FirstFed Financial Corp. (OTC:FFED.PK), parent company of First Federal Bank of California, today announced preliminary results for the third quarter of 2009. Non-performing assets (NPAs) as of September 30, 2009 have dropped $78.5 million from June 30, 2009. Loans delinquent less than ninety days at September 30, 2009 have declined to $74.7 million from their peak of $262.0 million in February of this year. Only $7.5 million of the shorter term delinquencies as of September 30, 2009 were past due more than 60 days.
The Company has $150.0 million in outstanding unsecured fixed/floating rate senior debentures on which it has not paid interest since December 15, 2008. On June 19, 2009, the Company commenced a cash tender offer and consent solicitation for these debentures with an offer to pay $200.00 per $1,000.00 principal amount of securities. As of October 15, 2009, 95% of the debentures have tendered. The tendered notes are to be paid with proceeds from additional capital raised by the Company. See the Company’s press release dated October 16, 2009 for more information.
The Company’s modification program (see press release dated October 15, 2009 for more details) has been very successful in shoring up both the Bank’s loan documentation and reducing the levels of Option ARM loans. After modification, only 17% of loans in the total portfolio had low documentation as of September 30, 2009. Non-modified loans originated between 2004 and 2007 yet to recast were reduced to 22% of the single family loan portfolio at September 30, 2009.
The net loss of $46.0 million or $3.36 per diluted share of common stock for the third quarter of 2009 compared to a net loss of $46.0 million or $3.37 per diluted share of common stock for the second quarter of 2009 and a net loss of $51.6 million during the third quarter of 2008. The 2008 third quarter loss was net of a $27.6 million tax benefit. No such benefit was available during 2009.
Non-performing Assets
Non-performing assets for the Bank include loans delinquent over 90 days (non-accrual loans), current loans with interest recognized on a cash basis, loans in foreclosure and real estate acquired by foreclosure (REO). The following is an analysis of non-performing assets at the dates indicated:
September 30, | June 30, | March 31, | |||||||
2009 | 2009 | 2009 | |||||||
(In thousands) | |||||||||
Non-accrual loans : | |||||||||
Single family | $ | 389,223 | $ | 543,720 | $ | 473,225 | |||
Multi-family and commercial | 2,716 | 4,422 | 2,246 | ||||||
Other | 13 | 13 | 13 | ||||||
Total non-accrual loans | 391,952 | 548,155 | 475,484 | ||||||
Real estate owned | 175,725 | 98,032 | 98,081 | ||||||
Total non-performing assets | $ | 567,677 | $ | 646,187 | $ | 573,565 | |||
Single family REO has increased as the Bank has worked through its large volume of delinquent loans. Non-performing assets as of September 30, 2009 include REO of $175.7 million which has been written down to fair market value less estimated selling costs and $113.9 million of severely delinquent non-accrual loans which have been written down to net collateral value.
Single family non-accrual loans at September 30, 2009, June 30, 2009 and March 31, 2009 include $95.8 million, $61.8 million and $26.6 million in loans which were current, but for which the Bank has capitalized interest into the loan balance as part of the modification process. It is the Bank’s policy that these loans remain classified as non-accrual loans until the loans have performed by making all contractual payments required by their loan for six months.
Delinquent Loans
Delinquent loans have declined for the past seven months, from their peak in February 2009. Management believes that the decline in single family loan delinquencies is the result of several factors including the success of the Bank’s loan modification programs, improving real estate prices and home sales in California and the overall lowering of interest rates upon which the Bank’s adjustable mortgages are based. The following table shows the outstanding balances of our loans that were delinquent by 30-59 days, 60-89 days and 90 or more days, or were in foreclosure, as of the respective dates shown:
Delinquencies 30-59 Days | Delinquencies 60-89 days | Delinquencies 90 or more days | In Foreclosure | Total | |||||||||||||
(Dollars in thousands) | |||||||||||||||||
September 30, 2008 | $ | 115,638 | $ | 96,991 | $ | 170,412 | $ | 270,911 | $ | 653,952 | |||||||
October 31, 2008 | $ | 115,534 | $ | 81,355 | $ | 192,638 | $ | 257,436 | $ | 646,963 | |||||||
November 30, 2008 | $ | 121,561 | $ | 92,963 | $ | 198,665 | $ | 254,187 | $ | 667,376 | |||||||
December 31, 2008 | $ | 136,599 | $ | 75,030 | $ | 200,222 | $ | 184,983 | $ | 596,834 | |||||||
January 31, 2009 | $ | 157,510 | $ | 97,665 | $ | 212,297 | $ | 188,523 | $ | 655,995 | |||||||
February 28, 2009 | $ | 148,827 | $ | 119,160 | $ | 222,169 | $ | 203,117 | $ | 693,273 | |||||||
March 31, 2009 | $ | 147,493 | $ | 89,525 | $ | 165,287 | $ | 276,287 | $ | 678,592 | |||||||
April 30, 2009 | $ | 124,633 | $ | 79,142 | $ | 51,213 | $ | 406,154 | $ | 661,142 | |||||||
May 31, 2009 | $ | 102,943 | $ | 60,292 | $ | 37,527 | $ | 450,841 | $ | 651,603 | |||||||
June 30, 2009 | $ | 78,582 | $ | 37,501 | $ | 21,390 | $ | 456,179 | $ | 593,652 | |||||||
July 31, 2009 | $ | 87,345 | $ | 17,715 | $ | 15,783 | $ | 427,992 | $ | 548,835 | |||||||
August 31, 2009 | $ | 66,497 | $ | 13,015 | $ | 9,345 | $ | 356,705 | $ | 445,562 | |||||||
September 30, 2009 | $ | 70,641 | ((1)) | $ | 8,301 | ((2)) | $ | 8,531 | $ | 281,791 | $ | 369,264 | |||||
(1) This amount includes $2.5 million of loans whose balances contained capitalized interest. These loans are included in non-accrual loans. | |||||||||||||||||
(2) This amount includes $843 thousand of loans whose balances contained capitalized interest. These loans are included in non-accrual loans. | |||||||||||||||||
Loan Payment Recast
The “recast” of adjustable loans to a higher payment amount was a factor in the higher delinquency levels experienced by the Bank during 2008 and the nine months ended September 30, 2009 because many borrowers were unable to afford the higher payments. The percentage increase in the payment amount and the loan-to-value (LTV) ratios are important considerations in the future collectability of the loans.
The following table shows the reduction in the amount of Option ARM loans in our portfolio that have not yet recast from $5.8 billion, as of December 31, 2006, to $816.5 million, as of September 30, 2009, or a reduction from 91% to 22% of all the loans in our single-family mortgage loan portfolio.
Single Family Loan Portfolio (Dollars in thousands) | ||||||||||||||||||||
Single Family Loans | December 31, | December 31, | December 31, | June 30, | September 30, | |||||||||||||||
(By Origination Period) | 2006 | 2007 | 2008 | 2009 | 2009 | |||||||||||||||
Pre-2004 Loan Production(1) | $ | 605,563 | $ | 395,506 | $ | 301,288 | $ | 278,951 | $ | 274,480 | ||||||||||
2004-2007 Loan Production | ||||||||||||||||||||
Modified loans | 1,799 | 655,215 | 892,628 | 1,232,791 | ||||||||||||||||
Non-Modified loans(2) | 5,838,662 | 4,255,571 | 2,520,702 | 1,913,031 | 1,282,506 | |||||||||||||||
2008-2009 Loan Production(3) | 901,526 | 903,901 | 864,432 | |||||||||||||||||
Single Family Loan Portfolio | $ | 6,444,225 | $ | 4,652,876 | $ | 4,378,731 | $ | 3,988,511 | $ | 3,654,209 | ||||||||||
2004-2007 Loan Production | ||||||||||||||||||||
Non-Modified 2004-2007 Production as a Percentage of the Single Family Loan Portfolio | 91 | % | 91 | % | 58 | % | 48 | % | 35 | % | ||||||||||
Non-Modified 2004-2007 Production Yet to Recast | $ | 5,838,662 | $ | 3,222,281 | $ | 1,879,785 | $ | 1,265,833 | $ | 816,457 | ||||||||||
Non-Modified 2004-2007 Production Yet to Recast as a Percentage of the Single Family Loan Portfolio | 91 | % | 69 | % | 43 | % | 32 | % | 22 | % | ||||||||||
(1) Single family loans originated prior to 2004 are currently amortizing and were originated under more stringent documentation requirements. Pre-2004 loan production includes modified loans of $17.7 million at December 31, 2008, $31.5 million at June 30, 2009 and $33.6 million at September 30, 2009. | ||||||||||||||||||||
(2) Single family loans originated between 2004 and 2007 contain a negative amortization option. | ||||||||||||||||||||
(3) None of the single family loans originated since February 2008 contains a negative amortization option. 2008-2009 loan production includes modified loans of $1.4 million at December 31, 2008, $3.7 million at June 30, 2009 and $7.0 million at September 30, 2009. | ||||||||||||||||||||
The Bank estimates that 129 loans with balances totaling approximately $56.1 million remain scheduled to recast during 2009. Another 771 loans, with balances totaling $344.0 million, are scheduled to recast during 2010. In comparison, 1,960 loans with balances totaling approximately $907.3 million were scheduled to recast during 2008.
Modified Loans
Based on an underwriting of the borrower and the property, the Bank attempts to arrive at an appropriate loan modification that will allow the borrower to stay in their home. At September 30, 2009, the Bank had modified 2,724 loans with principal balances totaling $1.3 billion. These loans were modified into a variety of loan products, as summarized below:
Loan modifications at September 30, 2009 (Dollars in thousands) | Loan Balance | Number of Loans | |||
Loan terms modified to: | |||||
5-year Adjustable-rate, Interest Only | $ | 641,006 | 1,304 | ||
5-year Fixed-rate, Interest Only | 362,679 | 780 | |||
Adjustable-rate, Amortizing | 98,803 | 233 | |||
10-year Fixed-rate, Amortizing | 105,075 | 249 | |||
5-year Fixed-rate, Amortizing | 39,268 | 96 | |||
6-month Adjustable-rate, Amortizing | 22,863 | 54 | |||
Other | 3,712 | 8 | |||
Grand Total | $ | 1,273,406 | 2,724 | ||
Based on the underwriting at the time of the modification, the Bank makes a determination whether or not the loan is a troubled debt restructuring (“TDR”). Modified loans are not considered TDRs when the loan terms are consistent with the Bank’s current product offerings and the borrowers meet the Bank’s current underwriting standards with regard to Fair Isaac Corporation (“FICO”) score, debt-to-income ratio, and LTV ratio. At September 30, 2009, 2,654 modified loans, with balances totaling $1.2 billion, were considered TDRs and 70 loans, with balances totaling $34.9 million, were not considered TDRs.
Negative amortization totaled $213.0 million at September 30, 2009, $262.9 million at December 31, 2008 and $289.6 million at September 30, 2008. The dollar amount of negative amortization decreased by $49.9 million from the level at the end of the year and $76.6 million from the September 30, 2008 level due to loan payoffs, charge-offs, declines in the underlying indices on adjustable rate loans, and payment increases required under the terms of the Bank’s adjustable rate loan notes.
The percentage of negative amortization that has been added to the original balances of single family loans that allow negative amortization increased to 10.20% at September 30, 2009 from 9.63% at December 31, 2008 and 9.29% at September 30, 2008. The increase was due to shrinkage in the loan portfolio due to loan payoffs and charge-offs.
Capital
The Bank’s risk-based capital ratio was 8.91% at September 30, 2009 and its core and tangible capital ratios were 4.25%. These capital ratios are below the levels required by the Bank’s federal regulators to be considered “well capitalized.” As previously disclosed, the Company and the Bank are operating under Amended Orders to Cease and Desist issued by the Office of Thrift Supervision (OTS) on May 28, 2009. Under the terms of the Bank’s Order, the Bank was required to meet and thereafter maintain a minimum Tier 1 Core Capital ratio of 7% and a minimum Total Risk-Based Capital ratio of 14% by September 30, 2009. The Bank failed to meet these required capital ratios, and, accordingly, as required by the Bank’s Order, the Bank submitted to the OTS a contingency plan to accomplish either a merger of the Bank with, or an acquisition of the Bank by, another federally insured institution or holding company thereof or a voluntary liquidation of the Bank. The Bank continues to pursue alternatives to increase the Bank’s capital ratios to preclude the need to implement the contingency plan.
Results of Operations for the Quarter Ended September 30, 2009
The net loss recorded during the third quarter of 2009 was due primarily to a $70.0 million provision for loan losses relating to the Bank’s single family loan portfolio. The Bank’s estimate of losses on single family loans is based on the continued weakness in the California real estate market and the increase in unemployment in California. However, the loan loss provision decreased compared to the third quarter of last year because fewer loans are facing payment recast, newly delinquent single family loans have decreased and slightly greater than half (51%) of the Bank’s non-performing assets have already been adjusted to fair market value less estimated selling costs.
Single family net loan charge-offs during the third quarter of 2009 were $94.1 million. This compares with $94.1 million during the second quarter of 2009, and $103.5 million during the third quarter of 2008. The general valuation allowance associated with single family loans totaled $230.9 million or 6.32% of single family loans outstanding at September 30, 2009. This compares with $259.0 million or 6.49% at June 30, 2009, $312.1 million or 7.13% at December 31, 2008 and $250.2 million or 5.53% at September 30, 2008. The decrease in general valuation allowance over the last year was partially due to the fact that severely delinquent single family loans have been written down to fair value less estimated selling costs and therefore required no general valuation allowance.
Overall net loan charge-offs were $95.0 million and $284.7 million for the third quarter and the nine months ended September 30, 2009. This compares to net loan charge-offs of $103.5 million and $212.3 million for the third quarter and the nine months ended September 30, 2008. The overall allowance for loan losses totaled $244.0 million or 4.27% of gross loans outstanding at September 30, 2009. This compares with $326.9 million or 4.97% at December 31, 2008 and $264.1 million or 3.96% at September 30, 2008.
Net interest income during the third quarter of 2009 increased 20% compared to the second quarter of 2009 due to improved delinquencies and decreased 21% compared to the third quarter of last year due to decreased interest-earning assets. The interest rate spread during the third quarter of 2009 increased by 57 basis points compared to the second quarter of 2009 and decreased by 14 basis points compared to the third quarter of last year. Early payoff fees and late charges on loans, which are calculated as part of the loan yield, decreased to $508 thousand for the third quarter of 2009 from $874 thousand during the second quarter of 2009 and $699 thousand during the third quarter of 2008. The majority of Bank’s loans have passed the period for which there is a prepayment penalty.
Non-interest income increased to $14.5 million during the third quarter of 2009 from $14.3 million during the second quarter of 2009 and $8.5 million during the third quarter of 2008. The slight increase during the third quarter of 2009 compared to the second quarter of 2009 was due to increased net gains on the sale of REO which offset the gain on the sale of investment securities during the second quarter. The increase during the third quarter of 2009 compared to the third quarter of 2008 was also due to increased net gains on the sale of real estate owned and additional trustee fees earned by the Bank’s wholly-owned subsidiary, Seaside Financial Corporation.
Gains on sale of REO result from write downs taken at the time of foreclosure and throughout the holding period which create gains upon the ultimate disposition of the properties. Operating costs on foreclosed real estate, which are included in non-interest expense, totaled $5.7 million during the third quarter of 2009 compared to $3.6 million during the second quarter of 2009 and $4.3 million during the third quarter of 2008.
Non-interest expense was $26.5 million during the third quarter of 2009, $27.3 million during the second quarter of 2009 and $23.2 million for the third quarter of 2008. The decrease in non-interest expense during the third quarter of 2009 compared to the second quarter of 2009 was due primarily to a $3.0 million FDIC special assessment during the second quarter which was partially offset by increased operating costs on REO and higher professional fees during the third quarter. The increase in non-interest expense during the third quarter of 2009 compared to the third quarter of 2008 was due to increased operational costs on REO and higher federal deposit insurance rates which were offset by lower employment costs. The Bank reduced its workforce by 10% in January 2009 when it curtailed its lending efforts to comply with the original Order to Cease and Desist issued by the OTS. The ratio of non-interest expense to average total assets was 1.69% for the third quarter of 2009, 1.65% for the second quarter of 2009 and 1.28% for the third quarter of 2008 due to the increased expenses mentioned above and decreases in average total assets over the last year.
Consolidated Balance Sheets
At September 30, 2009, the Company had consolidated stockholders’ equity of $111.1 million compared to $258.7 million at December 31, 2008 and $499.2 million at September 30, 2008. Stockholders’ equity decreased from December 31, 2008 to September 30, 2009 due to a $145.4 million loss recorded during the nine months ended September 30, 2009.
Total assets decreased to $6.2 billion at September 30, 2009 from $7.5 billion at December 31, 2008 and $7.4 billion at September 30, 2008 primarily due to loan payoffs and the sale of the Bank’s investment securities and mortgage-backed securities during the second quarter of 2009. Loan originations decreased to $108.0 million during the nine months ended September 30, 2009 from $1.3 billion during the nine months ended September 30, 2008, given the Bank’s curtailment of its lending efforts.
First Federal Bank of California operates 39 retail banking offices in Southern 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 and employment markets, 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 PRELIMINARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollars in thousands, except share data) (Unaudited) | ||||||||
September 30, | December 31, | |||||||
2009 | 2008 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 298,661 | $ | 391,469 | ||||
Investment securities, available-for-sale (at fair value) | — | 323,048 | ||||||
Mortgage-backed securities, available-for-sale (at fair value) | — | 40,504 | ||||||
Loans receivable, net of allowances for loan losses of $244,048 and $326,920 | 5,464,538 | 6,254,686 | ||||||
Accrued interest and dividends receivable | 19,163 | 30,061 | ||||||
Real estate owned, net | 175,725 | 117,664 | ||||||
Office properties and equipment, net | 21,262 | 24,102 | ||||||
Investment in Federal Home Loan Bank (FHLB) stock, at cost | 115,150 | 115,150 | ||||||
Other assets | 56,114 | 153,902 | ||||||
$ | 6,150,613 | $ | 7,450,586 | |||||
LIABILITIES | ||||||||
Deposits | $ | 4,524,487 | $ | 4,907,356 | ||||
FHLB advances | 1,300,000 | 2,085,000 | ||||||
Senior debentures | 150,000 | 150,000 | ||||||
Accrued expenses and other liabilities | 65,046 | 49,488 | ||||||
6,039,533 | 7,191,844 | |||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
STOCKHOLDERS' EQUITY | ||||||||
Common stock, par value $.01 per share; authorized 100,000,000 shares; issued 24,002,093 shares; outstanding 13,684,553 shares | 240 | 240 | ||||||
Additional paid-in capital | 58,391 | 57,880 | ||||||
Retained earnings | 318,336 | 463,759 | ||||||
Treasury stock, at cost, 10,317,540 shares | (266,040 | ) | (266,040 | ) | ||||
Accumulated other comprehensive income,
net of taxes | 153 | 2,903 | ||||||
111,080 | 258,742 | |||||||
$ | 6,150,613 | $ | 7,450,586 |
FIRSTFED FINANCIAL CORP. AND SUBSIDIARY PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Dollars in thousands, except per share data) (Unaudited) | ||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Interest and dividend income: | ||||||||||||||||
Interest on loans | $ | 73,678 | $ | 93,141 | $ | 232,407 | $ | 297,807 | ||||||||
Interest on mortgage-backed securities | — | 427 | 691 | 1,543 | ||||||||||||
Interest and dividends on investments | 410 | 6,356 | 6,519 | 17,754 | ||||||||||||
Total interest income | 74,088 | 99,924 | 239,617 | 317,104 | ||||||||||||
Interest expense: | ||||||||||||||||
Interest on deposits | 25,797 | 32,280 | 92,984 | 105,738 | ||||||||||||
Interest on borrowings | 12,306 | 21,864 | 40,607 | 71,541 | ||||||||||||
Total interest expense | 38,103 | 54,144 | 133,591 | 177,279 | ||||||||||||
Net interest income | 35,985 | 45,780 | 106,026 | 139,825 | ||||||||||||
Provision for loan losses | 70,000 | 110,300 | 208,000 | 350,800 | ||||||||||||
Net interest loss after provision for loan losses | (34,015 | ) | (64,520 | ) | (101,974 | ) | (210,975 | ) | ||||||||
Other income: | ||||||||||||||||
Loan servicing and other fees | 296 | 149 | 1,037 | 3,407 | ||||||||||||
Banking service fees | 1,786 | 1,848 | 5,562 | 5,306 | ||||||||||||
Gain on sale of loans | 116 | — | 138 | 20 | ||||||||||||
Gain on sale of investment securities | — | — | 4,770 | — | ||||||||||||
Net gain on real estate owned | 9,584 | 4,170 | 19,505 | 7,357 | ||||||||||||
Other operating income | 2,759 | 2,374 | 5,937 | 5,098 | ||||||||||||
Total other income | 14,541 | 8,541 | 36,949 | 21,188 | ||||||||||||
Non-interest expense: | ||||||||||||||||
Salaries and employee benefits | 8,867 | 11,105 | 28,479 | 35,456 | ||||||||||||
Occupancy | 3,647 | 3,029 | 11,225 | 10,932 | ||||||||||||
Advertising | 66 | 284 | 220 | 619 | ||||||||||||
Amortization of core deposit intangible | — | 127 | — | 380 | ||||||||||||
Federal deposit insurance | 4,073 | 1,074 | 16,477 | 2,970 | ||||||||||||
Data processing | 589 | 559 | 1,890 | 1,667 | ||||||||||||
OTS assessment | 615 | 439 | 1,880 | 1,347 | ||||||||||||
Legal | 616 | 497 | 1,123 | 1,805 | ||||||||||||
Real estate owned operations | 5,726 | 4,277 | 13,285 | 8,541 | ||||||||||||
Other operating expense | 2,322 | 1,776 | 5,819 | 6,642 | ||||||||||||
Total non-interest expense | 26,521 | 23,167 | 80,398 | 70,359 | ||||||||||||
Loss before income taxes | (45,995 | ) | (79,146 | ) | (145,423 | ) | (260,146 | ) | ||||||||
Income tax benefit | — | (27,560 | ) | — | (103,267 | ) | ||||||||||
Net loss | $ | (45,995 | ) | $ | (51,586 | ) | $ | (145,423 | ) | $ | (156,879 | ) | ||||
Net loss | $ | (45,995 | ) | $ | (51,586 | ) | $ | (145,423 | ) | $ | (156,879 | ) | ||||
Other comprehensive loss, net of taxes | — | (756 | ) | (2,750 | ) | (676 | ) | |||||||||
Comprehensive loss | $ | (45,995 | ) | $ | (52,342 | ) | $ | (148,173 | ) | $ | (157,555 | ) | ||||
Loss per share: | ||||||||||||||||
Basic | $ | (3.36 | ) | $ | (3.77 | ) | $ | (10.63 | ) | $ | (11.48 | ) | ||||
Diluted | $ | (3.36 | ) | $ | (3.77 | ) | $ | (10.63 | ) | $ | (11.48 | ) | ||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 13,678,708 | (13,668,576 | ) | 13,677,947 | 13,663,059 | |||||||||||
Diluted | 13,678,708 | (13,668,576 | ) | 13,677,947 | 13,663,059 |
FIRSTFED FINANCIAL CORP. AND SUBSIDIARY KEY FINANCIAL RESULTS (Dollars in thousands, except per share data) (Unaudited) | ||||||||||||
September 30, | December 31, | September 30, | ||||||||||
2009 | 2008 | 2008 | ||||||||||
End of period: | ||||||||||||
Total assets | $ | 6,150,613 | $ | 7,450,586 | $ | 7,355,296 | ||||||
Cash and securities | $ | 298,661 | $ | 714,517 | $ | 391,703 | ||||||
Mortgage-backed securities | $ | — | $ | 40,504 | $ | 41,510 | ||||||
Loans, net | $ | 5,464,538 | $ | 6,254,686 | $ | 6,395,706 | ||||||
Core deposit intangible asset | $ | — | $ | — | $ | 84 | ||||||
Deposits-retail and commercial | $ | 3,975,971 | $ | 3,256,400 | $ | 3,080,602 | ||||||
Deposits-wholesale | $ | 548,516 | $ | 1,650,956 | $ | 1,248,248 | ||||||
Borrowings | $ | 1,450,000 | $ | 2,235,000 | $ | 2,463,000 | ||||||
Stockholders' equity | $ | 111,080 | $ | 258,742 | $ | 499,196 | ||||||
Book value per share | $ | 8.12 | $ | 18.91 | $ | 36.48 | ||||||
Tangible book value per share | $ | 8.12 | $ | 18.91 | $ | 36.47 | ||||||
Stock price (period-end) | $ | 0.42 | $ | 1.75 | $ | 7.84 | ||||||
Total loan servicing portfolio | $ | 6,150,290 | $ | 6,977,929 | $ | 6,948,390 | ||||||
Loans serviced for others | $ | 19,852 | $ | 53,789 | $ | 55,205 | ||||||
Other data: | ||||||||||||
Employees (full-time equivalent) | 509 | 603 | 606 | |||||||||
Branches | 39 | 39 | 38 | |||||||||
Asset quality: | ||||||||||||
Real estate owned (foreclosed) | $ | 175,725 | $ | 117,664 | $ | 132,957 | ||||||
Non-accrual loans | 391,952 | 403,818 | 446,186 | |||||||||
Non-performing assets | $ | 567,677 | $ | 521,482 | $ | 579,143 | ||||||
Non-performing assets to total assets | 9.23 | % | 7.00 | % | 7.87 | % | ||||||
Single family loans delinquent less than 90 days | $ | 74,722 | $ | 208,183 | $ | 212,096 | ||||||
General valuation allowance (GVA) | $ | 156,309 | $ | 280,185 | $ | 221,360 | ||||||
Allowance for impaired loans | 87,739 | 46,735 | 42,732 | |||||||||
Allowance for loan losses | $ | 244,048 | $ | 326,920 | $ | 264,092 | ||||||
Allowance for loan losses as a percentage of
gross loans receivable | 4.27 | % | 4.97 | % | 3.96 | % | ||||||
Modified loans (not impaired) | $ | 34,867 | $ | 18,685 | $ | 16,157 | ||||||
Impaired loans, net | $ | 1,276,248 | $ | 725,791 | $ | 530,809 | ||||||
Capital ratios: | ||||||||||||
Tangible capital ratio | 4.25 | % | 5.35 | % | 8.38 | % | ||||||
Core capital ratio | 4.25 | 5.35 | 8.38 | |||||||||
Risk-based capital ratio | 8.91 | 11.26 | 15.87 | |||||||||
Net worth to assets ratio | 1.81 | * | 3.47 | * | 6.79 | * | ||||||
*FirstFed Financial Corp. |
FIRSTFED FINANCIAL CORP. AND SUBSIDIARY KEY FINANCIAL RESULTS (continued) (Dollars in thousands) (Unaudited) | ||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Selected ratios: | ||||||||||||||||
Expense ratios: | ||||||||||||||||
Efficiency ratio | 52.49 | % | 42.65 | % | 56.23 | % | 43.70 | % | ||||||||
Expense to average assets ratio | 1.69 | 1.28 | 1.60 | 1.30 | ||||||||||||
Return on average assets | (2.94 | ) | (2.84 | ) | (2.89 | ) | (2.90 | ) | ||||||||
Return on average equity | (137.15 | ) | (39.30 | ) | (105.86 | ) | (36.51 | ) | ||||||||
Yields earned and rates paid: | ||||||||||||||||
Average yield on loans | 5.20 | % | 5.85 | % | 5.18 | % | 6.21 | % | ||||||||
Average yield on investment portfolio | 0.43 | 4.92 | 1.81 | 5.03 | ||||||||||||
Average yield on all interest-earning assets | 4.90 | 5.78 | 4.91 | 6.13 | ||||||||||||
Average rate paid on deposits | 2.24 | 3.12 | 2.62 | 3.45 | ||||||||||||
Average rate paid on borrowings | 3.28 | 3.43 | 2.99 | 3.89 | ||||||||||||
Average rate paid on interest-bearing liabilities | 2.50 | 3.24 | 2.72 | 3.61 | ||||||||||||
Interest rate spread | 2.40 | 2.54 | 2.19 | 2.52 | ||||||||||||
Effective net spread | 2.38 | 2.65 | 2.17 | 2.70 | ||||||||||||
Average balances: | ||||||||||||||||
Average loans | $ | 5,667,384 | $ | 6,367,111 | $ | 5,980,834 | $ | 6,390,301 | ||||||||
Average investments | 379,456 | 551,527 | 529,899 | 511,412 | ||||||||||||
Average interest-earning assets | 6,046,840 | 6,918,638 | 6,510,733 | 6,901,713 | ||||||||||||
Average deposits | 4,606,710 | 4,135,349 | 4,736,952 | 4,084,812 | ||||||||||||
Average borrowings | 1,498,611 | 2,553,089 | 1,808,722 | 2,454,768 | ||||||||||||
Average interest-bearing liabilities | 6,105,321 | 6,688,438 | 6,545,674 | 6,539,580 | ||||||||||||
Excess of interest-earning assets over interest-bearing liabilities | $ | (58,481 | ) | $ | 230,200 | $ | (34,941 | ) | $ | 362,133 | ||||||
Loan originations and purchases | $ | 1,883 | $ | 479,281 | $ | 107,966 | $ | 1,256,236 |
FIRSTFED FINANCIAL CORP. AND SUBSIDIARY SUPPLEMENTAL LOAN DATA (Unaudited) | |||||||||
The following table shows the components of the Bank’s loan portfolio by type at the dates indicated: | |||||||||
September 30, | December 31, | September 30, | |||||||
2009 | 2008 | 2008 | |||||||
(In thousands) | |||||||||
REAL ESTATE LOANS: | |||||||||
First trust deed residential loans | |||||||||
One-to-four units | $ | 3,654,209 | $ | 4,378,731 | $ | 4,521,889 | |||
Five or more units | 1,835,117 | 1,936,286 | 1,857,634 | ||||||
Residential loans | 5,489,326 | 6,315,017 | 6,379,523 | ||||||
OTHER REAL ESTATE LOANS: | |||||||||
Commercial and industrial | 130,529 | 148,841 | 149,901 | ||||||
Second trust deeds | 2,607 | 4,201 | 2,021 | ||||||
Other | 4,169 | 1,953 | 4,212 | ||||||
Real estate loans | 5,626,631 | 6,470,012 | 6,535,657 | ||||||
NON-REAL ESTATE LOANS: | |||||||||
Deposit accounts | 1,108 | 1,354 | 1,330 | ||||||
Commercial business loans | 51,398 | 79,378 | 92,605 | ||||||
Consumer loans | 33,590 | 33,661 | 32,139 | ||||||
Loans receivable | 5,712,727 | 6,584,405 | 6,661,731 | ||||||
LESS: | |||||||||
General valuation allowances | 156,309 | 280,185 | 221,360 | ||||||
Valuation allowances for impaired loans | 87,739 | 46,735 | 42,732 | ||||||
Deferred loan origination costs, net | 4,141 | 2,799 | 1,933 | ||||||
Loans receivable, net | $ | 5,464,538 | $ | 6,254,686 | $ | 6,395,706 | |||
The following table summarizes the Bank’s total loan originations by type for the periods indicated:
Nine months ended | ||||||
September 30, | ||||||
2009 | 2008 | |||||
(In thousands) | ||||||
Single family real estate | $ | 29,508 | $ | 767,313 | ||
Single family loans purchased | 402 | 6,484 | ||||
Multi-family and commercial real estate | 68,248 | 450,763 | ||||
Other | 9,808 | 31,676 | ||||
Total | $ | 107,966 | $ | 1,256,236 | ||
The following table summarizes the Bank’s single family loan fundings by borrower documentation type for the periods indicated:
Nine months ended | ||||||
September 30, | ||||||
2009 | 2008 | |||||
(In thousands) | ||||||
Verified Income/Verified Asset | $ | 29,508 | $ | 761,944 | ||
Stated Income/Verified Asset | — | 5,369 | ||||
Total | $ | 29,508 | $ | 767,313 |
FIRSTFED FINANCIAL CORP. AND SUBSIDIARY SUPPLEMENTAL LOAN DATA (continued) (Unaudited) | ||||||
The following table summarizes total loan fundings by type of index for the periods indicated: | ||||||
Nine months ended | ||||||
September 30, | ||||||
2009 | 2008 | |||||
(In thousands) | ||||||
12MAT | $ | 24,032 | $ | 17,808 | ||
COFI | 54,959 | 57,634 | ||||
Other | 9,808 | 37,611 | ||||
Hybrid and Fixed | 19,167 | 1,143,183 | ||||
Total | $ | 107,966 | $ | 1,256,236 | ||
The following table shows the composition of the Bank’s single family loan portfolio by borrower documentation type at origination for the dates indicated:
September 30, | December 31, | September 30, | |||||||
Documentation Type: | 2009 | 2008 | 2008 | ||||||
(In thousands) | |||||||||
Verified Income/Verified Asset | $ | 2,660,809 | $ | 2,383,688 | $ | 2,192,511 | |||
Stated Income/Verified Asset (1) | 457,519 | 867,098 | 1,004,974 | ||||||
Stated Income/Stated Asset (1) | 396,318 | 830,818 | 977,700 | ||||||
No Income/No Asset (1) | 139,563 | 297,127 | 346,704 | ||||||
Total | $ | 3,654,209 | $ | 4,378,731 | $ | 4,521,889 | |||
(1) As part of the loan modification process, an aggregate of $1.0 billion of loans originated in these low documentation categories have become fully documented. | |||||||||
The following table shows the composition of the Bank’s single family loan portfolio by borrower documentation type with weighted average LTV ratio and FICO score all at origination for the dates indicated:
September 30, 2009 | December 31, 2008 | September 30, 2008 | |||||||||||||
LTV | FICO | LTV | FICO | LTV | FICO | ||||||||||
Ratio | Score | Ratio | Score | Ratio | Score | ||||||||||
Verified Income/Verified Asset | 69.6 | % | 713 | 70.2 | % | 708 | 70.2 | % | 708 | ||||||
Stated Income/Verified Asset | 72.8 | 711 | 73.9 | 711 | 73.9 | 711 | |||||||||
Stated Income/Stated Asset | 74.3 | 712 | 74.9 | 712 | 74.9 | 712 | |||||||||
No Income/No Asset | 69.2 | 726 | 70.7 | 726 | 70.7 | 726 | |||||||||
Total Weighted Average | 71.3 | % | 713 | 72.4 | % | 712 | 72.4 | % | 712 |
FIRSTFED FINANCIAL CORP. AND SUBSIDIARY SUPPLEMENTAL LOAN DATA (continued) (Unaudited) | |||||||||
The following table shows the composition of the Bank’s single family loan portfolio at the dates indicated by the FICO score of the borrower at origination: | |||||||||
FICO Score at | September 30, | December 31, | September 30, | ||||||
Origination: | 2009 | 2008 | 2008 | ||||||
(In thousands) | |||||||||
<620 | $ | 21,987 | $ | 24,481 | $ | 24,606 | |||
620-659 | 264,479 | 330,096 | 352,102 | ||||||
660-719 | 1,443,248 | 1,784,932 | 1,927,844 | ||||||
>720 | 1,886,685 | 2,198,022 | 2,175,160 | ||||||
Not Available | 37,810 | 41,200 | 42,177 | ||||||
Total | $ | 3,654,209 | $ | 4,378,731 | $ | 4,521,889 | |||
The following table shows the composition of the Bank’s single family loan portfolio at the dates indicated by original LTV ratio:
Original LTV Ratio: | September 30, 2009 | December 31, 2008 | September 30, 2008 | |||
(Dollars in thousands) | ||||||
<65% | $850,185 | $949,119 | $922,295 | |||
65-70% | 476,456 | 535,765 | 539,725 | |||
70-75% | 520,526 | 606,856 | 617,812 | |||
75-80% | 1,638,678 | 2,047,508 | 2,161,945 | |||
80-85% | 31,099 | 46,797 | 53,881 | |||
85-90% | 103,385 | 153,273 | 182,318 | |||
>90% | 33,880 | 39,413 | 43,913 | |||
Total | $3,654,209 | $4,378,731 | $4,521,889 |
FIRSTFED FINANCIAL CORP. AND SUBSIDIARY SUPPLEMENTAL LOAN DATA (continued) (Unaudited) | |||||||||
The following table shows the composition of the Bank’s single family loan portfolio at September 30, 2009 by estimated current LTV ratio: | |||||||||
Current LTV Ratio Price Adjusted (1): | Loan Balance | % of Portfolio | Average Current LTV Ratio | ||||||
(Dollars in thousands) | |||||||||
<65% | $ | 593,012 | 16.2 | % | 42.7 | % | |||
65 - 70% | 129,198 | 3.5 | 67.5 | ||||||
70 - 75% | 208,874 | 5.7 | 73.2 | ||||||
75 - 80% | 189,075 | 5.2 | 77.9 | ||||||
80 - 85% | 226,937 | 6.2 | 82.9 | ||||||
85 - 90% | 264,467 | 7.2 | 87.3 | ||||||
>90% | 1,900,119 | 52.0 | 111.1 | ||||||
Partially charged off | 133,218 | 3.7 | 100.0 | ||||||
Not in MSAs | 9,309 | 0.3 | N/A | ||||||
Total | $ | 3,654,209 | 100.0 | % | 79.9 | % | |||
(1) The current estimated loan to value ratio is based on Federal Housing Finance Agency (“FHFA”) June 2009 data. The FHFA housing price index provides a broad measure of the housing price movements by Metropolitan Statistical Area (“MSA”). In evaluating the potential for loan losses within the bank’s portfolio, the Bank considers both the fact that FHFA data cannot reflect price movements for the most recent three months, and that individual areas within an MSA will perform worse than the average for the larger area. The Bank therefore also looks at sales data that is available by zip code, as well as the Bank’s experience with marketing foreclosed properties in estimating the loan loss allowance that is required. | |||||||||
The following table shows the composition of the Bank’s single family loan portfolio by geographic distribution at the dates indicated:
September 30, | December 31, | September 30, | ||||||||||||||||
2009 | 2008 | 2008 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||
LA County | $ | 1,107,597 | 30.3 | % | $ | 1,233,889 | 28.2 | % | $ | 1,224,568 | 27.1 | % | ||||||
Bay Area | 635,366 | 17.4 | 768,262 | 17.5 | 785,080 | 17.4 | ||||||||||||
Central California Coast | 495,458 | 13.6 | 598,268 | 13.7 | 612,533 | 13.5 | ||||||||||||
Orange County | 417,113 | 11.4 | 479,464 | 10.9 | 478,161 | 10.6 | ||||||||||||
San Diego Area | 359,058 | 9.8 | 441,631 | 10.1 | 471,140 | 10.4 | ||||||||||||
San Bernardino/ Riverside | 225,537 | 6.2 | 296,624 | 6.8 | 321,616 | 7.1 | ||||||||||||
Sacramento Valley | 144,048 | 3.9 | 197,861 | 4.6 | 222,163 | 4.9 | ||||||||||||
San Joaquin Valley | 136,221 | 3.7 | 194,741 | 4.4 | 227,129 | 5.0 | ||||||||||||
Other | 133,811 | 3.7 | 167,991 | 3.8 | 179,499 | 4.0 | ||||||||||||
Total | $ | 3,654,209 | 100.0 | % | $ | 4,378,731 | 100.0 | % | $ | 4,521,889 | 100.0 | % |
FIRSTFED FINANCIAL CORP. AND SUBSIDIARY SUPPLEMENTAL LOAN DATA (continued) (Unaudited) | |||||
The following table shows the composition of the Bank’s single family loan portfolio by year of origination as of September 30, 2009 (dollars in thousands): | |||||
2003 and Prior | $ | 266,780 | 7.3 | % | |
2004 | 468,873 | 12.8 | |||
2005 | 1,076,142 | 29.4 | |||
2006 | 677,979 | 18.6 | |||
2007 | 300,003 | 8.2 | |||
2008 | 835,304 | 22.9 | |||
2009 | 29,128 | 0.8 | |||
Total | $ | 3,654,209 | 100.0 | % | |
The following tables show the number and dollar amount of performing loans expected to recast by current estimated LTV ratios for the periods indicated (updated for both current loan balance and current estimated market value):
2009 | 2010 | Thereafter | |||||||||||||
Recast | Number of | Recast | Number of | Recast | Number of | ||||||||||
Balance | Loans | Balance | Loans | Balance | Loans | ||||||||||
Current LTV Ratio Price Adjusted (1): | (Dollars in thousands) | ||||||||||||||
< 70% | $ | 8,408 | 21 | $ | 36,992 | 102 | $ | 36,714 | 90 | ||||||
70-80% | 5,079 | 13 | 17,448 | 50 | 36,809 | 73 | |||||||||
80-90% | 7,961 | 19 | 27,355 | 66 | 46,066 | 59 | |||||||||
90-100% | 9,921 | 22 | 54,796 | 105 | 43,839 | 68 | |||||||||
100-110% | 8,269 | 18 | 69,660 | 137 | 75,564 | 116 | |||||||||
>110% | 16,507 | 36 | 137,706 | 311 | 184,984 | 338 | |||||||||
Grand total | $ | 56,145 | 129 | $ | 343,957 | 771 | $ | 423,976 | 744 | ||||||
(1) The current estimated loan to value ratio is based on FHFA June 2009 data. The FHFA housing price index provides a broad measure of the housing price movements by MSA. In evaluating the potential for loan losses within the bank’s portfolio, the Bank considers both the fact that FHFA data cannot reflect price movements for the most recent three months, and that individual areas within an MSA will perform worse than the average for the larger area. The Bank therefore also looks at sales data that is available by zip code, as well as the Bank’s experience with marketing foreclosed properties in estimating the loan loss allowance that is required. | |||||||||||||||
The following table shows the number and dollar amount of loans expected to recast by projected payment increase for the periods indicated:
2009 | 2010 | Thereafter | |||||||||||
Recast | Number of | Recast | Number of | Recast | Number of | ||||||||
Balance | Loans | Balance | Loans | Balance | Loans | ||||||||
Projected Payment Increase | (Dollars in thousands) | ||||||||||||
< 50% | $ | 18,240 | 47 | 145,117 | 337 | 340,408 | 602 | ||||||
50-100% | 28,314 | 63 | 181,469 | 400 | 75,279 | 129 | |||||||
100-125% | 9,591 | 19 | 14,320 | 29 | 3,306 | 5 | |||||||
125-150% | __ | __ | __ | 2,451 | 4 | ||||||||
>150% | — | — | 3,051 | 5 | 2,532 | 4 | |||||||
Grand total | $ | 56,145 | 129 | 343,957 | 771 | 423,976 | 744 |
Contacts:
Douglas Goddard, Chief Financial Officer
310-302-1714