Magazine article American Banker

Calif.'s Hawthorne Pins Hopes on New Chief

Magazine article American Banker

Calif.'s Hawthorne Pins Hopes on New Chief

Article excerpt

Scott Brawly, the new chief executive of Los Angeles-based Hawthorne Savings Bank, has to deal with more than $200 million of nonperforming assets, the weak Southern California economy, and the 33-year legacy of his predecessor.

He's just thankful he doesn't have to deal with a capital problem.

"Thrifts either have plenty of capital and no problem assets, or no capital and lots of problem assets," Mr. Brawly said. "Not-withstanding our asset quality problems, we have an enviable capital and reserve base."

Mr. Brawly, 39, took over as chief executive of $999 million-asset Hawthorne on July 14. It's a job that for 33 years was held by Vernon D. Herbst, who opted for retirement after a damning federal examination in which the Office of Thrift Supervision threatened to fine him and his board if changes weren't made in Hawthorne's management and internal controls.

Hawthorne has had a series of run-ins with the OTS since 1990. In December of that year, the agency directed the thrift to cease origination of non-owner-occupied single-family homes because Hawthorne's problem construction loans soared that year.

In February 1991, Hawthorne consented to a cease and desist order calling for it to develop a "comprehensive regulatory compliance strategy."

Penalty Assessed

In December 1992, the OTS ordered Hawthorne to limit its loan originations to owner-occupied single-family permanent loans only. But last year, the OTS told Hawthorne's board that it had failed to comply with the order. In March 1992, the OTS assessed a $20,000 penalty against the thrift. …

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