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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 March 31, 2005
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 (I.R.S. Employer Identification No.)
of incorporation or organization)
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 May 1, 2005, 16,531,627 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 Balance Sheets as of March 31, 2005, December 3
31, 2004 and March 31, 2004
Consolidated Statements of Income for the three months 4
ended March 31, 2005 and 2004
Consolidated Statements of Cash Flows for the three months 5
ended March 31, 2005 and 2004
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Item 4. Controls and Procedures 20
Part II. Other Information (omitted items are inapplicable)
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
Exhibits
31.1 Certification of Chief Executive Officer pursuant to 23
Section 302 of the Sarbanes-Oxley Act of 2002
24
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 25
18 USC Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to 26
18 USC Section 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 Balance Sheets
(In thousands, except share data)
March 31, March 31,
2005 December 31, 2004
(Unaudited) 2004 (Unaudited)
-------------- ------------- ---------------
ASSETS
Cash and cash equivalents $ 43,444 $ 68,343 $ 41,417
Investment securities, available-for-sale
(at fair value) 225,260 250,586 213,605
Mortgage-backed securities,
available-for-sale (at fair value) 90,597 97,059 124,217
Loans receivable, net of allowance for loan
losses of $83,075, $79,171 and $75,792) 7,824,493 6,837,945 4,640,055
Accrued interest and dividends receivable 30,629 24,115 18,155
Real estate owned, net -- -- 1,324
Real estate held for investment 656 986 --
Office properties and equipment, net 15,699 15,881 10,622
Investment in Federal Home Loan Bank (FHLB)
stock, at cost 158,350 143,425 95,400
Other assets 31,575 30,643 28,230
-------------- ------------- ---------------
$ 8,420,703 $ 7,468,983 $ 5,173,025
============== ============= ===============
LIABILITIES
Deposits $ 3,803,795 $ 3,761,165 $ 2,712,922
FHLB advances 2,998,813 3,004,600 1,852,000
Securities sold under agreements to
repurchase 1,059,700 187,000 117,122
Accrued expenses and other liabilities 63,062 38,744 38,804
-------------- ------------- ---------------
7,925,370 6,991,509 4,720,848
-------------- ------------- ---------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share;
authorized 100,000,000 shares;
issued 23,717,797, 23,693,350 and
23,589,144 shares, outstanding 16,523,201,
16,498,754 and 17,091,448 shares 237 237 236
Additional paid-in capital 41,414 40,977 38,386
Retained earnings - substantially restricted 567,694 549,202 498,342
Unreleased shares to employee stock
ownership plan (799) (53) (105)
Treasury stock, at cost, 7,194,596,
7,194,596 and 6,497,696 shares (113,776) (113,776) (85,727)
Accumulated other comprehensive income, net
of taxes 563 887 1,045
-------------- ------------- ---------------
495,333 477,474 452,177
-------------- ------------- ---------------
$ 8,420,703 $ 7,468,983 $ 5,173,025
============== ============= ===============
The accompanying notes are an integral part of these consolidated financial statements.
3
FirstFed Financial Corp. and Subsidiary
Consolidated Statements of Income
(Dollars in thousands, except per share data)
(Unaudited)
Three months ended March 31,
------------------------------
2005 2004
------------ --------------
Interest and dividend income:
Interest on loans $ 87,113 $ 55,660
Interest on mortgage-backed securities 728 939
Interest and dividends on investments 3,816 1,918
------------ -------------
Total interest income 91,657 58,517
------------ -------------
Interest expense:
Interest on deposits 17,354 8,484
Interest on borrowings 24,226 12,320
------------ -------------
Total interest expense 41,580 20,804
------------ -------------
Net interest income: 50,077 37,713
Provision for loan losses 3,750 --
------------ -------------
Net interest income after provision for
loan losses 46,327 37,713
------------ -------------
Non-interest income:
Loan servicing and other fees 2,828 2,001
Banking service fees 1,323 1,320
Gain on sale of loans -- 13
Real estate operations, net 248 49
Other operating income 97 78
------------ -------------
Total non-interest income 4,496 3,461
------------ -------------
Non-interest expense:
Salaries and employee benefits 12,173 9,194
Occupancy 2,295 2,057
Advertising 92 219
Amortization of core deposit intangible 499 499
Federal deposit insurance 116 95
Legal 516 289
Other operating expense 3,176 2,929
------------ -------------
Total non-interest expense 18,867 15,282
------------ -------------
Income before income taxes 31,956 25,892
Income taxes 13,464 10,915
------------ -------------
Net income $ 18,492 $ 14,977
============ =============
Net income $ 18,492 $ 14,977
Other comprehensive loss, net of taxes (324) (46)
------------ -------------
Comprehensive income $ 18,168 $ 14,931
============ =============
Earnings per share:
Basic $ 1.12 $ 0.88
============ =============
Diluted $ 1.10 $ 0.86
============ =============
Weighted average shares outstanding:
Basic 16,502,945 17,067,581
============ =============
Diluted 16,885,898 17,495,422
============ =============
The accompanying notes are an integral part of these consolidated financial statements.
4
FirstFed Financial Corp. and Subsidiary
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three months ended March 31,
-------------------------------------
2005 2004
---------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 18,492 $ 14,977
Adjustments to reconcile net income to
net cash provided by operating activities:
Net change in loans held-for-sale -- 492
Depreciation and amortization 428 266
Provision for loan losses 3,750 --
Amortization of fees and premiums/discounts 1,933 1,512
Decrease in servicing asset 16 30
Change in taxes payable 14,667 9,311
Increase in interest and dividends receivable (6,514) (1,214)
Decrease in interest payable 8,840 236
Amortization of core deposit intangible asset 499 499
Increase in other assets (2,340) (2,083)
Increase (decrease) in accrued expenses and
other liabilities 1,782 (4,178)
---------------- -----------------
Total adjustments 23,061 4,871
---------------- -----------------
Net cash provided by operating activities 41,553 19,848
---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans made to customers and principal
collections on loans (977,761) (262,248)
Loans purchased -- (293)
Deferred loan origination costs (15,477) (4,635)
Proceeds from maturities and principal payments
of investment securities, available-for-sale 24,883 6,277
Principal reductions on mortgage-backed securities,
available for sale 6,302 10,527
Purchase of investment securities,
available for sale -- (103,242)
Purchases of FHLB stock (13,633) (6,838)
---------------- -----------------
Net cash used by investing activities (975,686) (360,452)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 42,630 174,524
Net increase in short term borrowings 986,913 234,500
Net decrease in long term borrowings (120,000) (82,000)
Other (309) 679
---------------- -----------------
Net cash provided by financing activities 909,234 327,703
---------------- -----------------
Net decrease in cash and cash equivalents (24,899) (12,901)
Cash and cash equivalents at beginning of period 68,343 54,318
---------------- -----------------
Cash and cash equivalents at end of period $ 43,444 $ 41,417
================ =================
The accompanying notes are an integral part of these 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 financialstatements 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. In January of 2005, the Bank completed a multi-family loan securitization
with Fannie Man in which $1.3 billion in loans from its loan portfolio were
formed into mortgage-backed securities. In accordance with Statement of
Financial Accounting Standards No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" (SFAS
140), loan securitizations are not recorded as sales because the Company
retains all beneficial ownership interests. Securitized loans are presented
in the Company's loan portfolio and the borrowings used as collateral are
presented in the Company's liabilities as securities sold under agreements
to repurchase. Because the Bank retains full recourse on the securitized
loans, the mortgage-backed securities will continue to be accounted for as
part of its loan portfolio. These loans are evaluated for risk along with
the remainder of our multi-family loan portfolio.
5. 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.
6
Three Months Ended March 31,
-----------------------------
2005 2004
------------ -------------
(In thousands, except per share data)
Net income as reported.................. $ 18,492 $ 14,977
------------ -------------
Deduction:
Total stock-based compensation expense
determined under fair-value-based method
for all rewards, net of tax............ (195) (206)
------------ -------------
Pro forma net income.................. $ 18,297 $ 14,771
============ =============
Earnings per share:
Basic:
As reported........................... $ 1.12 $ 0.88
Pro forma............................. $ 1.11 $ 0.87
Diluted:
As reported........................... $ 1.10 $ 0.86
Pro forma............................. $ 1.09 $ 0.85
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 2005 and 2004, respectively: no dividend yield in
any year; expected volatility of 31% and 32%; risk free interest rates of 4.2%
and 4.2%; and expected average lives of 5.5 years. The weighted-average grant
date fair value of options granted during the periods are $14.30 and $15.58 for
2005 and 2004, respectively. The Company has elected to recognize forfeitures in
the year they occur.
6. The following table sets forth the net periodic benefit cost attributable to
the Company's Supplementary Executive Retirement Plan:
Pension Benefits
Three months ended March 31,
--------------------------------
2005 2004
-------------- ---------------
Quarterly Expense (In thousands)
Service cost........................... $ 141 $ 121
Interest cost.......................... 167 151
Amortization of net loss............... 57 35
Amortization of prior service cost..... 4 34
-------------- ---------------
Net periodic benefit cost............ $ 369 $ 341
============== ===============
Weighted Average Assumptions
Discount rate.......................... 5.75% 6.00%
Rate of compensation increase.......... 4.00% 4.00%
Expected return on plan assets......... N/A N/A
The Company does not expect any significant changes to the amounts previously
disclosed for contributions for benefits payments.
7
7. Recent Accounting Pronouncements
In December 2004, SFAS Statement No. 123 (revised), Share-Based Payment
(Statement No. 123R), was issued. Statement No. 123R requires a public entity to
measure the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value of the award (with limited
exceptions). That cost will be recognized over the period which an employee is
required to provide service in exchange for the award-the requisite service
period (usually the vesting period). No compensation cost is recognized for
equity instruments for which employees do not render the requisite service.
A public entity will initially measure the cost of employee services
received in exchange for an award of equity instruments based on its current
fair value; the fair value of that award will be re-measured subsequently at
each reporting date through the settlement date. Changes in fair value during
the requisite service period will be recognized as compensation cost over that
period. The grant-date fair value of employee share options and similar
instruments will be estimated using option-pricing models adjusted for the
unique characteristics of those instruments (unless observable market prices for
the same or similar instruments are available). If an equity award is modified
after the grant date, incremental compensation cost will be recognized in an
amount equal to the excess of the fair value of the modified award over the fair
value of the original award immediately before the modification.
On April 14, 2005, the Securities and Exchange Commission ("SEC") adopted a
new rule that amends the compliance dates for SFAS Statement No. 123R. The SEC's
new rule allows companies to implement Statement No. 123R at the beginning of
their next fiscal year, instead of the next reporting period that begins after
June 15, 2005, or December 15, 2005 for small business issuers. The Commission's
new rule does not change the accounting required by Statement No. 123R; it
changes only the dates for compliance with the standard. The Company expects to
adopt SFAS Statement No. 123R as of January 1, 2006.
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 will be
effective as of January 1, 2004, except for mandatorily redeemable financial
instruments. For certain mandatorily redeemable financial instruments, the
Statement is 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.
8
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 our 2004 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, 2004, and for the year then ended. Therefore, only material changes
in the consolidated balance sheets and consolidated statements of income 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, our periodic and current
reports are available free of charge on our 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.
Consolidated Balance Sheets
At March 31, 2005, FirstFed Financial Corp. ("Company"), holding company for
First Federal Bank of California and its subsidiaries ("Bank"), had consolidated
stockholders' equity of $495.3 million compared to $477.5 million at December
31, 2004 and $452.2 million at March 31, 2004. Consolidated total assets at
March 31, 2005 were $8.4 billion compared to $7.5 billion at December 31, 2004
and $5.2 billion at March 31, 2004. The increase in total assets for the period
ended March 31, 2005 compared to December 31, 2004 and March 31, 2004 is
primarily attributable to an increase in the loan portfolio to $7.8 billion at
March 31, 2005 from $6.8 billion at December 31, 2004 and $4.6 billion at March
31, 2004. Loan payoffs and principal reductions were $339.1 million for the
first quarter of 2005 compared to $361.5 million for the fourth quarter of 2004
and $331.0 million for the first quarter of 2004.
We funded our asset growth during the first quarter of 2005 with collateralized
borrowings, which increased to $1.1 billion at March 31, 2005 from $187.0
million at December 31, 2004 and $117.1 million at March 31, 2004. To facilitate
these borrowings, we completed a loan securitization with Fannie Mae in which
$1.3 billion of multi-family loans were converted into mortgage-backed
securities. Because we retained full recourse on the securitized loans, we
continue to account for these mortgage-backed securities as part of the loan
portfolio. Loan originations and purchases were $1.3 billion during the first
quarter of 2005 compared to $593.5 million during the first quarter of 2004. We
funded our asset growth from March 31, 2004 to March 31, 2005 with $1.1 billion
in FHLB advances, $1.1 billion in brokered deposits and $900 million in
collateralized borrowings.
9
We operate in the state of California, which has been undergoing record levels
of housing appreciation for the last several years. According to the California
Association of Realtors, as of March 2005, the median price of a home in
California increased 15.7% compared with the same period a year ago. There are
some concerns that home prices have appreciated beyond reasonable levels based
on the economics of the California housing market. The March 2005 UCLA Anderson
Forecast for California ("Forecast") indicates that, "The housing sector has
been maintaining the California economy, but its current growth path both in
building and in prices is clearly unsustainable. Price appreciation is already
slowing after a record run up in prices over the last three years. When this
appreciation stops, so does the income boost that has fed California's appetite
for consumption of many other services that have kept the internal job market
moving forward even as incomes were flat."
No one can say with certainty whether or not housing prices will decline. There
is evidence to justify the appreciation to date (availability of
reasonably-priced financing, tight housing supply in certain areas and stable
employment) and there is evidence to suggest that the market is overheated
(increasing inventories in certain areas, decreasing rents, and historically low
cap rates on apartments).
We continuously monitor the sufficiency of the collateral supporting our real
estate loan portfolio based on many factors including the property location, the
date of loan origination and the original loan-to-value ratio.
The following table summarizes loan originations and purchases by property type
for the periods indicated:
Three months ended
March 31,
2005 2004
------------- -------------
(In thousands)
Single family $ 1,153,401 $ 438,524
Multi-family and commercial 154,068 133,333
Other (1) 9,436 21,681
----------- -----------
Total $ 1,316,905 $ 593,538
=========== ===========
(1) Includes consumer loans and commercial business loans.
The following table summarizes loan originations and purchases by loan type for
the periods indicated:
Three months ended
March 31,
2005 2004
------------ ------------
(In thousands)
Adjustable:
CODI $ 1,084,007 $ 321,942
12MAT 198,847 204,235
COFI 24,315 26,615
Other 9,436 22,640
Fixed: 300 1,549
Hybrid (1) -- 16,557
----------- ----------
Total $ 1,316,905 $ 593,538
=========== ==========
(1) These loan types are adjustable rate loans with initial fixed interest rate
periods ranging from 3 to 7 years.
10
No hybrid loans were originated during the first quarter of 2005 because
management decided to focus on originating monthly adjustable rate loans.
Our non-performing assets to total assets ratio was 0.08% at March 31, 2005,
compared to 0.07% at December 31, 2004 and 0.06% at March 31, 2004. (See
"Non-performing Assets" for further discussion.)
We recorded net loan recoveries of $154 thousand and $58 thousand for the first
quarter of 2005 and first quarter of 2004, respectively. Due to the growth in
the loan portfolio, we recorded a $3.8 million provision for loan losses during
the first quarter of 2005 but no provision was recorded for the comparable 2004
period. Allowances for loan losses (including general valuation allowances and
valuation allowances for impaired loans) totaled $83.1 million or 1.05% of gross
loans at March 31, 2005. This compares with $79.2 million or 1.15% at December
31, 2004 and $75.8 million or 1.61% at March 31, 2004.
The following table shows the components of our portfolio of loans (including
loans held for sale) and mortgage-backed securities by collateral type at the
dates indicated:
March 31, December 31, March 31,
2005 2004 2004
--------------- -------------- ---------------
(In thousands)
REAL ESTATE LOANS
First trust deed residential loans
One-to-four units $ 5,503,994 $ 4,585,962 $ 2,690,039
Five or more units 1,905,146 1,825,564 1,564,844
--------------- -------------- ---------------
Residential loans 7,409,140 6,411,526 4,254,883
OTHER REAL ESTATE LOANS
Commercial and industrial 315,483 324,805 346,305
Second trust deeds 5,230 5,466 6,621
Other 3,615 20,902 12,077
--------------- -------------- ---------------
Real estate loans 7,733,468 6,762,699 4,619,886
NON-REAL ESTATE LOANS
Deposit accounts 488 491 641
Commercial business loans 65,386 58,869 40,401
Consumer 60,329 60,677 52,956
--------------- -------------- ---------------
Loans receivable 7,859,671 6,882,736 4,713,884
LESS:
General valuation allowances -
loan portfolio 82,579 78,675 75,296
Valuation allowances - impaired loans 496 496 496
Deferred loan origination costs, net (47,897) (34,380) (1,963)
--------------- -------------- ---------------
Net loans receivable 7,824,493 6,837,945 4,640,055
FHLMC AND FNMA MORTGAGE-BACKED
SECURITIES (at fair value):
Secured by single family dwellings 85,050 91,308 117,633
Secured by multi-family dwellings 5,547 5,751 6,584
--------------- -------------- ---------------
Mortgage-backed securities 90,597 97,059 124,217
--------------- -------------- ---------------
TOTAL $ 7,915,090 $ 6,935,004 $ 4,764,272
=============== ============== ===============
11
At March 31, 2005, 94.4% of our loan portfolio was invested in adjustable rate
products. Loans that adjust monthly based on the 3-Month Certificate of Deposit
Index ("CODI") comprised 51.5% of the loan portfolio. Loans that adjust monthly
based on the Federal Home Loan Bank ("FHLB") Eleventh District Cost of Funds
Index ("COFI") comprised 17.7% of the loan portfolio. Loans that adjust monthly
based on the 12-month average U.S. Treasury Security rate ("12MAT") comprised
23.2% of the loan portfolio. Loans that adjust monthly based on the London
Inter-Bank Offering Rate ("LIBOR") and other indices comprised 2.0% of the loan
portfolio.
Loans that allow for a reduced level of documentation at origination are an
increasing percentage of loans originated in our market areas. On Stated
Income/Stated Asset ("SISA") loans, the borrower includes information on his/her
level of income and assets that is not subject to verification. On Stated
Income/Verified Assets ("SIVA") loans, the borrower includes information on
his/her level of income, but his/her assets are verified. For No Income/No Asset
("NINA") loans, the borrower is not required to submit information on his/her
level of income or assets. The underwriting of these loans is based on the
borrower's credit score and the value of the collateral. At March 31, 2005,
approximately 9%, 30% and 38% of our single family loan portfolio was comprised
of NINA, SIVA or SISA loans, respectively. This compares to 8%, 29% and 39% of
our single family loan portfolio being NINA, SIVA or SISA loans at December 31,
2004, respectively. Our portfolios of multi-family and other real estate loans
all require full documentation by the borrowers.
The mortgage-backed securities portfolio, classified as available-for-sale, was
recorded at fair value as of March 31, 2005. An unrealized gain of $327
thousand, net of taxes, was recorded in stockholders' equity as of March 31,
2005. This compares to net unrealized gains of $420 thousand as of December 31,
2004 and $715 thousand as of March 31, 2004.
The investment securities portfolio, classified as available-for-sale, was
recorded at fair value as of March 31, 2005. An unrealized gain of $236
thousand, net of taxes, was reflected in stockholders' equity as of March 31,
2005. This compares to net unrealized gains of $467 thousand as of December 31,
2004 and $330 thousand as of March 31, 2004.
Asset/Liability Management
Market risk is the risk of loss from adverse changes in market prices and
interest rates. Our market risk arises primarily from the interest rate risk
inherent in our lending and liability funding activities.
Our interest rate spread typically decreases during periods of increasing
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 our adjustable rate loans. Therefore, during periods
immediately following interest rate increases, our cost of funds tends to
increase faster than the yield earned on our adjustable rate loan portfolio. The
reverse is true during periods immediately following interest rate decreases.
The composition of our financial instruments that are subject to market risk has
not changed materially since December 31, 2004.
The one year GAP (the difference between rate-sensitive assets and liabilities
repricing within one year or less) was a positive $496.3 million or 5.89% of
total assets at March 31, 2005. In comparison, the one year GAP was a positive
$653.7 million or 8.75% of total assets at December 31, 2004. The decrease in
GAP at March 31, 2005 from December 31, 2005 is attributable to our use of
short-term borrowings to fund adjustable rate loans.
12
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 meets the standards necessary to be deemed well capitalized
under the applicable regulatory requirements. The following table summarizes our
actual capital and required capital at March 31, 2005:
Tier 1
Tangible Core Risk- based Risk-based
Capital Capital Capital Capital
----------- ----------- ------------- -----------
(Dollars in thousands)
Actual Capital:
Amount $ 485,755 $ 485,755 $ 485,755 $ 543,923
Ratio 5.77% 5.77% 10.49% 11.75%
FIRREA minimum required capital:
Amount $ 126,210 $ 336,560 $ -- $ 370,325
Ratio 1.50% 4.00% --% 8.00%
FIRREA well capitalized required capital:
Amount $ -- $ 420,700 $ 277,744 $ 462,907
Ratio --% 5.00% 6.00% 10.00%
The above capital ratios include a $20.0 million investment in the Bank by
FirstFed Financial Corp.
There were no repurchases of common stock during the first quarter of 2005.
Common stock repurchases during the year 2004 were 696,900 shares of company
stock at an average market price of $40.25 per share. There remain 1,472,079
shares eligible for repurchase under our stock repurchase program as of May 1,
2005.
13
Loan Loss Allowances
Listed below is a summary of activity in our general valuation allowance and the
valuation allowance for impaired loans during the periods indicated:
Three Months Ended March 31, 2005
--------------------------------------------
General Impaired
Valuation Valuation
Allowances Allowances Total
-------------- ------------- ----------
(In thousands)
Balance at December 31, 2004 $ 78,675 $ 496 $ 79,171
Provision for loan losses 3,750 -- 3,750
Charge-offs:
Single family (5) -- (5)
-------------- ------------- ----------
Total charge-offs (5) -- (5)
Recoveries 159 -- 159
-------------- ------------- ----------
Balance at March 31, 2005 $ 82,579 $ 496 $ 83,075
============== ============= ==========
Three Months Ended March 31, 2004
--------------------------------------------
General Impaired
Valuation Valuation
Allowances Allowances Total
-------------- ------------- ----------
(In thousands)
Balance at December 31, 2003 $ 75,238 $ 496 $ 75,734
Recoveries 58 -- 58
-------------- ------------- ----------
Balance at March 31, 2004 $ 75,296 $ 496 $ 75,792
============== ============= ==========
Management is unable to predict future levels of loan loss provisions. Among
other things, loan loss provisions are based on the level of loan charge-offs,
foreclosure activity, and the economy in Southern California.
Consolidated Statements of Income
We reported consolidated net income of $18.5 million or $1.10 per diluted share
of common stock for the first quarter of 2005 compared to net income of $15.0
million or $0.86 per diluted share of common stock for the first quarter of
2004. Net income increased for the first quarter of 2005 primarily due to a 60%
increase in average interest-earning assets compared to the first quarter of
2004, which more than offset a decrease in net interest spread due to increased
interest rates. Average interest-earning assets totaled $7.7 billion during the
first quarter of 2005 compared to $4.8 billion during the first quarter of 2004.
The growth in interest-earning assets was attributable to record loan
origination activity, which totaled $1.3 billion for the first quarter of 2005
compared to $593.5 million during the first quarter of 2004.
14
Net Interest Income
Net interest income was $50.1 million during the first quarter of 2005 compared
to $37.7 million for the first quarter of 2004. The interest rate spread
decreased by 56 basis points to 2.39% in the first quarter of 2005 from 2.95%
for the same period last year. The reduction in spread is attributable to a 15
basis point decrease in yield on our adjustable rate loan portfolio while the
cost of funds increased by 41 basis points. See "Asset/Liability Management" for
additional information.
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 Three Months Ended
March 31,
-------------------------------
2005 2004
------------ ---------------
(Dollars in thousands)
Average loans and mortgage-backed securities $ 7,409,789 $ 4,619,315
Average investment securities 247,283 169,682
----------- --------------
Average interest-earning assets 7,657,072 4,788,997
----------- --------------
Average savings deposits 3,816,761 2,639,485
Average borrowings 3,578,534 1,839,696
----------- --------------
Average interest-bearing liabilities 7,395,295 4,479,181
----------- --------------
Excess of interest-earning assets over
interest-bearing liabilities $ 261,777 $ 309,816
=========== ==============
Yields earned on average interest-earning assets 4.67% 4.82%
Rates paid on average interest-bearing liabilities 2.28 1.87
Interest rate spread 2.39 2.95
Effective net spread (1) 2.47 3.07
Total interest income $ 89,396 $ 57,707
Total interest expense 41,576 20,826
----------- --------------
47,820 36,881
Total other items (2) 2,257 832
----------- --------------
Net interest income $ 50,077 $ 37,713
=========== ==============
(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 and miscellaneous
interest income).
(2) Includes Federal Home Loan Bank Stock dividends and other miscellaneous
interest income.
Non-Interest Income and Expense
Loan servicing and other fees were $2.8 million for the first quarter of 2005
compared to $2.0 million for the same period of 2004. The increase is primarily
the result of increased prepayment fees as borrowers paid off loans early to
refinance into loans with more favorable terms.
Real estate operations resulted in net income of $248 thousand for the first
quarter of 2005 compared to net income of $49 thousand for the same period of
2004. Real estate operations include gains and losses on the sale of foreclosed
properties as well as rental income and operating expense during the holding
period. The gain on real estate operations for the first quarter of 2005 was the
result of sales of properties acquired from borrowers in settlement of
judgments.
15
Non-interest expense increased to $18.9 million during the first quarter of
2005. This compares with $15.3 million during the first quarter of 2004. The
increase is primarily due to higher incentive-based compensation and other
operating costs associated with increased loan production.
The ratio of non-interest expense to average assets decreased to 0.95% for the
first quarter of 2005 from 1.22% during the comparable 2004 period. The decrease
is attributable to an increase in average assets for the comparable periods.
Non-accrual, Past Due, Modified and Restructured Loans
We accrue interest earned but uncollected for every loan without regard to its
contractual delinquency status and establish a specific interest allowance for
each loan which becomes 90 days or more past due or which is in foreclosure.
Loans requiring delinquent interest allowances (non-accrual loans) totaled $6.9
million at March 31, 2005 compared to $5.0 million at December 31, 2004 and $1.6
million at March 31, 2004.
The amount of interest allowance for loans 90 days or more delinquent or in
foreclosure was $310 thousand, $256 thousand, and $200 thousand as of March 31,
2005, December 31, 2004, and March 31, 2004, respectively.
We allow 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 us.
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. At March 31, 2005, we had net modified loans totaling $2.1
million. No modified loans were 90 days or more delinquent at March 31, 2005.
We consider a loan impaired when management believes that it is probable that we
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, 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.
The following is a summary of impaired loans, net of valuation allowances for
impairment, at the dates indicated:
March 31, December 31, March 31,
2005 2004 2004
--------------- -------------- ---------------
(In thousands)
Non-accrual loans $ 4,546 $ 1,360 $ --
Modified loans -- -- 1,467
--------------- -------------- ---------------
$ 4,546 $ 1,360 $ 1,467
=============== ============== ===============
We evaluate loans for impairment whenever the collectibility of contractual
principal and interest payments is questionable. When a loan is considered
impaired we measure 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, we record an impairment allowance equal to the excess of
our recorded investment in the loan over its measured value.
16
The following is a summary of information pertaining to impaired and
non-accrual loans:
At March 31,
------------------------
2005 2004
----------- ----------
(In thousands)
Impaired loans without a valuation allowance . $ 4,546 $ 1,467
Impaired loans with a valuation allowance.. $ 496 $ 496
Valuation allowance related to impaired loans. $ 496 $ 496
Total non-accrual loans...................... $ 6,851 $ 1,561
Three Months Ended
-------------------------------------------------
March 31, December 31, March 31,
2005 2004 2004
------------- --------------- -------------
(In thousands)
Average investment in impaired loans.... $ 3,484 $ 602 $ 1,467
Interest income recognized on impaired loans $ -- $ 22 $ 16
Interest income recognized on a cash basis
on impaired loans...................... $ -- $ 16 $ 16
Asset Quality
The following table sets forth certain asset quality ratios at the dates
indicated:
March 31, December 31, March 31,
2005 2004 2004
-------------- -------------- --------------
Non-performing loans to gross loans receivable (1) 0.09% 0.07% 0.03%
Non-performing assets to total assets (2) 0.08% 0.07% 0.06%
Loan loss allowances to non-performing loans (3) 1,213% 1,588% 4,855%
Loan loss allowances to gross loans receivable (4) 1.05% 1.15% 1.61%
--------------------------
(1) Loans receivable are before deducting unrealized loan 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) Our loan loss allowances, including general valuation allowances and
valuation allowances for impaired loans.
(4) Our general valuation allowances plus the allowance for impaired loans as a
percentage of loans receivable before deducting unrealized loan fees
(costs), general valuation allowances and valuation allowances for impaired
loans.
17
Non-performing Assets
We define 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 at the
dates indicated:
March 31, December 31, March 31,
2005 2004 2004
---------------- -------------- -----------------
(In thousands)
Real estate owned:
Single family $ -- $ -- $ 1,324
---------------- -------------- -----------------
Total real estate owned -- -- 1,324
---------------- -------------- -----------------
Non-accrual loans:
Single family 5,438 4,590 1,551
Multi-family -- 391 --
Other 1,413 4 10
---------------- -------------- -----------------
Total non-accrual loans 6,851 4,985 1,561
---------------- -------------- -----------------
Total non-performing assets $ 6,851 $ 4,985 $ 2,885
================ ============== =================
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 deposits from several sources,
advances from the Federal Home Loan Bank of San Francisco, and securitized
borrowings.
Savings deposits are accepted from retail banking offices, telemarketing
sources, and national deposit brokers. The cost of funds, operating margins and
our net income associated with brokered and telemarketing deposits are generally
comparable to the cost of funds, operating margins and our net income 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 us and other depository institutions, we select funds from
the lowest cost source until the relative costs change. As the cost of funds,
operating margins and our net income associated with each source of funds are
generally comparable, we do not deem the impact of our use of any one of the
specific sources of funds at a given time to be material.
Total savings deposits increased by $42.6 million during the first quarter of
2005. The increase in deposits for the first quarter of 2005 is attributable to
an increase in deposits from all sources.
Brokered deposits increased by $13.2 million during the first quarter of 2005.
Due to increased asset growth from loan originations, we increased our use of
brokered deposits during the first quarter of 2005. Brokered deposits comprised
32% and 4% of total deposits at March 31, 2005 and March 31, 2004, respectively.
Because we have sufficient capital to be deemed "well-capitalized" under the
standards established by the Office of Thrift Supervision, we may solicit
brokered funds without special regulatory approval.
Deposits accepted by retail banking offices increased by $16.3 million during
the first quarter of 2005. Retail deposits comprised 67% and 95% of total
deposits as of March 31, 2005 and March 31, 2004, respectively.
18
Telemarketing deposits increased by $13.1 million during the first quarter of
2005. These deposits are normally large deposits from pension plans, managed
trusts and other financial institutions. These deposit levels fluctuate based on
the attractiveness of our rates compared to returns available to investors on
alternative investments. Telemarketing deposits comprised 1% of total deposits
at March 31, 2005 and March 31, 2004.
Total borrowings increased by $866.9 million during the first quarter of 2005
due to a $5.8 million net decrease in advances from the FHLB and a net increase
of $872.7 million in reverse repurchase agreements. Borrowings under reverse
repurchase agreements increased because during the first quarter of 2005 we
securitized $1.3 billion of our multi-family loans into mortgage-backed
securities in order to create additional collateral for these types of
borrowings.
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 $339.1 million during the first
quarter of 2005, comparable to $331.0 million during the first quarter of 2004.
19
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See "Management's and Discussion and Analysis of Consolidated Balance Sheets and
Consolidated Statements of Income- 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, we are required to maintain disclosure controls and procedures
designed to ensure that information required to be disclosed in the reports that
we file or submit 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, we carried out an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures. Our management, including
our 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, our disclosure controls and procedures were effective in alerting
management to material information that may be required to be included in our
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 our internal controls or in other factors
that could significantly affect these controls subsequent to the date of their
evaluation.
20
PART II - OTHER INFORMATION
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 ChiefFinancial 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
We filed current reports on Form 8-K during the quarter ended March 31, 2005 on
the following dates: January 27, 2005, February 25, 2005 and March 25, 2005.
These reports are related to the release of our disclosure of certain other
financial data.
21
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: May 10, 2005 By: /s/ Douglas J. Goddard
----------------------
Douglas J. Goddard
Chief Financial Officer and
Executive Vice President
22
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 consolidated balance sheets, consolidated statements
of income and cash flows of the registrant as of, and for, the periods
presented in this quarterly report;
(4) The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) and internal control over 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
internal control over financial reporting 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 principles;
(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 report any change in the registrant's internal control
over financial reporting that occurred during the registrant's fourth fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting;
(5) The registrant's other certifying officer 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:
(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 officer and I have indicated in this
quarterly 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 May 2005.
By: /s/ Babette E. Heimbuch
-----------------------
Babette E. Heimbuch
Chief Executive Officer
23
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Douglas J. 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 consolidated balance sheets, consolidated statements
of income and cash flows of the registrant as of, and for, the periods
presented in this quarterly report;
(4) The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) and internal control over 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
internal control over financial reporting 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 principles;
(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 report any change in the registrant's internal control
over financial reporting that occurred during the registrant's fourth fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting;
(5) The registrant's other certifying officer 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:
(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 officer and I have indicated in this
quarterly 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 May 2005.
By: /s/ Douglas Goddard
-------------------
Douglas Goddard
Chief Financial Officer
24
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 March 31, 2005 (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 consolidated balance sheets and
consolidated statements of income 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: May 10, 2005
By: /s/ Babette E. Heimbuch
-----------------------
Babette E. Heimbuch
Chief Executive Officer
25
EXHIBIT 32.2
CFO CERTIFICATION
The undersigned, as Chief Financial Officer hereby certifies, to the best of his
knowledge and belief, that:
(1) the Form 10-Q of FirstFed Financial Corp. (the "Company") for the
quarterly period ended March 31, 2005 (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 consolidated balance sheets and
consolidated statements of income 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: May 10, 2005
By: /s/ Douglas J. Goddard
----------------------
Douglas J. Goddard
Chief Financial Officer and
Executive Vice President
26