8-K 1 pr0404.txt 12.31.04 EARNINGS RELEASE UNITED STATES 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) January 27, 2005 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 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a 12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act 917 CFR 240.13e-4(c)) ITEM 2.02 Results of Operations and Financial Condition On January 27, 2005, the registrant, FirstFed Financial Corp., issued a press release setting forth the Company's third quarter 2004 earnings. A copy of this press release is attached and incorporated herein as Exhibit 99. ITEM 9.01 Financial Statements and Exhibits (a) Financial Statements Not Applicable. (b) Pro Forma Financial Information Not Applicable. (c) Exhibits: Exhibit 99 - Press Release dated January 27, 2005, regarding results for the fourth quarter of 2004. 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: January 27, 2005 By: /s/ Douglas J. Goddard ---------------------- Douglas J. Goddard Chief Financial Officer Exhibit 99 FIRSTFED REPORTS RESULTS FOR THE FOURTH QUARTER OF 2004 Santa Monica, California, January 27, 2005 -- FirstFed Financial Corp. (NYSE-FED), parent company of First Federal Bank of California, today announced net earnings of $16.4 million or $0.97 per diluted share of common stock for the fourth quarter of 2004 compared to net earnings of $15.2 million or $0.87 per diluted share of common stock for the fourth quarter of 2003. Net earnings for the fourth quarter included increased net interest income due to growth in the loan portfolio. The additional earnings were offset by higher operating costs associated with loan production. Net earnings for the year ended December 31, 2004 increased to $65.8 million or $3.85 per diluted share from $64.5 million or $3.70 per diluted share for the year ended December 31, 2003. The increase in earnings for the year is primarily attributable to growth in the loan portfolio. Additionally, 2004 net earnings included an after tax adjustment of $3.1 million or $0.19 per diluted share due to the elimination of the Bank's repurchase liability for loans sold with recourse. 2003 net earnings included a similar after tax adjustment of $870 thousand or $0.05 per diluted share for a reduction in the same liability. 2004 net earnings also included $907 thousand after tax or $0.05 per diluted share for interest received from the California Franchise Tax Board after settlement of open tax years. 2003 net earnings included a $1.6 million or $0.09 per diluted share reduction in income tax expense resulting from a change in the California tax method of accounting for bad debts. The Company's total assets reached $7.5 billion at the end of 2004 as a result of record loan production throughout the year. Loan originations grew to $1.4 billion during the fourth quarter of 2004 from $660 million during the fourth quarter of the prior year and $1.2 billion during the third quarter of 2004. Loan originations for the year increased to $3.9 billion during 2004 compared to $2.3 billion for 2003. Single-family loans comprised 80% of originations during the year 2004 compared to 75% during 2003. Net interest income increased by 23% and 9% during the fourth quarter and twelve months of 2004 compared to the same periods of the prior year. Average interest-earning assets increased by 50% and 29% during the fourth quarter and twelve months of 2004 over the comparable periods of 2003 due to record loan originations. However, because the Bank's cost of funds responds to changes in rates faster than its loan portfolio, interest rate spreads dropped to 2.51% and 2.68% for the fourth quarter and twelve months of 2004 from 3.09% and 3.22% during the comparable periods of 2003 due to the increasing rate environment during the fourth quarter and throughout 2004. The Company recorded a $3.0 million provision for loan losses during the fourth quarter of 2004 due to the significant loan growth during the quarter. Loans held for investment at December 31, 2004 were $6.8 billion compared to $4.4 billion at December 31, 2003. Net loan charge-offs during the fourth quarter of 2004 were $6 thousand compared to loan charge-offs of $10 thousand during the fourth quarter of 2003. Recoveries totaling $437 thousand were recorded during the twelve months of 2004 compared to recoveries totaling $15 thousand during the twelve months of 2003. 1 Loan servicing and other fees were $2.6 million and $9.5 million for the fourth quarter and twelve months ended December 31, 2004, respectively, compared to $2.4 million and $8.0 million for the same periods of the prior year. Because a greater number of loans subject to prepayment fees paid off, loan prepayment fees grew to $2.2 million and $8.0 million for the fourth quarter and twelve months ended 2004 compared to $2.0 million and $6.0 million for the same periods of the prior year. Loan payoffs and principal reductions were $361.5 million and $1.4 billion for the fourth quarter and twelve months ended 2004 compared to $398.6 million and $1.7 billion for the same periods last year. Non-interest expense increased during the fourth quarter of 2004 due to higher incentive-based compensation and other operating costs associated with increased loan production. For 2004, non-interest expense included higher legal costs, in addition to incentive-based compensation and other operating costs associated with loan production. However, due to growth in total assets, the ratio of non-interest expense to average total assets fell to 1.04% and 1.13% for the fourth quarter and twelve months of 2004 compared to 1.24% for both the fourth quarter and the twelve months of 2003. During 2004, the Company repurchased 696,900 shares of common stock at an average market price of $40.25 per share. All share repurchases occurred during the second quarter of 2004. During 2003, the Company repurchased 33,800 shares of common stock at an average market price of $28.53 per share. There remain 1,472,079 shares eligible for repurchase under the Company's stock repurchase program as of January 27, 2005. First Federal Bank of California operates 29 full-service retail banking offices in Southern California and lending offices in both Southern and Northern California. This news release contains certain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Act of 1995. 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 margin, the California real estate market, branch openings, and 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 guarantees or promises regarding future results and assumes no responsibility to update such forward-looking statements. Contact: Douglas Goddard, Executive Vice President (310) 319-6014 KEY FINANCIAL RESULTS FOLLOW 2 FIRSTFED FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollars in thousands, except share data) (Unaudited) December 31, December 31, 2004 2003 --------------- -------------- ASSETS Cash and cash equivalents $ 68,343 $ 54,318 Investment securities, available-for-sale (at fair value) 250,586 116,411 Mortgage-backed securities, available-for-sale (at fair value) 97,059 135,176 Loans receivable, held-for-sale (fair value $0 and $494) -- 492 Loans receivable, net 6,837,945 4,373,620 Accrued interest and dividends receivable 24,115 16,941 Real estate owned, net -- 1,324 Real estate held for investment 986 -- Office properties and equipment, net 15,881 10,568 Investment in Federal Home Loan Bank (FHLB) stock, at cost 143,425 87,775 Other assets 30,643 28,397 --------------- -------------- $ 7,468,983 $ 4,825,022 =============== ============== LIABILITIES Deposits $ 3,761,165 $ 2,538,398 FHLB advances 3,004,600 1,694,000 Securities sold under agreements to repurchase 187,000 122,622 Accrued expenses and other liabilities 38,744 33,435 --------------- -------------- 6,991,509 4,388,455 --------------- -------------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common stock, par value $.01 per share; authorized 100,000,000 shares; issued 23,693,350 and 23,543,339 shares; outstanding 16,498,754 and 17,045,643 shares 237 235 Additional paid-in capital 40,977 37,733 Retained earnings - substantially restricted 549,202 483,360 Unreleased shares to employee stock ownership plan (53) (125) Treasury stock, at cost 7,194,596 and 6,497,696 shares (113,776) (85,727) Accumulated other comprehensive earnings, net of taxes 887 1,091 --------------- -------------- 477,474 436,567 --------------- -------------- $ 7,468,983 $ 4,825,022 =============== ==============
3 FIRSTFED FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE EARNINGS (Dollars in thousands, except per share data) (Unaudited) Three months ended Twelve months ended December 31, December 31, ------------------------------ ------------------------------ 2004 2003 2004 2003 ------------- ------------- ------------- ------------- Interest income: Interest on loans $ 73,557 $ 55,054 $ 247,892 $ 224,779 Interest on mortgage-backed securities 729 1,051 3,312 5,328 Interest and dividends on investments 3,560 1,181 11,518 5,774 ------------- ------------- ------------- ------------- Total interest income 77,846 57,286 262,722 235,881 ------------- ------------- ------------- ------------- Interest expense: Interest on deposits 14,545 8,671 42,159 39,104 Interest on borrowings 18,335 12,183 59,031 49,238 ------------- ------------- ------------- ------------- Total interest expense 32,880 20,854 101,190 88,342 ------------- ------------- ------------- ------------- Net interest income 44,966 36,432 161,532 147,539 Provision for loan losses 3,000 -- 3,000 -- ------------- ------------- ------------- ------------- Net interest income after provision for loan losses 41,966 36,432 158,532 147,539 ------------- ------------- ------------- ------------- Other income: Loan servicing and other fees 2,617 2,377 9,545 7,990 Retail office fees 1,512 1,432 5,639 5,095 Gain on sale of loans -- 62 5,434 2,444 Real estate operations, net 202 465 308 780 Other operating income 138 74 370 432 ------------- ------------- ------------- ------------- Total other income 4,469 4,410 21,296 16,741 ------------- ------------- ------------- ------------- Non-interest expense: Salaries and employee benefits 11,226 8,458 40,907 33,484 Occupancy 2,253 2,114 8,691 8,171 Advertising expense 277 135 705 315 Amortization of core deposit intangible 499 500 1,995 1,995 Federal deposit insurance 99 92 388 394 Legal 398 648 1,686 1,103 Other expense 3,293 2,575 12,000 10,127 ------------- ------------- ------------- ------------- Total non-interest expense 18,045 14,522 66,372 55,589 ------------- ------------- ------------- ------------- Earnings before income taxes 28,390 26,320 113,456 108,691 Income tax provision 11,950 11,159 47,614 44,216 ------------- ------------- ------------- ------------- Net earnings $ 16,440 $ 15,161 $ 65,842 $ 64,475 ============= ============= ============= ============= Net earnings $ 16,440 $ 15,161 $ 65,842 $ 64,475 Other comprehensive loss, net of taxes (224) 52 (204) (1,110) ------------- ------------- ------------- ------------- Comprehensive earnings $ 16,216 $ 15,213 $ 65,638 $ 63,365 ============= ============= ============= ============= Earnings per share: Basic $ 1.00 $ 0.89 $ 3.95 $ 3.80 ============= ============= ============= ============= Diluted $ 0.97 $ 0.87 $ 3.85 $ 3.70 ============= ============= ============= ============= Weighted average shares outstanding: Basic 16,461,945 17,027,977 16,679,927 16,986,725 ============= ============= ============= ============= Diluted 16,879,903 17,505,446 17,090,227 17,407,459 ============= ============= ============= =============
4 FIRSTFED FINANCIAL CORP. AND SUBSIDIARY KEY FINANCIAL RESULTS (Unaudited) Quarter ended December 31, 2004 2003 -------------- ----------- (Dollars in thousands, except per share data) End of period: Total assets $ 7,468,983 $ 4,825,022 Cash and securities $ 318,929 $ 170,729 Mortgage-backed securities $ 97,059 $ 135,176 Loans $ 6,837,945 $ 4,374,112 Core deposit intangible asset $ 5,333 $ 7,328 Deposits $ 3,761,165 $ 2,538,398 Borrowings $ 3,191,600 $ 1,816,622 Stockholders' equity $ 477,474 $ 436,567 Book value per share $ 28.94 $ 25.61 Tangible book value per share $ 28.62 $ 25.18 Stock price (period-end) $ 51.87 $ 43.50 Total loan servicing portfolio $ 6,985,282 $ 4,601,240 Loans serviced for others $ 102,546 $ 145,475 % of adjustable mortgages 91.44 % 79.03 % Other data: Employees (full-time equivalent) 604 574 Branches 29 29 Asset quality: Real estate owned (foreclosed) $ -- $ 1,324 Non-accrual loans $ 4,985 $ 3,342 Non-performing assets $ 4,985 $ 4,666 Non-performing assets to total assets 0.07 % 0.10 % General valuation allowance (GVA) $ 78,675 $ 75,238 Allowances for impaired loans 496 496 -------------- ----------- Allowances for loan losses $ 79,171 75,734 Allowances for loan losses as a percent of gross loans receivable 1.16 % 1.70 % Loans sold with recourse $ 76,338 $ 91,003 GVA for loans sold with recourse $ -- $ 5,400 GVA to loans sold with recourse -- % 5.93 % Modified loans (not impaired) $ 2,086 $ 2,472 Impaired loans, net $ 1,360 $ 3,270 Allowance for impaired loans $ 496 $ 496 Capital ratios: Tangible capital ratio 5.99 % 8.48 % Core capital ratio 5.99 8.48 Risk-based capital ratio 11.96 15.92 Net worth to assets ratio 6.39 9.05
5 FIRSTFED FINANCIAL CORP. AND SUBSIDIARY KEY FINANCIAL RESULTS (continued) (Unaudited) Three months ended December Twelve months ended 31, December 31, ------------------------------ ----------------------------- 2004 2003 2004 2003 ------------ -------------- ------------- ------------ (Dollars in thousands) Selected ratios: Expense ratios: Efficiency ratio 36.50 % 35.61 % 37.42 % 34.35 % Expense-to-average-assets ratio 1.04 1.24 1.13 1.24 Return on average assets 0.95 1.30 1.12 1.43 Return on average equity 14.06 14.15 14.54 15.97 Yields earned and rates paid: Average yield on loans and mortgage-backed securities 4.61 % 5.14 % 4.68 % 5.49 % Average yield on investment portfolio 3.16 1.70 2.79 2.20 (1) Average yield on all interest-earning assets (1) 4.55 5.08 4.59 5.40 Average rate paid on deposits 1.63 1.36 1.42 1.55 Average rate paid on borrowings 2.54 2.99 2.53 3.21 Average rate paid on all interest-bearing liabilities 2.04 1.99 1.91 2.18 Interest rate spread 2.51 3.09 2.68 3.22 Effective net spread 2.60 3.22 2.78 3.35 Average balances: Average loans and mortgage-backed securities $ 6,398,547 $ 4,363,905 $ 5,325,910 $ 4,194,404 Average investments (2) 283,797 84,967 252,708 113,624 ------------ -------------- ------------- ------------ Average interest-earning assets (2) 6,682,344 4,448,872 5,578,618 4,308,028 ------------ -------------- ------------- ------------ Average deposits 3,539,945 2,535,615 2,968,757 2,515,471 Average borrowings 2,861,681 1,616,091 2,317,518 1,529,630 ------------ -------------- ------------- ------------ Average interest-bearing liabilities 6,401,626 4,151,706 5,286,275 4,045,101 ------------ -------------- ------------- ------------ Excess of interest-earning assets over interest-bearing liabilities $ 280,718 $ 297,166 $ 292,343 $ 262,927 ============ ============== ============= ============ Loan originations $ 1,359,502 $ 659,806 $ 3,880,809 $ 2,275,530 (1) Excludes FHLB stock dividends and other miscellaneous items. (2) Excludes FHLB stock.
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