The president and chief executive officer of Hawthorne Financial Corp. abruptly resigned last week amid differences with the board of directors over the direction of the El Segundo, Calif., thrift company, according to industry sources.

Scott A. Braly, who is widely credited with resurrecting Hawthorne from near death after it lost nearly $30 million in 1993, also stepped down from the board of the $1.6 billion-asset company.

Banking sources said the move Thursday was prompted by disagreement over the makeup of Hawthorne's loan portfolio. Sources said Mr. Braly wanted to continue making higher-risk, higher-yielding loans but that the board sought to take a more conservative route.

The company, parent of Hawthorne Savings FSB, specializes in construction loans for luxurious single-family estates, one- to four-family homes, multifamily and commercial real estate projects. It also buys and develops land.

Timothy R. Chrisman, Hawthorne's board chairman, called the separation "amicable."

"There was not a major confrontation between the board and management," Mr. Chrisman said. He acknowledged that the company would alter its direction somewhat but said it would not become "a plain-vanilla thrift."

"We have some tweaking to do," he said.

Attempts to reach Mr. Braly, who owns 7.8% of Hawthorne's stock, were unsuccessful.

Gary W. Brummett has temporarily replaced Mr. Braly until a permanent CEO can be named. Mr. Brummett, who joined the company's board in October, is the former chief operating officer of Cal Fed Bancorp.

The change drew plaudits from some quarters. Tom Gillen, investment director of RCG Kingston Fund, which owns about 3% of Hawthorne's stock, applauded the board's decision to reshape its loan portfolio. He said some investor anxiety is apparent because of the types of loans the company makes.

"We think the board is concerned about shareholder value," said Mr. Gillen. "We think this is in the best interests of investors."

Observers said the board was also frustrated by Hawthorne's low stock price compared with those of other Southern California thrift companies. Despite the company's strong earnings this year, its stock has fallen 25% since mid-January.

Wall Street reacted favorably to the resignation, partly on speculation that the company might be sold. Shares of Hawthorne were trading at $13.6875 late Friday, up 11% since Wednesday's close.

Mr. Chrisman said Hawthorne would not put itself on the block.

Mark Fitzgibbon, a bank analyst at Sandler O'Neill in New York, would not comment directly on the resignation but did credit Mr. Braly for guiding Hawthorne out of its real estate troubles earlier this decade. He also said the company has performed well of late - its earnings climbed 19%, to $10.1 million, in the first nine months of 1999, compared to the year earlier.

"The company has steadily improved its returns," said Mr. Fitzgibbon, who has set a $19 per share 12-month target price. "It's a cheap stock based on fundamentals."

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