Hawthorne Financial Announces First Quarter 2001 Results

Apr 19, 2001, 01:00 ET from Hawthorne Financial Corporation

    EL SEGUNDO, Calif., April 19 /PRNewswire/ -- Hawthorne Financial
 Corporation (Nasdaq:   HTHR), parent company of Hawthorne Savings, F.S.B., today
 announced first quarter earnings for 2001 of $3.0 million, or $0.40 per
 diluted share, compared with $2.9 million, or $0.39 per diluted share, for the
 first quarter of 2000.
     During the first quarter of 2001, the Company repurchased $8.7 million of
 1997 12.50% Senior Notes at an average price of 101.30% of par value.  The
 Company was able to replace the 1997 12.50% Senior Notes with 10.18% Capital
 Securities (see subsequent discussion), thereby lowering the Company's cost of
 debt.  The first quarter 2001 after tax impact of the related premium and
 acceleration of original debt issuance costs totaled $0.2 million, or $0.03
 per diluted share.
     Net income for the three months ended March 31, 2001, resulted in an
 annualized return on average assets ("ROA") of 0.68% and an annualized return
 on average equity ("ROE") of 11.39%, compared with an annualized ROA of 0.72%
 and an annualized ROE of 12.36%, for the three months ended March 31, 2000.
 Pre-tax income increased 4.62%, for the three months ended March 31, 2001, to
 $5.3 million from $5.0 million during the same period in 2000.
     The Company's net interest income before provision for credit losses
 decreased 1.86% to $14.5 million during the three months ended March 31, 2001,
 compared with $14.7 million for the three months ended March 31, 2000.  The
 Company's yield on average earning assets was 8.73% for the three months ended
 March 31, 2001, compared with 8.64% during the same period in 2000.  The
 average cost of funds for the Company increased to 6.06% during the three
 months ended March 31, 2001, compared with 5.41% for the three months ended
 March 31, 2000.  The Company's resulting net interest margin for the three
 months ended March 31, 2001, was 3.28%, compared with 3.70% during the same
 period in 2000.  The compression in the net interest margin was the result of
 the inverted yield curve environment in which short term rates were higher
 than long term rates.  The adjustable rate assets were repricing off of the
 lower, long term rates and interest-bearing liabilities were pricing off of
 the higher short term rates.  The 150 basis point drop in interest rates
 during the first quarter of 2001 caused further compression in the net
 interest margin due to the immediate repricing of adjustable rate assets and
 the lag in liability repricing resulting from the six month weighted average
 maturity of certificates of deposits.
     Provisions for credit losses totaled $1.5 million for the three months
 ended March 31, 2001 and March 31, 2000.  At March 31, 2001, the ratio of
 total allowance for estimated credit losses to net loans reached 1.86%,
 compared with 1.80% at December 31, 2000 and 1.71% at March 31, 2000.
     "We have made tremendous progress in lowering the risk profile of the
 balance sheet," said Simone Lagomarsino, president and chief executive officer
 of Hawthorne Financial Corporation.  "Nonaccrual loans and delinquencies
 decreased significantly year over year, as well as over December 31, 2000.
 Other real estate owned balances have also decreased considerably over the
 same periods," she concluded.
     Nonaccrual loans totaled $25.2 million at March 31, 2001 (or 1.41% of
 total assets), compared with nonaccrual loans of $31.6 million (or 1.80% of
 total assets) at December 31, 2000.  Other classified loans were $32.6 million
 at March 31, 2001, compared with $40.6 million at December 31, 2000.
 Delinquent loans totaled $11.3 million at March 31, 2001, compared with
 $26.9 million at December 31, 2000.  Other real estate owned totaled
 $0.7 million at March 31, 2001, compared with $2.9 million at
 December 31, 2000.
     Noninterest revenues were $1.5 million for the three months ended March
 31, 2001, compared with noninterest revenues of $1.8 million earned during the
 three months ended March 31, 2000.  Due to the nature of the loans we are
 currently underwriting, loan fees have declined.  This decrease has been
 partially offset by higher deposit fees as a result of new product offerings
 and a new fee schedule rolled out in July 2000.
     Total general and administrative expenses ("G&A") were $9.3 million for
 the three months ended March 31, 2001, a 14.84% increase over the $8.1 million
 of G&A incurred during the same period in 2000.  The increase in G&A for the
 three months ended March 31, 2001, was primarily due to increases in employee
 costs, operating costs and professional fees.  The $0.4 million increase in
 employee costs was due to a change in the payroll accrual from bi-weekly to
 semi-monthly.  This accrual change was initiated in the third quarter of 2000,
 therefore, a variance will result for the first half of 2001.  The
 $0.5 million increase in operating costs was primarily due to the acceleration
 of $0.3 million in prepaid offering costs in conjunction with the repurchase
 of $8.7 million in 1997 12.50% Senior Notes during the first quarter.  The
 $0.1 million in premium paid on the repurchase also contributed to the
 increase in operating costs.  The $0.2 million increase in professional fees
 was primarily comprised of legal fees.  These fees were attributable to
 routine litigation, as discussed in the Annual Report on Form 10-K for the
 year ended December 31, 2000, as well as loan documentation and
 restructurings.  The $1.2 million increase in G&A had a negative impact on the
 Company's efficiency ratio (defined as total general and administrative
 expenses divided by net interest income before provision and noninterest
 revenues, excluding REO, net).  The efficiency ratio for the three months
 ended March 31, 2001, increased to 58.12% compared with 49.07% for the three
 months ended March 31, 2000.
     Other non-operating expenses decreased to $0.1 million for the three
 months ended March 31, 2001, compared with $1.8 million during the same period
 in 2000.  The $1.7 million decrease was primarily due to fewer legal
 settlements in 2001 compared with 2000.
     In April 2001, the Company authorized the repurchase of approximately
 77,000 shares of its common stock.  This was in addition to the two 5%
 repurchase authorizations announced in March 2000 and July 2000, which
 authorized an aggregate of approximately 541,000 shares.  As of April 18,
 2001, the Company has repurchased 431,513 shares at an average price of $9.89.
     On March 28, 2001, HFC Capital Trust I (the "Trust"), a statutory business
 trust and wholly owned subsidiary of the Company, issued in a private
 placement transaction $9.0 million of 10.18% capital securities (the "Capital
 Securities"), which represent undivided preferred beneficial interests in the
 assets of the Trust.  The Company is the owner of all the beneficial interests
 represented by the common securities of the Trust (the "Common Securities")
 (together with the Capital Securities, the "Trust Securities").  The Trust
 exists for the sole purpose of issuing the Trust Securities and investing the
 proceeds thereof in 10.18% junior subordinated deferrable interest debentures
 (the "Junior Subordinated Debentures") issued by the Company and engaging in
 certain other limited activities.  The Junior Subordinated Debentures held by
 the Trust will mature on June 8, 2031, at which time the Company is obligated
 to redeem the Capital Securities.  The proceeds were used to repurchase
 $8.7 million of its 1997 12.50% Senior Notes at an average price of 101.30% of
 par value.
     Total assets reached $1.78 billion at March 31, 2001, reflecting an
 annualized growth rate of 6.31% over total assets of $1.75 billion at
 December 31, 2000.  Loans receivable at March 31, 2001, totaled $1.62 billion,
 reflecting an annualized growth rate of 4.16% over total loans receivable of
 $1.61 billion at December 31, 2000.  For the three months ended March 31,
 2001, average earning assets were $1.76 billion, an increase of 10.66% over
 average earning assets of $1.59 billion during the three months ended
 March 31, 2000.
     The growth in loans during the first quarter of 2001 was funded through
 core deposit growth.  Total deposits increased to $1.24 billion at March 31,
 2001, from $1.21 billion at December 31, 2000, reflecting an annualized growth
 rate of 7.11%.
     Transaction accounts increased $16.6 million, to $332.0 million at
 March 31, 2001, from $315.4 million at December 31, 2000, reflecting an
 annualized growth rate of 21.10%.  As a percentage of total deposits,
 transaction accounts have increased to 26.85% at March 31, 2001, compared with
 25.96% of total deposits at December 31, 2000.  Certificates of deposit
 totaled $904.4 million, or 73.15% of total deposits at March 31, 2001,
 compared with 74.04% of total deposits, or $899.5 million, at December 31,
 2000.  The cross-sell ratio, defined as the number of different types of loan
 and/or deposit products and services per household serviced, was 1.79
 per household at March 31, 2001.  Based on revised tracking capabilities which
 include services in addition to products, the cross-sell ratio at December 31,
 2000 was revised to 1.78 from the 1.51 previously reported.
     At March 31, 2001, the Bank is categorized as well-capitalized with core
 and risk based capital ratios of 8.13% and 12.68%, respectively.  The minimum
 ratios for well-capitalized banks are 5% and 10% for core capital and
 risk-based capital, respectively.
 
     This press release contains forward-looking statements as referenced in
 the Private Securities Litigation Reform Act of 1995.  Forward-looking
 statements are inherently unreliable and actual results may vary.  Factors
 which could cause actual results to differ from these forward-looking
 statements include changes in the competitive marketplace, changes in the
 interest rate environment, economic conditions, outcome of pending litigation,
 risks associated with credit quality and other factors discussed in the
 Company's filings with the Securities and Exchange Commission.  The Company
 undertakes no obligation to publicly update or revise any forward-looking
 statements, whether as a result of new information, future events or
 otherwise.
 
      Hawthorne Financial Corporation
      Consolidated Statements of Financial Condition
      (Dollars in thousands)
 
                                                    March 31,     December 31,
                                                       2001           2000
                                                   (unaudited)
 
     ASSETS
     Cash and cash equivalents                       $108,701        $99,919
     Loans receivable (net of allowance for
      estimated credit losses
      of $30,733 in 2001 and $29,450 in 2000)       1,624,786      1,608,067
     Real estate owned, net                               676          2,859
     Investment in capital stock of FHLB               21,068         20,730
     Other assets                                      25,842         21,820
       Total Assets                                $1,781,073     $1,753,395
 
     LIABILITIES & STOCKHOLDERS' EQUITY
     Deposits                                      $1,236,441     $1,214,856
     FHLB advances                                    384,000        384,000
     Senior notes                                      30,628         39,358
     Capital securities                                 9,000             --
     Other liabilities                                 12,533         11,020
       Total Liabilities                            1,672,602      1,649,234
 
       Total Stockholders' Equity                     108,471        104,161
 
       Total Liabilities & Stockholders' Equity    $1,781,073     $1,753,395
 
 
     SUPPLEMENTAL INFORMATION - BANK CAPITAL        March 31,     December 31,
                                                       2001           2000
 
     Core capital                                    $144,465       $140,387
     Ratio                                              8.13%          8.01%
 
     Risk-based capital                              $159,601       $151,914
     Ratio                                             12.68%         12.23%
 
 
      Hawthorne Financial Corporation
      Consolidated Statements of Income (unaudited)
      (In thousands, except per share data)
 
                                                        Three Months Ended
                                                            March 31,
                                                       2001           2000
     Interest revenues:
       Loans                                          $36,916        $32,913
       Investments                                      1,598          1,523
         Total interest revenues                       38,514         34,436
     Interest costs:
       Deposits                                        17,301         13,843
       FHLB advances                                    5,528          4,598
       Senior notes                                     1,206          1,250
       Capital securities                                   8             --
         Total interest costs                          24,043         19,691
     Net interest income                               14,471         14,745
     Provision for credit losses                        1,500          1,500
       Net interest income after provision
        for credit losses                              12,971         13,245
     Noninterest revenues:
       Loan related and other fees                      1,198          1,578
       Deposit fees                                       333            182
         Total noninterest revenues                     1,531          1,760
     Income/(loss) from real estate operations, net       160            (59)
     Noninterest expenses:
     General and administrative expenses:
       Employee                                         4,490          4,052
       Operating                                        2,004          1,513
       Occupancy                                          945            963
       Professional                                     1,109            875
       Technology                                         510            474
       SAIF premiums and OTS assessments                  243            222
         Total general and administrative expenses      9,301          8,099
     Other non-operating expense:
       Legal settlement expense                           110          1,703
       Other                                               --            125
         Total noninterest expenses                     9,411          9,927
     Income before income taxes                         5,251          5,019
     Income tax provision                               2,258          2,115
     Net income                                        $2,993         $2,904
 
     Basic earnings per share                           $0.58          $0.53
     Diluted earnings per share                         $0.40          $0.39
     Weighted average basic shares outstanding          5,178          5,461
     Weighted average diluted shares outstanding        7,563          7,503
 
 
      Hawthorne Financial Corporation
      Supplemental Information - Classified Assets (unaudited)
      (Dollars in thousands)
 
                                         March 31,   December 31,  March 31,
                                            2001         2000         2000
     Risk Elements
       Nonaccrual loans                   $25,194      $31,601     $39,221
       Real estate owned, net                 676        2,859       5,525
                                           25,870       34,460      44,746
       Performing loans classified
        substandard or lower (1)           32,572       40,642      48,439
 
     Total classified assets              $58,442      $75,102     $93,185
 
     Total classified loans               $57,766      $72,243     $87,660
 
     Loans restructured and paying
      in accordance with
      modified terms (2)                  $14,427      $14,933     $15,456
 
     Gross loans before allowance
      for estimated credit losses      $1,655,519   $1,637,517  $1,507,938
 
     Loans receivable net of
      specific reserves and
      deferred fees                    $1,649,741   $1,631,721  $1,507,632
 
     Delinquent Loans
       30 - 89 days                        $3,641      $12,407     $27,791
       90+ days                             7,668       14,509      23,011
 
     Total Delinquent Loans               $11,309      $26,916     $50,802
 
     Allowance for Estimated Credit Losses
       General                            $24,955      $23,654     $25,425
       Specific (3)                         5,778        5,796         306
 
     Total allowance for estimated
      credit losses                       $30,733      $29,450     $25,731
     Net loan charge-offs:
       Net charge-offs for quarter ended     $217         $663         $54
       Percent to net loans (annualized)    0.05%        0.16%       0.01%
       Percent to beginning of period
        allowance for credit losses
        (annualized)                        2.95%        9.27%       0.89%
     Selected Asset Quality
      Ratios at Period End:
     Total nonaccrual loans to
      total assets                          1.41%        1.80%       2.42%
     Total allowance for estimated
      credit losses to loans receivable,
      net of specific reserves and
      deferred fees                         1.86%        1.80%       1.71%
     Total general allowance for
      estimated credit losses to
      loans receivable, net of
      specific reserves and
      deferred fees                         1.51%        1.45%       1.69%
     Total reserves to nonaccrual loans   121.99%       93.19%      65.61%
     Total classified assets to
      Bank core capital and
      general loan loss reserves           34.50%       45.78%      59.58%
 
 
     (1) Excludes nonaccrual loans.
     (2) Troubled debt restructured loans not classified and not on nonaccrual.
     (3) In December 2000, a specific allowance was identified for one
         nonaccrual loan requiring a reclassification from general allowance to
         specific allowance. No additional provision was required.
 
 
      Selected Financial Data
      (unaudited)
      (Dollars in thousands)
 
                                                        Three Months Ended
                                                            March 31,
                                                       2001           2000
 
     Performance Ratios (1)
     Return on Average Assets                           0.68%          0.72%
     Return on Average Equity                          11.39%         12.36%
     Efficiency Ratio                                  58.12%         49.07%
 
     Average Earning Assets                        $1,764,378     $1,594,433
     Average Total Assets                           1,765,833      1,607,735
     Average Interest-bearing Liabilities           1,609,607      1,463,826
     Average Total Equity                             105,127         93,987
 
     Yields and Costs (1)
     Interest-earning Assets                            8.73%          8.64%
     Interest-bearing Liabilities                       6.06%          5.41%
     Net Interest Margin                                3.28%          3.70%
 
     Growth Ratios (1)
     Total Assets                                       6.31%          9.87%
     Loans Receivable, net                              4.16%         10.31%
     Total Deposits                                     7.11%         21.52%
 
     Bank Capital Ratios
     Core Capital                                       8.13%          8.09%
     Tier 1 Capital                                    11.47%         11.28%
     Risk-based Capital                                12.68%         12.06%
 
     Book Value per Share as of March 31, 2001
       Basic    $20.63
       Diluted  $14.13
 
     (1) Annualized.
 
 

SOURCE Hawthorne Financial Corporation
    EL SEGUNDO, Calif., April 19 /PRNewswire/ -- Hawthorne Financial
 Corporation (Nasdaq:   HTHR), parent company of Hawthorne Savings, F.S.B., today
 announced first quarter earnings for 2001 of $3.0 million, or $0.40 per
 diluted share, compared with $2.9 million, or $0.39 per diluted share, for the
 first quarter of 2000.
     During the first quarter of 2001, the Company repurchased $8.7 million of
 1997 12.50% Senior Notes at an average price of 101.30% of par value.  The
 Company was able to replace the 1997 12.50% Senior Notes with 10.18% Capital
 Securities (see subsequent discussion), thereby lowering the Company's cost of
 debt.  The first quarter 2001 after tax impact of the related premium and
 acceleration of original debt issuance costs totaled $0.2 million, or $0.03
 per diluted share.
     Net income for the three months ended March 31, 2001, resulted in an
 annualized return on average assets ("ROA") of 0.68% and an annualized return
 on average equity ("ROE") of 11.39%, compared with an annualized ROA of 0.72%
 and an annualized ROE of 12.36%, for the three months ended March 31, 2000.
 Pre-tax income increased 4.62%, for the three months ended March 31, 2001, to
 $5.3 million from $5.0 million during the same period in 2000.
     The Company's net interest income before provision for credit losses
 decreased 1.86% to $14.5 million during the three months ended March 31, 2001,
 compared with $14.7 million for the three months ended March 31, 2000.  The
 Company's yield on average earning assets was 8.73% for the three months ended
 March 31, 2001, compared with 8.64% during the same period in 2000.  The
 average cost of funds for the Company increased to 6.06% during the three
 months ended March 31, 2001, compared with 5.41% for the three months ended
 March 31, 2000.  The Company's resulting net interest margin for the three
 months ended March 31, 2001, was 3.28%, compared with 3.70% during the same
 period in 2000.  The compression in the net interest margin was the result of
 the inverted yield curve environment in which short term rates were higher
 than long term rates.  The adjustable rate assets were repricing off of the
 lower, long term rates and interest-bearing liabilities were pricing off of
 the higher short term rates.  The 150 basis point drop in interest rates
 during the first quarter of 2001 caused further compression in the net
 interest margin due to the immediate repricing of adjustable rate assets and
 the lag in liability repricing resulting from the six month weighted average
 maturity of certificates of deposits.
     Provisions for credit losses totaled $1.5 million for the three months
 ended March 31, 2001 and March 31, 2000.  At March 31, 2001, the ratio of
 total allowance for estimated credit losses to net loans reached 1.86%,
 compared with 1.80% at December 31, 2000 and 1.71% at March 31, 2000.
     "We have made tremendous progress in lowering the risk profile of the
 balance sheet," said Simone Lagomarsino, president and chief executive officer
 of Hawthorne Financial Corporation.  "Nonaccrual loans and delinquencies
 decreased significantly year over year, as well as over December 31, 2000.
 Other real estate owned balances have also decreased considerably over the
 same periods," she concluded.
     Nonaccrual loans totaled $25.2 million at March 31, 2001 (or 1.41% of
 total assets), compared with nonaccrual loans of $31.6 million (or 1.80% of
 total assets) at December 31, 2000.  Other classified loans were $32.6 million
 at March 31, 2001, compared with $40.6 million at December 31, 2000.
 Delinquent loans totaled $11.3 million at March 31, 2001, compared with
 $26.9 million at December 31, 2000.  Other real estate owned totaled
 $0.7 million at March 31, 2001, compared with $2.9 million at
 December 31, 2000.
     Noninterest revenues were $1.5 million for the three months ended March
 31, 2001, compared with noninterest revenues of $1.8 million earned during the
 three months ended March 31, 2000.  Due to the nature of the loans we are
 currently underwriting, loan fees have declined.  This decrease has been
 partially offset by higher deposit fees as a result of new product offerings
 and a new fee schedule rolled out in July 2000.
     Total general and administrative expenses ("G&A") were $9.3 million for
 the three months ended March 31, 2001, a 14.84% increase over the $8.1 million
 of G&A incurred during the same period in 2000.  The increase in G&A for the
 three months ended March 31, 2001, was primarily due to increases in employee
 costs, operating costs and professional fees.  The $0.4 million increase in
 employee costs was due to a change in the payroll accrual from bi-weekly to
 semi-monthly.  This accrual change was initiated in the third quarter of 2000,
 therefore, a variance will result for the first half of 2001.  The
 $0.5 million increase in operating costs was primarily due to the acceleration
 of $0.3 million in prepaid offering costs in conjunction with the repurchase
 of $8.7 million in 1997 12.50% Senior Notes during the first quarter.  The
 $0.1 million in premium paid on the repurchase also contributed to the
 increase in operating costs.  The $0.2 million increase in professional fees
 was primarily comprised of legal fees.  These fees were attributable to
 routine litigation, as discussed in the Annual Report on Form 10-K for the
 year ended December 31, 2000, as well as loan documentation and
 restructurings.  The $1.2 million increase in G&A had a negative impact on the
 Company's efficiency ratio (defined as total general and administrative
 expenses divided by net interest income before provision and noninterest
 revenues, excluding REO, net).  The efficiency ratio for the three months
 ended March 31, 2001, increased to 58.12% compared with 49.07% for the three
 months ended March 31, 2000.
     Other non-operating expenses decreased to $0.1 million for the three
 months ended March 31, 2001, compared with $1.8 million during the same period
 in 2000.  The $1.7 million decrease was primarily due to fewer legal
 settlements in 2001 compared with 2000.
     In April 2001, the Company authorized the repurchase of approximately
 77,000 shares of its common stock.  This was in addition to the two 5%
 repurchase authorizations announced in March 2000 and July 2000, which
 authorized an aggregate of approximately 541,000 shares.  As of April 18,
 2001, the Company has repurchased 431,513 shares at an average price of $9.89.
     On March 28, 2001, HFC Capital Trust I (the "Trust"), a statutory business
 trust and wholly owned subsidiary of the Company, issued in a private
 placement transaction $9.0 million of 10.18% capital securities (the "Capital
 Securities"), which represent undivided preferred beneficial interests in the
 assets of the Trust.  The Company is the owner of all the beneficial interests
 represented by the common securities of the Trust (the "Common Securities")
 (together with the Capital Securities, the "Trust Securities").  The Trust
 exists for the sole purpose of issuing the Trust Securities and investing the
 proceeds thereof in 10.18% junior subordinated deferrable interest debentures
 (the "Junior Subordinated Debentures") issued by the Company and engaging in
 certain other limited activities.  The Junior Subordinated Debentures held by
 the Trust will mature on June 8, 2031, at which time the Company is obligated
 to redeem the Capital Securities.  The proceeds were used to repurchase
 $8.7 million of its 1997 12.50% Senior Notes at an average price of 101.30% of
 par value.
     Total assets reached $1.78 billion at March 31, 2001, reflecting an
 annualized growth rate of 6.31% over total assets of $1.75 billion at
 December 31, 2000.  Loans receivable at March 31, 2001, totaled $1.62 billion,
 reflecting an annualized growth rate of 4.16% over total loans receivable of
 $1.61 billion at December 31, 2000.  For the three months ended March 31,
 2001, average earning assets were $1.76 billion, an increase of 10.66% over
 average earning assets of $1.59 billion during the three months ended
 March 31, 2000.
     The growth in loans during the first quarter of 2001 was funded through
 core deposit growth.  Total deposits increased to $1.24 billion at March 31,
 2001, from $1.21 billion at December 31, 2000, reflecting an annualized growth
 rate of 7.11%.
     Transaction accounts increased $16.6 million, to $332.0 million at
 March 31, 2001, from $315.4 million at December 31, 2000, reflecting an
 annualized growth rate of 21.10%.  As a percentage of total deposits,
 transaction accounts have increased to 26.85% at March 31, 2001, compared with
 25.96% of total deposits at December 31, 2000.  Certificates of deposit
 totaled $904.4 million, or 73.15% of total deposits at March 31, 2001,
 compared with 74.04% of total deposits, or $899.5 million, at December 31,
 2000.  The cross-sell ratio, defined as the number of different types of loan
 and/or deposit products and services per household serviced, was 1.79
 per household at March 31, 2001.  Based on revised tracking capabilities which
 include services in addition to products, the cross-sell ratio at December 31,
 2000 was revised to 1.78 from the 1.51 previously reported.
     At March 31, 2001, the Bank is categorized as well-capitalized with core
 and risk based capital ratios of 8.13% and 12.68%, respectively.  The minimum
 ratios for well-capitalized banks are 5% and 10% for core capital and
 risk-based capital, respectively.
 
     This press release contains forward-looking statements as referenced in
 the Private Securities Litigation Reform Act of 1995.  Forward-looking
 statements are inherently unreliable and actual results may vary.  Factors
 which could cause actual results to differ from these forward-looking
 statements include changes in the competitive marketplace, changes in the
 interest rate environment, economic conditions, outcome of pending litigation,
 risks associated with credit quality and other factors discussed in the
 Company's filings with the Securities and Exchange Commission.  The Company
 undertakes no obligation to publicly update or revise any forward-looking
 statements, whether as a result of new information, future events or
 otherwise.
 
      Hawthorne Financial Corporation
      Consolidated Statements of Financial Condition
      (Dollars in thousands)
 
                                                    March 31,     December 31,
                                                       2001           2000
                                                   (unaudited)
 
     ASSETS
     Cash and cash equivalents                       $108,701        $99,919
     Loans receivable (net of allowance for
      estimated credit losses
      of $30,733 in 2001 and $29,450 in 2000)       1,624,786      1,608,067
     Real estate owned, net                               676          2,859
     Investment in capital stock of FHLB               21,068         20,730
     Other assets                                      25,842         21,820
       Total Assets                                $1,781,073     $1,753,395
 
     LIABILITIES & STOCKHOLDERS' EQUITY
     Deposits                                      $1,236,441     $1,214,856
     FHLB advances                                    384,000        384,000
     Senior notes                                      30,628         39,358
     Capital securities                                 9,000             --
     Other liabilities                                 12,533         11,020
       Total Liabilities                            1,672,602      1,649,234
 
       Total Stockholders' Equity                     108,471        104,161
 
       Total Liabilities & Stockholders' Equity    $1,781,073     $1,753,395
 
 
     SUPPLEMENTAL INFORMATION - BANK CAPITAL        March 31,     December 31,
                                                       2001           2000
 
     Core capital                                    $144,465       $140,387
     Ratio                                              8.13%          8.01%
 
     Risk-based capital                              $159,601       $151,914
     Ratio                                             12.68%         12.23%
 
 
      Hawthorne Financial Corporation
      Consolidated Statements of Income (unaudited)
      (In thousands, except per share data)
 
                                                        Three Months Ended
                                                            March 31,
                                                       2001           2000
     Interest revenues:
       Loans                                          $36,916        $32,913
       Investments                                      1,598          1,523
         Total interest revenues                       38,514         34,436
     Interest costs:
       Deposits                                        17,301         13,843
       FHLB advances                                    5,528          4,598
       Senior notes                                     1,206          1,250
       Capital securities                                   8             --
         Total interest costs                          24,043         19,691
     Net interest income                               14,471         14,745
     Provision for credit losses                        1,500          1,500
       Net interest income after provision
        for credit losses                              12,971         13,245
     Noninterest revenues:
       Loan related and other fees                      1,198          1,578
       Deposit fees                                       333            182
         Total noninterest revenues                     1,531          1,760
     Income/(loss) from real estate operations, net       160            (59)
     Noninterest expenses:
     General and administrative expenses:
       Employee                                         4,490          4,052
       Operating                                        2,004          1,513
       Occupancy                                          945            963
       Professional                                     1,109            875
       Technology                                         510            474
       SAIF premiums and OTS assessments                  243            222
         Total general and administrative expenses      9,301          8,099
     Other non-operating expense:
       Legal settlement expense                           110          1,703
       Other                                               --            125
         Total noninterest expenses                     9,411          9,927
     Income before income taxes                         5,251          5,019
     Income tax provision                               2,258          2,115
     Net income                                        $2,993         $2,904
 
     Basic earnings per share                           $0.58          $0.53
     Diluted earnings per share                         $0.40          $0.39
     Weighted average basic shares outstanding          5,178          5,461
     Weighted average diluted shares outstanding        7,563          7,503
 
 
      Hawthorne Financial Corporation
      Supplemental Information - Classified Assets (unaudited)
      (Dollars in thousands)
 
                                         March 31,   December 31,  March 31,
                                            2001         2000         2000
     Risk Elements
       Nonaccrual loans                   $25,194      $31,601     $39,221
       Real estate owned, net                 676        2,859       5,525
                                           25,870       34,460      44,746
       Performing loans classified
        substandard or lower (1)           32,572       40,642      48,439
 
     Total classified assets              $58,442      $75,102     $93,185
 
     Total classified loans               $57,766      $72,243     $87,660
 
     Loans restructured and paying
      in accordance with
      modified terms (2)                  $14,427      $14,933     $15,456
 
     Gross loans before allowance
      for estimated credit losses      $1,655,519   $1,637,517  $1,507,938
 
     Loans receivable net of
      specific reserves and
      deferred fees                    $1,649,741   $1,631,721  $1,507,632
 
     Delinquent Loans
       30 - 89 days                        $3,641      $12,407     $27,791
       90+ days                             7,668       14,509      23,011
 
     Total Delinquent Loans               $11,309      $26,916     $50,802
 
     Allowance for Estimated Credit Losses
       General                            $24,955      $23,654     $25,425
       Specific (3)                         5,778        5,796         306
 
     Total allowance for estimated
      credit losses                       $30,733      $29,450     $25,731
     Net loan charge-offs:
       Net charge-offs for quarter ended     $217         $663         $54
       Percent to net loans (annualized)    0.05%        0.16%       0.01%
       Percent to beginning of period
        allowance for credit losses
        (annualized)                        2.95%        9.27%       0.89%
     Selected Asset Quality
      Ratios at Period End:
     Total nonaccrual loans to
      total assets                          1.41%        1.80%       2.42%
     Total allowance for estimated
      credit losses to loans receivable,
      net of specific reserves and
      deferred fees                         1.86%        1.80%       1.71%
     Total general allowance for
      estimated credit losses to
      loans receivable, net of
      specific reserves and
      deferred fees                         1.51%        1.45%       1.69%
     Total reserves to nonaccrual loans   121.99%       93.19%      65.61%
     Total classified assets to
      Bank core capital and
      general loan loss reserves           34.50%       45.78%      59.58%
 
 
     (1) Excludes nonaccrual loans.
     (2) Troubled debt restructured loans not classified and not on nonaccrual.
     (3) In December 2000, a specific allowance was identified for one
         nonaccrual loan requiring a reclassification from general allowance to
         specific allowance. No additional provision was required.
 
 
      Selected Financial Data
      (unaudited)
      (Dollars in thousands)
 
                                                        Three Months Ended
                                                            March 31,
                                                       2001           2000
 
     Performance Ratios (1)
     Return on Average Assets                           0.68%          0.72%
     Return on Average Equity                          11.39%         12.36%
     Efficiency Ratio                                  58.12%         49.07%
 
     Average Earning Assets                        $1,764,378     $1,594,433
     Average Total Assets                           1,765,833      1,607,735
     Average Interest-bearing Liabilities           1,609,607      1,463,826
     Average Total Equity                             105,127         93,987
 
     Yields and Costs (1)
     Interest-earning Assets                            8.73%          8.64%
     Interest-bearing Liabilities                       6.06%          5.41%
     Net Interest Margin                                3.28%          3.70%
 
     Growth Ratios (1)
     Total Assets                                       6.31%          9.87%
     Loans Receivable, net                              4.16%         10.31%
     Total Deposits                                     7.11%         21.52%
 
     Bank Capital Ratios
     Core Capital                                       8.13%          8.09%
     Tier 1 Capital                                    11.47%         11.28%
     Risk-based Capital                                12.68%         12.06%
 
     Book Value per Share as of March 31, 2001
       Basic    $20.63
       Diluted  $14.13
 
     (1) Annualized.
 
 SOURCE  Hawthorne Financial Corporation