Hovde's partnership with the companies in which it invests leads to significantly enhanced takeout value that equally benefits the remaining shareholders as well as our investors. Investments made by Hovde Acquisition, the firm's affiliated private equity arm, have included:

American International Bank (AIB):   In mid-1997, a Hovde affiliate recapitalized AIB, a troubled Asian-American bank, after obtaining necessary federal and state regulatory approvals. We placed two members on the AIB board of directors, became actively involved in managing the bank, and then spearheaded the sale of the bank. In January 2000, AIB was sold to EastWest Bancorp in a cash transaction valued at approximately $34 million, resulting in a gross IRR of 17.6% on an investment of approximately $1.7 million.

B&I Lending:    In February 1999, HACQ acquired a 60% interest in B&I Lending, LLC, a finance company specializing in rural development loans guaranteed by the USDA. In the fourth quarter of 2000, HACQ became actively involved in the management of B&I and, in April 2001, removed the chairman & CEO and replaced him with a HACQ senior officer. B&I was sold in a stock exchange transaction in July 2001; HACQ liquidated this position in December 2001, allowing HACQ to recognize a gross IRR of 14.7% on its $10.4 million investment, $5.4 million of which was not funded until late 2000 and early 2001.

Bank of Coronado (Coronado):   In 1998, Hancock Park Acquisition, L.L.C. (Hancock) acquired a controlling interest in Coronado. In connection with the recapitalization, we received approvals from the Board of Governors of the Federal Reserve System and the California Department of Financial Institutions to be a bank holding company and placed one of our senior officers on its board of directors. After a period of strategic improvements promoted by our representative, Coronado was sold to First Community in 2003 in a cash transaction, resulting in a gross IRR of 22.3% on an investment of approximately $1 million.

Bank of Hollywood (Hollywood):   Beginning in 1996, Hovde Acquisition affiliates acquired shares of Bank of Hollywood and, in 1998, received change in control approval from the Federal Deposit Insurance Corporation, and the California Department of Financial Institutions, and entered into passivity commitments with the Board of Governors of the Federal Reserve System to acquire in excess of 9.9% of Hollywood's outstanding shares. Hollywood was sold in February 2000 to PBOC Holding Inc., resulting in a gross IRR of 33.4% on an investment of approximately $1.1 million.

Bank of Stockdale / VIB Corp.:    FIP Ltd was formed in December 1997, for the purpose of acquiring an approximately 31% ownership interest in the Bank of Stockdale, FSB. After receiving approval of the Office of Thrift Supervision to be a savings and loan holding company and recapitalizing the bank, at which time FIP Ltd appointed two of our senior officers to its board of directors, and assisting in cleaning up the operation, the bank was marketed for sale. The bank sold to VIB Corp. in January 1999 in a stock transaction; the subsequent sale of the VIB Corp. stock (a “double dip) yielded a gross IRR of 35.3% on an investment of $2.6 million.

Belmont Associates, Inc. / Monarch Savings Bank, FSB:   Hovde Acquisition LLC   (HACQ) was formed in 1994 to acquire a 49% interest in Belmont Associates, Inc., and its wholly owned subsidiary, Monarch Savings Bank, FSB, in New Jersey. HACQ was approved by the Office of Thrift Supervision to be a savings and loan company. After a period of strategic improvements promoted by Hovde's representatives, including a restructuring of the board of directors and replacement of senior management, Belmont was sold for $33.9 million in January 1999, allowing HACQ to recognize a gross IRR of 123.5% on its $2.2 million investment, $1.7 million of which was not funded until June 1997.

Business and Professional Bank (B&P):   In June 1996, principals of Hovde acquired approximately 11.5% of B&P. The bank was acquired for cash in May 1997 by U. S. Bancorp, yielding a gross IRR of 123.4% on an investment of $1.9 million.

Hancock Savings Bank, FSB:    Hancock Park Acquisition, L.P. (Hancock) was formed in 1996 concurrently with Western and capitalized with approximately $6.3 million for the primary purpose of purchasing a controlling interest in Hancock Savings Bank, FSB. Hancock acquired an approximate 46% ownership interest in the bank following receipt of approval from the Office of Thrift Supervision to become a savings and loan holding company for the bank. After a period of strategic improvements promoted by Hovde board representatives and active involvement in the management of the bank, the bank was sold to Bank Plus in a stock exchange; our position in Bank Plus was subsequently acquired in 2000 by Fidelity Federal Bank. Upon liquidation of our investment in 2002, a gross IRR of 7.1% on an investment of $7.1 million was realized.

NorthCounty Bancorp (NorthCounty):    In 1995, an affiliate of Hovde Acquisition acquired a controlling interest in NorthCounty in a recapitalization transaction intended to strengthen capital and fund growth and expansion. In connection with the recapitalization, change in control approvals were received from and our passivity commitments were accepted by the Board of Governors of the Federal Reserve System and the California Department of Financial Institutions. In January 2000, we assisted in the sale of NorthCounty to Wells Fargo & Company, resulting in a gross IRR of 54.2% on an investment of approximately $2 million.

Sunwest Bank:     Western Acquisition Partners LLC (Western) was formed in 1996 and capitalized with approximately $5.7 million for the primary purpose of purchasing a controlling interest in Sunwest Bank. Since purchasing this interest and restructuring the board of directors and management, Hovde has been actively involved in the management, growth and strategic development of the bank. We have, among other things, positively resolved credit issues, reigned in costs and improved the bank's efficiency. As a result, the bank is performing very well and is now the largest remaining independent bank in Orange County, California. As of December 31, 2003, Western has achieved a gross IRR of 27.2% on an investment of approximately $4.6 million, based on the fair market value of the shares of Sunwest Bank held by Western. We believe the takeout value of Sunwest Bank now is substantially higher based on comparable transactions.

U.S. Capital:     In December 2003, Hovde Investment Corp. acquired a 55% interest for $3 million in U.S. Capital Associates, LLC, a privately-held insurance premium finance company. In addition to holding the largest market share of any insurance premium finance company in Maryland, U.S. Capital also has a significant presence in California, Delaware, Virginia and the District of Columbia.