FED Firstfed Financial Corp

Fifth paragraph, third sentence of release should read: In comparison, 1,366 loans with balances totaling approximately $644.0 million were scheduled to recast during the first half of 2008 and 1,778 loans with balances totaling approximately $823.0 million were scheduled to recast in the second half of 2007 (sted In comparison, 1,366 loans with balances totaling approximately $644.0 million were scheduled to recast during the first half of 2008 and 1,778 loans with balances totaling approximately $823.0 million are scheduled to recast in the second half of 2008). The corrected release reads: FIRSTFED REPORTS RESULTS FOR THE SECOND QUARTER OF 2008 FirstFed Financial Corp. (NYSE:FED), parent company of First Federal Bank of California, today announced lower loan loss provisions and a decline in single family loans less than 90 days delinquent in the second quarter of 2008 compared to the first quarter of 2008. �While there can be no assurance that this trend will continue, it does reflect our efforts to work through the issues in the single family loan portfolio,� said Babette Heimbuch, CEO. The Company reported a net loss of $35.5 million or $2.60 per diluted share of common stock for the second quarter of 2008 compared to a net loss of $69.8 million or $5.11 per diluted share of common stock for the first quarter of 2008 and net income of $29.1 million or $1.74 per diluted share of common stock for the second quarter of 2007. The second quarter loss resulted primarily from a $90.2 million provision for loan losses. The loan loss provision was due to ongoing charge-offs and modifications of single family loans as well as higher levels of non-accrual single family loans (loans greater than 90 days delinquent or in foreclosure). The Company recorded a $150.3 million provision for loan losses during the first quarter of 2008 and a $3.1 million loan loss provision during the second quarter of 2007. The Bank�s higher levels of single family non-accrual loans are the result of the large numbers of adjustable rate mortgages that faced a recast of their payment amount in the latter part of 2007 and early 2008. Non-accrual single family loans increased to $491.7 million as of June 30, 2008 from $393.6 million at March 31, 2008 and $179.7 million as of December 31, 2007 compared to $53.3 million as of June 30, 2007. However, single family loans delinquent less than 90 days have declined as the number of loans facing payment recast have declined during 2008. Single family loans less than 90 days delinquent have decreased to $207.7 million as of June 30, 2008 from $273.3 million as of March 31, 2008 and $236.7 million as of December 31, 2007 compared to $35.2 million as of June 30, 2007. The level of delinquent loans during 2008 was significantly impacted by adjustable rate mortgages that reached their maximum allowable negative amortization and required an increased payment. The Bank estimates that 594 loans with balances totaling approximately $266.3 million could hit their maximum allowable negative amortization during the rest of 2008. In comparison, 1,366 loans with balances totaling approximately $644.0 million were scheduled to recast during the first half of 2008 and 1,778 loans with balances totaling approximately $823.0 million were scheduled to recast in the second half of 2007. Another 1,422 loans, with balances totaling $653.0 million, could hit their maximum allowable negative amortization during 2009. The Bank has a program to reach out to borrowers faced with loan recasts to encourage them to modify their loans before the recast date. Total modified loans were $308.7 million as of June 30, 2008. These modified loans are considered troubled debt restructurings (�TDRs�) and valuation allowances of $26.3 million were established as of June 30, 2008. Another $13.2 million in adjustable rate mortgages were modified as of June 30, 2008 but were not considered TDRs and therefore no valuation allowances were established. Modified loans totaled $108.1 million at March 31, 2008 and $1.8 million as of December 31, 2007. There were no modified loans as of June 30, 2007. Second quarter net earnings were also impacted by lower net interest income which decreased by $4.6 million or 9% compared to the first quarter of 2008 and $25.0 million or 36% compared to the second quarter of 2007. Net interest income decreased due to lower interest-earning assets, increased non-accrual loans and lower interest rate spreads compared to the earlier periods. On a year-to-date basis, the Company reported a net loss of $105.3 million or $7.71 per diluted share for the first six months of 2008 compared to net income of $61.5 million or $3.66 per diluted share for the first six months of 2007. The year-to-date loss was attributable to the increased loan loss provisions recorded during the first and second quarters and a 35% decrease in net interest income compared to the same period of the prior year. Net loan charge-offs totaled $80.4 million and $108.9 million for the second quarter and the first six months of 2008 compared to $1.1 million and $1.8 million for the second quarter and the first six months of 2007. The Bank�s non-performing assets to total assets ratio increased to 8.20% at June 30, 2008 from 6.20% at March 31, 2008 and 2.79% at December 31, 2007 compared to 0.85% at June 30, 2007. The increases over the last year were due primarily to increased single family non-accrual loans. Total allowances for loan losses (general valuation allowances plus allowances for impaired loans) as a percentage of gross loans were 3.96% or $259.7 million at June 30, 2008 compared to 3.83% or $249.9 million as of March 31, 2008, 1.93% or $128.1 million as of December 31, 2007 and 1.62% or $114.9 million as of June 30, 2007. Allowances allocated to single family loans were 5.5% of gross single family loans at June 30, 2008. Sales of real estate owned resulted in net gains of $3.4 million for the second quarter of 2008 and $3.2 million for the first six months of 2008 compared to net losses of $103 thousand and $189 thousand for the second quarter and first six months of 2007. The gains recorded during 2008 resulted from conservative write downs at the time of foreclosure which created gains upon the ultimate disposition of the properties. Holding costs associated with foreclosed real estate totaled $3.2 million and $4.4 million during the second quarter and first six months of 2008 compared to $369 thousand and $555 thousand during the second quarter and first six months of 2007. Net interest income was $44.7 million and $94.0 million during the second quarter and the first six months of 2008 compared to $69.7 million and $144.9 million during the second quarter and the first six months of 2007. Net interest income decreased during 2008 compared to 2007 due to declines in average interest-earning assets and lower net interest spreads. Due to loan payoffs, average interest-earning assets decreased by 13% during the second quarter of 2008 compared to the second quarter of 2007 and 18% during the first six months of 2008 compared to same period of 2007. The interest rate spread decreased by 71 basis points during the second quarter of 2008 compared to the second quarter of 2007 and 51 basis points during the first six months of 2008 compared to the first six months of last year. The decreased spreads were primarily caused by interest lost on non-performing loans which lowered the loan yield by 1.15% during the second quarter of 2008 and 0.92% during the first six months of 2008. Loan originations were $491.6 million and $777.0 million during the second quarter and the first six months of 2008 compared to $180.4 million and $439.9 million during the second quarter and the first six months of 2007. Single family loans comprised 63% of loan originations during the second quarter of 2008 compared with 73% of loan originations during the second quarter of 2007. Multi-family and commercial real estate loans comprised 33% of loan originations for the second quarter of 2008, compared with 21% of loan originations for the second quarter of 2007. Total assets decreased to $7.2 billion as of June 30, 2008 from $7.7 billion as of June 30, 2007 due to loan payoffs and principal reductions. Due to increased loan originations during the first six months of 2008, total assets at June 30, 2008 were comparable to total assets as of December 31, 2007. Negative amortization, included in the balance of loans receivable, totaled $302.3 million at June 30, 2008 compared to $301.7 million at December 31, 2007 and $267.5 million at June 30, 2007. Negative amortization represents unpaid interest earned by the Bank that is added to the principal balance of the loan. Negative amortization decreased by $7.1 million for the quarter ended June 30, 2008, but increased by $586 thousand for the first six months ended June 30, 2008 compared to increases of $19.0 million and $51.7 million for the quarter and six months ended June 30, 2007. Negative amortization as a percentage of all single family loans that have negative amortization totaled 8.89% at June 30, 2008 compared to 8.35% at March 31, 2008, 7.68% at December 31, 2007 and 5.19% at June 30, 2007. The portfolio of single family loans with one-year fixed monthly payments totaled $2.8 billion at June 30, 2008 compared to $3.2 billion at December 31, 2007 and $3.6 billion at June 30, 2007. The portfolio of single family loans with three-to-five year fixed monthly payments totaled $901.3 million at June 30, 2008 compared to $1.1 billion at December 31, 2007 and $1.3 billion at June 30, 2007. Non-interest expense was $25.1 million and $47.2 million for the second quarter and the first six months of 2008 compared to $20.9 million and $41.8 million for the second quarter and the first six months of 2007. The ratio of non-interest expense to average total assets was 1.41% and 1.32% for the second quarter and the first six months ended June 30, 2008 compared to 1.03% and 0.98% for the quarter and the first six months ended June 30, 2007. The increase in non-interest expense during the second quarter of 2008 compared to the second quarter of 2007 was due primarily to holding costs associated with foreclosed real estate, increased loan incentive costs, and increased federal deposit insurance costs. The increase in non-interest expense during the first six months of 2008 compared to the first six months of 2007 was due to increased holding costs on foreclosed real estate, increased federal deposit insurance costs and increased occupancy costs due to the opening of new branches and a $1.1 million lease write-off for the former corporate headquarters. The Bank�s risk-based capital ratio was 17.83% at June 30, 2008 and its core and tangible capital ratios were 9.45%, which were in excess of the 10% and 5% ratios, respectively, required by the Bank�s federal regulators to be considered well capitalized. First Federal Bank of California operates 37 retail banking offices in Southern California. In keeping with the Bank�s retail branch expansion plan, two new retail branches were opened during the second quarter of 2008. The Bank operates two lending offices, one in Southern California and one in 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, changes in laws and regulations affecting the Company�s business, the California real estate market, 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. FIRSTFED FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollars in thousands, except share data) (Unaudited) � June 30,2008 � December 31, 2007 ASSETS Cash and cash equivalents $ 49,869 $ 53,974 Investment securities, available-for-sale (at fair value) 340,586 316,788 Mortgage-backed securities, available-for-sale (at fair value) 43,233 46,435 Loans receivable, net of allowances for loan losses of $259,695 and $128,058 � 6,299,039 6,518,214 Accrued interest and dividends receivable 35,409 45,492 Real estate owned, net (REO) 96,665 21,090 Office properties and equipment, net 20,197 17,785 Investment in Federal Home Loan Bank (FHLB) stock, at cost 121,307 104,387 Other assets 171,831 � 98,816 � $ 7,178,136 � $ 7,222,981 � � LIABILITIES Deposits $ 3,850,828 $ 4,156,692 FHLB advances 2,199,000 2,084,000 Securities sold under agreements to repurchase 370,000 120,000 Senior debentures 150,000 150,000 Accrued expenses and other liabilities 57,411 � 57,790 � 6,627,239 � 6,568,482 � � COMMITMENTS AND CONTINGENCIES � STOCKHOLDERS' EQUITY Common stock, par value $.01 per share; authorized 100,000,000 shares; issued 24,002,093 and 23,970,227 shares; outstanding 13,684,553 and 13,640,997 shares � 240 � 240 Additional paid-in capital 56,504 55,232 Retained earnings 760,118 865,411 Unreleased shares to employee stock ownership plan � (339 ) Treasury stock, at cost, 10,317,540 and 10,329,230 shares (266,040 ) (266,040 ) Accumulated other comprehensive income (loss), net of taxes � 75 � (5 ) 550,897 � 654,499 � $ 7,178,136 � $ 7,222,981 � FIRSTFED FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (Dollars in thousands, except per share data) (Unaudited) � Three months ended June 30, Six months ended June 30, 2008 � � 2007 � 2008 � � 2007 � Interest and dividend income: Interest on loans $ 95,193 $ 148,512 $ 204,666 $ 311,833 Interest on mortgage-backed securities 523 681 1,116 1,390 Interest and dividends on investments 5,876 � 5,543 � 11,398 � 11,930 � Total interest income 101,592 � 154,736 � 217,180 � 325,153 � Interest expense: Interest on deposits 33,122 54,053 73,458 115,118 Interest on borrowings 23,766 � 30,991 � 49,677 � 65,125 � Total interest expense 56,888 � 85,044 � 123,135 � 180,243 � � Net interest income 44,704 69,692 94,045 144,910 Provision for loan losses 90,200 � 3,100 � 240,500 � 6,900 � Net interest (loss) income after provision for loan losses (45,496 ) 66,592 � (146,455 ) 138,010 � � Other income: Loan servicing and other fees 2,785 854 3,258 1,814 Banking service fees 1,752 1,686 3,458 3,372 Gain on sale of loans 7 1,482 20 4,438 Net gain (loss) on real estate owned 3,371 (103 ) 3,187 (189 ) Other operating income 1,706 � 423 � 2,724 � 759 � Total other income 9,621 � 4,342 � 12,647 � 10,194 � � Non-interest expense: Salaries and employee benefits 13,143 12,044 24,351 24,753 Occupancy 2,849 2,997 7,903 5,800 Advertising 300 208 335 442 Amortization of core deposit intangible 126 126 253 625 Federal deposit insurance 1,352 924 1,896 1,552 Data processing 571 582 1,108 1,203 OTS assessment 454 577 908 1,153 Legal 494 522 1,183 993 Real estate owned operations 3,153 369 4,389 555 Other operating expense 2,632 � 2,591 � 4,866 � 4,711 � Total non-interest expense 25,074 � 20,940 � 47,192 � 41,787 � � (Loss) income before income taxes (60,949 ) 49,994 (181,000 ) 106,417 Income tax (benefit) expense (25,437 ) 20,923 � (75,707 ) 44,962 � Net (loss) income $ (35,512 ) $ 29,071 � $ (105,293 ) $ 61,455 � � Net (loss) income $ (35,512 ) $ 29,071 $ (105,293 ) $ 61,455 Other comprehensive (loss) income, net of taxes (benefits) (1,052 ) (656 ) 80 � (711 ) Comprehensive (loss) income $ (36,564 ) $ 28,415 � $ (105,213 ) $ 60,744 � � (Loss) earnings per share: Basic $ (2.60 ) $ 1.77 � $ (7.71 ) $ 3.72 � Diluted $ (2.60 ) $ 1.74 � $ (7.71 ) $ 3.66 � � Weighted average shares outstanding: Basic 13,668,097 � 16,458,283 � 13,661,856 � 16,539,440 � Diluted 13,668,097 � 16,671,802 � 13,661,856 � 16,774,887 � FIRSTFED FINANCIAL CORP. AND SUBSIDIARY � KEY FINANCIAL RESULTS (Unaudited) � Quarter ended June 30, 2008 � 2007 (Dollars in thousands, except per share data) End of period: Total assets $ 7,178,136 $ 7,669,286 Cash and securities $ 390,455 $ 385,942 Mortgage-backed securities $ 43,233 $ 50,569 Loans, net $ 6,299,039 $ 6,994,426 Core deposit intangible asset $ 211 $ 717 Deposits-retail and commercial $ 3,186,570 $ 3,083,127 Deposits-wholesale $ 664,258 $ 1,764,913 Borrowings $ 2,719,000 $ 1,995,900 Stockholders' equity $ 550,897 $ 724,334 Book value per share $ 40.26 $ 45.24 Tangible book value per share $ 40.24 $ 45.20 Stock price (period-end) $ 8.04 $ 56.73 Total loan servicing portfolio $ 6,807,095 $ 7,230,806 Loans serviced for others $ 62,905 $ 68,637 % of adjustable mortgages 79.73 % 96.84 % � Other data: Employees (full-time equivalent) 620 583 Branches 37 33 � Asset quality: Real estate owned (foreclosed) $ 96,665 $ 11,774 Non-accrual loans $ 491,712 $ 53,344 Non-performing assets $ 588,377 $ 65,118 Non-performing assets to total assets 8.20 % 0.85 % � Single family loans delinquent less than 90 days $ 207,696 $ 35,187 � General valuation allowance (GVA) $ 226,877 $ 114,894 Allowance for impaired loans 32,818 � Allowance for loan losses $ 259,695 114,894 Allowance for loan losses as a percentage of gross loans receivable � 3.96 % 1.62 % � Loans sold with recourse $ 39,787 $ 47,038 Modified loans (not impaired) $ 13,164 $ � Impaired loans, net $ 332,590 $ 15,486 � Capital ratios: Tangible capital ratio 9.45 % 10.84 % Core capital ratio 9.45 10.84 Risk-based capital ratio 17.83 21.88 Net worth to assets ratio 7.67 9.44 FIRSTFED FINANCIAL CORP. AND SUBSIDIARY � KEY FINANCIAL RESULTS (continued) (Unaudited) (Dollars in thousands) � Three months ended June 30, Six months ended June 30, 2008 � � 2007 2008 � � 2007 (Dollars in thousands) Selected ratios: Expense ratios: Efficiency ratio 46.16 % � 28.28 % � 44.23 % � 26.94 % Expense to average assets ratio 1.41 1.03 1.32 0.98 Return on average assets (1.99 ) 1.44 (2.94 ) 1.45 Return on average equity (24.97 ) 15.98 (35.25 ) 17.07 � Yields earned and rates paid: Average yield on loans 6.02 % � 8.02 % � 6.48 % � 7.99 % Average yield on investment portfolio 5.19 5.40 5.09 5.46 Average yield on all interest-earning assets 5.96 7.87 6.38 7.84 Average rate paid on deposits 3.29 4.40 3.62 4.46 Average rate paid on borrowings 3.88 5.38 4.13 5.39 Average rate paid on interest-bearing liabilities 3.51 4.71 3.81 4.76 Interest rate spread 2.45 3.16 2.57 3.08 Effective net spread 2.90 3.55 2.76 3.49 � Average balances: Average loans $ 6,321,262 $ 7,402,560 $ 6,317,025 $ 7,806,242 Average investments 493,431 � 460,789 491,355 � 487,832 Average interest-earning assets 6,814,693 � 7,863,349 6,808,380 � 8,294,074 Average deposits 4,024,173 4,931,418 4,059,543 5,201,614 Average borrowings 2,450,413 � 2,309,361 2,405,607 � 2,436,988 Average interest-bearing liabilities 6,474,586 � 7,240,779 6,465,150 � 7,638,602 Excess of interest-earning assets over interest-bearing liabilities $ 340,107 � $ 622,570 $ 343,230 � $ 655,472 � Loan originations and purchases $ 491,645 $ 180,376 $ 776,955 $ 439,885