SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________
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, 1999
FirstFed Financial Corp.
(Exact name of registrant as specified in its charter)
Delaware 1-9566 95-4087449
(State of Incorporation) (Commission File No.) (IRS Employer
Identification No.)
401 Wilshire Boulevard, Santa Monica, California, 90401-1490
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 319-6000
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Total number of pages is 11
Index to Exhibit is on Page 3.
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Item 5. Other Events.
On July 29, 1999, 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, 1999.
S I G N A T U R E S
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, 1999 By:/s/Babette E. Heimbuch
-------------------------
Babette E. Heimbuch
President and
Chief Operating Officer
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INDEX TO EXHIBITS
Item Page
99 Press Release dated July 29, 1999 4
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FIRSTFED REPORTS RESULTS FOR THE SECOND QUARTER OF 1999
Santa Monica, California, July 29, 1999--FirstFed Financial
Corp. (NYSE-FED), parent company of First Federal Bank of
California, today announced net earnings of $9.1 million or 47
cents per share of common stock for the second quarter of 1999,
compared to net earnings of $8.6 million or 40 cents per share
for the second quarter of 1998. All per share figures are
presented on a diluted basis.
The improvement in second quarter net earnings compared to
the prior year is primarily the result of the elimination of the
loan loss provision due to improvement in asset quality,
increased non-interest income, and a reduced number of shares
outstanding as a result of the Company's repurchase program. The
quarter was also highlighted by the Company's announcement of its
plans to acquire Professional Bancorp, Inc., parent company for
First Professional Bank, which is discussed more fully below.
The Company did not record a provision for loan losses
during the second quarter or first six months of 1999, reflecting
the continued improvement in the Company's asset quality. The
Company's general valuation allowance was $68.6 million or 2.28%
of loans and real estate owned as of June 30, 1999, compared to
$68.1 million or 2.26% at December 31, 1998 and $66.0 million or
2.07% at June 30, 1998. Non-performing assets were 0.45% of
total assets as of June 30, 1999 compared to 0.84% of total
assets as of December 31, 1998 and 0.84% of total assets at June
30, 1998.
Charge-offs, net of recoveries, were $764 thousand and $1.2
million during the second quarter and first six months of 1999,
respectively. In comparison, charge-offs, net of recoveries were
$1.8 million and $2.2 million for the second quarter and first
six months of 1998, respectively. Net charge-offs include
amounts charged against the general valuation allowance, the
allowance for impaired loans, and the allowance for recourse
loans.
Non-interest income increased during the second quarter and
first six months of 1999 primarily due to gains on the sale of
real estate owned which increased to $1.5 million and $1.8
million during the second quarter and first six months of 1999,
respectively.
The ratio of non-interest expense to average assets
increased to 1.38% of average assets for the second quarter of
1999 from 1.26% for the comparable 1998 period. The ratio
increased to 1.37% for the first six months of 1999 from 1.21%
for the first six months of 1998. The increased ratio was
attributable to higher than normal legal costs, increased costs
related to maintaining the Company's new operating systems and a
decrease in average assets in 1999 compared to 1998.
Loan originations increased to $210.9 million during the
second quarter of 1999 from $162.7 million during the second
quarter of 1998. 41% of loan originations during the quarter
were in loan products for other investors. Net loans receivable
were $2.8 billion at June 30, 1999, $2.8 billion at December 31,
1998 and $3.0 billion at June 30, 1998. Net loans receivable
decreased by $40.0 million during the first six months of 1999
due to continued accelerated loan payoffs. The Bank's portfolio
of mortgage-backed securities was similarly impacted by loan
payoffs, declining by $76.0 million during the first six months
of 1999.
The Company repurchased 1,991,900 shares of its common stock
at an average per share price of $16.21 during the first six
months of 1999. An additional 281,000 shares were repurchased
through July 27, 1999 at an average price of $16.33. As of July
27, 1999, 938,497 shares remain eligible for repurchase under a
Board of Directors authorization in April of 1999.
On June 28, 1999, the Company announced that it had entered
into a Letter of Intent to purchase Professional Bancorp, Inc.,
parent company of First Professional Bank. First Professional
Bank is a $250 million commercial bank headquartered in Santa
Monica. First Professional has developed a special business
niche serving the financial needs of the healthcare industry. As
currently contemplated, the transaction calls for the Company to
pay $23.50 in cash for each share of Professional Bancorp stock,
and is expected to close in the fourth quarter of 1999 or the
first quarter of 2000.
The acquisition of First Professional Bank is expected to
accomplish several of the Company's strategic goals previously
outlined. Specifically, the acquisition will:
>> Improve asset generation capability by expanding on the
healthcare lending niche developed by First Professional
Bank.
>> Add commercial banking products and services that will
facilitate migration to a full-service community bank.
>> Diversify credit risk through the addition of healthcare
loans to the existing portfolio.
>> Improve interest rate risk exposure with the acquisition of
non-interest bearing commercial deposits, along with the
pricing structure of the commercial loans.
>> Increase the core deposit base, which improves the ratio of
non-wholesale liabilities and will help fund the Company's
future growth.
First Professional's experienced commercial banking team led
by Melinda McIntyre-Kolpin has had considerable success over the
years marketing financial services to the medical and
professional communities and maintaining a reputation for
excellent client service. This acquisition will allow First
Professional, operating as a division of First Federal Bank, to
improve its profitability and growth, as the Company's capital
strength and corporate infrastructure leverages First
Professional's expertise. The First Professional lending team
should benefit from both a higher lending limit to individual
borrowers and the elimination of the administrative burden of
managing a separate public entity in a highly-regulated
industry. Allowing the First Professional Bank team to focus
even more on client service, products and marketing will help to
make this acquisition a beneficial transaction for the Company,
First Professional and their clients.
At June 30, 1999, First Federal Bank met the capital
requirements necessary to be deemed "well-capitalized" for
regulatory capital purposes. It has 24 full-service retail
banking offices and 6 retail loan offices.
This press release contains certain forward-looking
statements that are subject to various factors which could cause
actual results to differ materially from such statements. Such
factors include, but are not limited to, (1) the possibility that
the transaction discussed herein may not be consummated or may be
delayed, (2) the possibility that the terms of such transaction,
if consummated, may differ from the terms described herein, and
(3) changing economic, market or business condition which may
affect the Company's results following consummation of such a
transaction.
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<CAPTION>
KEY FINANCIAL RESULTS FOLLOW
FIRSTFED FINANCIAL CORP.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
(Unaudited)
June 30, December 31,
ASSETS 1999 1998
<S> <C> <C>
Cash and cash equivalents $141,806 $126,280
Investment securities,
available-for-sale (at fair value) 121,956 64,333
Mortgage-backed securities,
available-for-sale(at fair value) 480,727 556,679
Loans receivable, held-for-sale
(market of $6,038 and $16,602) 6,038 16,450
Loans receivable, net 2,762,208 2,791,771
Accrued interest and dividends
receivable 21,719 23,476
Real estate 4,017 4,791
Office properties and equipment, net 12,261 11,819
Investment in Federal Home Loan Bank
(FHLB) stock, at cost 69,830 72,700
Other assets 8,022 8,829
$3,628,584 $3,677,128
LIABILITIES
Deposits $2,012,504 $2,135,909
FHLB advances and other borrowings 963,300 764,000
Securities sold under agreements to
repurchase 376,800 471,172
Accrued expenses and other liabilities 39,875 49,047
3,392,479 3,420,128
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share;
authorized 100,000,000 shares; issued
23,266,501 and 23,075,266 shares,
outstanding 19,326,761 and 21,127,426
shares 233 231
Additional paid-in capital 31,047 29,965
Retained earnings - substantially
restricted 259,713 241,694
Loan to employee stock ownership plan (1,859) (833)
Treasury stock, at cost,
3,939,740 and 1,947,840 shares (45,650) (13,354)
Accumulated other comprehensive loss,
net of taxes (7,379) (703)
236,105 257,000
$3,628,584 $3,677,128
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<CAPTION>
FIRSTFED FINANCIAL CORP.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE EARNINGS (LOSS)
(Dollars in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Interest income:
Interest on loans $ 53,324 $ 59,901 $107,331 $121,577
Interest on mortgage-backed
securities 7,043 10,907 14,652 22,439
Interest and dividends on
investments 3,330 2,779 6,451 5,526
Total interest income 63,697 73,587 128,434 149,542
Interest expense:
Interest on deposits 21,268 25,060 43,932 49,082
Interest on borrowings 17,210 22,613 34,118 48,095
Total interest expense 38,478 47,673 78,050 97,177
Net interest income 25,219 25,914 50,384 52,365
Provision for loan losses - 2,100 - 4,600
Net interest income
after provision for losses 25,219 23,814 50,384 47,765
Other income:
Loan and other fees 1,099 1,567 2,384 1,607
Gain on sale of loans 504 1,204 1,087 1,863
Real estate operations, net 1,526 133 1,828 665
Other operating income 1,028 1,070 1,991 2,094
Total other income 4,157 3,974 7,290 6,229
Non-interest expense 13,113 12,684 25,701 24,674
Earnings before income taxes 16,263 15,104 31,973 29,320
Income tax provision 7,160 6,467 13,955 12,540
Net earnings $ 9,103 $ 8,637 $ 18,018 $ 16,780
Other comprehensive earnings (loss),
net of taxes (7,302) (1,082) (6,676) 444
Comprehensive earnings $ 1,801 $ 7,555 $ 11,342 $ 17,224
Earnings per share
Basic $ 0.47 $ 0.41 $ 0.90 $ 0.79
Diluted $ 0.47 $ 0.40 $ 0.90 $ 0.78
Weighted average shares outstanding
Basic 19,331,157 21,206,104 19,939,106 21,193,532
Diluted 19,529,207 21,677,810 20,118,593 21,642,628
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<CAPTION>
KEY FINANCIAL RESULTS ARE HIGHLIGHTED BELOW
Quarter Ended June 30,
1999 1998
(Dollars in thousands, except per share data)
<S> <C> <C>
For the period:
Interest on loans & MBS $ 60,367 $ 70,808
Investment income 3,330 2,779
Deposit expense 21,268 25,060
Borrowing expense 17,210 22,613
Net interest income 25,219 25,914
Loan fees 530 833
Loan servicing fees 569 734
Real estate operations 1,526 133
Gain on sale of loans 504 1,204
Other income 1,028 1,070
Total non-interest income 4,157 3,974
Compensation 6,637 6,538
Occupancy 1,991 1,618
Goodwill amortization 121 121
Other expense 4,364 4,407
Total non-interest expense 13,113 12,684
Loss provision - 2,100
Pretax earnings 16,263 15,104
Tax provision 7,160 6,467
Net earnings $ 9,103 $ 8,637
Earnings per share(diluted basis)$ 0.47 $ 0.40
Weighted average shares
outstanding (diluted basis) 19,529,207 21,677,810
End of period:
Total assets $3,628,584 $ 4,010,381
Cash and securities $ 263,762 $ 256,258
Mortgage-backed securities $ 480,727 $ 630,881
Loans $2,768,246 $ 2,994,987
Goodwill $ 1,058 $ 1,542
Deposits $2,012,504 $ 2,139,018
Borrowings $1,340,100 $ 1,584,219
Stockholders' equity $ 236,105 $ 240,295
Book value per share $ 12.22 $ 11.33
Stock price (period-end) $ 19.25 $ 26.00
Total loan servicing portfolio $3,749,823 $ 4,202,105
Loans serviced for others $ 403,403 $ 473,665
% of Adjustable mortgages 92.59% 96.75%
Other data:
Employees (full-time equivalent) 472 456
Branches 24 24
Loan Offices 6 6
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<CAPTION>
Quarter Ended June 30,
1999 1998
(Dollars in thousands, except per share data)
<S> <C> <C>
Asset quality:
Real estate (foreclosed) $ 3,981 $ 5,954
Non-accrual loans $ 12,171 $ 27,744
Non-performing assets $ 16,152 $ 33,698
Non-performing assets to total assets 0.45% 0.84%
General valuation allowance (GVA) $ 68,637 $ 66,046
GVA to assets with loss exposure * 2.28% 2.07%
Loans sold with recourse $ 192,601 $ 211,122
GVA for loans sold with recourse $ 12,824 $ 13,029
GVA to loans sold with recourse 6.66% 6.17%
Modified loans (not impaired) $ 4,374 $ 763
Impaired loans, net $ 12,275 $ 19,723
Allowance for impaired loans $ 5,644 $ 7,829
Capital ratios:
Tangible capital ratio 7.85% 6.89%
Core capital ratio 7.85% 6.89%
Risk-based capital ratio 14.88% 13.62%
Net worth to assets ratio 6.51% 5.99%
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<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Loan originations $210,879 $ 162,661 $406,125 $313,980
Net interest income $ 25,219 $ 25,914 $ 50,384 $ 52,365
Selected ratios:
Expense ratios:
Efficiency ratio 45.41% 44.22% 45.42% 43.49%
Expense-to-average-assets ratio 1.38 1.26 1.37 1.21
Return on average assets 0.96 0.86 0.96 0.82
Return on average equity 15.43 14.61 14.83 14.47
Yields earned and rates paid:
Average yield on loans and
mortgage-backed securities 7.39% 7.60% 7.43% 7.64%
Average yield on investment
portfolio 5.14 5.41 5.03 5.21
Average yield on all interest-
earning assets 7.27 7.53 7.30 7.56
Average rate paid on deposits 4.13 4.67 4.20 4.69
Average rate paid on borrowings 5.47 5.75 5.54 5.82
Average rate paid on all interest-
bearing liabilities 4.64 5.12 4.70 5.18
Interest rate spread 2.63 2.41 2.60 2.38
Effective net spread 2.80 2.58 2.77 2.54
* Primarily the Bank's loans receivable
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