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
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