UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[Mark One]
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission file number 0-13311
CityFed Financial Corp.
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(Exact name of small business issuer as specified in its charter)
Delaware 22-2527684
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(State or other jurisdiction of incorporation (IRS Employer Identification
or organization) No.)
PO Box 3126, Nantucket, MA 02584
--------------------------------
(Address of principal executive offices)
(508) 228-2366
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(Issuer's telephone number)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. As of June 30, 2000, the number of
shares of outstanding common stock was 18,715,609.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
CITYFED FINANCIAL CORP.
STATEMENTS OF FINANCIAL CONDITION
June 30, 2000 and December 31, 1999
(Dollars in Thousands)
<TABLE>
<CAPTION>
June 30, 2000 December 31,
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(Unaudited) 1999
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<S> <C> <C>
ASSETS
------
Cash $ 86 $ 63
Investment securities at amortized cost
(Market value $6,312 in 2000 and $9,430 in 1999) 6,317 9,444
Other assets 147 145
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TOTAL ASSETS $ 6,550 $ 9,652
============ ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
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LIABILITIES:
Contingency reserve $ 4,193 $ 6,353
Other liabilities 4,523 4,504
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Total liabilities 8,716 10,857
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY:
Preferred stock, 30,000,000 shares authorized:
$2.10 cumulative convertible, Series B, $25 par value,
issued and outstanding: 2,538,850 in 2000 and 1999 63,471 63,471
Series C Junior, cumulative, $.01 par value, liquidation
preference $3.00 per share, shares issued and
outstanding: 8,257,079 in 2000 and 1999 82 82
Common stock, $.01 par value, 100,000,000 shares authorized,
issued: 18,914,609 in 2000 and 1999, outstanding:
18,715,609 in 2000 and 1999 188 188
Additional paid-in capital 108,868 108,868
Accumulated deficit (173,775) (172,814)
Treasury stock (199,000 shares of common stock) (1,000) (1,000)
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Total stockholders' deficiency (2,166) (1,205)
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 6,550 $ 9,652
============ ==========
See notes to financial statements.
</TABLE>
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CITYFED FINANCIAL CORP.
STATEMENTS OF OPERATIONS
Six Months Ended June 30, 2000 and 1999
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
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June 30, June 30,
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2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME:
Interest on investments $ 123 $ 114 $ 255 $ 227
Other income - - 24 -
------ ------ ------ ------
Total income 123 114 279 227
------ ------ ------ ------
EXPENSES:
Compensation and employee benefits 51 29 86 64
Other operating expenses 73 29 117 58
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Total expenses 124 58 203 122
------ ------ ------ ------
(LOSS) INCOME FROM CONTINUING OPERATIONS
(1) 56 76 105
LOSS FROM DISCONTINUED OPERATIONS - - (1,037) -
------ ------ ------ ------
NET (LOSS) INCOME $ ( 1) $ 56 $ ( 961) $ 105
========= ======== ======== ========
NET LOSS AVAILABLE FOR COMMON
STOCKHOLDERS $ (2,160) $ (2,103) $ ( 5,278) $ (4,212)
BASIC LOSS PER SHARE:
From continuing operations $ (0.12) $ (0.11) $ (0.23) $ (0.23)
From discontinued operations $ - $ - $ (0.05) $ -
Net loss $ (0.12) $ (0.11) $ (0.28) $ (0.23)
AVERAGE SHARES OUTSTANDING 18,715,609 18,715,609 18,715,609 18,715,609
DIVIDENDS PER COMMON SHARE - - - -
See notes to financial statements.
</TABLE>
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CITYFED FINANCIAL CORP.
STATEMENTS OF CASH FLOWS Six Months Ended June 30, 2000 and 1999
(Dollars in Thousands)
(Unaudited)
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 407 $ 239
Operating expenses (214) (174)
Settlement payment (3,169) -
Other income 24 -
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Net cash (used in) provided by
operating activities (2,952) 65
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CASH FLOWS FROM INVESTING ACTIVITIES:
(Decrease) increase in investment securities (2,975) 76
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Net cash used in investing activities (2,975) 76
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NET INCREASE (DECREASE) IN CASH 23 (11)
CASH AT BEGINNING OF PERIOD 63 48
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CASH AT END OF PERIOD $ 86 $ 37
======= =======
RECONCILIATION OF NET (LOSS) INCOME TO NET CASH
PROVIDED BY OPERATING
ACTIVITIES:
Net (loss) income $ (961) $ 105
Loss from discontinued operations 1,037 -
Settlement payment (3,169)
Contingency reserve payments (7) (31)
Decrease in accrued income and expense, net 148 (9)
------- -------
NET CASH (USED IN) PROVIDED BY OPERATING $(2,952) $ 65
ACTIVITIES ======= =======
See notes to financial statements.
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CITYFED FINANCIAL CORP.
NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED
JUNE 30, 2000 (UNAUDITED)
1. Until December 8, 1989, CityFed Financial Corp. (the "Company" or
"CityFed") was a unitary savings and loan holding company that
conducted its business primarily through its ownership of City Federal
Savings Bank ("City Federal") and its subsidiaries. On December 7,
1989, the Office of Thrift Supervision ("OTS") of the United States
Department of the Treasury declared City Federal insolvent, ordered it
closed and appointed the Resolution Trust Corporation ("RTC") as
receiver of City Federal. A new federal mutual savings bank, City
Savings Bank, F.S.B. ("City Savings"), was created, which acquired all
deposits and substantially all of the assets and liabilities of City
Federal. CityFed no longer controls City Federal and has no control
over City Savings.
As a result of the receivership of City Federal, the Company has
undergone material changes in the nature of its business and is no
longer operating as a savings and loan holding company. At June 30,
2000, the Company's business activities consisted primarily of
attempting to resolve outstanding indemnification claims against the
Company and the management of investments.
As a result of the receivership of City Federal, the financial
statements of CityFed at December 31, 1989, for the year then ended,
and for subsequent periods, reflect CityFed's interest in City Federal
as discontinued operations. The financial statements have been prepared
assuming the Company will continue as a going concern. As discussed
above and in Note 4, substantially all of the operations of the Company
have been discontinued and the Company is subject to a number of
contingencies that raise substantial doubt about its ability to
continue as a going concern. Except as indicated in Note 4, the
financial statements do not include any adjustments that might result
from the outcome of these uncertainties. Currently, CityFed is not
conducting an operating business. At the present time, management has
invested, and intends to invest, CityFed's assets on a short-term
basis.
2. The financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Form
10-KSB for the year ended December 31, 1999 ("1999 Form 10-KSB"). The
interim statements reflect all adjustments of a normal recurring nature
that are, in the opinion of management, necessary for a fair
presentation of the results and financial position for the periods
presented.
3. In July 1989, the Company's Board of Directors suspended the payment of
dividends on all three currently outstanding series of the Company's
stock. These include the Company's common stock, $0.01 par value per
share ("Common Stock"), on which the Company had been paying quarterly
dividends of one cent per share; the Series C, Junior Preferred Stock,
Cumulative, $0.01 par value per share ("Series C Stock"), with a
quarterly dividend of ten cents per share; and the $2.10 Cumulative
Convertible Preferred Stock, Series B, $25.00 par value per share
("Series B Stock"), with a quarterly dividend of $0.525 per share.
Dividends on both series of the Company's preferred stock are
cumulative. At June 30, 2000, dividends in arrears were $58.6 million
and $36.3 million on the Company's Series B and Series C Stock,
respectively.
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4. COMMITMENTS AND CONTINGENCIES
INDEMNIFICATION CLAIMS - The Bylaws of CityFed, INTER ALIA, obligate
CityFed to indemnify, to the fullest extent authorized by the Delaware
General Corporation Law, any person who is made or threatened to be
made a party to or becomes involved in an action by reason of the fact
that he or she is or was an employee of CityFed or one of its
subsidiaries, and to pay on his or her behalf expenses incurred in
defending such an action prior to the final disposition of such action;
provided that expenses incurred by an officer or director may be paid
in advance only if such person delivers an undertaking to CityFed to
repay such amounts if it ultimately is determined that the person is
not entitled to be indemnified under CityFed's Bylaws and the Delaware
General Corporation Law. These undertakings are generally not secured.
Consequently, CityFed may become obligated to indemnify such persons
for their expenses incurred in connection with any such action and to
advance legal expenses incurred by such persons prior to the final
disposition of any such action. In addition to any amounts paid on
behalf of such person for expenses incurred in connection with such an
action, CityFed may also have further indemnification responsibilities
to the extent damages are assessed against such a person and for
settlement amounts.
As described below, CityFed and several former directors and/or
officers of City Federal have been named as defendants or respondents
in the First and Second RTC Actions and in the Notice of Charges (as
such terms are defined below). Many of these former directors and/or
officers of City Federal have requested CityFed to indemnify them and
to advance expenses to them in connection with these matters. A special
committee of CityFed's Board of Directors, comprised of directors who
have not been named in the First or Second RTC Actions, was established
to consider this request for indemnification and advancement of
expenses with respect to the First and Second RTC Actions. On the
advice of counsel to the special committee, CityFed advanced reasonable
defense costs to such former directors and officers in such Actions.
In addition to the First and Second RTC Actions, the Notice of Charges
and the "Indemnification Claims Relating to Deferred Compensation
Plans" (described below), CityFed is currently aware of several other
legal actions and matters with respect to which current or former
officers, directors or employees of CityFed or its former subsidiaries
have requested that CityFed advance expenses and indemnify them. Except
for the indemnification requests relating to the Notice of Charges
(which CityFed's Board of Directors has not yet considered), CityFed
had generally agreed to advance expenses in connection with these
requests, except where certain preconditions to advancement and
indemnification have not been met or where advancement and
indemnification may not be warranted under applicable law.
CityFed is not continuing to advance expenses in connection with any of
the indemnification and advancement requests referred to above. CityFed
may be required to make payments of legal fees and expenses (including
settlement amounts) to the individuals who have settled with the RTC or
Federal Deposit Insurance Corporation ("FDIC") in the Second RTC Action
or to make payments to the RTC or FDIC in respect of the
indemnification claims assigned to the RTC or FDIC by some of the
individuals who have settled with the RTC or FDIC. For more information
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<PAGE>
regarding these settlements and assignments of indemnification rights,
see "Second RTC Action" below.
CityFed received a letter dated June 21, 1995, from Skadden, Arps,
Slate, Meagher & Flom ("Skadden"), which is counsel for Gordon Allen,
Marshall Criser, Edwin Halkyard, Peter Kellogg, William Liffers and
Victor Pelson ("Outside Directors"), who are or were parties to one or
more of the following matters (collectively, the "Cases"): (1) the
Second RTC Action; (2) the efforts to set aside the Temporary Order (as
defined below); (3) the Supreme Court Case (as defined below); and (4)
the administrative enforcement proceeding brought by the OTS against
CityFed and the Individual Respondents (as defined below). In the
letter, the Outside Directors demanded that, pursuant to CityFed's
Bylaws and Restated Certificate of Incorporation, CityFed pay all
outstanding invoices from Skadden for legal services rendered to the
Outside Directors in connection with the Cases. The letter states that,
if CityFed refuses to make the payments demanded, the Outside Directors
will consider taking appropriate legal action to enforce their rights.
CityFed received a similar letter from Venable, Baetjer, Howard &
Civiletti, counsel for John Kean, who was a party to the Second RTC
Action, as well as from Alfred J. Hedden, Gilbert G. Roessner, and
Gordon Allen, who were or are parties to the Cases. CityFed also
received similar letters in connection with the deferred compensation
matters described below. See "Indemnification Claims Relating to
Deferred Compensation Plans." CityFed is considering what action to
take in response to these letters. CityFed expects that it may receive
other, similar letters demanding payment from other current or former
directors and officers who were or are parties to one or more of the
Cases.
Through June 30, 2000, CityFed received but has not paid bills totaling
$4,356,800 in the aggregate for legal services and expenses rendered in
connection with the defense of current and former directors and
officers of CityFed in the Cases.
On May 19, 2000, CityFed finalized with the OTS and the FDIC a
settlement ("Settlement"), which settled the action described below
under "In the Matter of CityFed Financial Corporation." Pursuant to the
Settlement, the Temporary Order was dissolved, and the Escrow Agreement
(as described below) was terminated. Following the Settlement, CityFed
may undergo reorganization, perhaps involving a bankruptcy proceeding.
It is anticipated that these indemnification claims will be addressed
as part of any such reorganization.
CityFed does not know whether all current or former officers, directors
or employees of CityFed or its former subsidiaries who are or were
involved in actions or proceedings will request advancement or payment
of legal expenses and indemnification or, if requested, whether they
will be entitled to advancement of expenses or indemnification. CityFed
also does not know whether the RTC or FDIC will request payment on the
indemnification claims assigned to it by individuals who have settled
with the RTC or FDIC in the Second RTC Action, as described above.
Thus, it is not possible for CityFed to estimate with any accuracy the
probable amount or range of liability relating to current or potential
indemnification claims pursuant to CityFed's Bylaws, although the
amount of such claims could be material.
Certain insurance policies may provide coverage to CityFed for
indemnification payments made by CityFed. These policies, subject to
certain exclusions, limitations and loss participation provisions,
provide coverage to CityFed for amounts that it may be obligated to pay
to indemnify its current and former directors and officers, and in some
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<PAGE>
cases also provide coverage to the directors and officers of CityFed
directly for covered losses resulting from claims made against
CityFed's directors and officers for certain wrongful acts. Under the
insurance policies, CityFed would be required, prior to any payment by
the insurers to it, to absorb a retention amount equal to the first $4
million of each covered loss unless it is unable to do so by reason of
insolvency.
The insurers have denied coverage with respect to the claims made
against the directors and officers in the First and Second RTC Actions.
Consequently, CityFed may not be reimbursed by the insurers for any
expenses advanced or indemnification payments made to these individuals
in the First and Second RTC Actions.
IN THE MATTER OF CITYFED FINANCIAL CORPORATION, OTS Order No. AP 94-26
(June 2, 1994). On June 2, 1994, the Office of Thrift Supervision
issued a Notice of Charges ("OTS Action") against CityFed Financial
Corp. ("CityFed") and against Gordon E. Allen, John W. Atherton, Jr.,
Edwin M. Halkyard, Alfred J. Hedden, Peter R. Kellogg, William A.
Liffers and Gilbert G. Roessner ("Individual Respondents"), who are
current or former directors or officers of CityFed and of CityFed's
former subsidiary, City Federal.
The OTS charged that CityFed failed to maintain the net worth of City
Federal at levels required by applicable capital requirements in
violation of a Stipulation dated December 4, 1984. CityFed had provided
the Stipulation to the Federal Savings and Loan Insurance Corporation
in connection with the approval by the Federal Home Loan Bank Board of
CityFed's acquisition of City Federal in December 1984. Federal Home
Loan Bank Board ("FHLBB") Resolution No. 84-664, dated November 21,
1984, approved CityFed's acquisition of City Federal on the condition
that, among other things, CityFed provide the Stipulation to the
Federal Savings and Loan Insurance Corporation. The Stipulation
provided that, as long as CityFed controlled City Federal, CityFed
would cause the net worth of City Federal to be maintained at a level
consistent with that required by regulations and would infuse
sufficient additional equity capital, in a form satisfactory to the
regulators, to effect compliance with the capital requirement.
The Notice of Charges sought restitution in an amount not less than
$118.4 million, which the OTS alleged to be the regulatory capital
deficiency reported by City Federal in the Fall of 1989.
The OTS also sought a civil money penalty against CityFed on the
grounds that CityFed allegedly "knowingly" committed the alleged
violations described above and allegedly "knowingly or recklessly
caused a substantial loss to City Federal." The amount of the civil
money penalty assessed against CityFed in the Notice of Charges was
$2,649,600.
The Crime Control Act of 1990 provides that commitments to maintain the
capital of federally insured depository institutions, such as City
Federal, are afforded a priority over other unsecured claims in a
bankrupt corporation's estate to the extent provided in 11 U.S.C.
Section 507(a). Thus, if CityFed was held liable for the amount of
capital that would have been required to cause City Federal to meet its
regulatory capital requirements, a claim based on such liability would
have priority over other unsecured claims against CityFed's estate in
bankruptcy to the extent provided in such section.
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The OTS charged that the individual Respondents had an affirmative
obligation to see that CityFed complied with its net worth maintenance.
OTS alleged that some of the Respondents (Messrs. Allen, Atherton,
Hedden, Kellogg and Roessner) were unjustly enriched through CityFed's
payment of their legal expenses with CityFed assets, an allegation that
refers to the advancement by CityFed, pursuant to its obligations in
its Bylaws and Restated Certificate of Incorporation, of litigation
expenses to those Respondents in the RTC action in the United States
District Court for the District of New Jersey, RESOLUTION TRUST
CORPORATION V. ATHERTON, ET AL., Civil Action No. 93-1811 (consolidated
with RESOLUTION TRUST CORPORATION V. SIMMONS, ET AL., Civil Action No.
92-5261-B). The Notice of Charges requested that an order be entered by
the Director of the OTS requiring the Respondents to make restitution,
reimburse, indemnify or guarantee the OTS against loss in an amount not
less than $400,000, which OTS alleged to be the amount of legal
expenses CityFed paid on their behalf from April to December 1993.
In the Notice of Charges, the OTS also assessed a civil money penalty
against the individual Respondents on the grounds that they allegedly
"violated a condition imposed in writing and/or a written agreement."
The amount of civil money penalties assessed against the Respondents
was $51,750 each.
Also on June 2, 1994, the OTS issued a Temporary Order to Cease and
Desist ("Temporary Order") against CityFed. The Temporary Order sought
to "freeze" CityFed's assets by placing them in various respects under
the control of OTS. CityFed and several of the individual Respondents
attempted to have the Temporary Order set aside in court, but that
attempt was unsuccessful.
On October 26, 1994, CityFed and the OTS entered into an Escrow
Agreement with CoreStates Bank, N.A. (now First Union National Bank)
pursuant to which CityFed transferred substantially all of its assets
to First Union Bank for deposit into an escrow account. The Escrow
Agreement provided CityFed with $15,000 per month for normal business
expenses and allowed CityFed to sell and purchase securities in the
escrow account. Although the Escrow Agreement was terminated, CityFed's
assets continue to be invested in money market instruments with a
maturity of one year or less and money market mutual funds.
The terms of the Settlement generally include the following:
o CityFed paid to the FDIC, as receiver for City Federal,
$3,169,115;
o CityFed assigned to the FDIC all of CityFed's interest in its
goodwill claim (see "Supervisory Goodwill Action" below);
o CityFed conveyed to the FDIC its ownership interest in City
Federal and gave up any claims against its receivership
estate;
o The OTS dismissed with prejudice the OTS Action, and the OTS
and the FDIC gave full and complete releases to CityFed and
the Individual Respondents;
o CityFed and the Individual Respondents gave full and complete
releases to the OTS and the FDIC; and
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o The OTS dissolved the Temporary Order and authorized First
Union Bank to release to CityFed all of its assets remaining
in the escrow account following payment of the settlement
proceeds.
Under the terms of the Settlement, the Settlement may be declared null
and void if bankruptcy proceedings are instituted by or against CityFed
before August 23, 2000. If the Settlement becomes null and void, the
OTS and the FDIC would have the right to reinstate all claims against
CityFed and the Individual Respondents and could seek to litigate those
claims in the bankruptcy court or elsewhere. As noted above, claims
based on commitments to maintain the capital of federally insured
depository institutions are afforded a priority over other unsecured
claims in a bankrupt corporation's estate to the extent provided in 11
U.S.C. Section 507(a).
For further information regarding the Stipulation, see "First RTC
Action" below.
FIRST RTC ACTION - On December 7, 1992, the RTC in its capacity as
receiver for City Savings, and the RTC in its corporate capacity, filed
the First RTC Action in the N.J. Court against CityFed and against two
former officers of City Federal. In its complaint in the First RTC
Action, the RTC, in its corporate capacity, sought, INTER ALIA, to
recover damages in excess of $12 million against CityFed resulting from
CityFed's alleged violation of the Stipulation to maintain the net
worth of City Federal.
In connection with the First RTC Action, the RTC filed an Order to Show
Cause with Temporary Restraints Freezing Assets of Defendant CityFed
Financial Corp. ("Order to Show Cause") seeking an order from the N.J.
Court placing all assets of CityFed under the control of the N.J. Court
and related relief pending a hearing on a preliminary injunction. On
January 5, 1993, CityFed and the RTC entered into the Expense
Agreement, effective as of December 14, 1992, whereby the RTC agreed to
refrain from seeking the relief sought in its Order to Show Cause. In
the Expense Agreement, the RTC further agreed that CityFed could make
payments of ordinary and reasonable business expenses, including
aggregate compensation and employee benefits in amounts not to exceed
those paid in 1991 for John W. Atherton, Jr., as President of CityFed,
and for CityFed's corporate secretary, directors' fees and reasonable
expenses in connection with attendance at meetings of CityFed's Board
of Directors, reasonable and necessary fees for outside auditing
services, taxes, transfer fees, and rent and utilities for CityFed's
offices in Florida and Massachusetts, reasonable corporate legal fees,
and reasonable defense costs, attorneys' fees and/or disbursements in
connection with the First RTC Action and, relating only to the defense
of CityFed, with respect to the action originally filed in the United
States District Court for the Northern District of California captioned
RIDDER, ET AL. V. CITYFED FINANCIAL CORP., C92-4649-BAC, which was
dismissed without prejudice and refiled in the N.J. Court captioned
RIDDER, ET AL. V. CITYFED FINANCIAL CORP., (Case No. 93-1676) (HLS)
("Ridder Action"). (The Ridder Action has been settled.) Pursuant to
the Expense Agreement, CityFed had been giving a monthly accounting of
such expenditures to the RTC, and the RTC had the right to apply to the
N.J. Court in the First RTC Action for an appropriate Order to prohibit
such expenditures.
CityFed agreed in the Expense Agreement to give the RTC written notice
prior to making any payment of extraordinary expenses of more than
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$5,000 and of any payment on behalf of CityFed (other than with respect
to the First RTC Action and the Ridder Action) and/or on behalf of any
individual or individuals with respect to whom CityFed is obligated
under its Bylaws to make such payment for defense costs, attorneys'
fees and/or disbursements with respect to any other then-pending or
threatened, or subsequently initiated or threatened, civil or
administrative investigation, action or proceeding. The RTC had the
right to make an application to the N.J. Court to prohibit the payment
of such extraordinary expenses of more than $5,000 and such defense
costs, attorneys' fees and/or disbursements.
By its terms, the Expense Agreement remained in full force and effect
until (a) it was terminated by mutual agreement of CityFed and the RTC
in writing, (b) it was terminated by an order of the N.J. Court or (c)
the N.J. Court entered a final order with respect to the RTC's claim
against CityFed in the First RTC Action regarding the Stipulation.
On September 30, 1993, CityFed was advised by OTS staff that it
intended to recommend that the OTS initiate an administrative
enforcement proceeding against CityFed. The OTS staff reaffirmed its
intention to recommend that the OTS initiate such a proceeding in
meetings between OTS staff and representatives of CityFed in April
1994. In light of this, and at the request of the RTC and CityFed, the
N.J. Court entered several successive orders staying the First RTC
Action from October 1993 through June 1994. The Orders staying the
First RTC Action did not affect the Expense Agreement, except that the
Orders provided that the Expense Agreement would terminate upon the
effective date of any order issued by the OTS, or of any consent order
or agreement between the OTS and CityFed, that addressed the subject
matter of the Expense Agreement. In light of the filing by the OTS of
the Notice of Charges on June 2, 1994, the RTC and CityFed agreed to
(1) a Consent Order Dismissing Claims Against Defendant CityFed
Financial Corp. Without Prejudice, which provides for the dismissal
without prejudice of the RTC's claim against CityFed in the First RTC
Action, and which was entered as an Order of the N.J. Court on July 19,
1994; and (2) a Tolling Agreement, effective as of July 11, 1994,
pursuant to which CityFed and the RTC agreed (a) to toll, during the
pendency of the OTS' proceeding against CityFed, the running of the
statute of limitations with respect to the claims the RTC had asserted
against CityFed in the First RTC Action and (b) that, if the OTS'
proceeding against CityFed results in a determination that the
Stipulation was void and/or unenforceable as a matter of law, or that
CityFed did not violate the Stipulation, the RTC would be bound by such
determination.
Pursuant to the Settlement, the FDIC released CityFed from all claims
in the First RTC Action.
The RTC also sought, in its complaint in the First RTC Action, to
recover damages in excess of $130 million from two former officers of
City Federal resulting from their alleged negligence, gross negligence,
breach of fiduciary duty and other duties and other wrongful and
improper conduct while serving as officers of City Federal in
connection with the approval, funding, management, oversight and
workout of two large acquisition, development and construction loans
for two projects located in Florida, Grand Harbor ("Grand Harbor") and
Woodfield Country Club Estates ("Woodfield"). On February 9, 1993, upon
motion of CityFed in the First RTC Action, the N.J. Court entered an
order severing the RTC's claims against CityFed from the RTC's claims
against the two former officers of City Federal.
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SECOND RTC ACTION - On April 26, 1993, the RTC, in its capacity as
receiver for City Savings, filed the Second RTC Action in the N.J.
Court against John W. Atherton, Jr., Gordon E. Allen, Alfred J. Hedden,
Peter R. Kellogg, John Kean, Gilbert G. Roessner, George E. Mikula and
James P. McTernan, all former directors and/or officers of City
Federal. In its initial complaint in the Second RTC Action, the RTC
sought to recover damages in excess of $130 million for alleged
negligence, gross negligence and breach of fiduciary duties by the
defendants in connection with the Grand Harbor and Woodfield loans.
Although the Second RTC Action was filed separately from the First RTC
Action, the N.J. Court consolidated the two actions for administrative
purposes.
On June 17, 1993, the RTC filed a First Amended Complaint ("First
Amended Complaint") in the Second RTC Action that named as additional
defendants in the Second RTC Action Victor A. Pelson and Marshall M.
Criser, two former directors of City Federal. With the exception of the
addition of Messrs. Pelson and Criser as defendants, the substance of
the First Amended Complaint is identical to the complaint filed by the
RTC on April 26, 1993.
On November 15, 1993, the N.J. Court granted the motions of several of
the defendants to dismiss the RTC's First Amended Complaint to the
extent it alleged a cause of action for simple negligence. On December
15, 1993, the RTC filed a Second Amended Complaint ("Second Amended
Complaint") in the Second RTC Action, alleging gross negligence and
breach of duty against the defendants named in the Second RTC Action in
connection with the Grand Harbor and Woodfield loans, and also in
connection with the Port Liberte loan ("Port Liberte"), a large real
estate development loan in New Jersey that had not been mentioned in
the First RTC Action or in the initial complaint or the First Amended
Complaint in the Second RTC Action. The Second Amended Complaint, with
the addition of allegations regarding Port Liberte, seeks damages in
excess of $200 million (as compared to $130 million in the First
Amended Complaint).
The RTC filed an interlocutory appeal with the United States Court of
Appeals for the Third Circuit ("Third Circuit") from the N.J. Court's
November 15, 1993 Orders in the Second RTC Action that dismissed the
RTC's First Amended Complaint to the extent it alleged a cause of
action for simple negligence. On June 23, 1995, the Third Circuit
reversed the N.J. Court's November 15, 1993 Orders. On January 14,
1997, in the case captioned ATHERTON V. FEDERAL DEPOSIT INSURANCE
CORPORATION, 117 S. Ct. 666 (1997) ("Supreme Court Case"), the Supreme
Court of the United States vacated the Third Circuit's judgment and
remanded the case.
On January 2, 1996, the FDIC, as statutory successor to the RTC, filed
a Third Amended Complaint ("Third Amended Complaint") in the Second RTC
Action. The Third Amended Complaint alleged that the defendants in the
Second RTC Action were liable for negligence as well as gross
negligence and breach of fiduciary duty under federal common law. In
all other respects, the Third Amended Complaint was identical to the
Second Amended Complaint. On February 14, 1996, some of the defendants
in the Second RTC Action filed a motion to dismiss the Third Amended
Complaint.
CityFed is aware that all of the defendants in the Second RTC Action
have settled with the RTC or FDIC. The settlement agreement for Victor
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Pelson includes a waiver by him of his indemnification claim against
CityFed for legal fees and expenses and the amount of his settlement
payment in the Second RTC Action, which occurred pursuant to the
Settlement. Mr. Pelson agreed to pay the RTC $650,000 to settle the
Second RTC Action. The settlement agreements for John Kean, Marshall
Criser, Alfred Hedden and Gilbert Roessner include (1) an assignment by
them to the RTC or FDIC of their respective indemnification claims
against CityFed for settlement payments they make to the RTC or FDIC to
settle the Second RTC Action, and (2) retention by them of their
respective indemnification claims against CityFed for legal fees and
expenses incurred in the Second RTC Action. The settlement payments
agreed to be made by Messrs. Kean, Criser, Hedden and Roessner to the
RTC or FDIC, and thus the amount of indemnification claim assigned by
them to the RTC or FDIC, are $1,200,000 for Mr. Kean, $400,000 for Mr.
Criser, $250,000 for Mr. Hedden and $335,000 for Mr. Roessner. The RTC
agreed to allow a $70,000 credit toward the amount to be paid by Mr.
Roessner as a means of resolving Mr. Roessner's claim against the RTC
for lost earnings on deferred compensation amounts Mr. Roessner claims
were withheld from him by the RTC. In their settlements with the FDIC,
Gordon Allen and Peter Kellogg retained their rights to seek
indemnification from CityFed for settlement payments they made to the
FDIC as well as for legal fees and expenses incurred by them in the
Second RTC Action. Mr. Allen agreed to pay $250,000 to settle the
Second RTC Action, and Mr. Kellogg agreed to pay $3,000,000. CityFed
understands also that the FDIC has settled with George Mikula, James
McTernan, John W. Atherton, Jr., Richard Simmons and Michael DeFreytas
for $5,000 each and they each have retained their rights to seek
indemnification from CityFed for their settlement payments.
Pursuant to the Settlement, the FDIC assigned any rights it acquired in
the settlements described above to CityFed. See "Indemnification
Claims" above.
SUPERVISORY GOODWILL ACTION - The United States Supreme Court held in
the WINSTAR case that the loss by a financial institution of
supervisory goodwill carried on its books as a consequence of earlier
supervisory mergers, as a result of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, constituted a breach of contract
by the United States. On August 7, 1995, CityFed, acting in its own
right and as shareholder of City Federal, filed a civil action in the
United States Court of Federal Claims seeking damages for loss of
supervisory goodwill on its books as a result of various acquisitions
by City Federal of troubled depository institutions. CITYFED FINANCIAL
CORP., IN ITS OWN RIGHT AND IN ITS CAPACITY AS SHAREHOLDER OF CITY
FEDERAL SAVING BANK, BEDMINSTER, NEW JERSEY V. UNITED STATES OF
AMERICA, No. 95-508c.
CityFed's case is one of more than one hundred supervisory goodwill
cases currently pending in the Court of Federal Claims. The Court has
adopted case management procedures to govern the priority and handling
of these cases, and CityFed's counsel is participating with other
plaintiffs' counsel in coordinated prosecution of these cases.
The FDIC has intervened as a plaintiff in each supervisory goodwill
case involving closed institutions where there is claimed to be a
deficit in the receivership estate. CityFed's case is such a case, and
the FDIC has intervened as a plaintiff in CityFed's case. The FDIC
claims that, as receiver, it is the proper party to assert goodwill
claims, since its receivership claim likely exceeds any potential
goodwill recovery. The Court has permitted the FDIC to participate in
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the prosecution of such goodwill claims, but not to the exclusion of
other plaintiffs. The Court has not yet determined whether the FDIC
will be entitled to some or all of the recovery in such cases.
CityFed's supervisory goodwill case remains stayed, pursuant to the
Court's case management procedures, while the Court completes discovery
and trials in other supervisory goodwill cases.
Pursuant to the Settlement, CityFed assigned to the FDIC all of
CityFed's interest in its supervisory goodwill case, ceased to be a
party to that case, and has no right to share in the recovery in that
case, should there be one.
CLAIM OF A FORMER DIRECTOR AND OFFICER - As a result of the
receivership of City Federal, City Federal failed to pay Gilbert G.
Roessner, a former director and officer of CityFed, the amounts owed to
him under various deferred compensation arrangements City Federal had
with him. He claims that CityFed is responsible for this amount
(approximately $1.1 million as of November 1989). On April 30, 1991,
special counsel to the Compensation Committee of CityFed's Board of
Directors recommended to the full Board that no payments be made to Mr.
Roessner currently, but that the Board keep Mr. Roessner's claim under
advisement, to be reconsidered in light of then existing circumstances
and any additional evidence provided by Mr. Roessner in support of his
claim. The full Board of Directors received the report of special
counsel to the Compensation Committee.
Pursuant to Mr. Roessner's settlement with the RTC as discussed under
"Second RTC Action" above, CityFed believes Mr. Roessner's current
deferred compensation claim is in the amount of $169,365.60 plus
accrued interest thereon, if any.
INDEMNIFICATION CLAIMS RELATING TO DEFERRED COMPENSATION PLANS - In
September 1990, the RTC, as receiver for City Federal (and the new
Federal mutual savings bank created to acquire all of the deposits and
substantially all of the assets and indebtedness of City Federal),
caused an action to be filed in the N.J. Court seeking the return of
approximately $3.1 million (since reduced to $1.9 million) in deferred
compensation paid by City Federal to certain officers, directors and
employees of City Federal, some of whom are or were also officers,
directors or employees of CityFed. Pursuant to the Delaware General
Corporation Law and the Bylaws of CityFed, CityFed paid the defendants'
legal fees in connection with their defense of the litigation.
A settlement agreement, under which the defendants were to pay
$790,000, was entered into by the parties in June 1993 (of which
$114,000 was in the form of promissory notes from two defendants
payable over four years). This settlement agreement concluded the case.
Several defendants have requested that CityFed reimburse them for the
settlement payments made by them under the settlement agreement.
CityFed has not responded to the request. It is likely that CityFed
will receive similar requests from the other parties to the settlement.
CityFed's liability to the individuals remains to be determined;
however, CityFed has included in its contingency reserve the full
settlement amount of $790,000.
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TAX LIABILITIES - CityFed's liability for federal income taxes for tax
years through 1990 was calculated on the basis of CityFed's inclusion
in a consolidated group that includes City Federal and the successor
institutions created by the OTS to acquire the assets and liabilities
of City Federal. Under the applicable provisions of the Internal
Revenue Code of 1986, as amended ("Code"), and the regulations
thereunder, all members of the consolidated group, including CityFed,
are jointly and severally liable for any income taxes owed by the
group. CityFed has not included City Federal and the successor
institutions in the Federal income tax returns CityFed filed for its
tax years 1991 through 1998. CityFed's position is not free from
challenge, although CityFed believes that its position is reasonable
under the current tax law.
CONTINGENCY RESERVE - As noted above, the Company is subject to a
number of loss contingencies for which it is currently unable to
reasonably assess the probability or range of loss. At June 30, 2000,
the Company had a $4.2 million contingency reserve that includes
amounts for claims asserted for indemnification of expenses in the OTS
Action, expenses and settlements in the Second RTC Action and the
claims described above under "Indemnification Claims Relating to
Deferred Compensation Plans." The reserve also includes amounts
representing the current minimum legal expenses estimated to be
incurred related to these claims. The charges for the six months ended
June 30, 2000 include $3,169,115 relating to the Settlement. The
following is an analysis of the Company's contingency reserve:
Balance - December 31, 1999 $6,353,000
Charges (3,197,000)
Provision 1,037,000
----------
Balance - June 30, 2000 $4,193,000
==========
Item 2. Management's Discussion and Analysis or Plan of Operation.
General
On December 7, 1989, the Office of Thrift Supervision appointed the
Resolution Trust Corporation ("RTC") as receiver for City Federal
Savings Bank ("City Federal"), the sole subsidiary of CityFed Financial
Corp. ("CityFed" or the "Company"). A new federal mutual savings bank,
City Savings Bank, F.S.B. ("City Savings"), was created, which acquired
all deposits and substantially all of the assets and liabilities of
City Federal. CityFed no longer controls City Federal and has no
control over City Savings.
As a result of this action, the financial statements of CityFed at
December 31, 1989, for the year then ended, and for subsequent periods
reflect CityFed's interest in City Federal as discontinued operations.
Because City Federal was placed in receivership, CityFed's interest in
City Federal was a claim against the receivership estate for the
proceeds, if any, of the receivership estate of City Federal that
remain after all creditors, including the RTC, have been paid. For a
fuller description of the receivership, see Item 1., "Business" in
CityFed's 1999 Form 10-KSB. In the Settlement relating to IN THE MATTER
OF CITYFED FINANCIAL CORPORATION, OTS Order No. AP 94-26 (June 2, 1994)
("Settlement"), CityFed conveyed its interest, if any, in City Federal
to the Federal Deposit Insurance Corporation and gave up any claim
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against the receivership estate of City Federal. See Note 4 to the
Notes to Financial Statements for the Six Months Ended June 30, 2000 in
this Form 10-QSB ("Notes") under In the Matter of Cityfed Financial
Corporation for further information regarding the Settlement.
Since the receivership of City Federal, CityFed has been, and currently
is, in the process of determining its liabilities, including its
contingent liabilities described in Note 4 to the Notes. To maintain
the principal value of its existing assets while this process is
ongoing, CityFed has invested substantially all of its funds in high
grade money market instruments with a maturity of one year or less and
money market mutual funds. Since the receivership of City Federal, the
operating expenses of CityFed have consisted of the salaries of the
employees of CityFed, the expenses of the two small offices maintained
by CityFed and the related office operating expenses, expenses relating
to the audit of its financial statements by its independent auditors,
and expenses of its outside legal counsel. Currently, CityFed has one
full-time employee and one office.
Due to the nature of its assets at and subsequent to December 8, 1989,
CityFed may be deemed to fall within the definition of an "investment
company" under the Investment Company Act of 1940, as amended ("1940
Act"), from that date to the present. To resolve any question regarding
its current status under the 1940 Act, CityFed filed an application on
October 19, 1990 with the Division of Investment Management of the
Securities and Exchange Commission ("SEC") for an order exempting it
from certain provisions of the 1940 Act and certain rules and
regulations thereunder. This application was amended on September 23,
1993, January 18, 1994 and March 1, 1994. The application was granted
under Sections 6(c) and (e) of the 1940 Act on March 15, 1994. Under
the order granting the application ("1940 Act Order"), CityFed was not
required to register as an investment company. However, CityFed and
other persons in their transactions and relations with CityFed are,
under the terms of the 1940 Act Order, subject to Sections 9, 17(a),
17(d), 17(e), 17(f), 36 through 45 and 47 through 51 of the 1940 Act,
and the rules thereunder, as if CityFed were a registered investment
company, except insofar as permitted by the 1940 Act Order. The 1940
Act Order exempted CityFed from having to register as an investment
company until the earlier of March 15, 1995 or such time as CityFed
would no longer be required to register as an investment company. On
February 28, 1995, an Order was issued extending the requested
exemption until February 28, 1996, on February 21, 1996, an order was
issued extending the requested exemption until February 21, 1997, on
February 12, 1997, an Order was issued extending the requested
exemption until February 12, 1999, on February 12, 1999, an Order was
issued extending the requested exemption until February 12, 2000, and,
on February 9, 2000, an order was issued extending the requested
exemption until February 9, 2001.
Liquidity and Capital Resources
At June 30, 2000, CityFed had approximately $6,550,000 in total assets,
$8,716,000 in total liabilities and $2,166,000 in negative
stockholders' equity. At December 31, 1999, CityFed had approximately
$9,652,000 in total assets, $10,857,000 in total liabilities and
$1,205,000 in negative stockholders' equity. However, as discussed in
Note 4 to the Notes and under Item 1., "Business - Potential
Obligations of CityFed" in CityFed's 1999 Form 10-KSB, a number of
claims have been asserted against CityFed. If the claimants under some
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or all of these claims are successful, their claims against CityFed
could greatly exceed CityFed's assets. Consequently, CityFed's assets
are currently being invested short term, and expenses have been reduced
to a level that management believes is commensurate with CityFed's
current activities pending resolution of these claims.
While CityFed's liquidity is expected to be sufficient to meet legal
and administrative expenses over the next twelve months, any
substantial indemnification expense could reduce liquidity to a level
that would jeopardize the continuation of the Company's activities. As
a result of additions to the contingency reserve, CityFed currently has
a negative net worth and it is unlikely that CityFed will be able to
achieve a positive net worth in the foreseeable future.
As discussed above, since the receivership of City Federal, CityFed
initially marshaled its assets and has been, and currently is, in the
process of determining its liabilities. To maintain the value of
CityFed's existing assets while this process is ongoing, CityFed has
invested in income producing instruments. Funds are invested so that
they are convertible into cash in a reasonably short time with minimal,
if any, loss of principal.
Since the receivership of City Federal, CityFed has invested and will
continue to invest substantially all its funds in securities with a
maturity of one year or less. These consist of U.S. government or
agency securities, commercial paper, bank certificates of deposit,
money market mutual funds and corporate debt obligations. Repurchase
agreements may only be entered into using U.S. government securities as
collateral. Non-governmental or agency investments are purchased only
if they are rated in one of the two highest categories by an
established rating agency. Investments in the corporate debt securities
of any one issuer are limited to $2,500,000.
Under the terms of the 1940 Act Order, CityFed may not purchase or
otherwise acquire any additional securities other than securities that
are rated investment grade or higher by a nationally recognized
statistical rating organization or, if unrated, deemed to be of
comparable quality under guidelines approved by CityFed's Board of
Directors, subject to two exceptions:
(a) CityFed may make an equity investment in issuers
that are not investment companies as defined in Section 3(a)
of the 1940 Act (including issuers that are not investment
companies because they are covered by a specific exclusion
from the definition of investment company under Section 3(c)
of the 1940 Act other than Sections 3(c)(1) and 3(c)(7)) in
connection with the possible acquisition of an operating
business as evidenced by a resolution approved by CityFed's
Board of Directors; and
(b) CityFed may invest in one or more money market
mutual funds that limit their investments to "Eligible
Securities" within the meaning of Rule 2a-7(a)(10) promulgated
under the 1940 Act.
The financial statements of CityFed at December 31, 1989, for the year
then ended, and for subsequent periods reflect that CityFed maintains a
contingency reserve which, at June 30, 2000, was $4,193,000 and, at
December 31, 1999, was $6,353,000.
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The current reserves include amounts for claims asserted for
indemnification of expenses in the OTS Action, expenses and settlements
in the Second RTC Action and the claims described above under
"Indemnification Claims Relating to Deferred Compensation Plans." The
reserve also includes amounts representing the current minimum legal
expenses estimated to be incurred in connection with the claims. See
Note 4 to the Notes, and Item 1., "Business - Potential Obligations of
CityFed" in CityFed's 1999 Form 10-KSB for a description of the major
claims that may give rise to expected future costs. Although management
believes that CityFed's current level of reserves are sufficient to
cover the costs of pending claims, no assurances can be given that the
reserves established will be adequate, that any ultimate resolution of
the claims will not result in substantial amounts being incurred or
that further claims will not be asserted.
On October 26, 1994, CityFed and the OTS entered into an Escrow
Agreement ("Escrow Agreement") with CoreStates Bank, N.A., now First
Union Bank ("First Union"), pursuant to which CityFed transferred
substantially all of its assets to First Union for deposit into an
escrow account to be maintained by First Union. Under the Settlement,
CityFed is no longer subject to the terms of the Escrow Agreement.
Results of Operations
CityFed recorded income from continuing operations for the six months
ended June 30, 2000 of $76,000. This compares to income from continuing
operations in the amount of $105,000 for the six months ended June 30,
1999. No addition to the contingency reserve was made during the three
or six months ended June 30, 1999 while an addition of $1,037,000 was
made for the six months ended June 30, 2000.
CityFed recorded a loss from continuing operations for the three months
ended June 30, 2000 of $1,000. This compares to income from continuing
operations in the amount of $56,000 for the three months ended June 30,
1999. No addition to the contingency reserve was made during the three
months ended June 30, 1999 or 2000.
Interest on investments was $255,000 for the six months ended June 30,
2000 compared to $227,000 for the six months ended June 30, 1999 due
primarily to the higher level of interest rates. Total expenses of
$203,000 for the six months ended June 30, 2000 were higher than the
$122,000 for the same period in 1999 due to higher professional service
fees. In 2000, CityFed received a distribution of $24,000 from CX
Partners, L.P. See Item 1., "Business-Boesky Settlement" in CityFed's
1999 Form 10-KSB.
Interest on investments was $123,000 for the three months ended June
30, 2000, compared to $114,000 for the three months ended June 30, 1999
due primarily to the higher level of interest rates. Total operating
expenses of $124,000 for the three months ended June 30, 2000 were
higher than the $58,000 for the same period in 1999 due to the higher
level of compensation and professional service fees.
CityFed's contingency reserve was established in 1989 and is intended
to include reserves for CityFed's legal and indemnification expenses.
See Note 4 to the Notes to Financial Statements in this Form 10-QSB,
and Item 1., "Business - Potential Obligations of CityFed" in CityFed's
1999 Form 10-KSB for a description of the major claims that may give
rise to expected future costs. An addition of $1,037,000 was made to
the reserve for the six months ended June 30, 2000. Due to the addition
to the reserve less charges of $28,000 and the settlement payment in
the OTS Action of $3,169,115, the contingency reserve was decreased
from $6,353,000 at December 31, 1999 to $4,193,000 at June 30, 2000.
The basic net loss per share of $0.12 and $0.28 for the three and six
months ended June 30, 2000, respectively, compares to $0.11 and $0.23
for the three and six months ended June 30, 1999. The basic net loss
per share of $0.28 for the six months ended June 30, 2000 is after the
loss from discontinued operations of $0.05 per share. In all periods,
the basic net loss per share is after the deduction of unpaid preferred
dividends. No preferred or common dividends have been paid since the
second quarter of 1989 and none are expected to be paid until CityFed's
situation changes significantly.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
See Note 4 to the Notes for a description of currently pending
litigation.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
(a) None.
(b) CityFed's $2.10 Cumulative Convertible Preferred Stock, Series B,
par value $25.00 per share ("Series B Stock"), is required to pay
quarterly dividends at a rate of $0.525 per share on March 1, June 1,
September 1 and December 1 of each year. CityFed's Series C, Junior
Preferred Stock, Cumulative, par value $0.01 per share ("Series C
Stock"), is required to pay quarterly dividends at a rate of $0.10 per
share on March 15, June 15, September 15 and December 15 of each year.
The dividends on both the Series B and the Series C Stock are
cumulative. The Series C Stock is junior to the Series B Stock in the
payment of dividends.
Beginning with the payment due on September 1, 1989, CityFed has not
paid any quarterly dividends on the Series B Stock. Beginning on
September 15, 1989, CityFed also has not paid any quarterly dividends
on the Series C Stock. Because CityFed has failed to pay at least six
quarterly dividends on the Series B Stock, the holders of such stock
have the exclusive right, voting separately as a class, to elect, and
have elected, two directors of CityFed. Until the aggregate deficiency
is declared and fully paid on the Series B Stock and the Series C
Stock, CityFed may not declare any dividends or make any other
distributions on or redeem the Common Stock. Until the aggregate
deficiency is declared and fully paid on the Series B Stock, CityFed
may not declare any dividends or make any other distributions on or
redeem the Series C Stock. As of June 30, 2000, the aggregate
deficiency on the Series B Stock was approximately $58.6 million and
the aggregate deficiency on the Series C Stock was approximately $36.3
million.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
11. Statement Regarding the Computation of Per Share Loss.
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27. Financial Data Schedule
(b) Reports on Form 8-K.
A Report on Form 8-K, dated May 19, 2000, was filed on May 23, 2000,
reporting, under Item 5, the Settlement with the OTS and the FDIC as
discussed in Note 4 to the Financial Statements under Item 1 of this
Form 10-QSB.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CITYFED FINANCIAL CORP.
By: /s/ John W. Atherton, Jr.
--------------------------
John W. Atherton, Jr.
President, Chief Executive Officer
and Treasurer (Principal Executive
and Financial Officer)
Date: August 14, 2000
21
