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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
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PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: April 29, 1997
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HAWTHORNE FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Commission File Number 0-1100
DELAWARE 95-2085671
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
2381 ROSECRANS AVENUE, EL SEGUNDO, CA 90245
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (310) 725-5000
Page 1 of 3 Pages
Exhibit index at Page 2
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HAWTHORNE FINANCIAL CORPORATION AND SUBSIDIARY
FORM 8-K INFORMATION TO BE INCLUDED
DATE OF REPORT: APRIL 29, 1997
ITEM 5. Other Events
On April 28, 1997, Hawthorne Financial Corporation issued the
press release which is included as Exhibit 99(a) hereto.
ITEM 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Not applicable.
(b) Not applicable.
(c) The following exhibit is included with this Report.
Exhibit 99(a) Press Release, dated April 28, 1997
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HAWTHORNE FINANCIAL CORPORATION
Dated April 29, 1997 /s/ SCOTT A. BRALY
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Scott A. Braly
President and
Chief Executive Officer
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[HAWTHORNE LOGO]
HAWTHORNE FINANCIAL CORPORATION
PRESS RELEASE
APRIL 28, 1997
IMMEDIATE RELEASE
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Contact: Mr. Scott Braly, President and Chief Executive Officer (310) 725-5600
Mr. Norman Morales, Chief Financial Officer (310) 725-5631
</TABLE>
HAWTHORNE FINANCIAL REPORTS RESULTS FOR FIRST QUARTER
(NASDAQ:HTHR) (El Segundo, CA) Hawthorne Financial Corporation (the
"Company") and its subsidiary, Hawthorne Savings, F.S.B. (the "Bank") today
announced unaudited results for the quarter ended March 31, 1997. For the
quarter, the Company reported net earnings of $1.4 million, or $0.17 per share,
compared with net earnings of $2.6 million, or $0.41 per share for the same
period in 1996. Results for both quarters are calculated using the modified
Treasury method and are based on outstanding shares of 5.1 million shares. The
earnings per share are adjusted for the Company's preferred stock dividends.
The Bank maintained core and risk-based regulatory capital ratios of 6.67% and
11.11%, respectively, at March 31, 1997, which are in excess of the regulatory
minimums which define a "well capitalized" institution. Total assets at March
31, 1997 were $838 million, as compared with $847 million at December 31, 1996
and $773 million at March 31, 1996.
Pretax earnings from the Company's core operations continued to rise during the
March 1997 quarter, reaching their highest level since mid-1993. Core
earnings are earnings after loan loss provisions and before interest on parent
company indebtedness, income taxes, and nonrecurring items. For the
three-month periods ended March 31, 1997, December 31, 1996 and March 31, 1996,
core earnings were $1.3 million, $1.2 million and $0.4 million, respectively,
which amounts include loan loss provisions of $1.5 million, $1.0 million and
$1.2 million, respectively.
During the March 1997 quarter, the Company's net interest margin was 3.43% on
average earning assets of $800 million. For the December 1996 and March 1996
quarters, the Company's net interest margin and average earning assets were
3.44% and $833 million, and 2.93% and $735 million, respectively. In December
1996, the Company sold approximately $60 million of loans, realizing a modest
gain thereon. Though the proceeds from these loan sales had been reinvested in
loans and securities by March 31, 1997, the results for the first quarter of
1997 were modestly impacted because such funds were not fully invested for the
entire quarter.
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HAWTHORNE FINANCIAL CORPORATION
PRESS RELEASE
APRIL 28, 1997
PAGE 2
For the March 1997 quarter, real estate operations produced no net cost for the
Company. For the December 1996 quarter, real estate operations produced a net
cost of $0.4 million and such activities resulted in net revenues of $0.4
million for the March 1996 quarter.
During the first quarter of 1997, the Company increased its deferred tax asset
to $4.9 million by recording additional income tax benefits of $0.7 million.
ASSET QUALITY
At March 31, 1997, nonperforming assets totaled $41.2 million, or 4.9% of total
assets at period end, consisting of the carrying value of foreclosed properties
($21.0 million) and loan principal three or more payments past due ($20.2
million). At December 31, 1996 and March 31, 1996, nonperforming assets were
$36.8 million (4.3% of total assets) and $39.2 million (5.1% of total assets),
respectively. Immediately following the end of the March 1997 quarter, the
Company completed the all-cash sale of one property, carried at $3.8 million
and sold for $4.0 million, and received full reinstatement of one delinquent
loan, with principal of $1.0 million which was more than 90 days past due at
the end of March. Had these post-quarter-end events been accomplished during
the March 1997 quarter, the Company's ratio of nonperforming assets to total
assets would have remained unchanged at March 31, 1997 from the ratio at the
end of 1996.
Loans delinquent 30 to 89 days, which the Company places on nonaccrual status
as a matter of policy, declined to $5.1 million at March 31, 1997, from $10.1
million at December 31, 1996 and $12.8 million at March 31, 1996.
Total nonaccruing assets were $47.7 million at March 31, 1997 ($42.9 million
after giving effect to the post-March resolutions described above), as compared
with $48.8 million at December 31, 1996 and $53.6 million at March 31, 1996.
This declining trend is consistent with the Company's current and improving
asset migration and loss experience measures.
PARENT COMPANY ITEMS
The Company's capital structure is comprised of common stockholders' equity,
and an aggregate of $27 million in high-cost Senior Notes bearing an annual
interest rate of 12% and Cumulative Perpetual Preferred stock with an annual
dividend rate of 18%. For the quarter ended March 31, 1997, interest expense
on the Senior Notes was $0.5 million, and accrued but unpaid dividends on the
Cumulative Perpetual Preferred stock was $0.6 million. Other parent company
costs totaled $0.2 million in the period.
INVESTOR COMMUNICATIONS PROGRAM
The Company will sponsor a teleconference call on Monday, May 5, at 10:15 a.m.
Pacific Daylight Time. You may connect with the Company by dialing (800)
403-2040 and entering the access code 660031.
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HAWTHORNE FINANCIAL CORPORATION
PRESS RELEASE
APRIL 28, 1997
PAGE 3
HAWTHORNE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS ARE IN THOUSANDS)
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MARCH 31, DECEMBER 31,
1997 1996
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ASSETS (UNAUDITED) (AUDITED)
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Cash and cash equivalents $ 16,024 $ 93,978
Investment securities 77,633 38,371
Loans receivable (net of allowance for estimated credit losses
of $13,657 in 1997 and $13,515 in 1996) 698,225 672,401
Real estate owned, net 20,977 20,140
Other assets 25,116 22,305
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Total Assets $837,975 $847,195
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LIABILITIES & STOCKHOLDERS' EQUITY
Deposits $708,113 $717,809
FHLB advances 65,000 50,000
Senior notes 12,385 12,307
Other liabilities 8,353 23,157
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Total Liabilities 793,851 803,273
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Preferred stock 11,592 11,592
Common stockholders' equity 32,532 32,330
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Total Stockholders' Equity 44,124 43,922
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Total Liabilities and Stockholders' Equity $837,975 $847,195
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</TABLE>
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SUPPLEMENTAL INFORMATION - BANK CAPITAL MARCH 31, DECEMBER 31,
1997 1996
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Core capital $55,663 $52,803
Ratio 6.67% 6.27%
Risk-based capital $62,773 $59,560
Ratio 11.11% 11.11%
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HAWTHORNE FINANCIAL CORPORATION
PRESS RELEASE
APRIL 28, 1997
PAGE 4
HAWTHORNE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS ARE IN THOUSANDS)
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THREE MONTHS ENDED
MARCH 31,
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1997 1996
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(UNAUDITED)
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Interest revenues
Loans, net of nonaccrual income $ 15,506 $13,782
Investment interest 1,501 1,019
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Total interest revenues 17,007 14,801
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Interest costs
Deposits (8,892) (8,938)
FHLB advances (780) 0.00
Senior notes (483) (471)
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Total interest costs (10,155) (9,409)
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Net interest income 6,852 5,392
Provision for credit losses (1,500) (1,200)
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Net interest income after provision
for credit losses 5,352 4,192
Noninterest revenues 732 440
Noninterest expenses
Employee (2,769) (2,294)
Operating (1,054) (1,061)
Occupancy (754) (723)
Professional (348) (448)
SAIF premium and OTS assessment (372) (585)
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(5,297) (5,111)
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Real estate operations, net 20 441
Other revenues (costs), net (13) 346
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Net earnings before income taxes 794 308
Income tax benefit 563 2,253
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Net earnings $ 1,357 $ 2,561
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Net earnings available for common(1) $ 852 $ 2,136
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Net earnings per share(1) $ 0.17 $ 0.41
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Weighted average shares(1) 5,142 5,141
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</TABLE>
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(1) Calculated using the modified Treasury method.
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HAWTHORNE FINANCIAL CORPORATION
PRESS RELEASE
APRIL 28, 1997
PAGE 5
HAWTHORNE FINANCIAL CORPORATION AND SUBSIDIARY
SUPPLEMENTAL INFORMATION - CLASSIFIED ASSETS
(DOLLARS ARE IN THOUSANDS)
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<CAPTION>
ASSET QUALITY MARCH 31, DECEMBER 31, MARCH 31,
1997 1996 1996
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(UNAUDITED) (UNAUDITED) (UNAUDITED)
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NONPERFORMING ASSETS
Real estate owned, net $ 20,977 $ 20,140 $ 25,960
Nonperforming loans, 90 days and greater delinquent 20,266 16,643 13,217
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GROSS NONPERFORMING ASSETS 41,243 36,783 39,177
OTHER CLASSIFIED LOANS
Other delinquent loans, 30 - 89 days 5,119 10,082 12,810
Performing loans classified substandard,
doubtful or loss 49,370 46,987 48,770
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GROSS CLASSIFIED ASSETS $ 95,732 $ 93,852 $100,757
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GROSS CLASSIFIED LOANS $ 74,755 $ 73,712 $ 74,797
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Net loans receivable, exclusive of allowance
for credit losses $711,882 $685,916 $629,225
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ALLOWANCE FOR CREDIT LOSSES
Specific $ 2,886 $ 2,185 $ 3,729
General 10,771 11,330 11,624
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Total $ 13,657 $ 13,515 $ 15,353
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RATIOS
Gross nonperforming assets to total assets 4.9% 4.3% 5.1%
Allowance for credit losses to net loans receivable 1.9% 2.0% 2.4%
Allowance for credit losses to classified loans 18.3% 18.3% 20.5%
Allowance for credit losses to nonperforming loans 67.4% 81.2% 116.2%
Gross classified assets to core capital and general reserves 143.2% 144.8% 170.6%
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