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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 29, 1994
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FirstFed Financial Corp.
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Delaware 1-9566 95-4087449
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(State of Incorporation) (Commission File No.) (IRS Employer
identification No.)
401 Wilshire Boulevard, Santa Monica, California 90401-1490
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 319-6000
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Total number of pages is 10.
Index to Exhibits is on page 3.
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Item 5. Other Events.
On July 29, 1994, the registrant, FirstFed Financial Corp., issued a
press release. A copy of this Press Release is attached and incorporated
herein as Exhibit 99.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
99. Press Release dated July 29, 1994.
S I G N A T U R E S
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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.
Dated: July 29, 1994 By: JAMES P. GIRALDIN
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James P. Giraldin
Chief Financial Officer
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INDEX TO EXHIBITS
Item page
[C] [S] [C]
99 Press Release dated July 29, 1994 4
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July 29, 1994
FIRSTFED REPORTS RESULTS FOR THE SECOND QUARTER
OF 1994
FirstFed Financial Corp., holding company for First Federal Bank of
California, today announced a net loss of $25.6 million or $2.42 per
share of common stock for the second quarter of 1994. For the second
quarter of 1993, the Company reported net earnings of $8.3 million or
$0.78 per share. For the first quarter of 1994, the Company recorded
a net loss of $6.1 million or $0.58 per share.
For the first six months of 1994 the Company recorded a net loss of
$31.7 million or $3.01 per share compared to a net loss of $8.1 million
or $0.77 per share for the first six months of 1993. Second quarter
results and results for the first six months of the year reflect losses
resulting from the January 17, 1994 earthquake and the recession in
Southern California.
As indicated in a press release dated June 20, 1994, the Company
recorded a $55.0 million provision for loan losses for the second
quarter, $23.1 million of which was for estimated losses resulting
from the earthquake and $31.9 million was for estimated losses
stemming from the weak Southern California economy and real estate
market. When combined with the $24.7 million provision recorded
during the first quarter of 1994, total loss provisions for the first
six months of 1994 reached $79.7 million.
The Bank recorded a total provision of $30.6 million for earthquake-
related losses during the first six months of the year. Based on
current information available, management believes that the loan loss
provisions recorded to date fully reflect the extent to which collateral
supporting the Bank's loan portfolio and real estate owned by the Bank
was affected by the earthquake. Charge-offs related to earthquake-damaged
properties totaled $11.8 million for the first six months of the year.
As of June 30, 1994, the Bank's general valuation allowance was $77.0
million or 2.62% of the Bank's portfolio of loans and real estate owned.
This compares to $41.1 million or 1.43% at March 31, 1994 and $44.3
million, or 1.60%, at June 30, 1993. Additionally, the Bank has
valuation allowances, recorded as a liability, for loans which it has
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sold with recourse. As of June 30, 1994, these allowances totaled
$6.3 million, or 2.13% of the loans sold with recourse. This compares
to $5.8 million, or 1.89% at March 31, 1994 and $8.2 million, or 2.23%
at June 30, 1993.
Total loan charge-offs, including those for earthquake damage, were
$18.6 million for the second quarter of 1994 compared to $8.8 million
for the second quarter of last year. Loan charge-offs for the first
quarter of 1994 were $24.7 million. Total loan charge-offs for the first
six months of 1994 were $43.3 million, compared with $21.2 million
for 1993. Multi-family loans in particular have been affected by the
Southern California economy. The current economic recession has
adversely affected multi-family properties due to lower rental income,
higher vacancy rates and lower rates of real estate appreciation and
sales.
Non-performing assets were $113.1 million or 3.03% of total assets at
June 30, 1994, down from $118.2 million or 3.23% of total assets at
December 31, 1993 and $149.6 million or 4.14% of total assets at
June 30, 1993. The decrease in non-performing assets during the
first six months of 1994 is attributable to specific reserves
established for non-performing loans and continuing sales of real estate
acquired by foreclosure.
As of June 30, 1994, the Bank had an additional $84.0 million in loans
on which the principal and interest payments had been temporarily
modified. Typically these modifications are for six to twelve months
and reduce the borrowers' payments to no less than the monthly interest
payment required under the note. The Bank had established loan loss
allowances of $6.1 million for these loans. Less than 5% of these
modified loans were 90 days or more delinquent as of June 30, 1994.
The Bank implemented Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan," ("SFAS No.
114") as of January 1, 1994. As of June 30, 1994, the Bank had $149.0
million of loans which were considered impaired, net of $31.1 million
in loan loss allowances related to such loans. This compares to $119.2
million of loans, net of allowances of $24.4 million as of March 31,
1994. Of the $149.0 million, $55.9 million are included in the modified
loans noted above.
Management continues to focus on the disposition of foreclosed real
estate. Sales of foreclosed real estate totaled $34.2 million and $53.0
million for the second quarter and first six months of 1994,
respectively, compared to $26.7 million and $37.6 million for the
second quarter and first six months of 1993.
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Net interest income, the Company's primary source of core earnings,
was $19.8 million for the second quarter of 1994 compared to $23.6
million for the first quarter of 1994 and $23.6 million for the second
quarter of 1993. The dollar amount of net interest income during the
second quarter of 1994 dropped due to decreased interest margins
resulting from four interest rate increases by the Federal Reserve
Board thus far in 1994. During periods of increasing interest rates,
the Bank's cost of funds increases more rapidly than the yield on the
adjustable rate loan portfolio. Correspondingly, the Bank's interest
margin decreased to 2.05% for the second quarter of 1994 from 2.43% for
the first quarter of 1994.
The Bank also increased its long-term liabilities, which are more
costly and which contributed to the decrease in interest margin. Long-
term liabilities are used to help offset the impact of future increases
in interest rates and the effect from the "lagging" nature of the index
upon which substantially all of the Bank's loans are based. The effect
of these longer term liabilities can be seen in the Bank's one-year gap,
expressed as a percentage of total assets, which has increased to a
positive 15.89% at June 30, 1994 from 11.50% at the same time last year.
Loan originations for the second quarter of 1994 increased to $197.0
million compared to $154.7 million for the first quarter of 1994. The
increase in loan originations during the second quarter of 1994
reflects the strong demand for adjustable rate mortgages which are
an area of primary focus for the Bank. The Bank's portfolio of
adjustable rate mortgages comprised 98.9% of its total loans
outstanding as of June 30, 1994.
Expense control remained a priority for the Bank during the second
quarter. The ratio of non-interest expense to total average assets for
the second quarter of 1994 was 1.26%, comparable to 1.27% for the
second quarter of 1993. On a year-to-date- basis, the expense ratio
was 1.29% for both the first six months of 1994 and 1993.
The Bank continues to exceed all minimum regulatory capital
requirements at the end of the second quarter of 1994. The most
stringent requirement, a risk-based capital ratio of 8% of risk-weighted
assets, was exceeded by the Bank, which had a risk-based capital ratio
of 8.71% of total risk-weighted assets at the end of the quarter. The
tangible and core capital ratios each were 4. 57% at the end of the
quarter.
William S. Mortensen, Chairman and CEO of FirstFed commented, "We have
built strong reserves to deal with both the continuing effects of the
economic recession and the recent earthquake in Southern California.
Management remains committed to Southern California and has positioned
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the Bank for growth as the economy recovers by building strong core
earnings, maintaining a low expense ratio and emphasizing the origination
of adjustable rate mortgages."
As announced on July 20, 1994, FirstFed has filed a registration
statement for the issuance of $50 million in 10-year notes. The
registration statement relating to these securities has been filed with
the Securities and Exchange Commission but has not yet become
effective. The securities may not be sold nor may offers to buy be
accepted prior to the time the Registration Statement becomes
effective. This news release shall not constitute an offer to sell or
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities
laws of any such state. A written prospectus meeting the requirements
of Section 10 of the Securities Act of 1933 will be available in the
future from Goldman, Sachs & Co., 85 Broad Street, New York, New
York 10004.
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<TABLE>
<CAPTION>
KEY FINANCIAL RESULTS ARE HIGHLIGHTED BELOW
(Unaudited)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1994 1993 1994 1993
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<S> <C> <C> <C> <C>
Net Earnings (Loss) $ (25,553,000) $ 8,328,000 $ (31,668,000) $ (8,074,000)
Earnings (Loss) per Share $ (2.42) $ 0.78 $ (3.01) $ (0.77)
Book Value Per Share $ 16.71 $ 19.11 $ 16.71 $ 19.11
Weighted Average
Share Outstanding 10,541,367 10,649,177 10,536,561 10,427,554
Assets $3,736,171,000 $3,610,600,000 $3,736,171,000 $3,610,600,000
Loans $3,504,528,000 $3,292,142,000 $3,504,528,000 $3,292,142,000
Deposits $2,284,874,000 $2,068,671,000 $2,284,874,000 $2,068,671,000
Borrowings $1,231,024,000 $1,291,821,000 $1,231,024,000 $1,291,821,000
Stockholders' Equity $ 176,704,000 $ 199,536,000 $ 176,704,000 $ 199,536,000
Loan Originations $ 196,962,000 $ 185,876,000 $ 351,665,000 $ 372,331,000
Net Interest Income $ 19,818,000 $ 23,608,000 $ 43,437,000 $ 48,657,000
Real Estate (Foreclosed) $ 20,054,000 $ 51,451,000 $ 20,054,000 $ 51,451,000
Modified Loans
(Not Impaired) $ 30,561,000 $ 35,231,000 $ 30,561,000 $ 35,231,000
Impaired Loans $ 149,014,000 - $ 149,014,000 -
Non-performing Assets
to Total Assets 3.03% 4.14% 3.03% 4.14%
Net Worth to Assets Ratio 4.73% 5.53% 4.73% 5.53%
Tangible Capital Ratio 4.57% 5.39% 4.57% 5.39%
Core Capital Ratio 4.57% 5.39% 4.57% 5.39%
Risk-Based Capital Ratio 8.71% 9.47% 8.71% 9.47%
Interest Rate Spread
During the Period 2.05% 2.58% 2.25% 2.62%
% Adjustable Mortgages 98.87% 97.99% 98.87% 97.99%
Expense Ratios:
% Gross Income 20.50% 18.90% 20.61% 18.84%
% Average Assets 1.26% 1.27% 1.29% 1.29%
One Year "Gap" % of Assets 15.89% 11.50% 15.89% 11.50%
Return on Average Assets (2.76%) 0.93% (1.72%) (0.45%)
Return on Average Equity (53.95%) 17.05% (32.90%) (7.93%)
</TABLE>
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<TABLE>
<CAPTION>
FIRSTFED FINANCIAL CORP.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
June 30,
1994 December 31,
(Unaudited) 1993
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ASSETS
<S> <C> <C>
Cash and cash equivalents $ 16,738 $ 17,491
U.S. Government and other securities, held to
maturity (market of $ 88,645 and $104,282) 91,719 103,836
Loans receivable 2,780,636 2,692,036
Mortgage-backed securities, held to maturity
(market of $699,624 and $715,726) 710,767 708,283
Loans held for sale, market value approximates
carrying value 13,125 23,627
Accrued interest and dividends receivable 20,871 21,018
Real estate 20,417 27,249
Office properties and equipment, net 9,700 8,923
Investment in Federal Home Loan Bank
Stock, at cost 39,722 38,967
Other assets 32,476 19,687
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$3,736,171 $3,661,117
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LIABILITIES
Deposits $2,284,874 $2,305,480
Federal Home Loan Bank advances
and other borrowings 1,231,024 1,093,149
Income taxes payable - 16,366
Accrued expenses and other liabilities 43,569 37,830
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3,559,467 3,452,825
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share;
authorized 25,000,000 shares; issued
11,371,066 and 11,326,191 shares,
outstanding 10,574,546 and 10,529,671
shares 114 113
Additional paid-in capital 27,414 27,279
Retained earnings - substantially
restricted 161,982 193,650
Loan to employee stock ownership plan (2,974) (2,918)
Treasury stock, at cost, 796,520 shares (9,832) (9,832)
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176,704 208,292
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$3,736,171 $3,661,117
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</TABLE>
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<TABLE>
<CAPTION>
FIRSTFED FINANCIAL CORP.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
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<S> <C> <C> <C> <C>
Interest income:
Interest on loans and mortgage-
back securities $ 52,060 $54,435 $105,622 $110,796
Interest and dividends on
investments 2,320 2,091 4,483 3,977
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Total interest income 54,380 56,526 110,105 114,773
Interest expense:
Interest on deposits 21,265 18,929 41,539 38,097
Interest on borrowings 13,297 13,989 25,129 28,019
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Total interest expense 34,562 32,918 66,668 66,116
Net interest income 19,818 23,608 43,437 48,657
Provision for loan losses 55,030 1,849 79,700 45,972
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Net interest income (loss)
after provision for losses (35,212) 21,759 (36,263) 2,685
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Other income:
Loan and other fees 1,725 1,550 3,359 3,341
Gain on sale of loans and
mortgage-backed securities 84 2,502 524 2,902
Real estate operations, net 579 (459) 961 (316)
Other operating income 367 430 721 814
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Total other income 2,755 4,023 5,565 6,741
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Non-interest expense 11,711 11,443 23,844 22,897
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Earnings (loss) before
income taxes (44,168) 14,339 (54,542) (13,471)
Income tax provision (benefit) (18,615) 6,011 (22,874) (5,397)
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Net earnings (loss) $(25,553) $ 8,328 $(31,668) $ (8,074)
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Earnings (loss) per share $ (2.42) $ 0.78 $ (3.01) $ (0.77)
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</TABLE>
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