lower than the prior quarter. During the fourth quarter of 2003, approximately
$366.9 million of CDs are scheduled to mature. The weighted average cost of
these CDs is 2.31%, which is approximately 1% higher than the current 6 month CD
rate. The Bank believes this represents an opportunity to further lower the
overall cost of deposits.
Hawthorne's lending team has produced record levels of loan originations in
recent quarters, yet the Bank's net interest margin has concurrently been
adversely impacted due to record levels of prepayments and the resulting 2.2%
annualized decrease in the loan portfolio during the year. "Continued strong
loan production, coupled with aggressive efforts to lower the overall cost of
funds and redistribute the deposit mix, is the combination that will produce the
best long-term results," Ms. Lagomarsino said. "Loan prepayments appear to be
declining. Our current volume of demands for payoff are at the lowest levels in
six months. However, due to significant levels of prepayments to date, we are
revising previously announced guidance for the 2003 net interest margin to 3.18%
to 3.23%. Further, we project that the net interest margin during 2004 will be
in a range of 3.05% to 3.15%," Ms. Lagomarsino added.
HAWTHORNE FINANCIAL CORPORATION
THIRD QUARTER 2003 RESULTS
OCTOBER 23, 2003
PAGE 3 OF 11
NONINTEREST REVENUE
Noninterest revenue were $2.6 million for the quarter, a 47.0% increase compared
to the same period in 2002. For the nine months ended September 30, 2003,
noninterest revenue were $6.2 million, a 47.7% increase, compared to the $4.2
million earned during the same period in 2002. Loan and other related fees
represented 57.9% of noninterest revenue for the nine months ended September 30,
2003, compared to 65.3% 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 35.8% during the third
quarter 2003, compared with the same period in 2002, as a result of the growth
in core transaction deposits and other fee generating initiatives.
The Company continues to expand its product array and as a result, the ratio of
products per household increased to 2.71 at September 30, 2003, compared with
2.64 for the prior quarter.
NONINTEREST EXPENSE
Total G&A was $10.3 million and $31.7 million for the three and nine months
ended September 30, 2003, respectively, compared with $10.4 million and $26.8
million incurred in the same periods of 2002. "Improving efficiency continues to
be a priority and the results of our continued success is evidenced by the fact
that G&A to average assets decreased to 1.64% for the nine months ended
September 30, 2003, compared with 1.84% for the year ended December 31, 2002,"
commented Ms. Lagomarsino. "As previously stated, 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
46.90% for the nine months ended September 30, 2003, which was better than the
46.99% achieved during the first half of 2003 and the 48.07% during the year
ended 2002, as previously reported.
The Company's efficiency ratio measurements are better than its peer group, and
the Company remains committed to reducing the ratio of G&A to average assets and
the efficiency ratio. The Company anticipates that the ratio of G&A to average
assets for 2003 will be in line with previous guidance of 1.6%, reflecting
management's diligence in controlling expenses. However, due to the compression
of the net interest margin, the efficiency ratio is expected to be slightly
higher than the guidance level for 2003. The expectation is that the efficiency
ratio will be slightly over 46% for 2003 rather than the previously announced
guidance of 45%. The Company expects slight improvement in both of these ratios
in 2004.
LOANS
Loans receivable averaged $2.1 billion during the third quarter of 2003, which
was comparable to the prior quarter, while reflecting a 16.3% increase compared
to average loans outstanding during the third quarter of 2002. New loan
originations were $287.8 million and $773.0 million for the three and nine
months ended September 30, 2003, respectively, which represented increases of
almost 50%, compared to originations during the same periods in 2002. "We
reiterate our guidance for loan growth for 2003 to between flat and 5% based on
our current robust pipeline and our anticipation of a reduction in loan
prepayments in the fourth quarter," Ms. Lagomarsino said. The Company has
experienced loan prepayments of 44% annualized during the third quarter and 38%
annualized year to date 2003. "We are encouraged because it appears that
prepayments peaked in August. Prepayments in September were 10.3% less than in
August, and prepayments for October to date are 14% lower than at this time in
September. As a result, we are projecting prepayments to be in the range of 25%
to 30% in 2004, and with our strong loan origination volume we anticipate net
loan portfolio growth of between 15% to 20% in 2004," Ms. Lagomarsino concluded.
HAWTHORNE FINANCIAL CORPORATION
THIRD QUARTER 2003 RESULTS
OCTOBER 23, 2003
PAGE 4 OF 11
DEPOSITS
Total deposits increased slightly to $1.74 billion at September 30, 2003, from
$1.66 billion at December 31, 2002, a 5.9% annualized increase. As of September
30, 2003, the Bank had 68,742 total retail deposit accounts, 40,302 total
households and 22,655 checking accounts (including interest-bearing and non
interest-bearing), which reflected annualized increases from the year ended
December 31, 2002 of 5.3%, 1.5% and 10.8%, respectively. The level of
transaction accounts to total deposits at September 30, 2003, remained
relatively inline with year-end 2002 levels at 39.0% compared to 38.3%. However,
the annualized growth in noninterest-bearing checking balances and in the number
of accounts was 19.6% and 5.8%, respectively, reflecting the Company's continued
emphasis on growing these core deposits and thus lowering the cost of funds.
ASSET QUALITY
Management said that classified assets remain at historically low levels. At
September 30, 2003, classified assets totaled $13.2 million, or 0.51% of total
Bank assets, compared to $33.1 million, or 1.37% of total Bank assets, a year
earlier. Year-to-date, classified assets have decreased $10.5 million, or
approximately 44.4% from December 31, 2002. During the third quarter, nonaccrual
loans decreased primarily due to the foreclosure of one loan in July ($2.2
million), which was subsequently sold at the approximate carrying value in
September, and the payoff of three loans ($0.9 million). Nonaccrual loans to
total assets remains lower than the Bank's peer group and decreased to 0.26% at
September 30, 2003 from 0.37% in the prior quarter. At September 30, 2003, the
ratio of total allowance for credit losses to loans receivable, net of specific
valuation allowance, was 1.60%, compared with 1.64% at December 31, 2002 and
1.68% at September 30, 2002. The reduction in the number of loans greater than
$10.0 million further improved the Bank's risk profile. At September 30, 2003,
there was only one loan greater than $10.0 million, compared to three and seven
loans at December 31, 2002 and December 31, 2001, respectively.
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 third quarter of 2003.
STOCK REPURCHASES
During the third quarter of 2003, 32,752 shares were repurchased at an average
price of $38.01. As of September 30, 2003, cumulative repurchases were 1,359,144
shares at an average price of $22.20. Currently, $2.4 million remains available
for additional share repurchases under previously announced repurchase
authorizations.
CAPITAL LEVELS
At September 30, 2003, the Bank remained well-capitalized with core, tier 1 and
risk-based capital ratios of 7.75%, 11.21% and 12.47%, 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, October 23, 2003, to
discuss the results of the third 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). 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 November
21, 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
HAWTHORNE FINANCIAL CORPORATION
THIRD QUARTER 2003 RESULTS
OCTOBER 23, 2003
PAGE 5 OF 11
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 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 continuing at the current pace or increasing, increased
competition in the Company's niche markets that impacts pricing and/or credit
standards, risk associated with credit quality, outcome of pending litigation,
inherent market risk associated with treasury activities, risks associated with
management's investment strategy, the Company's ability to successfully
identify, negotiate or finance strategic acquisition targets or 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
THIRD QUARTER 2003 RESULTS
OCTOBER 23, 2003
PAGE 6 OF 11
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
(DOLLARS IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31,
2003 2002
------------- ------------
Assets:
Cash and cash equivalents $ 12,724 $ 21,849
Investment securities available-for-sale, at fair value 365,127 267,596
Loans receivable (net of allowance for credit losses
of $33,745 in 2003 and $35,309 in 2002) 2,079,373 2,114,255
Accrued interest receivable 10,176 11,512
Investment in capital stock of Federal Home Loan Bank, at cost 33,602 34,705
Office property and equipment at cost, net 5,474 5,106
Deferred tax asset, net 10,199 10,068
Goodwill 22,970 22,970
Intangible assets 1,080 1,388
Other assets 33,594 5,521
---------- ----------
Total assets $2,574,319 $2,494,970
========== ==========
Liabilities and Stockholders' Equity:
Liabilities:
Deposits:
Noninterest-bearing $ 45,671 $ 39,818
Interest-bearing:
Transaction accounts 631,225 597,528
Certificates of deposit 1,059,995 1,025,464
---------- ----------
Total deposits 1,736,891 1,662,810
FHLB advances 586,572 600,190
Capital securities 51,000 51,000
Accounts payable and other liabilities 22,383 17,904
---------- ----------
Total liabilities 2,396,846 2,331,904
---------- ----------
Stockholders' Equity:
Common stock -- $0.01 par value; authorized 20,000,000
shares; issued, 13,641,453 shares (2003) and
12,864,072 shares (2002) (1) 91 86
Capital in excess of par value -- common stock 83,654 81,087
Retained earnings 125,950 105,134
Accumulated other comprehensive (loss)/income (1,997) 1,504
Less:
Treasury stock, at cost -- 2,046,816 shares (2003) and
1,782,575 shares (2002) (1) (30,225) (24,745)
---------- ----------
Total stockholders' equity 177,473 163,066
---------- ----------
Total liabilities and stockholders' equity $ 2,574,319 $2,494,970
========== ==========
(1) Reflects a 3-for-2 stock split in the form of a 50% stock dividend.
HAWTHORNE FINANCIAL CORPORATION
THIRD QUARTER 2003 RESULTS
OCTOBER 23, 2003
PAGE 7 OF 11
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
2003 2002 2003 2002
------- ------- ------- -------
Interest revenue:
Loans $30,766 $31,496 $97,566 $94,389
Investments securities 2,672 1,149 8,227 1,218
Investment in capital stock of FHLB, fed funds and other 372 985 1,167 2,935
------- ------- ------- -------
Total interest revenue 33,810 33,630 106,960 98,542
------- ------- ------- -------
Interest cost:
Deposits 8,505 8,975 27,477 27,002
FHLB advances 4,923 5,610 16,320 15,903
Senior notes -- 801 -- 2,412
Capital securities 736 633 2,264 1,536
------- ------- ------- -------
Total interest cost 14,164 16,019 46,061 46,853
------- ------- ------- -------
Net interest income 19,646 17,611 60,899 51,689
Provision for credit losses 50 100 450 770
------- ------- ------- -------
Net interest income after provision for credit losses 19,596 17,511 60,449 50,919
Noninterest revenue:
Loan related and other fees 1,656 1,125 3,620 2,763
Deposit fees 554 408 1,476 1,144
Other 349 208 1,152 322
------- ------- ------- -------
Total noninterest revenue 2,559 1,741 6,248 4,229
Income/(loss) from real estate operations, net (48) 2 (51) 71
Noninterest expense:
General and administrative expense:
Employee 5,324 5,683 16,989 15,415
Operating 2,329 2,282 7,008 5,301
Occupancy 1,357 1,027 3,933 2,882
Professional 710 658 1,496 1,364
Technology 478 423 1,562 1,163
SAIF premiums and OTS assessments 173 145 503 413
Other/legal settlements (54) 198 210 218
------- ------- ------- -------
Total general and administrative expense 10,317 10,416 31,701 26,756
------- ------- ------- -------
Income before income taxes 11,790 8,838 34,945 28,463
Income tax provision 4,614 3,227 14,129 11,666
------- ------- ------- -------
Net income $ 7,176 $ 5,611 $20,816 $16,797
======= ======= ======= =======
Basic earnings per share (1) $ 0.62 $ 0.54 $ 1.81 $ 1.86
======= ======= ======= =======
Diluted earnings per share (1) $ 0.57 $ 0.46 $ 1.66 $ 1.45
======= ======= ======= =======
Weighted average basic shares outstanding (1) 11,598 10,365 11,499 9,051
======= ======= ======= =======
Weighted average diluted shares outstanding (1) 12,567 12,135 12,512 11,568
======= ======= ======= =======
(1) Reflects a 3-for-2 stock split in the form of a 50% stock dividend.
HAWTHORNE FINANCIAL CORPORATION
THIRD QUARTER 2003 RESULTS
OCTOBER 23, 2003
PAGE 8 OF 11
SUPPLEMENTAL INFORMATION - CLASSIFIED ASSETS (UNAUDITED)
(Dollars in thousands)
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
2003 2002 2002
------------ ------------ -------------
Risk Elements:
Nonaccrual loans $ 6,745 $ 7,675 $ 8,683
Real estate owned, net -- -- --
---------- ---------- ----------
6,745 7,675 8,683
Performing loans classified substandard or lower (1) 6,423 16,002 24,461
---------- ---------- ----------
Total classified assets $ 13,168 $ 23,677 $ 33,144
========== ========== ==========
Total classified loans $ 13,168 $ 23,677 $ 33,144
========== ========== ==========
Loans restructured and paying in accordance with
modified terms (2) $ 2,331 $ 2,468 $ 2,109
========== ========== ==========
Gross loans before allowance for credit losses $2,113,118 $2,149,564 $2,136,953
========== ========== ==========
Loans receivable, net of specific valuation
allowance $2,112,865 $2,149,376 $2,136,165
========== ========== ==========
Delinquent loans:
30 - 89 days $ 8,771 $ 5,357 $ 7,527
90+ days 3,955 7,175 7,204
---------- ---------- ----------
Total delinquent loans $ 12,726 $ 12,532 $ 14,731
========== ========== ==========
Allowance for credit losses:
General valuation allowance ("GVA") (3) $ 33,492 $ 35,121 $ 35,085
Specific valuation allowance ("SVA") 253 188 788
---------- ---------- ----------
Total allowance for credit losses (3) $ 33,745 $ 35,309 $ 35,873
========== ========== ==========
Net loan charge-offs:
Net charge-offs for the quarter ended (4) $ 326 $ 664 $ 73
Percent to loans receivable, net of SVA (annualized) 0.06% 0.12% 0.01%
Percent to beginning of period allowance for credit
losses (annualized) 3.69% 7.40% 1.02%
Selected asset quality ratios at period end:
Total nonaccrual loans to total assets 0.26% 0.31% 0.36%
Total allowance for credit losses to loans
receivable, net of SVA 1.60% 1.64% 1.68%
Total GVA to loans receivable, net of SVA 1.59% 1.63% 1.64%
Total allowance for credit losses to
nonaccrual loans 500.30% 460.05% 413.14%
Total classified assets to Bank core capital and GVA 5.66% 10.81% 15.49%
- --------------------
(1) Excludes nonaccrual loans.
(2) Troubled debt restructured loans not classified and not on nonaccrual.
(3) During the third quarter of 2003, $1.3 million in reserves for unfunded
commitments were reclassified to other liabilities.
(4) During the course of the year, charge-offs are generally anticipated and
reflected as specific valuation allowances.
HAWTHORNE FINANCIAL CORPORATION
THIRD QUARTER 2003 RESULTS
OCTOBER 23, 2003
PAGE 9 OF 11
NET INTEREST INCOME (UNAUDITED)
(Dollars in thousands)
THREE MONTHS ENDED SEPTEMBER 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) $2,109,904 $30,766 5.81% $1,814,902 $31,496 6.92%
Investment securities 357,761 2,672 2.99 89,777 1,149 5.08
Investment in capital stock of
Federal Home Loan Bank 33,376 363 4.31 28,943 407 5.58
Cash, fed funds and other 3,077 9 1.16 138,455 578 1.66
---------- ------- ---------- -------
Total interest-earning assets 2,504,118 33,810 5.38 2,072,077 33,630 6.47
------- ---- ------- ----
Noninterest-earning assets 67,742 41,699
--------- ----------
Total assets $2,571,860 $2,113,776
========== ==========
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposits $1,701,244 $ 8,505 1.98% $1,320,797 $ 8,975 2.70%
FHLB advances 567,927 4,923 3.39 512,926 5,610 4.28
Senior notes -- -- -- 25,590 801 12.52
Capital securities 51,000 736 5.77 36,000 633 7.03
---------- ------- ---------- -------
Total interest-bearing liabilities 2,320,171 14,164 2.41 1,895,313 16,019 3.34
------- ---- ------- ----
Noninterest-bearing checking 45,977 37,661
Noninterest-bearing liabilities 31,869 47,248
Stockholders' equity 173,843 133,554
--------- ----------
Total liabilities and stockholders'
equity $2,571,860 $2,113,776
========== ==========
Net interest income $19,646 $17,611
======= =======
Interest rate spread 2.97% 3.13%
==== ====
Net interest margin 3.13% 3.38%
==== ====
- --------------
(1) Includes the interest on nonaccrual loans only to the extent it was paid
and recognized as interest income.
HAWTHORNE FINANCIAL CORPORATION
THIRD QUARTER 2003 RESULTS
OCTOBER 23, 2003
PAGE 10 of 11
NET INTEREST INCOME (UNAUDITED)
(Dollars in thousands)
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------
2003 2002
------------------------------------- -----------------------------------
WEIGHTED WEIGHTED
AVERAGE REVENUES/ AVERAGE AVERAGE REVENUES/ AVERAGE
BALANCE COSTS YIELD/COST BALANCE COSTS YIELD/COST
------- --------- ---------- --------- --------- -----------
Asets:
Interest-earning assets:
Loans receivable (1) $2,126,783 $97,566 6.13% $1,729,492 $94,389 7.28%
Investment securities 335,557 8,227 3.27 33,162 1,218 4.91
Investment in capital stock of
Federal Home Loan Bank 34,004 1,130 4.44 26,200 1,163 5.93
Cash, fed funds and other 3,720 37 1.33 142,183 1,772 1.67
---------- ------- ---------- -------
Total interest-earning assets 2,500,064 106,960 5.71 1,931,037 98,542 6.81
------- ---- ------- ----
Noninterest-earning assets 62,848 15,446
---------- ----------
Total assets $2,562,912 $1,946,483
========== ==========
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposits $1,698,385 $27,477 2.16% $1,212,137 $27,002 2.98%
FHLB advances 566,867 16,320 3.80 488,620 15,903 4.29
Senior notes -- -- -- 25,715 2,412 12.51
Capital securities 51,000 2,264 5.92 28,022 1,536 7.31
---------- ------- ---------- -------
Total interest-bearing liabilities 2,316,252 46,061 2.65 1,754,494 46,853 3.55
------- ---- ------- ----
Noninterest-bearing checking 43,976 36,923
Noninterest-bearing liabilities 33,796 28,869
Stockholders' equity 168,888 126,197
---------- ----------
Total liabilities and stockholders'
equity $2,562,912 $1,946,483
========== ==========
Net interest income $60,899 $51,689
======= =======
Interest rate spread 3.06% 3.26%
==== ====
Net interest margin 3.25% 3.57%
==== ====
- ---------------
(1) Includes the interest on nonaccrual loans only to the extent it was paid and
recognized as interest income.
HAWTHORNE FINANCIAL CORPORATION
THIRD QUARTER 2003 RESULTS
OCTOBER 23, 2003
PAGE 11 of 11
NET LOAN PORTFOLIO COMPOSITION (UNAUDITED)
(Dollars in thousands)
SEPTEMBER 30, 2003 DECEMBER 31, 2002
-------------------- --------------------
BALANCE PERCENT BALANCE PERCENT
---------- ------- ---------- -------
Single family residential $ 858,482 40.87% $ 851,268 39.81%
Income property:
Multi-family 744,585 35.45% 689,100 32.22%
Commercial 336,614 16.03% 387,354 18.11%
Development:
Multi-family 50,851 2.42% 57,037 2.67%
Commercial 15,839 0.75% 41,168 1.93%
Single family construction:
Single family residential 66,141 3.15% 75,218 3.52%
Land 26,679 1.27% 32,612 1.52%
Other 1,239 0.06% 4,738 0.22%
---------- ------ ---------- ------
Total loan principal (1) $2,100,430 100.00% $2,138,495 100.00%
========== ====== ========== ======
- ------------
(1) Excludes net deferred fees and costs.
SELECTED FINANCIAL DATA (UNAUDITED) (1)
(Dollars in thousands)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
2003 2002 2003 2002
---- ---- ---- ----
PERFORMANCE RATIOS
Return on average assets (2) 1.12% 1.06% 1.08% 1.15%
Return on average equity (2) 16.51% 16.81% 16.43% 17.75%
Efficiency ratio (3) 46.71% 52.80% 46.90% 47.46%
G&A to average assets (4) 1.64% 1.82%
GROWTH RATIOS (2)
Total assets 4.24% 40.45%(5)
Loans receivable, net -2.20% 30.56%(5)
Total deposits 5.94% 44.97%(5)
SEPTEMBER 30, SEPTEMBER 30,
2003 2002
------------- -------------
BANK CAPITAL RATIOS
Core capital $197,324 $178,919
Ratio 7.75% 7.49%
Tier 1 capital $197,324 $178,919
Ratio 11.21% 10.31%
Risk-based capital $219,475 $200,779
Ratio 12.47% 11.57%
- --------------
(1) 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 revenue.
(4) Represents annualized total general and administrative expense (excluding
other/legal settlements) divided by average assets.
(5) Primarily due to the acquisition of First Fidelity in August 2002.