-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LuN+XvtyNaFLkdgdi5/DPaGlHA3/99PD0xXqLULTKeZz3xAGmfkxJpg3NGSxxEcf Oyy4x9LoQLNI/3mFuCouLg== 0000950148-98-001983.txt : 19980817 0000950148-98-001983.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950148-98-001983 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTFED FINANCIAL CORP CENTRAL INDEX KEY: 0000810536 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 954087449 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09566 FILM NUMBER: 98687247 BUSINESS ADDRESS: STREET 1: 201 W THIRD ST CITY: DOVER STATE: OH ZIP: 44622 BUSINESS PHONE: 2163647777 MAIL ADDRESS: STREET 1: 201 W THIRD STREET CITY: DOVER STATE: OH ZIP: 44622 10-Q 1 FORM 10-Q 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 1998 OR TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 1-9566 FIRSTFED FINANCIAL CORP. (Exact name of registrant as specified in its charter) DELAWARE 95-4087449 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) 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 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] AS OF AUGUST 1, 1998, 21,215,080 SHARES OF THE REGISTRANT'S $.01 PAR VALUE COMMON STOCK WERE OUTSTANDING. ================================================================================ 2 FIRSTFED FINANCIAL CORP. INDEX
PAGE ---- PART I. Financial Information Item 1. Financial Statements Consolidated Statements of Financial Condition 3 as of June 30, 1998, December 31, 1997 and June 30, 1997 Consolidated Statements of Operations and Comprehensive 4 Earnings for the three months and six months ended June 30, 1998 and 1997 Consolidated Statements of Cash Flows for the six 5 months ended June 30, 1998 and 1997 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial 7 Condition and Results of Operations PART II. Other Information (omitted items are inapplicable) 17 Item 4. Submission of Matters to a Vote of Securities Holders Item 6. Exhibits and Reports on Form 8-K SIGNATURES 19
2 3 PART I - FINANCIAL STATEMENTS ITEM 1. FINANCIAL STATEMENTS FIRSTFED FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollars in thousands, except per share data)
June 30, December 31, June 30, 1998 1997 1997 ----------- ------------ ----------- ASSETS Cash and cash equivalents $ 213,257 $ 163,135 $ 187,978 Investment securities, available-for-sale (at fair value) 43,001 48,910 67,159 Mortgage-backed securities, available-for-sale (at fair value) 630,881 676,058 696,530 Loans receivable, held-for-sale (fair value of $113,082, $40,800, and $11,482) 112,315 40,382 11,335 Loans receivable, net 2,882,672 3,104,782 3,101,564 Accrued interest and dividends receivable 26,102 26,990 27,366 Real estate 5,992 10,257 13,031 Office properties and equipment, net 11,516 9,868 9,498 Investment in Federal Home Loan Bank (FHLB) stock, at cost 70,613 68,592 66,004 Other assets 14,032 11,141 12,738 ----------- ----------- ----------- $ 4,010,381 $ 4,160,115 $ 4,193,203 =========== =========== =========== LIABILITIES Deposits $ 2,139,018 $ 1,943,647 $ 1,960,394 FHLB advances and other borrowings 1,028,500 1,364,000 1,382,500 Securities sold under agreements to repurchase 555,719 577,670 601,849 Accrued expenses and other liabilities 46,849 52,011 46,004 ----------- ----------- ----------- 3,770,086 3,937,328 3,990,747 ----------- ----------- ----------- COMMITMENTS AND CONTINGENT LIABILITIES STOCKHOLDERS' EQUITY Common stock, par value $.01 per share; authorized 25,000,000 shares; issued 23,062,120 23,022,276, and 22,997,788 shares, outstanding 21,215,080, 21,175,236, and 21,150,748 shares(1) 231 230 230 Additional paid-in capital 29,841 29,513 29,295 Retained earnings - substantially restricted 223,845 207,065 194,481 Loan to employee stock ownership plan (1,789) (1,744) (2,187) Treasury stock, at cost, 1,847,040 shares(1) (11,885) (11,885) (11,885) Accumulated other comprehensive earnings - unrealized gain (loss) on securities available-for-sale, net of taxes 52 (392) (7,478) ----------- ----------- ----------- 240,295 222,787 202,456 ----------- ----------- ----------- $ 4,010,381 $ 4,160,115 $ 4,193,203 =========== =========== ===========
- ----------- (1) All per share amounts have been adjusted to reflect the two-for-one stock split declared June 25, 1998 to shareholders of record as of July 15, 1998. See accompanying notes to consolidated financial statements. 3 4 FIRSTFED FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE EARNINGS (Dollars in thousands, except per share data)
Three Months Ended Six Months Ended June 30, June 30, ------------------------------ ------------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ------------ INTEREST INCOME: Interest on loans $ 59,901 $ 58,409 $ 121,577 $ 116,222 Interest on mortgage-backed securities 10,907 12,268 22,439 24,904 Interest and dividends on investments 2,779 3,268 5,526 6,505 ------------ ------------ ------------ ------------ Total interest income 73,587 73,945 149,542 147,631 ------------ ------------ ------------ ------------ INTEREST EXPENSE: Interest on deposits 25,060 23,968 49,082 46,866 Interest on borrowings 22,613 26,949 48,095 53,704 ------------ ------------ ------------ ------------ Total interest expense 47,673 50,917 97,177 100,570 ------------ ------------ ------------ ------------ Net interest income 25,914 23,028 52,365 47,061 Provision for loan losses 2,100 5,500 4,600 11,500 ------------ ------------ ------------ ------------ Net interest income after provision for loan losses 23,814 17,528 47,765 35,561 ------------ ------------ ------------ ------------ NON-INTEREST INCOME: Loan and other fees 1,567 1,509 1,607 3,005 Gain on sale of loans 1,204 25 1,863 30 Real estate operations, net 133 467 665 1,098 Other operating income 1,070 889 2,094 1,659 ------------ ------------ ------------ ------------ Total non-interest income 3,974 2,890 6,229 5,792 ------------ ------------ ------------ ------------ Non-interest expense 12,684 10,996 24,674 22,908 ------------ ------------ ------------ ------------ Earnings before income taxes 15,104 9,422 29,320 18,445 Income tax provision 6,467 4,074 12,540 7,929 ------------ ------------ ------------ ------------ Net earnings $ 8,637 $ 5,348 $ 16,780 $ 10,516 ============ ============ ============ ============ Other comprehensive earnings - unrealized gain (loss) on securities available-for-sale, net of taxes (1,082) 1,723 444 (3,288) ------------ ------------ ------------ ------------ Comprehensive earnings $ 7,555 $ 7,071 $ 17,224 $ 7,228 ============ ============ ============ ============ Earnings per share: Basic $ 0.41 $ 0.25 $ 0.79 $ 0.50 ============ ============ ============ ============ Diluted $ 0.40 $ 0.25 $ 0.78 $ 0.49 ============ ============ ============ ============ Weighted average shares outstanding: Basic 21,206,104 21,132,438 21,193,532 21,109,014 ============ ============ ============ ============ Diluted 21,677,810 21,438,692 21,642,628 21,401,888 ============ ============ ============ ============
- ----------- (1) All per share amounts have been adjusted to reflect the two-for-one stock split declared June 25, 1998 to shareholders of record as of July 15, 1998. See accompanying notes to consolidated financial statements. 4 5 FIRSTFED FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Six Months Ended June 30, ------------------------- 1998 1997 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 16,780 $ 10,516 Adjustments to reconcile net earnings to net cash provided by operating activities: Net change in loans-held-for-sale (71,933) (5,140) Provision for loan losses 4,600 11,500 Provision for REO losses 484 581 Valuation adjustments on real estate sold (1,686) (2,984) Amortization of fees and discounts 40 (613) Negative amortization on loans (678) (1,319) (Increase) decrease in interest and dividends receivable 888 (456) Increase in interest payable 4,761 631 Other (8,576) (517) --------- --------- Total adjustments (72,100) 1,683 --------- --------- Net cash provided by operating activities (55,320) 12,199 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Loans made to customers net of principal collection on loans 208,270 (91,117) Loans repurchased under recourse arrangements (439) (5,468) Proceeds from sales of real estate 15,920 35,525 Principal reductions on mortgage-backed securities available-for-sale 45,930 33,629 Purchase of investment securities available-for-sale (11,045) (28,300) Proceeds from maturities and principal payments on investment securities available-for-sale 17,071 30,166 Purchase of FHLB stock -- (1,666) Other (1,946) (491) --------- --------- Net cash provided by (used in) investing activities 273,761 (27,722) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in savings deposits 195,371 2,946 Net increase (decrease) in short term borrowings (747,451) 93,867 Increase in long term borrowings 390,000 -- Repayment of long term borrowings -- (50,000) Payment of prior period taxes and interest to IRS (2,295) (9,812) Other (3,944) 4,098 --------- --------- Net cash provided by (used in) financing activities (168,319) 41,099 --------- --------- Net increase in cash and cash equivalents 50,122 25,576 Cash and cash equivalents at beginning of period 163,135 162,402 --------- --------- Cash and cash equivalents at end of period $ 213,257 $ 187,978 ========= =========
See accompanying notes to consolidated financial statements. 5 6 FIRSTFED FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The unaudited financial statements included herein have been prepared by the Registrant pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Registrant, all adjustments (which include only normal recurring adjustments) necessary to present fairly the results of operations for the periods covered have been made. Certain information and note disclosures normally included in financial statements presented in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The Registrant believes that the disclosures are adequate so as not to make the information presented misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Registrant's latest annual report on Form 10-K. The results for the periods covered hereby are not necessarily indicative of the operating results for a full year. 2. Earnings per share and weighted average shares outstanding for the three and six months periods of 1997 have been restated to reflect the adoption of Statement of Financial Accounting Standards No. 128 (SFAS No. 128.) Basic earnings per share is based on the weighted average shares of common stock outstanding for the period while diluted earnings per share gives effect to all dilutive potential common shares that were outstanding during part or all of the period. The Board of Directors of FirstFed Financial Corp. declared a two-for-one stock spilt on June 25, 1998 to shareholders of record on July 15, 1998. The additional shares were distributed on July 30, 1998. All per share computations for 1997 and 1998 have been adjusted for the stock split. 3. For purposes of reporting cash flows on the "Consolidated Statement of Cash Flows", cash and cash equivalents include cash, overnight investments and securities purchased under agreements to resell which mature within 90 days of the date of purchase. 4. In 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"), which establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Accordingly, for both the 1998 and 1997 periods, the Consolidated Statements of Operations have been expanded to include other comprehensive earnings in arriving at comprehensive earnings and, accordingly, have been renamed Consolidated Statements of Operations and Comprehensive Earnings. Neither net earnings nor earnings per share has been affected by the adoption of SFAS No. 130. 6 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION At June 30, 1998, FirstFed Financial Corp. (the "Company"), holding company for First Federal Bank of California and its subsidiaries (the "Bank"), had consolidated assets totaling $4.0 billion, compared to $4.2 billion at December 31, 1997 and June 30, 1997. The decrease in assets during the last six months is due to payoffs of loans and mortgage-backed securities. The Bank's primary market area is Southern California which is undergoing a period of economic growth. Improvement has been noted in several areas of the Bank's operations as it continues to recover from the economic downturn earlier this decade. Non-performing assets have decreased significantly to 0.84% as of June 30, 1998 from 1.39% as of June 30, 1997 and 2.52% as of June 30, 1996. Net loan charge-offs declined to $1.8 million and $2.2 million for the second quarter and first six months of 1998, respectively, from $5.3 million and $9.0 million for the same periods of 1997, respectively. Loan originations increased to $162.7 million and $314.0 million for the second quarter and first six months of 1998 from $124.1 million and $212.0 million for the same periods of 1997, respectively. Since these were primarily fixed rate loan products which are not maintained in the Bank's loan portfolio, loan sales increased commensurably to $125.5 million and $186.2 million for the second quarter and first six months of 1998 from $2.0 million and $3.2 million for the second quarter and first six months of 1997. The Bank's portfolio of loans, including mortgage-backed securities, decreased to $3.6 billion at June 30, 1998 from $3.8 billion at December 31, 1997 and $3.8 billion as of June 30, 1997. The decrease in the loan portfolio is attributable to higher than normal payoffs of adjustable rate loans due to customer preference for fixed rate loans in the current interest rate environment. 7 8 The following table shows the components of the Bank's portfolio of loans and mortgage-backed securities by collateral type as of the dates indicated:
June 30, December 31, June 30, 1998 1997 1997 ---------- ------------ ---------- (Dollars in thousands) REAL ESTATE LOANS: First trust deed residential loans: One unit $1,371,602 $1,440,761 $1,366,157 Two to four units 343,470 351,175 345,852 Five or more units 1,158,859 1,217,577 1,249,930 ---------- ---------- ---------- Residential loans 2,873,931 3,009,513 2,961,939 OTHER REAL ESTATE LOANS: Commercial and industrial 187,161 196,575 205,491 Second trust deeds 13,867 15,441 17,444 Other 3,433 6,303 6,735 ---------- ---------- ---------- Real estate loans 3,078,392 3,227,832 3,191,609 NON-REAL ESTATE LOANS: Manufactured housing 1,113 1,154 1,314 Deposit accounts 1,032 1,644 1,721 Consumer 400 185 112 ---------- ---------- ---------- Loans receivable 3,080,937 3,230,815 3,194,756 LESS: General valuation allowances- loan portfolio 65,546 61,237 53,321 Valuation allowances - impaired loans 7,829 9,775 12,019 Unrealized loan fees 12,575 14,639 16,517 ---------- ---------- ---------- Net loans receivable 2,994,987 3,145,164 3,112,899 FHLMC AND FNMA MORTGAGE- BACKED SECURITIES (at fair value): Secured by single family dwellings 612,585 657,342 677,587 Secured by multi-family dwellings 18,296 18,716 18,943 ---------- ---------- ---------- Mortgage-backed securities 630,881 676,058 696,530 ---------- ---------- ---------- TOTAL $3,625,868 $3,821,222 $3,809,429 ========== ========== ==========
Because the Bank structures mortgage-backed securities with loans from its own portfolio, mortgage-backed securities generally have the same experience with respect to prepayment, repayment, delinquencies and other factors as the remainder of the Bank's loan portfolio. No mortgage-backed securities were created during 1998 or 1997. The mortgage-backed securities portfolio, classified as available-for-sale, was recorded at fair value as of June 30, 1998. A positive fair value adjustment of $361 thousand, net of taxes, was reflected in stockholders' equity as of June 30, 1998. This adjustment represents a $436 thousand increase from the $75 thousand unrealized loss recorded as of December 31, 1997. The investment securities portfolio, classified as available-for-sale, was recorded at fair value as of June 30, 1998. An unrealized loss of $309 thousand, net of taxes, was reflected in stockholders' equity as of June 30, 1998. This adjustment represented an $8 thousand decrease from the $317 thousand unrealized loss recorded as of December 31, 1997. 8 9 Asset/Liability Management The one year Gap ratio (the difference between rate-sensitive assets and liabilities repricing within one year or less as a percentage of total assets) was a positive $498 million or 12.42% of total assets at June 30, 1998. In comparison, the one year Gap ratio was a positive $172 million or 4.14% of total assets as of December 31, 1997 and a positive $235 million or 5.60% of total assets as of June 30, 1997. Since over 94% of the Bank's loans adjust monthly based upon changes in the Eleventh District Cost of Funds Index ("COFI Index"), the Bank's one year Gap position varies primarily based upon the remaining terms of its savings and borrowings. The longer the term of the Bank's liabilities, the more positive the one year Gap. The increase in the Company's positive Gap from December 31, 1997 to June 30, 1998 is primarily due to a $390 million increase in long term borrowings during the period. A positive Gap normally benefits a financial institution in times of increasing interest rates. However, because there is a three month time lag before changes in the COFI Index can be implemented with respect to the Bank's loans, the Bank's net interest income typically declines during periods of increasing interest rates. Capital Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and percentages of total capital to risk-weighted assets. The Bank meets the standards necessary to be deemed well capitalized under the applicable regulatory requirements . The following table summarizes the Bank's actual capital and required capital as of June 30, 1998:
Tangible Core Risk-based Capital Capital Capital ----------- ----------- ----------- (Dollars in thousands) Actual Capital: Amount $ 277,247 $ 277,247 $ 305,768 Ratio 6.89% 6.89% 13.62% Minimum required capital: Amount $ 60,329 $ 120,659 $ 179,575 Ratio 1.50% 3.00% 8.00% Well capitalized required capital: Amount -- $ 201,098 $ 224,469 Ratio -- 5.00% 10.00%
Pursuant to the Board of Directors' authorization in 1987, the Company may repurchase up to 10% of its outstanding shares of common stock that were outstanding as of December 31, 1987. No shares were repurchased during the first six months of 1998 or during 1997. As of June 30, 1998, 274,000 shares remained eligible for repurchase. RESULTS OF OPERATIONS The Company reported consolidated net earnings of $8.6 million for the second quarter of 1998 compared to net earnings of $5.3 million for the second quarter of 1997. The improved earnings resulted primarily from a 62% decrease in the provision for loan losses to $2.1 million for the second quarter of 1998 from $5.5 million for the second quarter of 1997 and a 13% increase in net interest income to $25.9 million for the second quarter of 1998 from $23.0 million for the second quarter of 1997. 9 10 The Company reported consolidated net earnings of $16.8 million for the first six months of 1998 compared to $10.5 million for the same period last year. The provision for loan losses for the first six months of 1998 was $4.6 million compared to $11.5 million for the first six months of 1997. Net interest income increased to $52.4 million for the first six months of 1998 from $47.1 million for the first six months of 1997. Loan Loss Provisions Management is unable to predict future levels of loan loss provisions. Among other things, future loan loss provisions are based on the level of loan charge-offs, foreclosure activity, and management's perceptions of the economic climate in Southern California. Listed below is a summary of the activity in the general valuation allowance and the valuation allowance for impaired loans for the Bank's loan portfolio during the periods indicated:
Six Months Ended June 30, 1998 -------------------------------------- General Impaired Valuation Valuation Allowances Allowances Total ---------- ---------- -------- (Dollars in thousands) Balance at December 31, 1997 $ 61,237 $ 9,775 $ 71,012 Provision for loan losses 4,024 576 4,600 Charge-offs: Single family (1,077) (294) (1,371) Multi-family (506) (1,614) (2,120) Commercial (47) -- (47) Non-real estate (1) -- (1) -------- -------- -------- Total charge-offs (1,631) (1,908) (3,539) Recoveries 1,302 -- 1,302 Impaired loan recoveries 614 (614) -- -------- -------- -------- Net charge-offs 285 (2,522) (2,237) -------- -------- -------- Balance at June 30, 1998 $ 65,546 $ 7,829 $ 73,375 ======== ======== ========
Six Months Ended June 30, 1997 -------------------------------------- General Impaired Valuation Valuation Allowances Allowances Total ---------- ---------- -------- (Dollars in thousands) Balance at December 31, 1996 $ 54,900 $ 12,350 $ 67,250 Provision for loan losses 6,045 5,455 11,500 Charge-offs: Single family (3,255) (179) (3,434) Multi-family (1,568) (5,033) (6,601) Commercial -- (574) (574) -------- -------- -------- Total charge-offs (4,823) (5,786) (10,609) Recoveries 1,433 -- 1,433 -------- -------- -------- Net charge-offs (3,390) (5,786) (9,176) -------- -------- -------- Transfers to general valuation allowance for real estate (4,234) -- (4,234) -------- -------- -------- Balance at June 30, 1997 $ 53,321 $ 12,019 $ 65,340 ======== ======== ========
10 11 The Bank also maintains a valuation allowance for loans sold with recourse, recorded as a liability. This allowance was 6.17% of loans sold with recourse as of June 30, 1998, compared to 5.97% as of December 31, 1997 and 5.80% as of June 30, 1997. The balance of loans sold with recourse totaled $211.1 million, $218.1 million and $221.2 million as of June 30, 1998, December 31, 1997 and June 30, 1997, respectively. The Bank has not entered into any new recourse arrangements since 1989. Listed below is a summary of the activity in the valuation allowance for loans sold with recourse during the periods indicated:
Six Months Ended June 30, ------------------------- 1998 1997 -------- -------- (Dollars in thousands) Balance at beginning of period $ 13,029 $ 8,398 Charge-offs -- (70) Recoveries -- 268 Transfers from general loan valuation allowance -- 4,234 -------- -------- Balance at end of period $ 13,029 $ 12,830 ======== ========
The following table summarizes the activity in the general valuation allowance for real estate acquired by foreclosure for the periods indicated:
Six Months Ended June 30, ------------------------- 1998 1997 -------- -------- (Dollars in thousands) Balance at beginning of period $ 500 $ 520 Provision for losses 484 581 Charge-offs (484) (841) ----- ----- Balance at end of period $ 500 $ 260 ===== =====
Net Interest Income The Company's interest rate margin increased to 2.41% for the second quarter of 1998 from 2.07% for the second quarter of 1997. During the first six months of 1998, the interest rate margin increased to 2.38% from 2.08% for the same period of last year. The increases are due to a reduction in non-performing assets compared to the prior year. Also, the Bank's cost of funds decreased slightly compared to the prior year periods while the index which determines the yield on the Bank's loan portfolio increased. The COFI Index (on a lagged basis) determines the yield on over 94% of the loan portfolio. The average Index in effect during the three months and six months ended June 30, 1998 increased by 0.12% and 0.10%, respectively, compared to the same periods of the prior year. The Bank's cost of funds decreased by 0.13% during the three months ended June 30, 1998 over the same period of last year and decreased by 0.06% during the first six months of 1997 compared to the same period of last year. The following table sets forth: (i) the average daily dollar amounts of and average yields earned on loans, mortgage-backed securities and investment securities, (ii) the average daily dollar amounts of and average rates paid on savings and borrowings, (iii) the average daily dollar differences, (iv) the interest rate spreads, and (v) the effective net spreads for the periods indicated: 11 12
During the Six Months Ended June 30, ------------------------------------ 1998 1997 ---------- ---------- (Dollars In Thousands) Average loans and mortgage-backed securities $3,764,813 $3,794,458 Average investment securities 133,013 164,210 ---------- ---------- Average interest-earning assets 3,897,826 3,958,668 ---------- ---------- Average savings deposits 2,115,680 2,008,295 Average borrowings 1,654,986 1,846,517 ---------- ---------- Average interest-bearing liabilities 3,770,666 3,854,812 ---------- ---------- Excess of interest-earning assets over interest-bearing liabilities $ 127,160 $ 103,856 ========== ========== Yields earned on average interest earning assets 7.56% 7.32% Rates paid on average interest- bearing liabilities 5.18 5.24 Net interest rate spread 2.38 2.08 Effective net spread (1) 2.54 2.22 Total interest income $ 147,278 $ 144,925 Total interest expense 97,146 100,554 ---------- ---------- 50,132 44,371 Total other items (2) 2,233 2,690 ---------- ---------- Net interest income $ 52,365 $ 47,061 ========== ==========
During the Six Months Ended June 30, ------------------------------------ 1998 1997 ---------- ---------- (Dollars In Thousands) Average loans and mortgage-backed securities $3,721,550 $3,803,616 Average investment securities 126,449 161,210 ---------- ---------- Average interest-earning assets 3,847,999 3,964,826 ---------- ---------- Average savings deposits 2,157,953 2,030,509 Average borrowings 1,565,308 1,827,425 ---------- ---------- Average interest-bearing liabilities 3,723,261 3,857,934 ---------- ---------- Excess of interest-earning assets over interest-bearing liabilities $ 124,738 $ 106,892 ========== ========== Yields earned on average interest earning assets 7.53% 7.34% Rates paid on average interest- bearing liabilities 5.12 5.27 Net interest rate spread 2.41 2.07 Effective net spread (1) 2.58 2.22 Total interest income $ 72,475 $ 72,813 Total interest expense 47,671 50,908 ---------- ---------- 24,804 21,905 Total other items (2) 1,110 1,123 ---------- ---------- Net interest income $ 25,914 $ 23,028 ========== ==========
- ---------- (1) The effective net spread is a fraction, the denominator of which is the average dollar amount of interest-earning assets, and the numerator of which is net interest income (excluding stock dividends and miscellaneous interest income). (2) Includes Federal Home Loan Bank Stock and other miscellaneous items, including interest on California tax refunds at June 30, 1997. 12 13 NON-INTEREST INCOME AND EXPENSE Loan and other fees were $1.5 million and $1.6 million for the second quarter and first six months of 1998, respectively, compared to $1.5 million and $3.0 million for the same 1997 periods, respectively. The year-to-date decrease is due to a $1.4 million provision for impairment of the Bank's servicing assets recognized in the first quarter of 1998. Servicing assets are normally amortized over the expected lives of the loans being serviced. The provision, recorded as an adjustment to loan servicing fees in the current quarter, reflects the impact of higher expected prepayment rates on the existing mortgage portfolio due to lower interest rates on fixed rate mortgages. Gain on sale of loans results primarily from loan fees recognized at the time of sale and increased to $1.2 million and $1.9 million, respectively for the second quarter and first six months of 1998 from $25 thousand and $30 thousand, respectively, for the second quarter and first six months of 1997. The volume of loans sold totaled $125.5 million and $186.2 million, respectively, during the second quarter and first six months of 1998 compared to $2.0 million and $3.2 million, respectively for the same periods of 1997. The increase in the volume of loans sold results from borrower demand for fixed rate loans. The Bank originates fixed rate loans only for sale in the secondary markets. Real estate operations produced net gains of $133 thousand and $467 thousand for the second quarter of 1998 and 1997, respectively. For the first six months of 1998 and 1997, real estate operations produced net gains of $665 thousand and $1.1 million, respectively. The lower level of income from real estate operations results from a decrease in the level of foreclosed properties. Gains on sale typically result from the recovery of excess valuation allowances. Other operating income increased to $1.1 million during the second quarter of 1998 from $889 thousand for the same quarter last year. For the first six months of 1998 other operating income increased to $2.1 million from $1.7 million for the prior year. The improved amounts are due to increased fees collected for services rendered at the retail savings branches and increased ATM fees. Non-interest expense decreased to 1.26% of average total assets during the second quarter of 1998 compared to 1.06% for the same period of 1997. For the first six months of 1998 non-interest expenses were 1.21% of average total assets compared to 1.10% for the first six months of 1997. Expenses rose primarily due to investments being made in new operating systems, the development of new business lines and higher incentive compensation costs on larger loan volume and deposit growth. NON-ACCRUAL, PAST DUE, MODIFIED AND RESTRUCTURED LOANS The Bank accrues interest earned but uncollected for every loan without regard to its contractual delinquency status but establishes a specific interest allowance for each loan which becomes 90 days or more past due or is in foreclosure. Loans on which delinquent interest allowances had been established (non-accrual loans) totaled $31.2 million at June 30, 1998 compared to $34.1 million at December 31, 1997 and $54.9 million at June 30, 1997. The amount of interest that has been reserved for loans 90 days or more delinquent or in foreclosure was $1.9 million at June 30, 1998, $1.8 million at December 31, 1997 and $3.4 million at June 30, 1997. The Bank's modified loans resulted primarily from temporary modifications of principal and interest payments. Under these arrangements, loan terms are typically reduced to no less than a monthly interest payment required under the note. If the borrower is unable to return to scheduled principal and interest payments at the end of the modification period, foreclosure proceedings are initiated or the modification period may be extended. As of June 30, 1998, the Bank had modified loans totaling $9.2 million, net of loan loss allowances totaling $3.5 million, compared with $16.7 million, net of loan loss allowances of $4.1 million, at December 31, 1997 and $8.7 million, net of loan loss allowances of $525 thousand, at June 30, 1997. Pursuant to Statement of Financial Accounting Standards No. 114 ("SFAS No. 114"), a loan is considered to be impaired when management believes that it is probable that the Bank will be unable to collect all 13 14 amounts due under the contractual terms of the loan. Estimated impairment losses are recorded as separate valuation allowances and may be subsequently adjusted based upon changes in the measurement of impairment. Impaired loans, which are disclosed net of valuation allowances, include non-accrual major loans (single family loans with an outstanding principal amount greater than or equal to $500,000 and multi-family and commercial real estate loans with an outstanding principal amount greater than or equal to $750,000), modified loans, and major loans less than 90 days delinquent in which full payment of principal and interest is not expected to be received. The following is a summary of impaired loans, net of valuation allowances for impairment, as of the dates indicated:
June 30, December 31, June 30, 1998 1997 1997 ---------- ------------ --------- (Dollars in thousands) Non-accrual loans $ 5,551 $ 8,260 $ 17,887 Modified loans 8,472 8,090 4,539 Other impaired loans 5,700 9,335 10,969 ---------- --------- --------- $ 19,723 $ 25,685 $ 33,395 ========== ========= =========
The Bank evaluates loans for impairment whenever the collectibility of contractual principal and interest payments is questionable. Large groups of smaller balance homogenous loans that are collectively evaluated for impairment, including residential mortgage loans, are not subject to the application of SFAS No. 114. When a loan is considered impaired, the Bank measures impairment based on the present value of expected future cash flows (over a period not to exceed 5 years) discounted at the loan's effective interest rate. However, if the loan is "collateral-dependent" or probable of foreclosure, impairment is measured based on the fair value of the collateral. When the measure of an impaired loan is less than the recorded investment in the loan, the Bank records an impairment allowance equal to the excess of the Bank's recorded investment in the loan over its measured value. The following summary details impaired loans measured using the fair value method and loans measured based on the present value of expected future cash flows discounted at the effective interest rate of the loan as of the dates indicated:
June 30, December 31, June 30, 1998 1997 1997 -------- ------------ ---------- (Dollars in thousands) Present value method $ 1,067 $ 1,067 $ 1,071 Fair value method 18,656 24,618 32,324 -------- -------- -------- Total impaired loans $ 19,723 $ 25,685 $ 33,395 ======== ======== ========
Impaired loans for which there were no valuation allowances established totaled $2.5 million, $2.5 million and $4.2 million as of June 30, 1998, December 31, 1997, and June 30, 1997, respectively. See "Results of Operations" for an analysis of activity in the valuation allowance for impaired loans. The table below shows the Bank's net investment in non-performing loans determined to be impaired, by property type, as of the dates indicated:
June 30, December 31, June 30, 1998 1997 1997 -------- ------------ ---------- (Dollars in thousands) Single family $ -- $ 856 $ 1,879 Multi-family 5,081 6,893 15,555 Commercial 470 511 453 -------- -------- -------- $ 5,551 $ 8,260 $ 17,887 ======== ======== ========
14 15 Cash payments received from impaired loans are recorded in accordance with the contractual terms of the loan. The principal portion of the payment is used to reduce the principal balance of the loan, whereas the interest portion is recognized as interest income. On certain modified loans where the Bank does not believe that it will receive all amounts due under the original contractual loan terms, the Bank records an allowance for interest received. The average recorded investment in impaired loans during the quarters ended June 30, 1998, December 31, 1997 and June 30, 1997 was $19.8 million, $24.5 million and $30.6 million, respectively. The amount of interest income recognized for impaired loans during the quarters ended June 30, 1998, December 31, 1997 and June 30, 1997 was $337 thousand, $433 thousand and $361 thousand, respectively, under the cash basis method of accounting. Interest income recognized under the accrual basis method of accounting for the quarters ended June 30, 1998, December 31, 1997 and June 30, 1997 was $343 thousand, $433 thousand and $360 thousand, respectively. ASSET QUALITY The following table sets forth certain asset quality ratios of the Bank at the dates indicated:
June 30, December 31, June 30, 1998 1997 1997 -------- ------------ -------- Non-Performing Loans to Loans Receivable(1) 0.90% 0.91% 1.41% Non-Performing Assets to Total Assets(2) 0.84% 0.95% 1.39% Loan Loss Allowances to Non-Performing Loans (3) 220.79% 193.38% 114.99% General Loss Allowances to Assets with Loss Exposure(4) 2.07% 1.86% 1.65% General Loss Allowances to Total Assets with Loss Exposure(5) 2.32% 2.12% 1.92%
- -------------------- (1) Non-performing loans are net of valuation allowances related to those loans. Loans receivable exclude mortgage- backed securities and are before deducting unrealized loan fees, general valuation allowances and valuation allowances for impaired loans. (2) Non-performing assets are net of valuation allowances related to those assets. (3) The Bank's loan loss allowances, including valuation allowances for non-performing loans and general valuation allowances but excluding general valuation allowances for loans sold by the Bank with full or limited recourse. Non performing loans are before deducting valuation allowances related to those loans. (4) The Bank's general valuation allowances, excluding general valuation allowances for loans sold with full or limited recourse. The Bank's assets with loss exposure include primarily loans and real estate owned, but exclude mortgage-backed securities. (5) The Bank's general valuation allowances, including general valuation allowances for loans sold with full or limited recourse. Assets with loss exposure include the Bank's portfolio plus loans sold with recourse, but exclude Mortgage-backed securities. 15 16 NON-PERFORMING ASSETS The Bank defines non-performing assets as loans delinquent over 90 days (non-accrual loans), loans in foreclosure and real estate acquired by foreclosure (real estate owned). An analysis of non-performing assets follows as of the dates indicated:
June 30, December 31, June 30, 1998 1997 1997 -------- ------------ -------- (Dollars in thousands) Real estate owned: Single family $ 2,899 $ 5,806 $ 5,125 Multi-family 3,021 4,034 6,550 Commercial 481 826 1,576 Other 53 52 23 Less: General valuation allowance (500) (500) (260) -------- -------- -------- Total real estate owned 5,954 10,218 13,014 -------- -------- -------- Non-accrual loans: Single family 15,794 16,799 17,859 Multi-family 13,495 15,785 34,674 Commercial 2,008 1,533 2,369 Other -- -- 32 Less: Valuation allowances (1) (3,553) (4,738) (9,850) -------- -------- -------- Total non-accrual loans 27,744 29,379 45,084 -------- -------- -------- Total non-performing assets $ 33,698 $ 39,597 $ 58,098 ======== ======== ========
- ------------------- (1) Includes valuation allowances for impaired loans and loss allowances on other non-performing loans requiring fair value adjustments. Real estate owned at June 30, 1998 decreased 42% compared to December 31, 1997 and 54% compared to June 30, 1997 due to improvement in the Southern California real estate market. Properties are selling faster and property values have increased compared to the prior year. Non-accrual loans, net of valuation allowances, at June 30, 1998 decreased 6% compared to the level at December 31, 1997 and decreased 38% from the level one year ago. An overall decline in loan delinquencies, resulting from improvement in the Southern California economy, led to the current year decrease. SOURCES OF FUNDS External sources of funds include savings deposits from several sources, advances from the Federal Home Loan Bank of San Francisco ("FHLB"), securitized borrowings and unsecured term funds. Savings deposits are accepted from retail banking offices, a telemarketing department, and national deposit brokers. Including $21.2 million and $38.4 million in interest credits during the second quarter and first six months of 1998, respectively, total savings deposits decreased by $18.4 million and increased by $195.4 million during the same 1998 periods, respectively. The cost of funds, operating margins and net earnings of the Bank associated with brokered and telemarketing deposits are generally comparable to the cost of funds, operating margins and net earnings of the Bank associated with retail deposits, FHLB borrowings and repurchase agreements. As the cost of each 16 17 source of funds fluctuates from time to time, based on market rates of interest generally offered by the Bank and other depository institutions, the Bank will seek funds from the lowest cost source until the relative costs change. As the cost of funds, operating margins and net earnings of the Bank associated with each source of funds are generally comparable, the Bank does not deem the impact of its use of any one of the specific sources of funds at a given time to be material. Deposits accepted by retail branches increased by $7.8 million and $33.0 million during the second quarter and first six months of 1998, respectively. The Bank continues to focus its marketing efforts on attracting liquid accounts and short term certificates of deposits. Retail deposits comprised 70% of total savings deposits as of June 30, 1998. Telemarketing deposits are obtained by the Bank's employees via telephone, from depositors outside of the Bank's normal service areas. Telemarketing deposits decreased by $33.1 million and increased by $9.5 million during the second quarter and first six months of 1998, respectively. The level of telemarketing deposits varies based on the availability of higher yielding investments to investors, who are often professional money managers. The availability of telemarketing deposits also varies based on the investors' perception of the Bank's creditworthiness. Telemarketing deposits comprised 5% of total deposits at June 30, 1998. Deposits acquired from national brokerage firms ("brokered deposits") are considered a source of funds similar to borrowing. In evaluating brokered deposits as a source of funds, the cost of these deposits, including commission costs, is compared to other funding sources. Brokered deposits increased by $6.9 million and $152.9 million during the second quarter and first six months of 1998, respectively. At June 30, 1998, brokered deposits comprised 25% of total deposits. Total borrowings decreased by $37.1 million during the second quarter of 1998 due to net payoffs of $15.1 million in borrowings under reverse repurchase agreements, $2.0 million in unsecured term funds and $20.0 million in advances from the FHLB. Total borrowings decreased by $357.5 million during the first six months of 1998 due to net payoffs of $22.0 million in borrowings under reverse repurchase agreements, $0.5 million in additional unsecured term funds and $335.0 million in advances from the FHLB. Internal sources of funds include both principal payments and payoffs on loans and mortgage-backed securities, loan sales, and positive cash flows from operations. Principal payments include amortized principal and prepayments which are a function of real estate activity and the general level of interest rates. Total principal payments were $253.4 million and $384.5 million for the second quarter and first six months of 1998, respectively. This compares with principal payments of $79.5 million and $150.1 million for the second quarter and first six months of 1997, respectively. Loan sales increased to $125.5 million and $186.2 million for the second quarter and the first six months of 1998, respectively, compared with sales of $2.0 million and $3.2 million for the second quarter and first six months of 1997. The amount of salable product originated during 1998 increased due to borrower preference for fixed rate loans which are generally sold by the Bank. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS On April 24, 1998 the Company held its Annual Meeting of Stockholders for the purpose of voting on two proposals. The following are the matters voted on at the meeting and the votes cast for, against or withheld, and abstentions as to each such matter. There were no broker non-votes as to these matters. 17 18 1) Election of Directors.
For Against Abstain --------- ------- ------- Babette E. Heimbuch 9,870,198 1,903 0 William S. Mortensen 9,870,460 1,641 0 John R. Woodhull 9,844,871 27,230 0 2) Ratification of KPMG Peat Marwick LLP as independent public auditors for the Company for 1997.
For 9,840,627 Against 28,883 Abstain 2,591
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits (3.) Certificate of Incorporation and By Laws filed as Exhibit (1)(a) to Form 8-A dated June 4, 1987 and incorporated by reference. (4.1) Amended and Restated Rights Agreement filed as Exhibit 4.1 to Form 8-A/A, dated June 25, 1998 and incorporated by reference. (4.2) Indenture filed as Exhibit 4 to Amendment No. 3 to Form S-3 dated September 20, 1994 and incorporated by reference. (10.1) Deferred Compensation Plan filed as Exhibit 10.3 to Form 10-K for the fiscal year ended December 31, 1983 and incorporated by reference. (10.2) Amended Supplemental Executive Retirement Plan dated May 30, 1998. (10.3) Form of Change in Control Employment Agreement effective September 26, 1996 filed as Exhibit 10.4 to Form 10-Q for the quarter ended September 30, 1996 and incorporated by reference. (10.4) Form of Directors Stock Incentive Plan effective January 1, 1997 filed as Appendix A to Proxy Statement dated March 18, 1997 for Annual Meeting of Stockholders and incorporated by reference. (11.1) Computation of earnings per share. Part I hereof is incorporated by reference. b) Reports on Form 8-K No reports on Form 8-K were filed during the period ended June 30, 1998. 18 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRSTFED FINANCIAL CORP. ------------------------ Registrant Date: August 13, 1998 By /s/ BABETTE E. HEIMBUCH --------------------------------------- Babette E. Heimbuch President and Chief Executive Officer By /s/ DOUGLAS J. GODDARD --------------------------------------- Douglas J. Goddard Chief Financial Officer and Executive Vice President 19 EX-10.2 2 EXHIBIT 10.2 1 EXHIBIT 10.2 FIRST FEDERAL BANK OF CALIFORNIA Supplemental Executive Retirement Plan Amended and Restated as of May 30, 1998 WHEREAS, effective January 1, 1986 the Board of Directors of First Federal Bank of California (the "Bank") adopted the Supplemental Executive Retirement Plan, also known as the "SERP," to ensure adequate retirement income for selected members of the management of this Bank, to facilitate attracting and retaining highly qualified management employees and to reward past meritorious services; and WHEREAS, on May 30, 1998 the Board of Directors of the Company determined that it is advisable to amend and restate the entire SERP as set forth herein; NOW, THEREFORE, effective immediately the terms of the SERP shall be as follows: ARTICLE 1 Definitions 1.1 "Bank" means First Federal Bank of California and any successor in interest thereto. 1.2 "Board" means the Board of Directors of the Bank. 1.3 "Break in Employment" means a termination of Participant's employment with the Bank for any reason. For purposes of this definition absences caused by illness or disability, vacation time and leaves of absence approved by the Board shall not constitute a Break in Employment. 1.4 "Change in Ownership" means the following: (a) An acquisition (other than from FirstFed Financial Corp., hereafter referred to as the "Company") by any person, entity or group, within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act"), (excluding, for this purpose, the Company or any employee benefit plan of the Company which acquires beneficial ownership of voting securities of the Company) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 15% or more of either (i) the then outstanding shares of the Company's common stock or (ii) the 2 combined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of directors; or (b) Individuals who, as of the date hereof, constitute the Board of Directors of the Company (as of the date hereof, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of the Company, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of the SERP, considered as though such person were a member of the Incumbent Board; or (c) Approval by the stockholders fo the Company of a reorganization, merger, consolidation (other than a reorganization, merger or consolidation in which persons who were the stockholders of the Company immediately prior to such reorganization, merger ot consolidation do, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities), or a liquidation or dissolution of the Company or of the sale of all or substantially all of the assets of the Company. 1.5 "Commencement Date" means the first date on which payments under this Plan are distributed to a Participant or his or her spouse. 1.6 "Committee" means the committee of the Board that is appointed by the Board to administer this Plan, or if no committee is so appointed, the entire Board. 1.7 "Compensation" means all W-2 Compensation paid to a Participant by the Bank, plus any 401(k) Plan and Section 125 compensation deferrals, but excluding all non-cash bonuses paid to such Participant (including but not limited to the value of any bonus grants in the form of restricted stock or stock options). 1.8 "Early Retirement Date" means the first day of the month on which a Participant has attained the age of fifty (50) years and completed fifteen (15) Years of Service. 1.9 "Final Average Earnings" means a Participant's highest average monthly Compensation for the highest consecutive 60 months, divided by 60. 2 3 1.10 "Normal Retirement Date" means the first day of the month on which a Participant attains the age of sixty (60) years. 1.11 "Participant" means any person described in Article 2 hereof who is participating in the Plan. 1.12 "Plan" means this Supplemental Executive Retirement Plan as it may be amended from time to time. 1.13 "Plan Year" means the calendar year. 1.14 "Retirement Plan" means the First Federal Bank of California Pension Plan and Trust, which was terminated effective August 30, 1996. 1.15 "Service" means completed years and months of service with the Bank uninterrupted by a Break in Employment. Service includes all service accrued by a Participant with the Bank regardless of whether an individual was a Participant in this Plan at the time of service accrual. 1.16 "Year of Service" means any calendar year in which a Participant completes twelve (12) consecutive months of Service with the Bank. ARTICLE 2 Eligibility and Participation Babette E. Heimbuch and James P. Giraldin shall be the only individuals eligible to participate in the Plan, unless otherwise provided by the Committee. ARTICLE 3 Amount of Supplemental Benefits 3.1 Subject to the succeeding provisions of this Article 3, if a Participant in the Plan continues in his/her employment with the Bank until he/she attains sixty (60) years of age, the Participant shall be entitled to a supplemental retirement benefit. 3.2 The monthly normal supplemental retirement benefit under this Plan shall equal the excess of the amount calculated in (i) below over the sum of the amounts calculated in (ii) and (iii) below: (i) Seventy-five percent (75%) of the Participant's Final Average Earnings multiplied by the fraction, of which the numerator equals the number of 3 4 consecutive Years of Service, up to twenty (20) and the denominator is twenty (20). (ii) The monthly annuity payment which the Participant would receive if: (a) The Participant had always, while employed, made the maximum allowable pre-tax deferral to the Bank's 401(k) Plan [reflecting any reductions required by the ADP test], and (b) The Bank had always made the match on the amount in (a) above [reflecting any reductions required by the ACP test] at the end of each calendar year, and (c) The matching contributions in (b) above were credited with interest at a variable rate equal to the 10-year Treasury rate as of January 1 of each year until Normal Retirement Date, and (d) The account balance at Normal Retirement Date resulting from (b) and (c) above is converted to a life annuity, using the 1983 Group Annuity Mortality Table, weighted 50% Male and 50% Female (the "actuarial equivalent," as that term is used below), and an interest rate equal to the rate described in (c) above. (iii) The monthly benefit provided under the Retirement Plan lump sum distribution, if any, into the 401(k) Plan (the "Rollover Distribution"). For purposes of calculating benefits under the Rollover Distribution, the monthly benefit payable to a Participant from the Rollover Distribution shall equal the monthly benefit which the Participant would receive if the actual Rollover Distribution, was credited with interest at 4.75% per year until Normal Retirement Date, and the account balance at Normal Retirement Date resulting from the foregoing is converted to a life annuity, using the 1983 Group Annuity Mortality Table, weighted 50% Male and 50% Female, and an interest rate of 4.75%. 3.3 Subject to the provisions of this Article 3, if a Participant has completed fifteen (15) consecutive Years of Service and has attained the age of fifty (50) years, such Participant shall be eligible to receive an early retirement supplemental retirement benefit. The amount of the monthly early retirement supplemental benefit shall equal the excess of the amount calculated in (I) below over the sum of the amounts calculated in (ii) and (iii) below: 4 5 (i) Seventy-five percent (75%) of the Participant's Final Average Earnings multiplied by the fraction, of which the numerator equals the number of consecutive Years of Service, up to twenty (20) and the denominator is twenty (20), reduced by one-half of one percent (0.5%) for each of the first sixty (60) months and one-third of one percent (0.33%) for each of the succeeding sixty (60) months by which the Commencement Date for early supplemental retirement benefits precedes such Participant's Normal Retirement Date. (ii) The monthly annuity payment which the Participant would receive if: (a) The Participant had always, while employed, made the maximum allowable pre-tax deferral to the Bank's 401(k) Plan [reflecting any reductions required by the ADP test], and (b) The Bank had always made the match on the amount in (a) above [reflecting any reductions required by the ACP test] at the end of each calendar year, and (c) The matching contributions in (b) above were credited with interest at a variable rate equal to the 10-year Treasury rate as of January 1 of each year until Early Retirement Date, and (d) The account balance at Early Retirement Date resulting from (b) and (c) above is converted to an actuarially equivalent life annuity as provided in Section 3.2(d) above. (iii) The monthly benefit provided under the Retirement Plan lump sum distribution, if any, which the Participant rolled over into the 401(k) Plan (the "Rollover Distribution"). For purposes of calculating benefits under the Rollover Distribution, the monthly benefit payable to a Participant from the Rollover Distribution shall equal the monthly benefit which the Participant would receive if the actual Rollover Distribution, if any, was credited with interest at 4.75% per year until Normal Retirement Date, and the account balance at Normal Retirement Date resulting from the foregoing is converted to a life annuity, using the 1983 Group Annuity Mortality Table, weighted 50% Male and 50% Female, and an interest rate of 4.75%. 3.4 At any time prior to the commencement of payment of benefits under the Plan, a Participant may elect to receive benefits in the form of a ten year certain and life thereafter benefit, under which form a reduced monthly benefit will be paid to the 5 6 Participant for life, and after his or her death, if 120 monthly payments have not been made, payments will be made to the surviving spouse until a total of 120 monthly payments have been made. 3.5 For the purposes of this Article 3, if a Participant incurs a Break in Employment and is subsequently re-employed by the Bank, any Service accumulated by such Participant prior to incurring the Break of Employment shall be disregarded. At its discretion, the Committee may disregard any Break in Employment which is less than 90 days, or may restore any other Break in Employment Service for purposes of determining eligibility for benefits under the SERP. 3.6 If a Participant terminates employment within one year following a Change in Ownership of the Bank (other than a termination by the Company for cause, as determined by the Committee), such Participant shall be eligible to receive the supplemental normal retirement benefit provided under Section 3.1 of this Plan even if such Participant has not attained the age of sixty (60) years and/or completed twenty (20) consecutive Years of Service with the Bank. For the purposes of this Section 3.6 the amount of the benefit shall be calculated as of the employment termination date based upon the Participant's age and Years of Service as of the employment termination date. For purposes of calculating benefits under this Section, the monthly benefit payable to a Participant from the SERP shall be the actuarial equivalent at the termination date of the monthly payment that would be made under the single life annuity form to which the Participant would be entitled under the SERP commencing at the later of age 55 and the actual age at termination of employment. 3.7 Although the Plan provides a supplemental normal retirement benefit under Section 3.1 of this Article 3, a supplemental early retirement benefit under Section 3.3 of this Article 3, a death benefit under Section 3.4 of this Article 3 and a Change of Ownership termination benefit under Section 3.6 of this Article 3, no Participant may receive a distribution from the Plan derived from more than one of such categories of benefits. 3.8 Anything herein contained to the contrary notwithstanding, the Board in its discretion may increase the amount payable as a benefit hereunder to any one or more Participants, provided that such change in the supplemental retirement benefit is communicated in writing to the Participant. 6 7 ARTICLE 4 Vesting 4.1 Subject to the provisions of Section 3.4 and 3.6 hereof, if a Participant terminates his/her employment with the Bank at any time prior to his/her Normal Retirement Date or his/her Early Retirement Date, such Participant shall cease being a Participant in the Plan as of the date of his/her termination of employment and no benefits shall be payable under the Plan to such Participant or to any other person on behalf of such Participant. ARTICLE 5 Payment of Benefits 5.1 The actual Commencement Date for and benefit payable to a Participant pursuant to Section 3.1 or Section 3.3 of this Plan shall be the first of the month coinciding with or next following the date of (i) a Break in Employment and (ii) satisfaction of the eligibility requirement specified in Section 3.1 and 3.3 respectively. The actual Commencement Date for and benefit payable to a Participant pursuant to Section 3.6 hereof shall be the first of the month coinciding with or next following the date of termination of employment. The actual Commencement Date of any death benefit payable to the surviving spouse of a Participant under Section 3.4 hereof shall be the first of the month coinciding with or next following the Participant's date of death. The operation of this Section 5.1 is subject to modification by the provisions contained in Sections 5.5, 5.6 and 6.2 hereof. 5.2 Subject to the provisions of Sections 5.3 and 5.4 hereof, the benefit payable to a Participant shall be paid in the form of monthly payments payable on the same date of each month as the date of the month of the Commencement Date. Except as provided in Section 3.4, all payments shall cease upon the Participant's death. 5.3 Subject to the provisions of Section 5.4 and 5.5 hereof, the benefit payable to a surviving spouse pursuant to Section 3.4 hereof shall be paid in the form of monthly payments payable on the same date of each month as the date of the month of the 7 8 Commencement Date. All payments shall cease upon the expiration of the 10 year certain period. 5.4 Subject to the approval of the Board, the Committee may authorize the payment of benefits from the Plan in a form or time other than a form or time specified in this Article 5. 5.5 All forms for the payment of benefits under the Plan shall be actuarially equivalent to a theoretical annuity for the life of the Participant determined as of the Commencement Date. ARTICLE 6 Amendment and Termination 6.1 The Plan may be amended by the Board in whole or in part, at any time and from time to time; provided, however, that no amendment may reduce the present value (using the basis for actuarial equivalence as otherwise utilized herein and calculated assuming the Participant is fully vested) of the benefit otherwise payable to any Participant in the Plan. 6.2 The Plan may be terminated at any time by the Board. In the event of a termination of the Plan, each Participant as of the effective date of the termination shall have a nonforfeitable right to one hundred percent (100%) of his/her supplemental retirement benefit provided under Section 3.1 hereof determined as of the date of termination. Any supplemental retirement benefit payable under this Section to a Participant who has not commenced receiving retirement benefits under the Plan shall be paid to such Participant in accordance with the provisions of Article 5, unless the Committee in its discretion elects to commence distribution at an earlier date. 6.3 In the event that the Board adopts a resolution terminating the Plan, the Bank shall file a notice of its intention to terminate the Plan with all applicable regulatory agencies (if required by law or regulation) prior to the proposed termination date. 8 9 ARTICLE 7 Administration 7.1 The Committee shall be the administrator of the Plan and shall be responsible for providing all notices required under the Plan and for furnishing or filing all reports and returns required by law with respect to the Plan. 7.2 The books and records to be maintained for the purpose of the Plan shall be maintained by the officers and employees of the Bank at its expense and subject to the supervision and control of the Committee. All expenses of administering the Plan shall be paid by the Bank. ARTICLE 8 Miscellaneous 8.1 Nothing contained in the Plan shall be construed to create a contract of employment with any Participant. The Bank reserves the right to appoint, from time to time, any person to its offices and to remove any of its officers and discharge any of its employees, without exception, in any manner and upon any basis permitted by law. 8.2 All benefits payable under the Plan shall be paid from the general assets of the Bank. Nothing contained in the Plan shall be deemed to give any Participant or surviving spouse of any Participant any ownership, proprietary, security or other right in any asset of the Bank, whether or not earmarked for the Bank's purposes as a reserve or fund to be used by the Bank for the discharge of its vested or contingent obligations hereunder. 8.3 The right of any Participant or surviving spouse of any Participant to any benefit or payment hereunder shall not be subject in any manner to attachment or other legal process for the debts of such Participant or surviving spouse, and any such benefit or payment shall not be subject to anticipation, alienation, sale, transfer, assignment or encumbrance by the Participant or any other person. 8.4 This Plan is established under and shall be construed according to the laws of the United States, and, to the extent not inconsistent therewith, of the State of California. 8.5 In the event of any merger, consolidation, sale of substantially all of the assets of, or other reorganization involving the Bank, any successor entity by reason of such 9 10 reorganization shall succeed to all of the Bank's duties, obligation, rights, and benefits hereunder. 8.6 Wherever possible, each provision of this Plan shall be interpreted in a manner so as to be valid and effective under applicable law, but if any provision of this Plan is found to be prohibited or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Plan. 8.7 Singular words in this Plan may include the plural, the plural may include the singular, and the masculine may include the feminine. IN WITNESS WHEREOF, the foregoing Amended and Restated Supplemental Executive Retirement Plan was adopted by First Federal Bank of California at a regular meeting of its Board of Directors duly held on May 30, 1998. FIRST FEDERAL BANK OF CALIFORNIA By: BABETTE E. HEIMBUCH -------------------------------------- President and Chief Executive Officer By: ANN E. LEDERER -------------------------------------- Secretary 10 EX-27.2Q.98 3 EX-27.2Q.98
9 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 66,257 147,000 0 0 673,882 0 0 2,994,987 73,375 4,010,381 2,139,018 1,169,219 46,849 415,000 0 0 231 240,064 4,010,381 144,016 5,526 0 149,542 49,082 97,177 52,365 4,600 0 24,674 29,320 29,320 0 0 16,780 0.79 0.78 2.54 27,744 0 5,551 5,700 84,041 3,539 1,302 86,404 86,404 0 0
EX-27.2Q.97 4 EX-27.2Q.97
9 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 33,978 154,000 0 0 763,689 0 0 3,112,899 65,340 4,193,203 1,960,394 1,984,349 46,004 50,000 0 0 115 202,341 4,193,203 141,126 6,505 0 147,631 46,866 100,570 47,061 11,500 0 22,908 18,445 18,445 0 0 10,516 1.00 0.98 2.22 45,084 0 17,887 32,309 75,648 10,679 1,701 78,170 78,170 0 0
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