Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 2004
OR
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
From the Transition Period From ________ to __________
Commission File Number: 1-9566
FIRSTFED FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
Delaware 95-4087449
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
401 Wilshire Boulevard, Santa Monica, California 90401-1490
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 319-6000
Securities registered pursuant to Section 12(b) of the Act:
Common Stock $0.01 par value
Title of Class
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No | |
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes |X| No | |
As of August 1, 2004, 16,406,048 shares of the Registrant's $.01 par value
common stock were outstanding.
FirstFed Financial Corp.
Index
Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of June 30, 2004, 3
December 31, 2003 and June 30, 2003
Consolidated Statements of Operations and Comprehensive Earnings for the 4
three and six months ended June 30, 2004 and 2003
Consolidated Statements of Cash Flows for the six months ended June 30, 5
2004 and 2003
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results 8
of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
Item 4. Controls and Procedures 18
Part II. Other Information (omitted items are inapplicable)
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities 19
Item 4. Submission of Matters to a Vote of Securities Holders 19
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
Exhibits
31.1 Certification of Chief Executive Officer pursuant to Section 302 of 22
the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Section 302 of 23
the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to 18 USC Section 24
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
32.2 Certification of Chief Financial Officer pursuant to 18 USC Section 25
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
2
PART I - FINANCIAL STATEMENTS
Item 1. Financial Statements
FirstFed Financial Corp. and Subsidiary
Consolidated Statements of Financial Condition
(In thousands, except share data)
(Unaudited)
June 30, December 31, June 30,
2004 2003 2003
---------------- ------------------ -----------------
ASSETS
Cash and cash equivalents $ 40,268 $ 54,318 $ 34,388
Investment securities, available-for-sale (at fair value) 275,894 116,411 80,221
Mortgage-backed securities, available-for-sale (at fair value) 116,378 135,176 168,937
Loans receivable, held-for-sale (fair value $283, $494 and $2,797) 280 492 2,775
Loans receivable, net 4,927,767 4,373,620 4,037,893
Accrued interest and dividends receivable 18,695 16,941 17,700
Real estate, net -- 1,324 --
Office properties and equipment, net 10,773 10,568 10,315
Investment in Federal Home Loan Bank (FHLB) stock, at cost 104,575 87,775 76,078
Other assets 30,296 28,397 32,820
---------------- ------------------ -----------------
$ 5,524,926 $ 4,825,022 $ 4,461,127
================ ================== =================
LIABILITIES
Deposits $ 2,758,676 $ 2,538,398 $ 2,462,508
FHLB advances 2,169,000 1,694,000 1,424,000
Securities sold under agreements to repurchase 125,224 122,622 139,725
Accrued expenses and other liabilities 32,508 33,435 32,319
---------------- ------------------ -----------------
5,085,408 4,388,455 4,058,552
---------------- ------------------ -----------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share;
authorized 100,000,000 shares;
issued 23,600,644, 23,543,339 and 23,489,532 shares;
outstanding 16,406,048, 17,045,643 and 16,991,836 shares 236 235 235
Additional paid-in capital 38,552 37,733 36,775
Retained earnings - substantially restricted 514,890 483,360 449,995
Unreleased shares to employee stock ownership plan (964) (125) (559)
Treasury stock, at cost, 7,194,596, 6,497,696 and
6,497,696 shares (113,776) (85,727) (85,727)
Accumulated other comprehensive earnings, net of taxes 580 1,091 1,856
---------------- ------------------ -----------------
439,518 436,567 402,575
---------------- ------------------ -----------------
$ 5,524,926 $ 4,825,022 $ 4,461,127
================ ================== =================
See accompanying notes to consolidated financial statements.
3
FirstFed Financial Corp. and Subsidiary
Consolidated Statements of Operations and Comprehensive Earnings
(Dollars in thousands, except per share data)
(Unaudited)
Three months ended June 30, Six months ended June 30,
------------------------------------- ------------------------------------
2004 2003 2004 2003
---------------- ---------------- --------------- ----------------
Interest income:
Interest on loans $ 57,854 $ 56,882 $ 113,514 $ 113,951
Interest on mortgage-backed securities 867 1,385 1,806 3,055
Interest and dividends on investments 2,639 1,145 4,557 3,245
---------------- ---------------- --------------- ----------------
Total interest income 61,360 59,412 119,877 120,251
---------------- ---------------- --------------- ----------------
Interest expense:
Interest on deposits 8,645 9,886 17,129 21,253
Interest on borrowings 12,728 12,464 25,048 24,420
---------------- ---------------- --------------- ----------------
Total interest expense 21,373 22,350 42,177 45,673
---------------- ---------------- --------------- ----------------
Net interest income 39,987 37,062 77,700 74,578
Provision for loan losses -- -- -- --
---------------- ---------------- --------------- ----------------
Net interest income after provision for loan
losses 39,987 37,062 77,700 74,578
---------------- ---------------- --------------- ----------------
Other income:
Loan servicing and other fees 2,464 1,511 4,465 3,121
Retail office fees 1,396 1,150 2,716 2,296
Gain on sale of loans 18 220 31 693
Real estate operations, net 81 349 130 363
Other operating income 81 163 159 265
---------------- ---------------- --------------- ----------------
Total other income 4,040 3,393 7,501 6,738
---------------- ---------------- --------------- ----------------
Non-interest expense:
Salaries and employee benefits 9,421 8,247 18,615 17,029
Occupancy 2,022 1,962 4,079 3,969
Advertising expense 140 54 359 111
Amortization of core deposit intangible 499 499 998 997
Federal deposit insurance 95 101 190 204
Legal 443 137 732 218
Other expense 2,731 2,429 5,660 5,016
---------------- ---------------- --------------- ----------------
Total non-interest expense 15,351 13,429 30,633 27,544
---------------- ---------------- --------------- ----------------
Earnings before income taxes 28,676 27,026 54,568 53,772
Income tax provision 12,123 11,393 23,038 22,662
---------------- ---------------- --------------- ----------------
Net earnings $ 16,553 $ 15,633 $ 31,530 $ 31,110
================ ================ =============== ================
Other comprehensive earnings (loss), net of taxes (465) (435) (511) (345)
---------------- ---------------- --------------- ----------------
Comprehensive earnings $ 16,088 $ 15,198 $ 31,019 $ 30,765
================ ================ =============== ================
Earnings per share:
Basic $ 0.99 $ 0.92 $ 1.86 $ 1.84
================ ================ =============== ================
Diluted $ 0.96 $ 0.90 $ 1.82 $ 1.80
================ ================ =============== ================
Weighted average shares outstanding:
Basic 16,773,686 16,968,389 16,921,062 16,947,280
================ ================ =============== ================
Diluted 17,159,248 17,342,336 17,327,753 17,310,139
================ ================ =============== ================
See accompanying notes to consolidated financial statements.
4
FirstFed Financial Corp. and Subsidiary
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six months ended June 30,
---------------------------------------------
2004 2003
-------------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 31,530 $ 31,110
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Net change in loans held-for-sale 212 (482)
Depreciation 266 694
Valuation adjustments on real estate sold - (35)
Amortization of fees and premiums/discounts 4,984 634
Decrease in servicing asset 60 120
Change in taxes payable (891) (3,562)
(Increase) decrease in interest and dividends receivable (1,754) 52
Increase (decrease) in interest payable 632 (2,965)
Amortization of core deposit intangible asset 998 998
Increase in other assets (7,148) (7,876)
Increase in accrued expenses and
other liabilities 1,595 6,057
-------------------- --------------------
Total adjustments (1,046) (6,365)
-------------------- --------------------
Net cash provided by operating activities 30,484 24,745
-------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans made to customers and principal
collections on loans (545,812) (266,825)
Loans purchased (293) (77)
Change in unearned loan fees (12,546) (4,532)
Proceeds from sales of real estate owned 1,324 599
Proceeds from maturities and principal payments
of investment securities, available-for-sale 22,238 75,839
Principal reductions on mortgage-backed securities,
available for sale 19,080 31,826
Purchase of investment securities,
available for sale (183,202) (54,089)
(Purchases) redemptions of FHLB stock (15,135) 4,600
-------------------- --------------------
Net cash used by investing activities (714,346) (212,659)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 220,278 (64,518)
Net increase in short term borrowings 619,602 161,452
Net Increase (decrease) in long term borrowings (142,000) 80,000
Purchases of treasury stock (28,049) (965)
Other (19) 1,134
-------------------- --------------------
Net cash provided by financing activities 669,812 177,103
-------------------- --------------------
Net decrease in cash and cash equivalents (14,050) (10,811)
Cash and cash equivalents at beginning of period 54,318 45,199
-------------------- --------------------
Cash and cash equivalents at end of period $ 40,268 $ 34,388
==================== ====================
See accompanying notes to consolidated financial statements.
5
FirstFed Financial Corp. and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
1. The unaudited consolidated financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of the Company, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the results of operations for the periods covered have been
made. Certain information and note disclosures normally included in
financial statements presented in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted pursuant to such rules and regulations. The Company believes that
the disclosures are adequate to make the information presented not
misleading.
It is suggested that these condensed financial statements be read in
conjunction with the financial statements and the notes thereto included in
the Company's latest annual report on Form 10-K. The results for the
periods covered hereby are not necessarily indicative of the operating
results for a full year.
2. Basic earnings per share were computed by dividing net earnings by the
weighted average number of shares of common stock outstanding for the
period. Diluted earnings per share additionally include the effect of stock
options, if dilutive.
3. For purposes of reporting cash flows on the "Consolidated Statements of
Cash Flows", cash and cash equivalents include cash, overnight investments
and securities purchased under agreements to resell which mature within 90
days of the date of purchase.
4. The Company applies the intrinsic-value-based method of accounting
prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations including FASB
Interpretation No. 44, Accounting for Certain Transactions involving Stock
Compensation, an interpretation of APB Opinion No. 25, issued in March
2000, to account for its fixed-plan stock options. Under this method,
compensation expense is recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price. SFAS No.
123, Accounting for Stock-Based Compensation, establishes accounting and
disclosure requirements using a fair-value-based method of accounting for
stock-based employee compensation plans. As allowed by SFAS No. 123, the
Company has elected to continue to apply the intrinsic-value-based method
of accounting described above, and has adopted only the disclosure
requirements of SFAS No. 123. The following table illustrates the effect on
net income if the fair-value-based method had been applied to all
outstanding and unvested awards in each period.
Three Months Ended June 30, Six Months Ended June 30,
------------------------------------ ----------------------------------
2004 2003 2004 2003
---------------- ---------------- --------------- ---------------
(In thousands, except per share data)
Net income as reported...........................$ 16,553 $ 15,633 $ 31,530 $ 31,110
Deduction:
Total stock-based compensation expense
determined under fair-value-based method for
all awards, net of tax......................... (214) (207) (420) (339)
---------------- ---------------- --------------- ---------------
Pro forma net income...........................$ 16,339 $ 15,426 $ 31,110 $ 30,771
================ ================ =============== ===============
Earnings per share:
Basic:
As reported....................................$ 0.99 $ 0.92 $ 1.86 $ 1.84
Pro forma......................................$ 0.97 $ 0.91 $ 1.84 $ 1.82
Diluted:
As reported....................................$ 0.96 $ 0.90 $ 1.82 $ 1.80
Pro forma......................................$ 0.95 $ 0.89 $ 1.80 $ 1.78
6
The fair value of each option grant is estimated on the date of the grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 2004 and 2003, respectively: no dividend yield in
any year; expected volatility of 32% and 34%; risk free interest rates of 4.2%
and 3.8%; and expected average lives of 5.5 years in both periods. The
weighted-average grant date fair value of options granted during the periods are
$15.58 and $11.82 for 2004 and 2003, respectively. The Company has elected to
recognize forfeitures in the year they occur.
5. The following table sets forth the net periodic benefit cost attributable
to the Company's Supplementary Executive Retirement Plan:
Pension Benefits
Three months ended Six months ended
June 30, June 30,
----------------------------------- ------------------------------------
2004 2003 2004 2003
--------------- ---------------- ---------------- ---------------
(In thousands)
Service cost..................................$ 122,088 $ 111,690 $ 243,122 $ 223,380
Interest cost................................. 151,759 146,542 302,384 293,084
Expected return on plan assets................ -- -- -- --
Amortization of net (gain) loss............... 37,753 29,865 73,299 59,730
Amortization of prior service cost............ 33,661 33,661 67,322 67,322
Amortization of transition obligation/(asset). -- -- -- --
--------------- ---------------- ---------------- ---------------
Net periodic benefit cost...................$ 345,261 $ 321,758 $ 686,127 $ 643,516
=============== ================ ================ ===============
Weighted Average Assumptions
Discount rate................................. 6.00% 6.50% 6.00% 6.50%
Rate of compensation increase................. 4.00% 4.00% 4.00% 4.00%
Expected return on plan assets................ N/A N/A N/A N/A
The Company does not expect any significant changes to the amounts previously
disclosed for contributions for benefits payments.
6. Recent Accounting Pronouncements
In December 2003, SFAS Statement No. 132 (revised), Employers' Disclosures
about Pensions and Other Postretirement Benefits, was issued. Statement 132
(revised) prescribes employers' disclosures about pension plans and other
postretirement benefit plans; it does not change the measurement or recognition
of those plans. The Statement retains and revises the disclosure requirements
contained in the original Statement 132. It also requires additional disclosures
about the assets, obligations, cash flows, and net periodic benefit cost of
defined benefit pension plans and other postretirement benefit plans. The
Statement generally is effective for fiscal years ending after December 15,
2003. The Company's disclosures incorporate the requirements of Statement 132
(revised).
SFAS Statement No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity, was issued in May 2003. This
Statement establishes standards for the classification and measurement of
certain financial instruments with characteristics of both liabilities and
equity. The Statement also includes required disclosures for financial
instruments within its scope. For the Company, the Statement was effective for
instruments entered into or modified after May 31, 2003 and otherwise became
effective as of January 1, 2004, except for mandatorily redeemable financial
instruments. For certain mandatorily redeemable financial instruments, the
Statement will be effective for the Company on January 1, 2005. The effective
date has been deferred indefinitely for certain other types of mandatorily
redeemable financial instruments. The Company currently does not have any
financial instruments that are within the scope of this Statement.
7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following narrative is written with the presumption that the users have read
or have access to the Company's 2003 Annual Report on Form 10-K, which contains
the latest audited financial statements and notes thereto, together with
Management's Discussion and Analysis of Financial Condition and Results of
Operations as of December 31, 2003, and for the year then ended. Therefore, only
material changes in financial condition and results of operations are discussed
herein.
The Securities and Exchange Commission ("SEC") maintains a web site which
contains reports, proxy and information statements, and other information
pertaining to registrants that file electronically with the SEC, including the
Company. The address is: www.sec.gov. In addition, the Company's periodic and
current reports are available free of charge on its website at
www.firstfedca.com as soon as reasonably practicable after such material is
electronically filed with, or furnished to, the SEC.
Note regarding forward looking statements: This quarterly report contains
certain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"). All
statements, other than statements of historical facts, included in this
quarterly report that address activities, events or developments that the
Company expects, believes or anticipates will or may occur in the future, are
forward-looking statements. These statements are based on certain assumptions
and analyses made by the Company in light of its experience and perception of
historical trends, current conditions, expected future developments and other
factors it believes are appropriate in the circumstances. These forward-looking
statements are subject to various factors, many of which are beyond the
Company's control, which could cause actual results to differ materially from
such statements. Such factors include, but are not limited to, the general
business environment, interest rate fluctuations that may affect operating
margins, the California real estate market, branch openings, competitive
conditions in the business and geographic areas in which the Company conducts
its business, and regulatory actions. In addition, these forward-looking
statements are subject to assumptions as to future business strategies and
decisions that are subject to change. The Company makes no guarantee or promises
regarding future results and assumes no responsibility to update such
forward-looking statements.
Financial Condition
At June 30, 2004, FirstFed Financial Corp. ("Company"), holding company for
First Federal Bank of California and its subsidiaries ("Bank"), had consolidated
total assets of $5.5 billion compared to $4.8 billion at December 31, 2003 and
$4.5 billion at June 30, 2003. The increase in total assets for the period ended
June 30, 2004 compared to December 31, 2003 and June 30, 2003 is primarily
attributable to an increase in the loan portfolio to $4.9 billion at June 30,
2004 from $4.4 billion at December 31, 2003 and $4.0 billion at June 30, 2003.
Loan originations and purchases were $1.3 billion during the first six months of
2004 compared to $1.0 billion during the first six months of 2003. Loan payoffs
and principal reductions were $730.1 million during the first six months of 2004
compared to $789.4 million during the first six months of 2003. Consolidated
stockholders' equity at June 30, 2004 was $439.5 million compared to $436.6
million at December 31, 2003 and $402.6 million at June 30, 2003. Stockholders'
equity increased only slightly during the second quarter and first six months of
2004 because the Company repurchased 696,600 shares of common stock at an
average market price of $40.25 per share.
Despite the continuation of record home prices in California, residential
housing demand remains strong. According to the June 2004 UCLA Anderson Forecast
for California ("Forecast"), "the lack of new housing is a key basic cause of
the shooting up of existing home prices in recent years." Sales of existing
homes are expected to slow, but not collapse, due to decreased affordability
resulting from very high home prices and rising mortgage rates. The Forecast
predicts that a collapse in home prices of 15% or more would need additional
causal effects such as the riots and fires that contributed to the drop in home
prices in the Los Angeles area from 1993 to 1996.
8
The following table summarizes loan originations and purchases by property type
for the periods indicated:
Six months ended
June 30,
2004 2003
-------------- ---------------
(In thousands)
Single family $ 980,665 $ 754,445
Multi-family and commercial 249,499 263,945
Other (1) 46,003 28,683
------------ -------------
Total $ 1,276,167 $ 1,047,073
============ =============
(1) Includes consumer loans and commercial business loans.
The following table summarizes loan originations and purchases by loan type for
the periods indicated:
Six months ended
June 30,
2004 2003
--------------- ----------------
(In thousands)
Adjustable:
12MAT $ 375,566 $ 320,525
CODI 785,170 270,484
COFI 46,298 88,978
Prime 46,296 28,757
Fixed 3,228 47,828
Hybrid (1) 19,609 290,501
------------- --------------
Total $ 1,276,167 $ 1,047,073
============= ==============
(1) These loan types are adjustable rate loans with initial fixed interest rate
periods ranging from 3 to 7 years.
At June 30, 2004, 85.5% of the Bank's loan portfolio was invested in adjustable
rate products. Loans that adjust monthly based on the FHLB Eleventh District
Cost of Funds Index ("COFI") comprised 29.1% of the loan portfolio. Loans that
adjust monthly based on the 3-Month Certificate of Deposit Index ("CODI")
comprised 28.0% of the loan portfolio. Loans that adjust monthly based on the
12-month average U.S. Treasury Security rate ("12MAT") comprised 24.9% of the
loan portfolio. The remaining 3.5% of the adjustable rate loan portfolio varies
based on changes in the Prime Rate and the London Inter-Bank Offering Rate
("LIBOR") and other indices.
The Bank's non-performing assets to total assets ratio was 0.02% as of June 30,
2004, compared to 0.10% as of December 31, 2003 and 0.09% as of June 30, 2003.
(See "Non-performing Assets" for further discussion.)
The Bank recorded net loan recoveries of $154 thousand and $212 thousand for the
second quarter and first six months of 2004, respectively. For the comparable
periods last year, the Bank recorded net loan charge-offs of $22 thousand for
the second quarter of 2003 and net loan recoveries of $25 thousand during the
first six months of 2003, respectively. Allowances for loan losses (including
general valuation allowances and valuation allowances for impaired loans)
totaled $75.9 million or 1.52% of gross loans at June 30, 2004. This compares
with $75.7 million or 1.70% at December 31, 2003 and $75.7 million or 1.84% at
June 30, 2003.
9
The following table shows the components of the Bank's portfolio of loans
(including loans held for sale) and mortgage-backed securities by collateral
type as of the dates indicated:
June 30, December 31, June 30,
2004 2003 2003
------------------ ---------------- -----------------
(In thousands)
REAL ESTATE LOANS
First trust deed residential loans
One-to-four units $ 2,960,785 $ 2,456,971 $ 1,977,613
Five or more units 1,574,236 1,547,771 1,654,978
------------------ ---------------- -----------------
Residential loans 4,535,021 4,004,742 3,632,591
OTHER REAL ESTATE LOANS
Commercial and industrial 327,954 345,273 402,522
Second trust deeds 6,222 7,281 6,949
Construction 15,060 9,053 8,416
Land -- -- 134
------------------ ---------------- -----------------
Real estate loans 4,884,257 4,366,349 4,050,612
NON-REAL ESTATE LOANS:
Deposit accounts 520 649 1,094
Commercial business loans 56,565 34,424 29,937
Consumer 56,110 49,738 44,329
------------------ ---------------- -----------------
Loans receivable 4,997,452 4,451,160 4,125,972
LESS:
General valuation allowances - loan
portfolio 75,450 75,238 75,248
Valuation allowances - impaired loans 496 496 496
Deferred loan origination fees (costs), net (6,541) 1,314 9,560
------------------ ---------------- -----------------
Net loans receivable 4,928,047 4,374,112 4,040,668
FHLMC AND FNMA MORTGAGE-BACKED
SECURITIES (at fair value):
Secured by single family dwellings 110,120 128,465 161,259
Secured by multi-family dwellings 6,258 6,711 7,678
------------------ ---------------- -----------------
Mortgage-backed securities 116,378 135,176 168,937
------------------ ---------------- -----------------
TOTAL $ 5,044,425 $ 4,509,288 $ 4,209,605
================== ================ =================
The mortgage-backed securities portfolio, classified as available-for-sale, was
recorded at fair value as of June 30, 2004. An unrealized gain of $1.1 million,
net of taxes, was recorded in stockholders' equity as of June 30, 2004. This
compares to net unrealized gains of $965 thousand as of December 31, 2003 and
$1.7 million as of June 30, 2003.
The investment securities portfolio, classified as available-for-sale, was
recorded at fair value as of June 30, 2004. An unrealized loss of $548 thousand,
net of taxes, was reflected in stockholders' equity as of June 30, 2004. This
compares to net unrealized gains of $126 thousand as of December 31, 2003 and
$163 thousand as of June 30, 2003.
Asset/Liability Management
Market risk is the risk of loss from adverse changes in market prices and
interest rates. The Bank's market risk arises primarily from the interest rate
risk inherent in its lending and liability funding activities.
10
The Bank's net interest income typically improves during periods of decreasing
interest rates because there is a three-month time lag before changes in COFI,
and a two-month time lag before changes in 12MAT, CODI and LIBOR, can be
implemented with respect to the Bank's adjustable rate loans. Therefore, during
periods immediately following interest rate decreases, the Bank's cost of funds
tends to decrease faster than the yield earned on its adjustable rate loan
portfolio. The reverse is true during periods immediately following interest
rate increases.
The composition of the Bank's financial instruments that are subject to market
risk has not changed materially since December 31, 2003.
The one year GAP (the difference between rate-sensitive assets and liabilities
repricing within one year or less) was a positive $334.7 million or 6.06% of
total assets at June 30, 2004. In comparison, the one year GAP was a positive
$666.1 million or 13.8% of total assets at December 31, 2003. The decrease in
GAP at June 30, 2004 from December 31, 2003 is attributable to an increase in
short-term borrowings.
Capital
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and percentages of total capital to
assets. The Bank met the standards necessary to be deemed well capitalized under
the applicable regulatory requirements. The following table summarizes the
Bank's actual capital and required capital as of June 30, 2004:
Tangible Core Risk-based
Capital Capital Capital
-------------- -------------- ----------------
(Dollars in thousands)
Actual Capital:
Amount $ 411,300 $ 411,300 $ 450,427
Ratio 7.44% 7.44% 14.56%
Minimum required capital:
Amount $ 82,961 $ 221,230 $ 247,506
Ratio 1.50% 4.00% 8.00%
Well capitalized required capital:
Amount $ -- $ 276,537 $ 309,383
Ratio --% 5.00% 10.00%
During the second quarter and first six months of 2004, the Company repurchased
696,900 shares of common stock at an average market price of $40.25 per share.
During the second quarter and first six months of 2003, the Company repurchased
33,800 shares of common stock at an average market price of $28.53 per share. On
July 22, 2004, the Board of Directors authorized the repurchase of 820,302
additional shares, which represents 5% of the Company's shares outstanding on
that date. Combined with amounts previously authorized, shares available for
repurchase totaled 1,472,079 or 9% of total common shares as of August 1, 2004.
11
Loan Loss Allowances
Listed below is a summary of activity in the Bank's general valuation allowance
and the valuation allowance for impaired loans during the periods indicated:
Six Months Ended June 30, 2004
------------------------------------------------------
General Impaired
Valuation Valuation
Allowances Allowances Total
----------------- ---------------- -------------
(In thousands)
Balance at December 31, 2003 $ 75,238 $ 496 $ 75,734
Recoveries 212 -- 212
----------------- ---------------- -------------
Balance at June 30, 2004 $ 75,450 $ 496 $ 75,946
================= ================ =============
Six Months Ended June 30, 2003
------------------------------------------------------
General Impaired
Valuation Valuation
Allowances Allowances Total
----------------- ---------------- -------------
(In thousands)
Balance at December 31, 2002 $ 75,223 $ 496 $ 75,719
Charge-offs:
Single family (52) -- (52)
Multifamily (8) -- (8)
Other - non-real estate (32) (32)
----------------- ---------------- -------------
Total charge-offs (92) -- (92)
Recoveries 117 -- 117
----------------- ---------------- -------------
Net recoveries 25 -- 25
----------------- ---------------- -------------
Balance at June 30, 2003 $ 75,248 $ 496 $ 75,744
================= ================ =============
The Bank maintains a general valuation allowance for loan losses due to the
inherent risks in the loan portfolio that have yet to be specifically
identified. The Bank's loan portfolio is stratified based on factors affecting
the perceived level and concentration of risk, such as type of collateral, year
of origination, original loan-to-value ratio and geographic location.
The appropriate level of general valuation allowance is calculated by applying
reserve factors to the balance of assets on which the Bank has loss exposure.
These reserve factors represent the expected likelihood of default multiplied by
the expected rate of loss. The expected rates of loss and default are based on
the Bank's historical loss experience and adjusted for current and anticipated
conditions and trends.
Based on this methodology, the Bank did not record a provision for loan losses
during the first six months of 2004 or for any period in 2003.
Results of Operations
The Company reported consolidated net earnings of $16.6 million or $0.96 per
diluted common share for the second quarter of 2004 compared to net earnings of
$15.6 million or $0.90 per diluted common share for the second quarter of 2003.
Net earnings for the first six months of 2004 were $31.5 million or $1.82 per
diluted common share compared to $31.1 million or $1.80 per diluted common share
for the first six months of 2003. Net earnings for the second quarter and first
six months of 2004 include $1.6 million in interest received from the California
Franchise Tax Board ("FTB"). The interest resulted from settlement of amended
returns for the tax years 1993 to 1998. Net earnings for the second quarter and
first six months of 2004 also include higher net interest income and increased
loan fees compared to the prior year periods. These increases were offset by
decreased gains on the sale of loans and higher non-interest expenses.
12
Net Interest Income
Net interest income increased to $40.0 million and $77.7 million, respectively,
during the second quarter and first six months of 2004 compared to $37.1 million
and $74.6 million, respectively, during the same periods last year. Net interest
income increased primarily as a result of the $1.6 million in interest received
from the FTB and growth in average interest-earning assets, which offset
decreased interest rate spreads.
The interest rate spreads decreased to 2.81% and 2.89%, respectively, during the
second quarter and first six months of 2004 from 3.25% and 3.30%, respectively,
during the same periods last year. The reduction in spreads is attributable to
downward adjustments on the Bank's adjustable rate loan portfolio which exceeded
decreases in the costs of funds during the periods.
The following tables sets forth: (i) the average daily dollar amounts of and
average yields earned on loans, mortgage-backed securities and investment
securities, (ii) the average daily dollar amounts of and average rates paid on
savings deposits and borrowings, (iii) the average daily dollar differences,
(iv) the interest rate spreads, and (v) the effective net spreads for the
periods indicated:
During the Six Months Ended June 30,
--------------------------------------
2004 2003
--------------- ------------------
(Dollars in thousands)
Average loans and mortgage-backed securities $ 4,742,861 $ 4,092,189
Average investment securities 213,177 122,503
--------------- ------------------
Average interest-earning assets 4,956,038 4,214,692
--------------- ------------------
Average savings deposits 2,697,892 2,491,320
Average borrowings 1,974,023 1,457,813
--------------- ------------------
Average interest-bearing liabilities 4,671,915 3,949,133
--------------- ------------------
Excess of interest-earning assets over
interest-bearing liabilities $ 284,123 $ 265,559
=============== ==================
Yields earned on average interest-earning assets 4.70% 5.63%
Rates paid on average interest-bearing liabilities 1.81 2.33
Interest rate spread 2.89 3.30
Effective net spread (1) 2.99 3.45
Total interest income $ 116,467 $ 118,644
Total interest expense 42,050 45,673
--------------- ------------------
74,417 72,971
Total other items (2) 3,283 1,607
--------------- ------------------
Net interest income $ 77,700 $ 74,578
=============== ==================
(1) The effective net spread is a fraction, the denominator of which is the
average dollar amount of interest-earning assets, and the numerator of
which is net interest income (excluding stock dividends, interest from the
FTB and miscellaneous interest income).
(2) Includes Federal Home Loan Bank Stock dividends, interest from the FTB and
other miscellaneous interest income.
Non-Interest Income and Expense
Loan servicing and other fees increased to $2.5 million and $4.5 million for the
second quarter and first six months of 2004, respectively, compared to $1.5
million and $3.1 million for the same periods of the prior year. The amount of
loan servicing and other fees varies based on the total dollar amount and types
of loans paid off. Loan prepayment fees were $2.0 million and $3.6 million for
the second quarter and first six months of 2004 compared to $873 thousand and
$2.0 million for the same periods last year.
13
Gain on sale of loans was $18 thousand and $31 thousand, respectively, for the
second quarter and first six months of 2004 compared to gains of $220 thousand
and $693 thousand for the same periods in 2003. The decrease is the result of a
drop in the volume of loans sold to $1.4 million and $3.0 million during the
second quarter and first six months of 2004 from $21.6 million and $62.1
million, respectively for the same periods of 2003.
Real estate operations resulted in net gains of $81 thousand and $130 thousand,
respectively, for the second quarter and six months ended of 2004 compared to
net gains of $349 thousand and $363 thousand, respectively, for the same periods
in 2003. Real estate operations for the second quarter of June 2003 include the
reversal of the general valuation allowance for foreclosed properties. Real
estate operations normally include gains and losses on the sale of foreclosed
properties as well as rental income and operating expense during the holding
period of these foreclosed properties.
Non-interest expense increased to $15.4 million and $30.6 million, respectively,
for the second quarter and first six months of 2004 from $13.4 million and $27.5
million, respectively, from the second quarter and first six months of 2003. The
increase in non-interest expense during the second quarter and first six months
of 2004 resulted from an increase in compensation and legal costs and higher
other operating costs due to a vendor defalcation.
The ratio of non-interest expense to average assets decreased to 1.15% and
1.18%, respectively, for the second quarter and first six months of 2004
compared to 1.21% and 1.26%, respectively, during the same periods in 2003. The
decreased ratio is due to asset growth.
Non-accrual, Past Due, Modified and Restructured Loans
The Bank accrues interest earned but uncollected for every loan without regard
to its contractual delinquency status and establishes a specific interest
allowance for each loan which becomes 90 days or more past due or in
foreclosure. Loans requiring delinquent interest allowances (non-accrual loans)
totaled $1.3 million at June 30, 2004 compared to $3.3 million at December 31,
2003 and $3.9 million at June 30, 2003.
The amount of interest allowance for loans 90 days or more delinquent or in
foreclosure was $198 thousand, $227 thousand, and $266 thousand as of June 30,
2004, December 31, 2003, and June 30, 2003, respectively.
The Bank allows loan restructurings that result from temporary modifications of
principal and interest payments. Under these arrangements, loan terms are
typically reduced to no less than a monthly interest payment required under the
note. Any loss of revenues under the modified terms would be immaterial to the
Bank. Generally, if the borrower is unable to return to scheduled principal and
interest payments at the end of the modification period, foreclosure proceedings
are initiated. As of June 30, 2004, the Bank had net modified loans totaling
$2.4 million. No modified loans were 90 days or more delinquent as of June 30,
2004.
The Bank considers a loan impaired when management believes that it is probable
that the Bank will not be able to collect all amounts due under the contractual
terms of the loan. Estimated impairment losses are recorded as separate
valuation allowances and may be subsequently adjusted based upon changes in the
measurement of impairment. Impaired loans, disclosed net of valuation
allowances, include non-accrual major loans (commercial business loans with an
outstanding principal amount greater than or equal to $500 thousand and
single-family loans greater than or equal to $750 thousand, and income property
loans with an outstanding principal amount greater than or equal to $1.5
million), modified loans, and major loans less than 90 days delinquent in which
full payment of principal and interest is not expected to be received.
14
The following is a summary of impaired loans, net of valuation allowances for
impairment, as of the periods indicated:
June 30, December 31, June 30,
2004 2003 2003
------------------- ------------------ -------------------
(In thousands)
Non-accrual loans $ -- $ 1,782 $ 1,424
Modified loans -- 1,488 1,537
------------------- ------------------ -------------------
$ -- $ 3,270 $ 2,961
=================== ================== ===================
The Bank evaluates loans for impairment whenever the collectibility of
contractual principal and interest payments is questionable. When a loan is
considered impaired the Bank measures impairment based on the present value of
expected future cash flows (over a period not to exceed 5 years) discounted at
the loan's effective interest rate. However, if the loan is
"collateral-dependent" or foreclosure is probable, impairment is measured based
on the fair value of the collateral. When the measure of an impaired loan is
less than the recorded investment in the loan, the Bank records an impairment
allowance equal to the excess of the Bank's recorded investment in the loan over
its measured value.
All impaired loans were measured using the fair value method as of June 30,
2004, December 31, 2003 and June 30, 2003, respectively.
Impaired loans for which valuation allowances had been established totaled $496
thousand for each of the quarters ended June 30, 2004, December 31, 2003 and
June 30, 2003. Impaired loans for which there were no valuation allowances
established totaled $0 for the quarter ended June 30, 2004, $3.3 million for the
quarter ended December 31, 2003 and $3.0 million for the quarter ended June 30,
2003. See "Results of Operations" for an analysis of activity in the valuation
allowance for impaired loans.
Cash payments received from impaired loans are recorded in accordance with the
contractual terms of the loan. The principal portion of the payment is used to
reduce the principal balance of the loan, whereas the interest portion is
recognized as interest income.
The average net investment in impaired loans was $488 thousand for the quarter
ended June 30, 2004, $3.3 million for the quarter ended December 31, 2003 and
$3.0 million for the quarter ended June 30, 2003. The amount of interest income
recognized on the cash basis for impaired loans during the quarters ended June
30, 2004, December 31, 2003 and June 30, 2003 was $6 thousand, $17 thousand and
$19 thousand, respectively. Interest income recognized under the accrual basis
for the quarters ended June 30, 2004, December 31, 2003 and June 30, 2003 was
$0, $17 thousand and $18 thousand, respectively.
15
Asset Quality
The following table sets forth certain asset quality ratios of the Bank at the
periods indicated:
June 30, December 31, June 30,
2004 2003 2003
------------------ ----------------- -----------------
Non-performing loans to gross loans receivable (1) 0.03% 0.08% 0.09%
Non-performing assets to total assets (2) 0.02% 0.10% 0.09%
Loan loss allowances to non-performing loans (3) 5,706% 2,266% 1,957%
General loss allowances to gross loans receivable (4) 1.52% 1.70% 1.84%
--------------------------
(1) Non-performing loans are net of valuation allowances related to those
loans. Loans receivable are before deducting deferred loan origination fees
(costs), general valuation allowances and valuation allowances for impaired
loans.
(2) Non-performing assets are net of valuation allowances related to those
assets.
(3) The Bank's loan loss allowances, including any valuation allowances for
non-performing loans, impaired loans and the general valuation allowance.
Non-performing loans are before deducting valuation allowances related to
those loans.
(4) The Bank's general valuation allowances plus the allowance for impaired
loans as a percentage of gross loans receivable before deducting deferred
loan origination fees (costs), general valuation allowances and valuation
allowances for impaired loans.
Non-performing Assets
The Bank defines non-performing assets as loans delinquent over 90 days
(non-accrual loans), loans in foreclosure and real estate acquired by
foreclosure (real estate owned). The following is an analysis of non-performing
assets as of the periods indicated:
June 30, December 31, June 30,
2004 2003 2003
-------------------- ------------------ ----------------------
(In thousands)
Real estate owned:
Single family $ -- $ 1,324 $ --
-------------------- ------------------ ----------------------
Total real estate owned -- 1,324 --
-------------------- ------------------ ----------------------
Non-accrual loans:
Single family 1,319 3,326 3,867
Other 12 16 4
-------------------- ------------------ ----------------------
Total non-accrual loans 1,331 3,342 3,871
-------------------- ------------------ ----------------------
Total non-performing assets $ 1,331 $ 4,666 $ 3,871
==================== ================== ======================
16
Real estate owned and non-accrual loans, while varying slightly from quarter to
quarter, have remained at very low levels for the last few years. Historically,
single family non-performing loans have been attributable to factors such as
layoffs and decreased incomes. Historically, multi-family and commercial
non-performing loans have been attributable to factors such as declines in
occupancy rates, employment rates and rental values.
Sources of Funds
External sources of funds include savings and checking deposits from several
sources, advances from the Federal Home Loan Bank of San Francisco ("FHLB"), and
collateralized borrowings.
Savings and checking deposits are accepted from retail banking offices,
telemarketing sources, and national deposit brokers. The cost of funds,
operating margins and net earnings of the Bank associated with brokered and
telemarketing deposits are generally comparable to the cost of funds, operating
margins and net earnings of the Bank associated with retail deposits, FHLB
borrowings and repurchase agreements. As the cost of each source of funds
fluctuates from time to time, based on market rates of interest offered by the
Bank and other depository institutions, the Bank selects funds from the lowest
cost source until the relative costs change. To diversify its funding sources,
the Bank is considering securitizing additional loans for use as collateral for
reverse repurchase agreements.
Total savings deposits increased by $45.8 million and $220.3 million during the
second quarter and first six months of 2003, respectively. The increase in
deposits for the second quarter of 2004 is attributable to an increase in
deposits acquired from national brokerage firms ("brokered deposits") and
telemarketing deposits.
Brokered deposits increased by $57.1 million and $165.6 million during the
second quarter and first six months of 2004, respectively. Due to increased
asset growth from loan originations, the Bank increased its use of brokered
deposits during the first quarter of 2004. Brokered deposits comprised 6% and
0.3% of total deposits at June 30, 2004 and June 30, 2003, respectively. Because
the Bank has sufficient capital to be deemed "well capitalized" under the
standards established by the Office of Thrift Supervision, it may solicit
brokered funds without special regulatory approval.
Deposits accepted by retail banking offices decreased by $13.2 million during
the second quarter of 2004 and increased by $27.9 million during the first six
months of 2004. Retail and business deposits comprised 92% and 99% of total
deposits as of June 30, 2004 and June 30, 2003, respectively.
Telemarketing deposits increased by $1.9 million and $26.8 million during the
second quarter and first six months of 2004, respectively. These deposits are
normally large deposits from pension plans, managed trusts and other financial
institutions. These deposit levels fluctuate based on the attractiveness of the
Bank's rates compared to returns available to investors on alternative
investments. Telemarketing deposits comprised 2% and 1% of total deposits at
June 30, 2004 and June 30, 2003, respectively.
Total borrowings increased by $325.1 million and $477.6 million during the
second quarter and first six months of 2004, respectively, due to a $317.0
million and $475.0 million net increase in borrowings from the FHLB and net
increases of $8.1 million and $2.6 million in reverse repurchase agreements. The
Bank used FHLB advances during the second quarter and first six months of 2004
to fund asset growth because they were the most readily available and lowest
cost source of funds.
Internal sources of funds include both principal payments and payoffs on loans
and mortgage-backed securities, loan sales, and positive cash flows from
operations. Principal payments include amortized principal and prepayments that
are a function of lending activity and the general level of interest rates.
Loan payoffs and principal reductions were $730.1 million during the first six
months of 2004 compared to $789.4 million during the first six months of 2003.
The decrease is primarily attributable to decreased payoff activity as fewer
borrowers refinanced existing loans into new loans at lower rates.
17
The volume of loans sold totaled $1.4 million and $3.0 million during the second
quarter and first six months of 2004, respectively, compared to $21.6 million
and $62.1 million, respectively for the same periods of 2003. The decrease in
loans sold from the comparable periods is attributable to the Bank's efforts to
originate adjustable rate loans for its portfolio. Loan sale activity also
varies based upon borrower demand for 15-year and 30-year fixed rate loans,
which the Bank only originates for sale in the secondary market.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See "Management's and Discussion and Analysis of Financial Condition and Results
of Operations - Asset/Liability Management" on page 10 hereof for Quantitative
and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under SEC rules, the Company is required to maintain disclosure controls and
procedures designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms. Within the 90-day period prior
to the filing date of this report, the Company carried out an evaluation of the
effectiveness of the design and operation of its disclosure controls and
procedures. The Company's management, including the Company's Chief Executive
Officer and Chief Financial Officer, supervised and participated in the
evaluation. Based on this evaluation, the Chief Executive Officer and the Chief
Financial Officer concluded that as of the evaluation date, the Company's
disclosure controls and procedures were effective in alerting management to
material information that may be required to be included in the Company's public
filings. In designing and evaluating the disclosure controls and procedures,
management recognizes that any such controls and procedures can provide only
reasonable assurance as to the control objectives. Management is required to
apply its judgment in evaluating the cost-benefit relationship of such controls
and procedures.
Changes in Internal Controls
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation.
18
PART II - OTHER INFORMATION
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
Issuer Purchases of Equity Securities
Total number of
shares purchased as
part of publicly Maximum number of
Total number of announced plans shares that may yet be
shares purchased Average price paid purchases under the
Period (1) per share plans (2)
- ------------------------------ ----------------- ------------------ -------------------- ----------------------
04/01/04 - 04/30/04.......... 133,100 $ 40.67 133,100 1,215,577
05/01/04 - 05/31/04.......... 330,200 39.82 330,200 885,377
06/01/04 - 06/30/04.......... 233,600 40.61 233,600 651,777
----------------- --------------------
Total.................... 696,900 40.25 696,900
================= ====================
1) The Company repurchased an aggregate 696,900 shares of its common stock
pursuant to publicly-announced repurchase programs.
2) Unless terminated earlier by resolution of the Company's board of
directors, the repurchase programs will expire when the Company has
repurchased all shares authorized for repurchase thereunder.
Item 4. Submission of Matters to a Vote of Securities Holders
On April 21, 2004 the Company held its Annual Meeting of Stockholders for the
purpose of voting on three proposals. The following are matters voted on at the
meeting and the votes cast for, against or withheld, and abstentions as to each
such matter. There were no broker non-votes as to these matters.
1) Election of Directors.
For Withhold
Babette E. Heimbuch 15,379,882 421,178
James P. Giraldin 15,436,280 364,780
John R. Woodhull 15,436,778 364,282
2) Ratification of KPMG, LLP as independent public auditors for the Company for
2004.
For 15,419,549
Against 375,160
Abstain 6,351
19
Item 6. Exhibits and Reports on Form-8K
(a) Exhibits
(3.1)Restated Certificate of Incorporation filed as Exhibit 3.1 to Form 10-K
for the fiscal year ended December 31, 1999 and incorporated by reference.
(3.2)Bylaws filed as Exhibit 3.2 to Form 10-Q dated August 12, 2002 and
incorporated by reference.
(4.1)Amended and Restated Rights Agreement dated as of September 25, 1998,
filed as Exhibit 4.1 to Form 8-A/A, dated September 25, 1998 and
incorporated by reference.
(10.1) Deferred Compensation Plan filed as Exhibit 10.3 to Form 10-K for the
fiscal year ended December 31, 1983 and incorporated by reference.
(10.2) Supplemental Executive Retirement Plan dated January 16, 1986 filed as
Exhibit 10.5 to Form 10-K for the fiscal year ended December 31, 1992 and
incorporated by reference. (10.3) Change of Control Agreement effective
September 26, 1996 filed as Exhibit 10.4 to Form 10-Q for the Quarter ended
September 30, 1996 and Amendment filed as Exhibit 10.3 10.4 for change of
control to Form 10-Q for the Quarter ended March 31, 2001 and incorporated
by reference.
(10.4) 1997 Non-employee Directors Stock Incentive Plan filed as Exhibit 1 to
Form S-8 dated August 12, 1997 and Amendment filed as Exhibit 10.5 to Form
10-Q for the Quarter ended March 31, 2001, and incorporated by reference.
(21) Registrant's sole subsidiary is First Federal Bank of California, a federal
savings bank.
(31.1) Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
(31.2) Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
(32.1) Certification of Chief Executive Officer pursuant to 18 U.S.C. section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(32.2) Certification of Chief Financial Officer pursuant to 18 U.S.C. section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
The Company filed current reports on Form 8-K during the quarter ended June 30,
2004 on the following dates: April 22, 2004, May 20, 2004, June 21, 2004 and
June 30, 2004. These reports are related to the release of the Company's
disclosure of certain other financial data and earnings release.
20
SIGNATURES
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.
FIRSTFED FINANCIAL CORP.
Registrant
Date: August 10, 2004 By: /s/ Douglas J. Goddard
----------------------
Douglas J. Goddard
Chief Financial Officer and
Executive Vice President
21
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Babette Heimbuch, certify that:
(1) I have reviewed this quarterly report on Form 10-Q of FirstFed
Financial Corp.;
(2) Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
(4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over the financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15D-15(f) for the registrant and have:
(i) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this quarterly report is being prepared;
(ii) Designed such internal control over financial reporting, or caused
such disclosure controls and procedures to be designed under our
supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principals;
(iii) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
(iv) Disclosed in this quarterly report any change in the registrant's
internal control over financial reporting that occurred in the
registrant's most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect the registrant's internal
control over financial reporting; and
(5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons fulfilling the equivalent function):
(i) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(ii) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting and
(6) The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
control over financial reporting or in other factors that could
significantly affect internal control over financial reporting subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Dated this 10th day of August 2004.
By: /s/ Babette E. Heimbuch
Babette E. Heimbuch
Chief Executive Officer
22
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Douglas Goddard, certify that:
(1) I have reviewed this quarterly report on Form 10-Q of FirstFed
Financial Corp.;
(2) Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
(4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over the financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15D-15(f) for the registrant and have:
(i) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this quarterly report is being prepared;
(ii) Designed such internal control over financial reporting, or caused
such disclosure controls and procedures to be designed under our
supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principals;
(iii) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
(iv) Disclosed in this quarterly report any change in the registrant's
internal control over financial reporting that occurred in the
registrant's most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect the registrant's internal
control over financial reporting; and
(5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons fulfilling the equivalent function):
(i) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(ii) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting and
(6) The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
control over financial reporting or in other factors that could
significantly affect internal control over financial reporting subsequent to
the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Dated this 10th day of August 2004.
By: /s/ Douglas Goddard
Douglas Goddard
Chief Financial Officer
23
EXHIBIT 32.1
CEO CERTIFICATION
The undersigned, as Chief Executive Officer hereby certifies, to the best of her
knowledge and belief, that:
(1) the Form 10-Q of FirstFed Financial Corp. (the "Company") for
the quarterly period ended June 30, 2004 (the "Report ")
accompanying this certification fully complies with the
requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2) the information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company for such period.
This certification is made solely for purposes of complying with the provisions
of Section 906 of the Sarbanes-Oxley Act of 2003, 18 U.S.C. Section 1350.
FIRSTFED FINANCIAL CORP.
Registrant
Date: August 10, 2004
By: /s/ Babette E. Heimbuch
Babette E. Heimbuch
Chief Executive Officer
24
EXHIBIT 32.2
CFO CERTIFICATION
The undersigned, as Chief Financial Officer hereby certifies, to the best of her
knowledge and belief, that:
(1) the Form 10-Q of FirstFed Financial Corp. (the "Company") for
the quarterly period ended June 30, 2004 (the "Report ")
accompanying this certification fully complies with the
requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2) the information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company for such period.
This certification is made solely for purposes of complying with the provisions
of Section 906 of the Sarbanes-Oxley Act of 2003, 18 U.S.C. Section 1350.
FIRSTFED FINANCIAL CORP.
Registrant
Date: August 10, 2004
By: /s/ Douglas J. Goddard
Douglas J. Goddard
Chief Financial Officer and
Executive Vice President
25