UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 2003
OR
| | TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
From the Transition Period From ________ to __________
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 Identification No.)
incorporation or organization)
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
Securities registered pursuant to Section
12(b) of the Act:
Common Stock $0.01 par value
Title of Class
Securities registered pursuant to section 12(g) of the Act: None
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 | |
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes |X| No | |
As of August 1, 2003, 16,994,104 shares of the Registrant's $.01 par value
common stock were outstanding.
FirstFed Financial Corp.
Index
Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of June 30, 2003, 3
December 31, 2002 and June 30, 2002
Consolidated Statements of Operations and Comprehensive Earnings for the 4
three and six months ended June 30, 2003 and 2002
Consolidated Statements of Cash Flows for the six months ended June 30, 5
2003 and 2002
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results 8
of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
Item 4. Controls and Procedures 18
Part II. Other Information (omitted items are inapplicable)
Item 4. Submission of Matters to a Vote of Securities Holders 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 21
Exhibits 3.2 Bylaws 24
31.1 Certification of Chief Executive Officer pursuant to Section 302 of 33
the Sarbanes-Oxley Act of 2002
34
31.2 Certification of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
32 Certification of Chief Executive Officer and Chief Financial 35
Officer pursuant to 18 USC Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
2
PART I - FINANCIAL STATEMENTS
Item 1. Financial Statements
FirstFed Financial Corp. and Subsidiary
Consolidated Statements of Financial Condition
(In thousands, except share data)
(Unaudited)
June 30, December 31, June 30,
2003 2002 2002
----------------- ---------------- ------------------
ASSETS
Cash and cash equivalents $ 34,388 $ 45,199 $ 58,747
Investment securities, available-for-sale (at fair
value) 80,221 103,055 115,441
Mortgage-backed securities, available-for-sale (at
fair value) 168,937 200,585 235,148
Loans receivable, held-for-sale (fair value of
$2,797, $2,300 and $250) 2,775 2,293 250
Loans receivable, net 4,037,893 3,766,942 3,856,073
Accrued interest and dividends receivable 17,700 17,752 19,389
Real estate, net -- 347 606
Office properties and equipment, net 10,315 10,342 10,399
Investment in Federal Home Loan Bank (FHLB) stock, at
cost 76,078 78,728 85,634
Other assets 32,820 28,486 26,585
----------------- ---------------- ------------------
$ 4,461,127 $ 4,253,729 $ 4,408,272
================= ================ ==================
LIABILITIES
Deposits $ 2,462,508 $ 2,527,026 $ 2,493,389
FHLB advances 1,424,000 1,167,000 1,342,000
Securities sold under agreements to repurchase 139,725 155,273 176,131
Accrued expenses and other liabilities 32,319 32,789 46,486
----------------- ---------------- ------------------
4,058,552 3,882,088 4,058,006
----------------- ---------------- ------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share;
Authorized 100,000,000 shares; issued
23,489,532, 23,395,202 and 23,381,165 shares,
outstanding 16,991,836,
16,931,306 and 17,270,269 shares 235 234 234
Additional paid-in capital 36,775 35,680 34,858
Retained earnings - substantially restricted 449,995 418,885 388,368
Unreleased shares to employee stock
ownership plan (559) (597) --
Treasury stock, at cost, 6,497,696 shares,
6,463,896 and 6,110,896 shares (85,727) (84,762) (75,930)
Accumulated other comprehensive earnings, net of taxes 1,856 2,201 2,736
----------------- ---------------- ------------------
402,575 371,641 350,266
----------------- ---------------- ------------------
$ 4,461,127 $ 4,253,729 $ 4,408,272
================= ================ ==================
See accompanying notes to consolidated financial statements.
3
FirstFed Financial Corp. and Subsidiary
Consolidated Statements of Operations and Comprehensive Earnings
(Dollars in thousands, except per share data)
(Unaudited)
Three months ended June 30, Six months ended June 30,
------------------------------------- ------------------------------------
2003 2002 2003 2002
---------------- ---------------- --------------- ----------------
Interest income:
Interest on loans $ 56,882 $ 60,701 $ 113,951 $ 125,664
Interest on mortgage-backed securities 1,385 2,267 3,055 5,237
Interest and dividends on investments 1,145 2,955 3,245 5,799
---------------- ---------------- --------------- ----------------
Total interest income 59,412 65,923 120,251 136,700
---------------- ---------------- --------------- ----------------
Interest expense:
Interest on deposits 9,886 15,638 21,253 32,997
Interest on borrowings 12,464 17,305 24,420 36,734
---------------- ---------------- --------------- ----------------
Total interest expense 22,350 32,943 45,673 69,731
---------------- ---------------- --------------- ----------------
Net interest income 37,062 32,980 74,578 66,969
Provision for loan losses -- -- -- --
---------------- ---------------- --------------- ----------------
Net interest income after provision for loan
losses 37,062 32,980 74,578 66,969
---------------- ---------------- --------------- ----------------
Other income:
Loan servicing and other fees 1,511 838 3,121 1,890
Retail office fees 1,150 1,135 2,296 2,176
Gain on sale of loans 220 184 693 369
Real estate operations, net 349 31 363 192
Other operating income 163 306 265 566
---------------- ---------------- --------------- ----------------
Total other income 3,393 2,494 6,738 5,193
---------------- ---------------- --------------- ----------------
Non-interest expense:
Salaries and employee benefits 8,247 8,269 17,029 16,466
Occupancy 1,962 2,099 3,969 4,150
Amortization of core deposit intangible 499 464 997 965
Other expense 2,721 3,401 5,549 7,963
---------------- ---------------- --------------- ----------------
Total non-interest expense 13,429 14,233 27,544 29,544
---------------- ---------------- --------------- ----------------
Earnings before income taxes 27,026 21,241 53,772 42,618
Income tax provision 11,393 8,954 22,662 17,963
---------------- ---------------- --------------- ----------------
Net earnings $ 15,633 $ 12,287 $ 31,110 $ 24,655
================ ================ =============== ================
Other comprehensive earnings (loss), net of taxes (435) 533 (345) (255)
---------------- ---------------- --------------- ----------------
Comprehensive earnings $ 15,198 $ 12,820 $ 30,765 $ 24,400
================ ================ =============== ================
Earnings per share:
Basic $ 0.92 $ 0.71 $ 1.84 $ 1.43
================ ================ =============== ================
Diluted $ 0.90 $ 0.70 $ 1.80 $ 1.40
================ ================ =============== ================
Weighted average shares outstanding:
Basic 16,968,389 17,264,461 16,947,280 17,259,638
================ ================ =============== ================
Diluted 17,342,336 17,644,145 17,310,139 17,625,541
================ ================ =============== ================
See accompanying notes to consolidated financial statements.
4
FirstFed Financial Corp. and Subsidiary
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six months ended June 30,
---------------------------------------------
2003 2002
-------------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 31,110 $ 24,655
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Net change in loans held-for-sale (482) 4,996
Depreciation 694 820
Valuation adjustments on real estate sold (35) (204)
Amortization of fees and premiums/discounts 634 2,135
Decrease in servicing asset 120 120
Change in taxes payable (3,562) 1,765
Decrease in interest and dividends receivable 52 2,687
Decrease in interest payable (2,965) (406)
Amortization of core deposit intangible asset 998 965
Increase in other assets (7,876) (5,273)
Increase in accrued expenses and
other liabilities 6,057 968
-------------------- --------------------
Total adjustments (6,365) 8,573
-------------------- --------------------
Net cash provided by operating activities 24,745 33,228
-------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans made to customers and principal
collections on loans (266,825) 142,742
Loans purchased (77) --
Net change in unearned loan fees (4,532) (2,475)
Proceeds from sales of real estate owned 599 2,331
Proceeds from maturities and principal payments
of investment securities, available-for-sale 75,839 46,192
Principal reductions on mortgage-backed securities,
available for sale 31,826 48,343
Purchase of investment securities,
available for sale (54,089) (51,191)
Redemption of FHLB stock 4,600 8,385
-------------------- --------------------
Net cash used by investing activities (212,659) 194,327
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in deposits (64,518) (53,258)
Net increase (decrease) in short term borrowings 161,452 (289,909)
Increase in long term borrowings 80,000 --
Purchases of treasury stock (965) --
Other 1,134 188
-------------------- --------------------
Net cash provided by (used by) financing activities 177,103 (342,979)
-------------------- --------------------
Net decrease in cash and cash equivalents (10,811) (115,424)
Cash and cash equivalents at beginning of period 45,199 174,171
-------------------- --------------------
Cash and cash equivalents at end of period $ 34,388 $ 58,747
==================== ====================
See accompanying notes to consolidated financial statements.
5
FirstFed Financial Corp. and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
1. The unaudited consolidated financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. In the opinion of the Company, 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 accounting principles generally accepted in the
United States of America have been condensed or omitted pursuant to such rules
and regulations. The Company believes that the disclosures are adequate to make
the information presented not misleading.
It is suggested that these condensed financial statements be read in conjunction
with the financial statements and the notes thereto included in the Company'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. Basic earnings per share were computed by dividing net earnings by the
weighted average number of shares of common stock outstanding for the period.
Diluted earnings per share additionally include the effect of stock options, if
dilutive.
3. For purposes of reporting cash flows on the "Consolidated Statements 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. The Company applies the intrinsic-value-based method of accounting prescribed
by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
to Employees, and related interpretations including FASB Interpretation No. 44,
Accounting for Certain Transactions involving Stock Compensation, an
interpretation of APB Opinion No. 25, issued in March 2000, to account for its
fixed-plan stock options. Under this method, compensation expense is recorded on
the date of grant only if the current market price of the underlying stock
exceeded the exercise price. SFAS No. 123, Accounting for Stock-Based
Compensation, established accounting and disclosure requirements using a
fair-value-based method of accounting for stock-based employee compensation
plans. As allowed by SFAS No. 123, the Company has elected to continue to apply
the intrinsic-value-based method of accounting described above, and has adopted
only the disclosure requirements of SFAS No. 123. The following table
illustrates the effect on net income if the fair-value-based method had been
applied to all outstanding and unvested awards in each period.
Three Months Ended June 30, Six Months Ended June 30,
------------------------------------ ----------------------------------
2003 2002 2003 2002
---------------- ---------------- --------------- ---------------
(In thousands, except per share data)
Net income as reported...........................$ 15,633 $ 12,287 $ 31,110 $ 24,655
Deduction: total stock-based employee
compensation expense determined under
fair-value-based method for all awards, net of
tax............................................ (207) (221) (339) (469)
---------------- ---------------- --------------- --------------
Pro forma net income...........................$ 15,426 $ 12,066 $ 30,771 $ 24,186
================ ================ =============== ==============
Earnings per share:
Basic:
As reported....................................$ 0.92 $ 0.71 $ 1.84 $ 1.43
Pro forma......................................$ 0.91 $ 0.70 $ 1.82 $ 1.40
Diluted:
As reported....................................$ 0.90 $ 0.70 $ 1.80 $ 1.40
Pro forma......................................$ 0.89 $ 0.69 $ 1.78 $ 1.38
6
The fair value of each option grant is estimated on the date of the grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 2003 and 2002, respectively: no dividend yield in
any year; expected volatility of 34% and 36%; risk free interest rates of 3.8%
and 5.3%; and expected average lives of 5.5 years in both periods. The
weighted-average grant date fair value of options granted during the periods are
$11.31 and $11.48 for 2003 and 2002, respectively. The Company has elected to
recognize forfeitures in the year they occur.
5. Recent Accounting Pronouncements
In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51. This Interpretation
addresses the consolidation by business enterprises of variable interest
entities as defined in the Interpretation. The Interpretation applies
immediately to variable interests in variable interest entities created after
January 31, 2003, and to variable interests in variable interest entities
obtained after January 31, 2003. The Interpretation requires certain disclosures
in financial statements issued after January 31, 2003 if it is reasonably
possible that the Company will consolidate or disclose information about
variable interest entities when the Interpretation becomes effective. The
application of this Interpretation is not expected to have a material effect on
the Company's financial statements as the Company has no variable interest
entities.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities" (SFAS 149). SFAS 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
133. In particular, this Statement clarifies under what circumstances a contract
with an initial net investment meets the characteristic of a derivative and when
a derivative contains a financing component that warrants special reporting in
the statement of cash flows. This Statement is generally effective for contracts
entered into or modified after June 30, 2003 and is not expected to have a
material impact on the Company's financial statements as the Company has no
material derivative contracts.
In May 2003, the FASB issued SFAS No. 150, " Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity "
(SFAS 150). SFAS No. 150 establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both liabilities
and equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). Many of
those instruments were previously classified as equity. This Statement is
effective for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003 and is not expected to have a material impact on
the Company's financial statements as the Company does not currently have any
instruments subject to SFAS 150.
7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following narrative is written with the presumption that the users have read
or have access to the Company's 2002 Annual Report on Form 10-K, which contains
the latest audited financial statements and notes thereto, together with
Management's Discussion and Analysis of Financial Condition and Results of
Operations as of December 31, 2002, and for the year then ended. Therefore, only
material changes in financial condition and results of operations are discussed
herein.
The Securities and Exchange Commission ("SEC") maintains a web site which
contains reports, proxy and information statements, and other information
pertaining to registrants that file electronically with the SEC, including the
Company. The address is: www.sec.gov. In addition, the Company's periodic and
current reports are available free of charge on its website at
www.firstfedca.com as soon as reasonably practicable after such material is
electronically filed with, or furnished to, the SEC.
Note regarding forward looking statements: This quarterly report contains
certain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"). All
statements, other than statements of historical facts, included in this
quarterly report that address activities, events or developments that the
Company expects, believes or anticipates will or may occur in the future, are
forward-looking statements. These statements are based on certain assumptions
and analyses made by the Company in light of its experience and perception of
historical trends, current conditions, expected future developments and other
factors it believes are appropriate in the circumstances. 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
margins, the California real estate market, branch openings, 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 guarantee or promises
regarding future results and assumes no responsibility to update such
forward-looking statements.
Financial Condition
At June 30, 2003, FirstFed Financial Corp. ("Company"), holding company for
First Federal Bank of California and its subsidiaries ("Bank"), had consolidated
stockholders' equity of $402.6 million compared to $371.6 million at December
31, 2002 and $350.3 million at June 30, 2002. Consolidated total assets at June
30, 2003 were $4.5 billion compared to $4.3 billion at December 31, 2002 and
$4.4 billion at June 30, 2002. The increase in total assets from December 31,
2002 to June 30, 2003 is primarily attributable to growth in the loan portfolio.
The loan portfolio increased to $4.0 billion at June 30, 2003 from $3.8 billion
at December 31, 2002 due to loan originations, which increased to $1.0 billion
during the first six months of 2003 from $587.6 million during the first six
months of 2002. Loan payoffs and principal reductions were $789.4 million during
the first six months of 2003 compared to $778.6 million during the first six
months of 2002.
The Bank's financial results are primarily influenced by the interest rate
environment and Southern California real estate market. Southern California real
estate sales prices and sales volume have continued at record high levels during
2003. According to the UCLA Forecast for California, June 2003 Report
("Forecast"), "Although California's economy may be weak in other respects,
activity related to residential real estate construction, finance, and sales has
been the strongest sector. California's chronic housing shortage has combined
with the most favorable financial conditions to produce a construction
"boomlet"." The strong real estate market in Southern California over the last
several years has resulted from historically low interest rates. An increase in
interest rates would negatively affect real estate prices and the Bank's
interest rate spreads. See "Asset-Liability Management" for additional
information.
8
The following table summarizes loan originations and purchases by property type
for the periods indicated:
Six months ended
June 30,
2003 2002
-------------- ---------------
(In thousands)
Single family $ 754,445 $ 298,426
Multi-family and commercial 263,945 275,068
Other (1) 28,683 14,070
------------ -------------
Total $ 1,047,073 $ 587,564
============ =============
(1) Includes consumer loans and commercial business loans.
At June 30, 2003, 72.9% of the Bank's loan portfolio was comprised of adjustable
rate products. Loans that adjust monthly based on the FHLB Eleventh District
Cost of Funds Index ("COFI") comprised 48.8% of the loan portfolio. Loans that
adjust monthly based on the 12-month average U.S. Treasury Security rate
("12MAT") comprised 14.9% of the loan portfolio. Loans that adjust monthly based
on the Three Month Certificate of Deposit Index ("CODI") comprised 6.7% of the
loan portfolio and loans that adjust monthly based on the London Inter-Bank
Offering Rate ("LIBOR") comprised 2.5% of the loan portfolio.
The following table summarizes loan originations and purchases by loan type for
the periods indicated:
Six months ended
June 30,
2003 2002
--------------- --------------
(In thousands)
Fixed $ 47,828 $ 29,879
Hybrid (1) 290,501 220,901
Adjustable:
12MAT 320,525 83,324
CODI 270,484 --
COFI 88,978 219,293
LIBOR -- 20,037
Other 28,757 14,130
------------- ------------
Total $ 1,047,073 $ 587,564
============= ============
(1) These loan types are adjustable rate loans with initial fixed interest rate
periods ranging from 3 to 7 years.
The Bank's non-performing assets to total assets ratio was 0.09% as of June 30,
2003, compared to 0.17% as of December 31, 2002 and 0.11% as of June 30, 2002.
(See "Non-performing Assets" for further discussion.)
The Bank recorded net loan charge-offs of $22 thousand for the second quarter of
2003 and had net loan recoveries of $25 thousand during the first six months of
2003. For the comparable periods last year, the Company recorded net loan
recoveries of $1.4 million and $1.2 million during the second quarter and first
six months of 2002, respectively. Allowances for loan losses (including general
valuation allowances and valuation allowances for impaired loans) totaled $75.7
million or 1.84% of gross loans at June 30, 2003. This compares with $75.7
million or 1.96% at December 31, 2002 and $75.9 million or 1.92% at June 30,
2002.
9
The following table shows the components of the Bank's portfolio of loans
(including loans held for sale) and mortgage-backed securities by collateral
type as of the dates indicated:
June 30, December 31, June 30,
2003 2002 2002
----------------- ---------------- ------------------
(In thousands)
REAL ESTATE LOANS
First trust deed residential loans:
One-to-four units $ 1,977,613 $ 1,723,690 $ 1,873,754
Five or more units 1,654,978 1,646,430 1,604,806
----------------- ---------------- ------------------
Residential loans 3,632,591 3,370,120 3,478,560
OTHER REAL ESTATE LOANS
Commercial and industrial 402,522 419,273 399,581
Second trust deeds 6,949 5,965 8,582
Other 8,550 7,130 17,975
----------------- ---------------- ------------------
Real estate loans 4,050,612 3,802,488 3,904,698
NON-REAL ESTATE LOANS
Deposit accounts 1,094 1,185 608
Commercial business loans 29,937 19,582 13,390
Consumer 44,329 35,395 28,006
----------------- ---------------- ------------------
Loans Receivable 4,125,972 3,858,650 3,946,702
LESS:
General valuation allowances - loan
portfolio 75,248 75,223 73,786
Valuation allowances - impaired loans 496 496 2,154
Unearned loan fees 9,560 13,696 14,439
----------------- ---------------- ------------------
Net loans receivable 4,040,668 3,769,235 3,856,323
FHLMC AND FNMA MORTGAGE-BACKED
SECURITIES (at fair value):
Secured by single family dwellings 161,259 192,395 225,574
Secured by multi-family dwellings 7,678 8,190 9,574
----------------- ---------------- ------------------
Mortgage-backed securities 168,937 200,585 235,148
----------------- ---------------- ------------------
TOTAL $ 4,209,605 $ 3,969,820 $ 4,091,471
================= ================ ==================
The mortgage-backed securities portfolio, classified as available-for-sale, was
recorded at fair value as of June 30, 2003. An unrealized gain of $1.7 million,
net of taxes, was recorded in stockholders' equity as of June 30, 2003. This
compares to net unrealized gains of $1.6 million as of December 31, 2002 and
$1.5 million as of June 30, 2002.
The investment securities portfolio, classified as available-for-sale, was
recorded at fair value as of June 30, 2003. An unrealized gain of $163 thousand,
net of taxes, was reflected in stockholders' equity as of June 30, 2003. This
compares to net unrealized gains of $611 thousand as of December 31, 2002 and
$1.2 million as of June 30, 2002.
Asset/Liability Management
Market risk is the risk of loss from adverse changes in market prices and
interest rates. The Bank's market risk arises primarily from the interest rate
risk inherent in its lending and liability funding activities.
10
The Bank's net interest income typically improves during periods of decreasing
interest rates because there is a three month time lag before changes in COFI,
and a two month time lag before changes in 12MAT, LIBOR and CODI, can be
implemented with respect to the Bank's adjustable rate loans. Therefore, during
periods immediately following interest rate decreases, the Bank's cost of funds
tends to decrease faster than yields earned on its adjustable rate loan
portfolio. The reverse is true during periods immediately following interest
rate increases. The composition of the Bank's financial instruments that are
subject to market risk has not changed materially since December 31, 2002.
The one year GAP (the difference between rate-sensitive assets and liabilities
repricing within one year or less) was a positive $270.9 million or 6.1% of
total assets at June 30, 2003. In comparison, the one year GAP was a positive
$260.7 million or 6.1% of total assets at December 31, 2002.
Capital
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and percentages of total capital to
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, 2003:
Tangible Core Capital Risk-based
Capital Capital
-------------- -------------- ----------------
(Dollars in thousands)
Actual Capital:
Amount $ 374,019 $ 374,019 $ 408,800
Ratio 8.40% 8.40% 14.91%
Minimum required capital:
Amount $ 66,752 $ 178,005 $ 219,361
Ratio 1.50% 4.00% 8.00%
Well capitalized required capital:
Amount $ -- $ 222,506 $ 274,201
Ratio --% 5.00% 10.00%
During the first six months of 2003, the Company repurchased 33,800 shares of
Company common stock at an average market price of $28.53 per share. During
2002, the Company repurchased 353,000 shares of common stock at an average
market price of $25.02 per share. There remain 1,348,677 shares eligible for
repurchase under the Company's stock repurchase program as of August 1, 2003.
11
Loan Loss Allowances
Listed below is a summary of activity in the Bank's general valuation allowance
and the valuation allowance for impaired loans during the periods indicated:
Six Months Ended June 30, 2003
------------------------------------------------------
General Impaired
Valuation Valuation
Allowances Allowances Total
---------------- ---------------- -------------
(In thousands)
Balance at December 31, 2002 $ 75,223 $ 496 $ 75,719
Charge-offs:
Single family (52) -- (52)
Multifamily (8) -- (8)
Other - non-real estate (32) (32)
---------------- ---------------- ------------
Total charge-offs (92) -- (92)
Recoveries 117 -- 117
---------------- ---------------- ------------
Net recoveries 25 -- 25
--------------- ---------------- ------------
Balance at June 30, 2003 $ 75,248 $ 496 $ 75,744
=============== ================ ============
Six Months Ended June 30, 2002
------------------------------------------------------
General Impaired
Valuation Valuation
Allowances Allowances Total
---------------- ---------------- -------------
(In thousands)
Balance at December 31, 2001 $ 72,919 $ 1,850 $ 74,769
Transfers (304) 304 --
Charge-offs:
Single family (187) -- (187)
Other - non-real estate (65) -- (65)
---------------- ---------------- ------------
Total charge-offs (252) -- (252)
Recoveries 1,423 -- 1,423
---------------- ---------------- ------------
Net recoveries 1,171 -- 1,171
---------------- ---------------- ------------
Balance at June 30, 2002 $ 73,786 $ 2,154 $ 75,940
================ ================ ============
Management is unable to predict future levels of loan loss provisions. Among
other things, loan loss provisions are based on the level of loan charge-offs,
foreclosure activity, and the economy in Southern California.
Results of Operations
The Company reported consolidated net earnings of $15.6 million or $0.90 per
diluted common share for the second quarter of 2003 compared to net earnings of
$12.3 million or $0.70 per diluted common share for the second quarter of 2002.
Net earnings for the first six months of 2003 were $31.1 million or $1.80 per
diluted common share compared to $24.7 million or $1.40 per diluted common share
for the first six months of 2002. Net earnings increased during the second
quarter and first six months of 2003 compared to the same periods last year
primarily as a result of increased interest rate spreads.
12
Net Interest Income
Net interest income increased to $37.1 million and $74.6 million, respectively,
during the second quarter and first six months of 2003 compared to $33.0 million
and $67.0 million, respectively, during the same periods last year. Net interest
income increased primarily as a result of an increase in the average balance of
interest-earning assets over interest-bearing liabilities in addition to an
increase in the interest rate spread for the comparable periods.
The interest rate spread increased to 3.25% and 3.30%, respectively, during the
second quarter and first six months of 2003 from 2.81% and 2.77%, respectively,
during the same periods last year as the cost of interest-bearing liabilities
re-priced at reduced rates more quickly than the yield on interest-earning
assets during the period.
The following tables 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:
During the Six Months Ended June 30,
--------------------------------------
2003 2002
--------------- ------------------
(Dollars in thousands)
Average loans and mortgage-backed securities $ 4,092,189 $ 4,169,092
Average investment securities 122,503 194,340
-------------- -----------------
Average interest-earning assets 4,214,692 4,363,432
-------------- -----------------
Average savings deposits 2,491,320 2,519,687
Average borrowings 1,457,813 1,630,550
-------------- -----------------
Average interest-bearing liabilities 3,949,133 4,150,237
-------------- -----------------
Excess of interest-earning assets over
Interest-bearing liabilities $ 265,559 $ 213,195
============== =================
Yields earned on average interest-earning assets 5.63% 6.15%
Rates paid on average interest-bearing liabilities 2.33 3.38
Net interest rate spread 3.30 2.77
Effective net spread (1) 3.45 2.93
Total interest income $ 118,644 $ 134,176
Total interest expense 45,673 69,731
-------------- ------------------
72,971 64,445
Total other items (2) 1,607 2,524
-------------- ------------------
Net interest income $ 74,578 $ 66,969
============== ==================
(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 dividends and other miscellaneous
interest income.
Non-Interest Income and Expense
Loan servicing and other fees were $1.5 million and $3.1 million, respectively,
for the second quarter and first six months of 2003 compared to $838 thousand
and $1.9 million for the same periods of last year. The increase is primarily
the result of increased prepayment fees as borrowers paid off loans early to
refinance into lower rate loans.
13
Gain on sale of loans was $220 thousand and $693 thousand, respectively, for the
second quarter and first six months of 2003 compared to gains of $184 thousand
and $369 thousand for the same periods in 2002. The increase is primarily the
result of an increase in the volume of loans sold and a higher gain realized per
sale. The volume of loans sold totaled $21.6 million and $62.1 million during
the second quarter and first six months of 2003, respectively, compared to $16.0
million and $34.2 million, respectively for the same periods of 2002.
Real estate operations resulted in net gains of $349 thousand and $363 thousand,
respectively, for the second quarter and six months ended of 2003 compared to
net gains of $31 thousand and $192 thousand, respectively, for the same periods
in 2002. Real estate operations for the second quarter include the reversal of
the general valuation allowance, since there was no real estate owned as of June
30, 2003. Real estate operations normally include gains and losses on the sale
of foreclosed properties as well as rental income and operating expense during
the holding period.
Non-interest expense decreased to $13.4 million and $27.5 million, respectively,
for the second quarter and first six months of 2003 from $14.2 million and $29.5
million, respectively, from the second quarter and first six months of 2002. The
decrease in non-interest expense during the second quarter and first six months
of 2003 resulted from reductions in legal and advertising expenses. Advertising
expenses have been delayed due to the development of new marketing programs that
are expected to begin in the second half of the year.
Due to the reductions in non-interest expense, the ratio of non-interest expense
to average assets decreased to 1.21% and 1.26%, respectively, for the second
quarter and first six months of 2003 compared to 1.27% and 1.29%, respectively,
during the same periods in 2002.
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 and establishes a specific interest
allowance for each loan which becomes 90 days or more past due or in
foreclosure. Loans requiring delinquent interest allowances (non-accrual loans)
totaled $3.9 million at June 30, 2003 compared to $6.7 million at December 31,
2002 and $4.2 million at June 30, 2002.
The amount of interest allowance for loans 90 days or more delinquent or in
foreclosure was $266 thousand, $373 thousand, and $364 thousand as of June 30,
2003, December 31, 2002, and June 30, 2002, respectively.
Delinquent loans as a percentage of the Bank's total gross loan portfolio for
the periods indicated are as follows:
June 30, December 31, June 30,
2003 2002 2002
------------------- ------------------ -------------------
(Percentage of Gross Loans)
Period of delinquency
1 monthly payment 0.11% 0.24% 0.32%
2 monthly payments 0.02% 0.08% 0.04%
3 or more monthly payments or in foreclosure 0.09% 0.17% 0.11%
The Bank has debt restructurings that result 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. Any loss of revenues under the modified terms would be immaterial to the
Bank. Generally, if the borrower is unable to return to scheduled principal and
interest payments at the end of the modification period, foreclosure proceedings
are initiated. As of June 30, 2003, the Bank had net modified loans totaling
$5.2 million. No modified loans were 90 days or more delinquent as of June 30,
2003.
14
The Bank considers a loan impaired when management believes that it is probable
that the Bank will not be able to collect all 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, disclosed net of valuation
allowances, include non-accrual major loans (commercial business loans with an
outstanding principal amount greater than or equal to $500 thousand and
single-family loans greater than or equal to $750 thousand, and income property
loans with an outstanding principal amount greater than or equal to $1.5
million), 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 periods indicated:
June 30, December 31, June 30,
2003 2002 2002
------------------- ------------------ -------------------
(In thousands)
Non-accrual loans $ 1,424 $ -- $ --
Modified loans 1,537 1,567 5,265
------------------- ------------------ -------------------
$ 2,961 $ 1,567 $ 5,265
=================== ================== ===================
The Bank evaluates loans for impairment whenever the collectibility of
contractual principal and interest payments is questionable. 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 foreclosure is probable, 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.
All impaired loans were measured using the fair value method as of June 30,
2003, December 31, 2002 and June 30, 2002, respectively.
Impaired loans for which valuation allowances had been established totaled $496
thousand for the quarter ended June 30, 2003, $496 thousand for the quarter
ended December 31, 2002 and $3.7 million for the quarter ended June 30, 2002.
Impaired loans for which there was no valuation allowance established totaled
$3.0 million for the quarter ended June 30, 2003, $1.6 million for the quarter
ended December 31, 2002 and $1.6 million for the quarter ended June 30, 2002.
See "Results of Operations" for an analysis of activity in the valuation
allowance for impaired loans.
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.
The average recorded investment in impaired loans was $3.0 million for the
quarter ended June 30, 2003, $2.6 million for the quarter ended December 31,
2002 and $5.3 million for the quarter ended June 30, 2002. The amount of
interest income recognized on impaired loans using the cash basis for the
quarters ended June 30, 2003, December 31, 2002 and June 30, 2002 was $19
thousand, $61 thousand and $73 thousand, respectively. Interest income
recognized under the accrual basis for the quarters ended June 30, 2003,
December 31, 2002 and June 30, 2002 was $18 thousand, $61 thousand and $71
thousand, respectively.
15
Asset Quality
The following table sets forth certain asset quality ratios of the Bank at the
periods indicated:
June 30, December 31, June 30,
2003 2002 2002
------------------- ------------------ -------------------
Non-Performing Loans to Loans Receivable (1) 0.09% 0.17% 0.11%
Non-Performing Assets to Total Assets (2) 0.09% 0.17% 0.11%
Allowances for Loan Losses to Non-Performing
Loans (3) 1,957% 1,126% 1,823%
Allowances for Loan Losses to Loans
Receivable (4) 1.84% 1.96% 1.92%
--------------------------
(1) Loans receivable are before deducting unearned 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 allowance for impaired loans and the general
valuation allowance as a percentage of non-accrual loans.
(4) The Bank's general valuation allowances plus the allowance for impaired
loans as a percentage of gross loans receivable before deducting unearned
loan fees, general valuation allowances and valuation allowances for
impaired loans.
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). The following is an analysis of non-performing
assets as of the periods indicated:
June 30, December 31, June 30,
2003 2002 2002
-------------------- ------------------ ----------------------
(In thousands)
Real estate owned:
Single family $ -- $ 519 $ 766
Multi-family -- -- 161
Less:
General valuation allowance -- (200) (350)
-------------------- ------------------ ----------------------
Total real estate owned -- 319 577
-------------------- ------------------ ----------------------
Non-accrual loans:
Single family 3,867 5,705 3,266
Multi-family -- 1,017 425
Commercial real estate -- -- 248
Other 4 -- 247
-------------------- ------------------ ----------------------
Total non-accrual loans 3,871 6,722 4,186
-------------------- ------------------ ----------------------
Total non-performing assets $ 3,871 $ 7,041 $ 4,763
==================== ================== ======================
16
Real estate owned and non-accrual loans, while varying slightly from quarter to
quarter, have remained at very low levels for the last few years. Historically,
single family non-performing loans have been attributable to factors such as
layoffs and decreased incomes. Historically, multi-family and commercial
non-performing loans have been attributable to factors such as declines in
occupancy rates, employment rates and rental rates.
Sources of Funds
External sources of funds include savings deposits from several sources,
advances from the Federal Home Loan Bank of San Francisco ("FHLB"), and
securitized borrowings.
Savings deposits are accepted from retail banking offices, telemarketing
sources, and national deposit brokers. 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 source of funds fluctuates from time to time,
based on market rates of interest offered by the Bank and other depository
institutions, the Bank selects 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.
Total savings deposits decreased by $29.9 million and $64.5 million during the
second quarter and first six months of 2003, respectively. The decrease in
deposits for the second quarter and first six months of 2003 is attributable to
a reduction in deposits acquired from national brokerage firms ("brokered
deposits") and telemarketing deposits.
Brokered deposits decreased by $45.5 million and $154.8 million during the
second quarter and first six months of 2003, respectively. The Bank decreased
its use of brokered deposits during the first six months of 2003 due to growth
in core deposits and the availability of lower cost FHLB borrowings. Brokered
deposits comprised 0.3% and 10% of total deposits at June 30, 2003 and June 30,
2002, respectively. Because the Bank has sufficient capital to be deemed
"well-capitalized" under the standards established by the Office of Thrift
Supervision, it may solicit brokered funds without special regulatory approval.
Telemarketing deposits decreased by $19.6 million and $36.5 million during the
second quarter and first six months of 2003, respectively. These deposits are
normally large deposits from pension plans, managed trusts and other financial
institutions. These deposit levels fluctuate based on the attractiveness of the
Bank's rates compared to returns available to investors on alternative
investments. Telemarketing deposits comprised 1% and 2% of total deposits at
June 30, 2003 and June 30, 2002, respectively.
Deposits accepted by retail banking offices increased by $35.2 million and
$126.8 million during the second quarter and first six months of 2003,
respectively. Management attributes the increase to customer demand for safe,
liquid investments due to volatility in the equity markets. If the equity
markets improve, the Bank may lose substantial amounts of deposits, particularly
money market deposits, which have increased to 51% of total retail deposits as
of June 30, 2003 from 41% of total retail deposits at June 30, 2002. Retail
deposits comprised 99% and 88% of total deposits as of June 30, 2003 and June
30, 2002, respectively.
Total borrowings increased by $67.7 million and $241.5 million during the second
quarter and first six months of 2003, respectively, due to a $77.0 million and
$257.0 million net increase in borrowings from the FHLB and net payoffs of $9.3
million and $15.5 million in repurchase agreements. Borrowings from the FHLB
increased during the second quarter and first six months of 2003 because they
were the lowest cost source of funds.
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 that
are a function of lending activity and the general level of interest rates.
17
Loan payoffs and principal reductions were $789.4 million during the first six
months of 2003 compared to $778.6 million during the first six months of 2002.
The high volume of payoffs persisted during 2003 as borrowers continue to
refinance existing loans into new loans at lower rates.
Loan sales were $21.6 million and $62.1 million for the second quarter and first
six months of 2003, respectively. This compares with sales of $16.0 million and
$34.2 million for the second quarter and first six months of 2002, respectively.
Loan sale activity varies based upon borrower demand for 15-year and 30-year
fixed rate loans, which the Bank only originates for sale in the secondary
market. The Bank also originates residential hybrid loans for sell from time to
time. Due to the availability of 15-year and 30-year loans at historically low
rates during the second quarter and first six months of 2003, loans originated
for sale increased.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See "Management's and Discussion and Analysis of Financial Condition and Results
of Operations - Asset/Liability Management" on page 10 hereof for Quantitative
and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under SEC rules, the Company is required to maintain disclosure controls and
procedures designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms. As of the end of the period
covered by this report, the Company has carried out an evaluation of the
effectiveness of the design and operation of its disclosure controls and
procedures. The Company's management, including the Company's Chief Executive
Officer and Chief Financial Officer, supervised and participated in the
evaluation. Based on this evaluation, the Chief Executive Officer and the Chief
Financial Officer concluded that the Company's disclosure controls and
procedures were effective as of the evaluation date.
Changes in Internal Controls
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation.
18
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Securities Holders
On April 23, 2003 the Company held its Annual Meeting of Stockholders for
the purpose of voting on three proposals. The following are 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.
1) Election of Directors.
For Withhold
Christopher M. Harding 14,150,894 219,343
Steven L. Soboroff 14,196,601 173,626
2) Ratification of KPMG, LLP as independent public auditors for the Company for
2003.
For 14,087,848
Against 275,038
Abstain 7,351
3) To approve an amendment to the FirstFed Financial Corp. 1994 Stock Options
and Stock Appreciation Rights Plan (the "Employee Stock Plan") to extend the
term of the Employee Stock Plan and eliminate the ability to reprice shares
granted under the Employee Stock Plan.
For 10,684,626
Against 1,191,543
Abstain 42,085
Non-vote 2,451,983
Item 6. Exhibits and Reports on Form-8K
(a) Exhibits
(3.1) Restated Certificate of Incorporation filed as Exhibit 3.1 to Form
10-K for the fiscal year ended December 31, 1999 and incorporated by
reference.
(3.2) Bylaws filed as Exhibit 3.2 to Form 10-Q dated August 14, 2003 and
incorporated by reference.
(4.1) Amended and Restated Rights Agreement dated as of September 25, 1998,
filed as Exhibit 4.1 to Form 8-A/A, dated September 25, 1998 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) Supplemental Executive Retirement Plan dated January 16, 1986 filed as
Exhibit 10.5 to Form 10-K for the fiscal year ended December 31, 1992
and incorporated by reference.
(10.3) Change of Control Agreement effective September 26, 1996 filed as
Exhibit 10.4 to Form 10-Q for the Quarter ended September 30, 1996
and Amendment filed as Exhibit 10.3 10.4 for change of control to
Form 10-Q for the Quarter ended March 31, 2001 and incorporated by
reference.
(10.4) 1997 Non-employee Directors Stock Incentive Plan filed as Exhibit 1 to
Form S-8 dated August 12, 1997 and Amendment filed as Exhibit 10.5 to
Form 10-Q for the Quarter ended March 31, 2001, and incorporated by
reference.
(21) Registrant's sole subsidiary is First Federal Bank of California, a
federal savings bank.
(31.1) Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
(31.2) Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
(32) Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
19
(b) Reports on Form 8-K
The Company filed current reports on Form 8-K during the quarter ended June 30,
2003 on the following dates: April 23, 2003, April 25, 2003, May 23, 2003, and
June 23, 2003. These reports are related to the release of certain other Company
financial data.
20
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 14, 2003 By: /s/ Douglas J. Goddard
----------------------
Douglas J. Goddard
Chief Financial Officer and
Executive Vice President
21
EXHIBIT 3.2
EXHIBIT 3.2
BYLAWS
ARTICLE I
Offices
SECTION 1. Registered Office. The registered office of the Corporation within
the State of Delaware shall be in the City of Dover, County of Kent.
SECTION 2. Other Offices. The Corporation may also have an office or offices
other than said registered office at such place or places, either within or
without the State of Delaware, as the Board of Directors shall from time to time
determine or the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 1. Place of Meetings. All meetings of the stockholders for the election
of directors or for any other purpose shall be held at any such place, either
within or without the State of Delaware, as shall be designated from time to
time by the Board of Directors and stated in the notice of meeting or in a duly
executed waiver thereof.
SECTION 2. Annual Meeting. The annual meeting of stockholders, commencing with
the year 1988, shall be held at 10:00 o'clock A.M. on the fourth Wednesday of
April, if not a legal holiday, and if a legal holiday, then on the next
succeeding day not a legal holiday at 10:00 o'clock A.M., or at such other date
and time as shall be designated from time to time by the Board of Directors and
stated in the notice of meeting or in a duly executed waiver thereof. At such
annual meeting, the stockholders shall elect by a plurality vote a class of
directors of the Board of Directors from among those nominated in conformance
with the procedures set forth in these Bylaws and transact such other business
as may properly be brought before the meeting.
SECTION 3. Special Meetings. Special meetings of stockholders may be called as
provided in Article NINTH of the Certificate of Incorporation.
SECTION 4. Notice of Meetings. Except as otherwise expressly required by
statute, written notice of each annual and special meeting of stockholders
stating the date, place and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be given
to each stockholder of record entitled to vote thereat not less than ten nor
more than fifty days before the date of the meeting. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice. Notice shall be given personally or by mail and, if by mail, shall be
sent in a postage-prepaid envelope, addressed to the stockholder at his or her
address as it appears on the records of the Corporation. Notice by mail shall be
deemed given at the time when the same shall be deposited in the United States
mail, postage prepaid. Whenever notice is required to be given under any
provision of statute or the Certificate of Incorporation of the Corporation or
these Bylaws, a written waiver, signed by the person entitled to notice, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, an annual or special meeting of
stockholders need be specified in any written waiver of notice.
22
SECTION 5. List of Stockholders. The officer who has charge of the stock ledger
of the Corporation shall prepare and make, at least ten days before each meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, showing the address of and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city, town or village where the meeting is
to be held, which place shall be specified in the notice of meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 8. Quorum, Adjournments. The holders of a majority of the voting power
of the issued and outstanding stock of the Corporation entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum for the
transaction of business at all meetings of stockholders, except as otherwise
provided by statute or by the Certificate of Incorporation. If, however, such
quorum shall not be present or represented by proxy at any meeting of
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented by proxy. At such adjourned meeting at which a
quorum shall be present or represented by proxy, any business may be transacted
which might have been transacted at the meeting as originally called. If the
adjournment is for more than thirty days, or if after adjournment a new record
date is set, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 7. Organization. At each meeting of stockholders, the Chairman of the
Board, if one shall have been elected, or, in his or her absence or if one shall
not have been elected, the President shall act as chairman of the meeting. The
Secretary or, in his or her absence or inability to act, the person whom the
chairman of the meeting shall appoint as secretary of the meeting shall act as
secretary of the meeting and keep the minutes thereof.
SECTION 8. Order of Business. All meetings of stockholders shall be conducted in
accordance with such rules as are prescribed by the chairman of the meeting. The
order of business at all meetings of the stockholders shall be as determined by
the chairman of the meeting.
SECTION 9. Voting. Except as otherwise provided by statute, the Certificate of
Incorporation or any resolution of the Board of Directors establishing any class
or series of Preferred Stock, each stockholder of the Corporation shall be
entitled at each meeting of stockholders to one vote for each share of capital
stock of the Corporation standing in such person's name on the record of
stockholders of the Corporation
(a) on the date fixed pursuant to the provisions of Section 7 of Article V
of these Bylaws as the record date for the determination of the stockholders who
shall be entitled to notice of and to vote at such meeting; or
(b) if no such record date shall have been so fixed, then at the close of
business on the day next preceding the day on which notice thereof shall be
given, or, if notice is waived, at the close of business on the date next
preceding the day on which the meeting is held.
Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him or her by a proxy signed by
such stockholder or his or her attorney-in-fact, but no proxy shall be voted
after eleven months from its date. Any such proxy shall be delivered to the
secretary of the meeting at or prior to the time designated in the order of
business for so delivering such proxies. When a quorum is present at any
meeting, the vote of the holders of a majority of the voting power of the issued
and outstanding stock of the Corporation entitled to vote thereon, present in
person or represented by proxy, shall decide any question brought before such
meeting, unless the question is one upon which by express provision of statute
or of the Certificate of Incorporation or of these Bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of such question. Unless required by statute, or determined by the
chairman of the meeting to be advisable, the vote on any question need not be by
ballot. On a vote by ballot, each ballot shall be signed by the stockholder
voting, or by such person's proxy, if there be such proxy, and shall state the
number of shares voted.
23
SECTION 10. Voting by the Corporation. Shares of its own capital stock belonging
to the Corporation or to another corporation, if a majority of the shares
entitled to vote in the election of directors of such other corporation is held,
directly or indirectly, by the Corporation, shall neither be entitled to vote
nor be counted for quorum purposes. Nothing in this section shall be construed
as limiting the right of the Corporation to vote stock, including but not
limited to its own stock, held by it or by any of its subsidiaries in a
fiduciary capacity.
SECTION 11. Inspectors. The Board of Directors may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If any of the inspectors so appointed shall fail to appear
or act, the chairman of the meeting shall, or if inspectors shall not have been
appointed, the chairman of the meeting may, appoint one or more inspectors. Each
inspector, before entering upon the discharge of his or her duties, shall take
and sign an oath faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of his or her ability. The
inspectors shall determine the number of shares of capital stock of the
Corporation outstanding and the voting power of each, the number of shares
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count and
tabulate all votes, ballots or consents, determine the results, and do such acts
as are proper to conduct the election or vote with fairness to all stockholders.
On request of the chairman of the meeting, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. No director or candidate for the office
of director shall act as an inspector of an election of directors. Inspectors
need not be stockholders.
SECTION 12. Action by Consent. The stockholders of the Corporation may take
action by written consent only in accordance with the provisions of the
Certificate of Incorporation of the Corporation.
SECTION 13. Stockholder Nominations; Business to be Brought Before the Meeting.
(a) Stockholder Nominations. Nominations of candidates for election as
directors at any annual meeting of stockholders may be made (i) by, or at the
direction of, a majority of the Continuing Directors (as such term is defined in
Article SEVENTH of the Certificate of Incorporation of this Corporation) or (ii)
by any stockholder of record entitled to vote at such annual meeting. Only
persons nominated in accordance with procedures set forth in this Section 13(a)
shall be eligible for election as directors at an annual meeting.
Nominations, other than those made by, or at the direction of, a majority
of the Continuing Directors, shall be made pursuant to timely notice in writing
to the Secretary of the Corporation as set forth in this Section 13(a). To be
timely, a stockholder's notice shall be delivered to, or mailed and received at,
the principal executive offices of the Corporation not less than sixty (60) days
nor more than ninety (90) days prior to the date of the adjournments of that
meeting to a later date; provided, however, that if less than seventy (70) days'
notice or prior public disclosure of the date of the scheduled annual meeting is
given or made, notice by the stockholder to be timely must be so delivered or
received not later than the close of business on the tenth (10th) day following
the earlier of the day on which such notice of the date of the scheduled annual
meeting was mailed or the day on which such public disclosure was made. Such
stockholder's notice shall set forth (i) as to each person whom the stockholder
proposes to nominate for election as a director (a) the name, age, business
address and residence address of such person, (b) the principal occupation or
employment of such person, (c) the class and number of shares of the
Corporation's equity securities which are beneficially owned (as such term is
defined in Rule 13d-3 or 13d-5 under the Securities Exchange Act of 1934 as in
effect on January 1, 1987 (the "Exchange Act")) by such person on the date of
such stockholder notice and (d) any other information relating to such person
that would be required to be disclosed pursuant to Schedule 13D under the
Exchange Act in connection with the acquisition of shares, and pursuant to
Regulation 14A under the Exchange Act, in connection with the solicitation of
proxies with respect to nominees for election as directors, regardless of
whether such person is subject to the provisions of such regulations, including,
but not limited to, information required to be disclosed by Items 4(b) and 6 of
Schedule 14A under the Exchange Act and information which would be required to
be filed on Schedule 14B under the Exchange Act with the Securities and Exchange
Commission; and (ii) as to the stockholder giving the notice (a) the name and
address, as they appear on the Corporation's books, of such stockholder and any
other stockholder who is a record or beneficial owner of any equity securities
of the Corporation and who is known by such stockholder to be supporting such
nominee(s) and (b) the class and number of shares of the Corporation's equity
securities which are beneficially owned, as defined above, and owned of record
by stockholder on the date of such stockholder notice and the number of shares
of the Corporation's equity securities beneficially owned
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and owned of record by
any person known by such stockholder to be supporting such nominee(s) on the
date of such stockholder notice. At the request of a majority of the Continuing
Directors, any person nominated by, or at the direction of, the Board of
Directors for election as a director at an annual meeting shall furnish to the
Secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee.
No person shall be elected as a director of the Corporation unless nominated in
accordance with the procedures set forth in this Section 13(a). Ballots bearing
the names of all the persons who have been nominated for election as directors
at an annual meeting in accordance with the procedures set forth in this Section
13(a) shall be provided for use at the annual meeting.
A majority of the Continuing Directors may reject any nomination by a
stockholder not timely made in accordance with the requirements of this Section
13(a). If a majority of the Continuing Directors determines that the information
provided in a stockholder's notice does not satisfy the informational
requirements of this Section 13(a) in any material respect, the Secretary of the
Corporation shall promptly notify such stockholder of the deficiency in the
notice. The stockholder shall have an opportunity to cure the deficiency by
providing additional information to the Secretary within five (5) days from the
date such deficiency notice is given to the stockholder, or such shorter time as
may be reasonably deemed appropriate by a majority of the Continuing Directors,
taking into consideration the date of the meeting, the matters to be brought
before the meeting, time constraints for the printing and mailing of proxies and
other materials to stockholders, and such other considerations as may be deemed
appropriate by the Continuing Directors. If the deficiency is not cured within
such period, or if a majority of the Continuing Directors reasonably determines
that the additional information provided by the stockholder, together with the
information previously provided, does not satisfy the requirements of this
Section 13(a) in any material respect, then the Board of Directors may reject
such stockholder's nomination. The Secretary of the Corporation shall notify a
stockholder in writing whether his or her nomination has been made in accordance
with the time and informational requirements of this Section 13(a).
Notwithstanding the procedure set forth in this Section 13(a), if the majority
of the Continuing Directors does not make a determination as to the validity of
any nominations by a stockholder, the chairman of the annual meeting shall
determine and declare at the annual meeting whether a nomination was not made in
accordance with the terms of this Section 13(a). If the chairman of such meeting
determines that a nomination was not made in accordance with the terms of this
Section 13(a), he or she shall so declare at the annual meeting and the
defective nomination shall be disregarded.
(b) Business to be Brought Before the Meeting. At an annual meeting of
stockholders, only such business shall be conducted, and only such proposals
shall be acted upon as shall have been brought before the annual meeting (i) by,
or at the direction of, the majority of the Continuing Directors (as defined in
Article SEVENTH of the Certificate of Incorporation of the Corporation), or (ii)
by any stockholder of the Corporation who complies with the notice procedures
set forth in this Section 13(b). For a proposal to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to, or mailed and received at, the
principal executive offices of the Corporation not less than sixty (60) days nor
more than ninety (90) days prior to the scheduled annual meeting, regardless of
any postponements, deferrals or adjournments of that meeting to a later date;
provided, however, that if less than seventy (70) days' notice or prior public
disclosure of the date of the scheduled annual meeting is given or made, notice
by the stockholder, to be timely, must be so delivered or received not later
than the close of business on the tenth (10th) day following the earlier of the
day on which such notice of the date of the scheduled annual meeting was mailed
or the day on which such public disclosure was made. A stockholder's notice to
the Secretary shall set forth as to each matter the stockholder proposes to
bring before the annual meeting (i) a brief description of the proposal desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business and any other
stockholder who is the record or Beneficial Owner (as defined in Section 13(a)
of these Bylaws) of any equity security of the Corporation known by such
stockholder to be supporting such proposal, (iii) the class and number of shares
of the Corporation's equity securities which are beneficially owned (as defined
in Section 13(a) of these Bylaws) and owned of record by the stockholder giving
the notice on the date of such stockholder notice and by any other record or
Beneficial Owners of the Corporation's equity securities known by such
stockholder to be supporting such proposal on the date of such stockholder
notice, and (iv) any financial or other interest of the stockholder in such
proposal.
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A majority of the Continuing Directors may reject any stockholder proposal not
timely made in accordance with the terms of this Section 13(b). If a majority of
the Continuing Directors determines that the information provided in a
stockholder's notice does not satisfy the informational requirements of this
Section 13(b) in any material respect, the Secretary of the Corporation shall
promptly notify such stockholder of the deficiency in the notice. The
stockholder shall have an opportunity to cure the deficiency by providing
additional information to the Secretary within such period of time, not to
exceed five days from the date such deficiency notice is given to the
stockholder, as the majority of the Continuing Directors shall reasonably
determine. If the deficiency is not cured within such period, or if the majority
of the Continuing Directors determines that the additional information provided
by the stockholder, together with information previously provided, does not
satisfy the requirements of this Section 13(b) in any material respect, then a
majority of the Continuing Directors may reject such stockholder's proposal. The
Secretary of the Corporation shall notify a stockholder in writing whether such
person's proposal has been made in accordance with the time and information
requirements of this Section 13(b). Notwithstanding the procedures set forth in
this paragraph, if the majority of the Continuing Directors does not make a
determination as to the validity of any stockholder proposal, the chairman of
the annual meeting shall determine and declare at the annual meeting whether the
stockholder proposal was made in accordance with the terms of this Section
13(b). If the chairman of such meeting determines that a stockholder proposal
was not made in accordance with the terms of this Section 13(b), he or she shall
so declare at the annual meeting and any such proposal shall not be acted upon
at the annual meeting.
This provision shall not prevent the consideration and approval or
disapproval at the annual meeting of reports of officers, directors and
committees of the Board of Directors, but, in connection with such reports, no
new business shall be acted upon at such annual meeting unless stated, filed and
received as herein provided.
ARTICLE III
Board Of Directors
SECTION 1. General Powers. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors. The Board of
Directors may exercise all such lawful acts and things as are not by statute or
the Certificate of Incorporation directed or required to be exercised or done by
the stockholders. The Board of Directors shall designate, when present, either
the Chairman of the Board, if one has been elected, the President, or any other
member of the Board of Directors, to preside at its meetings.
SECTION 2. Number, Qualifications, Election and Term of Office. The number of
directors of the Corporation shall be set from time to time by the then serving
Continuing Directors of the Corporation, as defined in Article SEVENTH of the
Certificate of Incorporation of the Corporation, or if there are no Continuing
Directors, by the then serving directors of the Corporation in accordance with
the limits set forth in the Certificate of Incorporation of the Corporation.
Directors need not be stockholders. Nominations of candidates for election as
directors shall be made pursuant to the procedures set forth in Article 11,
Section 13(a) of these Bylaws.
SECTION 3. Place of Meetings. Meetings of the Board of Directors shall be held
at such place or places, within or without the State of Delaware, as the Board
of Directors may from time to time determine or as shall be specified in the
notice of any such meeting.
SECTION 4. Annual Meeting. The Board of Directors shall meet for the purpose of
organization, the election of officers and the transaction of other business, as
soon as practicable after each annual meeting of stockholders, on the same day
and at the same place where such annual meeting shall be held. Notice of such
meeting need not be given. In the event such annual meeting is not so held, the
annual meeting of the Board of Directors may be held at such other time or place
(within or without the State of Delaware) as shall be specified in a notice
thereof given as hereinafter provided in Section 7 of this Article III.
SECTION 5. Regular Meetings. Regular meetings of the Board of Directors shall be
held at such time and place as the Board of Directors may fix. If any day fixed
for a regular meeting shall be a legal holiday at the place where the meeting
is to be held, then the meeting which would otherwise be held on that day
shall be
26
held at the same time and place on the next succeeding business day. Notice of
regular meetings of the Board of Directors need not be given except as
otherwise required by statute or these Bylaws.
SECTION 6. Special Meetings. Special meetings of the Board of Directors may be
called by the Chairman of the Board, if one shall have been elected, the
President or by a majority of both the directors and the Continuing Directors of
the Corporation as such term is defined in Article SEVENTH of the Certificate of
Incorporation of the Corporation. Except as otherwise limited by statute, the
Certificate of Incorporation of the Corporation or these Bylaws, the persons
authorized to call special meetings of the Board of Directors may fix any place
as the place for holding any special meeting of the Board of Directors called by
such person or persons.
SECTION 7. Notice of Meetings. Notice of each special meeting of the Board of
Directors (and of each regular meeting for which notice shall be required) shall
be given by the Secretary as hereinafter provided in this Section 7, in which
notice shall be stated the time and place of the meeting. Except as otherwise
required by these Bylaws, such notice need not state the purposes of such
meeting. Notice of each such meeting shall be mailed, postage prepaid, to each
director, addressed to him or her at his or her residence or usual place of
business, by first class mail, at least two days before the day on which such
meeting is to be held, or shall be sent addressed to him or her at such place by
telegraph, cable, telex, telecopier or other similar means, or be delivered to
him personally or be given to him or her by telephone or other similar means, at
least twenty-four hours before the time at which such meeting is to be held.
Notice of any such meeting need not be given to any director who shall, either
before or after the meeting, submit a signed waiver of notice or who shall
attend such meeting, except when he or she shall attend for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
SECTION 8. Quorum and Manner of Acting. A majority of the entire Board of
Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, and, except as otherwise expressly required
by statute or the Certificate of Incorporation or these Bylaws, the act of a
majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board of Directors. In the absence of a quorum at any
meeting of the Board of Directors, a majority of the directors present thereat
may adjourn such meeting to another time and place. Notice of the time and place
of any such adjourned meeting shall be given to all of the directors unless such
time and place were announced at the meeting at which the adjournment was taken,
in which case such notice shall only be given to the directors who were not
present thereat. At any adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the meeting as
originally called. The directors shall act only as a Board and the individual
directors shall have no power as such, other than acting as a member of the
Board of Directors or a committee thereof.
SECTION 9. Organization. At each meeting of the Board of Directors, the Chairman
of the Board, if one shall have been elected, or, in the absence of the Chairman
of the Board or if one shall not have been elected, the President, if present,
and if not present, another director chosen by a majority of the directors
present, shall act as chairman of the meeting and preside thereat. Each meeting
of the Board of Directors shall be conducted in accordance with such rules as
are prescribed by the presiding officer of the meeting. The Secretary or, in his
or her absence, any person appointed by the chairman of the meeting shall act as
secretary of the meeting and keep the minutes thereof.
SECTION 10. Resignations. Any director of the Corporation may resign at any time
by giving written notice of his or her resignation to the Chairman of the Board
or the President, and to the Secretary of the Corporation. Any such resignation
shall take effect at the time specified therein or, if the time when it shall
become effective shall not be specified therein, immediately upon its receipt.
Unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 11. Vacancies. Vacancies on the Board of Directors shall be filled in
accordance with the procedures described in the Certificate of Incorporation.
SECTION 12. Age Limitation. No person shall be eligible for election,
reelection, appointment or reappointment to the Board of Directors if such
person is then more than 73 years of age. No director shall
27
serve beyond the annual meeting of the Corporation immediately following his or
her attainment of 73 years. This limitation shall not apply to a person serving
as an advisory director of the Corporation.
SECTION 13. Compensation. The Board of Directors shall have authority to fix the
compensation, including fees and reimbursement of expenses, of directors and any
advisory directors for services to the Corporation in any capacity.
SECTION 14. Committees.
(a) Appointment. The Board of Directors, by resolution duly adopted by a
majority of the Board, may designate one or more directors to constitute an
Executive Committee, provided that at least one-third of the members of the
Executive Committee shall not be full time employees of the Corporation. The
designation of any Executive Committee pursuant to this Article III, Section 14
and the delegation of authority thereto shall not operate to relieve the Board
of Directors, or any director, of any responsibility imposed by law or
regulation.
(b) Other Committees. The Board of Directors may by resolution establish an
Audit Committee and any other committees composed of directors as they may
determine necessary or appropriate for the conduct of the business of the
Corporation and may prescribe the duties, constitution and procedures thereof.
Any committee so established shall have and may exercise all of the authority
granted to it by the resolution establishing such committee.
(c) Authority. The Executive Committee, when the Board of Directors is not
in session, shall have and may exercise all of the authority of the Board of
Directors.
(d) Limitations on Authority. Notwithstanding any other provision of these
bylaws, neither the Executive Committee nor any other committee established by
the Board of Directors shall have the power (i) to amend the Certificate of
Incorporation of the Corporation (except, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the Board of Directors of the Corporation, that a committee may fix the
designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of the shares of any series);
(ii) to adopt an agreement of merger or consolidation; (iii) to recommend to the
stockholders of the Corporation the sale, lease or exchange or all or
substantially all of the Corporation or a revocation of a dissolution; (iv) to
amend these bylaws; and (v) in the absence of specific authorization in these
bylaws, the Certificate of Incorporation of the Corporation or resolution of the
Board of Directors establishing such committee to declare a dividend, authorize
the issuance of stock or adopt a certificate of ownership and merger; and that
such committee's powers shall be further limited to the extent, if any, that
such authority shall be limited by the resolution appointing such committee, by
statute, by the Certificate of Incorporation of the Corporation, or by these
Bylaws.
(e) Tenure. Subject to the provisions of these Bylaws, each member of the
Executive Committee shall hold office until the next regular annual meeting of
the Board of Directors following his or her designation and until a successor is
designated as a member of the Executive Committee.
(f) Meetings. Regular meetings of the Executive Committee may be held
without notice at such times and places as the Executive Committee may fix from
time to time. Special meetings of the Executive Committee may be called by any
member thereof upon notice given not less than twenty-four hours prior to the
meeting stating the place, date, and hour of the meeting, which notice may be
written or oral. Any member of the Executive Committee may waive notice of any
meeting and no notice of any meeting need be given to any member thereof who
attends in person. The notice of a meeting of the Executive Committee need not
state the business proposed to be transacted at the meeting.
(g) Quorum. A majority of the members of the Executive Committee shall
constitute a quorum for the transaction of business at any meeting thereof, and
action of the Executive Committee must be authorized by the affirmative vote of
a majority of the members present at a meeting at which a quorum is present.
28
(h) Vacancies. Any vacancy in the Executive Committee may be filled by
resolution duly adopted by a majority of the Board of Directors.
(i) Resignations and Removal. Any member of the Executive Committee may be
removed at any time with or without cause by resolution duly adopted by a
majority of the Board of Directors. Any member of the Executive Committee may
resign from the Executive Committee at any time by giving written notice to the
Chairman of the Board, the President or the Secretary of the Corporation. Unless
otherwise specified therein, such resignation shall take effect upon its
receipt. The acceptance of such resignation shall not be necessary to make it
effective.
(j) Procedure. The Executive Committee and any other committee established
by the Board of Directors shall elect a presiding officer from its members and
may fix its own rules of procedure which shall not be inconsistent with these
Bylaws or the resolution adopted by the Board of Directors establishing such
committee. It shall keep regular minutes of its proceedings and report the same
to the Board of Directors for its information at the meeting thereof held next
after the proceedings shall have occurred.
SECTION 15. Action by Consent. Unless restricted by the Certificate of
Incorporation, any action required or permitted to be taken by the Board of
Directors or any committee thereof may be taken without a meeting of all members
of the Board of Directors or such committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the minutes of the
proceedings of the Board of Directors or such committee, as the case may be.
SECTION 16. Telephonic Meeting. Unless restricted by the Certificate of
Incorporation, any one or more members of the Board of Directors or any
committee thereof may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other.
Participation by such means shall constitute presence in person at a meeting.
SECTION 17. Presumption of Assent. A director of the Corporation who is present
at a meeting of the Board of Directors at which action on any matter is taken
shall be presumed to have assented to the action taken unless his or her dissent
or abstention shall be entered in the minutes of the meeting or unless he shall
file a written dissent to such action with the person acting as the secretary of
the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the Corporation within ten days after the
date a copy of the minutes of the meeting is received. Such right to dissent
shall not apply to a director who voted in favor of such action.
29
ARTICLE IV
Officers
SECTION 1. Number and Qualifications. The officers of the Corporation shall be
elected by the Board of Directors and shall include the President, one or more
Vice-Presidents, the Secretary and the Treasurer. If the Board of Directors
wishes, it may also elect as an officer of the Corporation a Chairman of the
Board and may elect other officers (including, without limitation, a General
Counsel, one or more Assistant Treasurers and one or more Assistant
Secretaries) as may be necessary or desirable for the business of the
Corporation. The Board of Directors may designate one or more Vice Presidents
as Executive Vice President, First Vice President, Senior Vice President or
Assistant Vice President. Any two or more offices may be held by the same
person, and no officer except the Chairman of the Board need be a director.
Each officer shall hold office until his or her successor shall have been duly
elected and shall have qualified, until his or her death, or until he or she
shall have resigned or have been removed, as hereinafter provided in these
Bylaws.
SECTION 2. Resignations. Any officer of the Corporation may resign at any
time by giving written notice of his or her resignation to the Corporation.
Any such resignation shall take effect at the time specified therein or, if
the time when it shall become effective shall not be specified therein,
immediately upon receipt Unless otherwise specified therein, the acceptance
of any such resignation shall not be necessary to make it effective.
SECTION 3. Removal. Any officer of the Corporation may be removed, either
with or without cause, at any time, by the Board of Directors at any meeting
thereof. Any removal, other than for cause, shall be without prejudice to the
contractual rights, if any, of the person so removed.
SECTION 4. Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification, or other cause may be filled by a vote of the
majority of the Board of Directors.
SECTION 5. Officers' Bonds or Other Security. If required by the Board of
Directors, any officer of the Corporation shall give a bond or other security
for the faithful performance of his or her duties, in such amount and with
such surety as the Board of Directors may require.
SECTION 6. Compensation. The compensation of the officers of the Corporation
for their services as such officers shall be fixed from time to time by the
Board of Directors. An officer of the Corporation shall not be prevented from
receiving compensation by reason of the fact that he or she is also a
director of the Corporation.
ARTICLE V
Stock Certificates And Their Transfer
SECTION 1. Stock Certificates. Every holder of stock in the Corporation shall
be entitled to have a certificate, signed by, or in the name of the
Corporation by, the Chairman of the Board or the President or Vice President
and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Corporation, certifying the number of shares owned
by him or her in the Corporation. If the Corporation shall be authorized to
issue more than one class of stock or more than one series of any class, the
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the
qualifications, limitations or restriction of such preferences and /or rights
shall be set forth in full or summarized on the face or back of the
certificate which the Corporation shall issue to represent such class or
series of stock, provided that, except as otherwise provided in Section 202
of the General Corporation law of the State of Delaware, in lieu of the
foregoing requirements, there may be set forth on the face or back of the
certificate which the Corporation shall issue to represent such class or
series of stock, a statement that the Corporation will furnish without charge
to each stockholder who so requests the designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions
of such preferences and/or rights.
30
SECTION 2. Facsimile Signatures. Any or all of the signatures on a certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he or she were such officer, transfer agent or registrar at the date of
issue.
SECTION 3. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen, or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen, or
destroyed certificate or certificates, or his or her legal representative, to
give the Corporation a bond in such sum as it may direct sufficient to indemnity
it against any claim that may be made against the Corporation on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
SECTION 4. Transfer of Stock. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its records; provided, however, that the Corporation shall be
entitled to recognize and enforce any lawful restriction on transfer. Whenever
any transfer of stock shall be made for collateral security, and not absolutely,
it shall be so expressed in the entry of transfer if, when the certificates are
presented to the Corporation for transfer, both the transferor and the
transferee request the Corporation to do so.
SECTION 5. Transfer Agents and Registrars. The Board of Directors may appoint,
or authorize any officer or officers to appoint, one or more transfer agents and
one or more registrars.
SECTION 6. Regulations. The Board of Directors may make such additional rules
and regulations, not inconsistent with these Bylaws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation.
SECTION 7. Fixing the Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
SECTION 8. Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its records as the owner
of shares of stock to receive dividends and to vote as such owner, shall be
entitled to hold liable for calls and assessments a person registered on its
records as the owner of shares of stock, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares of stock on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VI
General Provisions
SECTION 1. Dividends. Subject to the provisions of statute and the Certificate
of Incorporation, dividends upon the shares of capital stock of the Corporation
may be declared by the Board of Directors at any regular or special meeting.
Dividends may be paid in cash, in property or in shares of capital stock of the
Corporation (Common or Preferred), unless otherwise provided by statute or the
Certificate of Incorporation.
31
SECTION 2. Reserves. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
Board of Directors may, from time to time, in its absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation or
for such other purpose as the Board of Directors may think conducive to the
interests of the Corporation. The Board of Directors may modify or abolish any
such reserves in the manner in which it was created.
SECTION 3. Seal. The seal of the Corporation shall be in such form as shall be
approved by the Board of Directors.
SECTION 4. Fiscal Year. The fiscal year of the Corporation shall be fixed,
and once fixed, may thereafter be changed, by resolution of the Board of
Directors.
SECTION 5. Checks, Notes, Drafts, Etc. All checks, notes, drafts or other orders
for the payment of money of the Corporation shall be signed, endorsed or
accepted in the name of the Corporation by such officer, officers, person or
persons as from time to time may be designated by the Board of Directors or by
an officer or officers authorized by the Board of Directors to make such
designation.
SECTION 6. Execution of Contracts, Deeds, Etc. The Board of Directors may
authorize any officer or officers, agent or agents, in the name and on behalf of
the Corporation to enter into or execute and deliver any and all deeds, bonds,
mortgages, contracts and other obligations or instruments, and such authority
may be general or confined to specific instances.
SECTION 7. Voting of Stock in Other Corporations. Unless otherwise provided by
resolution of the Board of Directors, the Chairman of the Board or the
President, from time to time, may (or may appoint one or more attorneys or
agents to cast the votes which the Corporation may be entitled to cast as a
stockholder or otherwise in any other corporation, any of whose shares or
securities may be held by the Corporation, at meetings of the holders of the
shares or other securities of such other corporation. In the event one or more
attorneys or agents are appointed, the Chairman of the Board or the President
may instruct the person or persons so appointed as to the manner of casting such
votes or giving such consent. The Chairman of the Board or the President may, or
may instruct the attorneys or agents appointed to, execute or cause to be
executed in the name and on behalf of the Corporation and under its seal or
otherwise, such written proxies, consents, waivers or other instruments as may
be necessary or proper in the circumstances.
ARTICLE VII
Amendments
These Bylaws may be amended or repealed or new bylaws adopted as provided in the
Certificate of Incorporation of the Corporation.
32
EXHIBIT 31.1
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Babette Heimbuch, certify that:
(1) I have reviewed this quarterly report on Form 10-Q of FirstFed Financial
Corp.;
(2) Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
(3) Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
(4) The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) for the registrant and have:
(i) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this quarterly report is being
prepared;
(ii) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
(iii) Disclosed in this quarterly report any change in the registrant's
internal control over financial reporting that occurred in the
registrant's most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect the registrant's internal
control over financial reporting; and
(5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons fulfilling the equivalent function):
(i) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(ii) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting
Dated this 14th day of August 2003.
By: /s/ Babette E. Heimbuch
Babette E. Heimbuch
Chief Executive Officer
33
EXHIBIT 31.2
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Douglas Goddard, certify that:
(1) I have reviewed this quarterly report on Form 10-Q of FirstFed Financial
Corp.;
(2) Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
(3) Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
(4) The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) for the registrant and have:
(i) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this quarterly report is being
prepared;
(ii) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
(iii) Disclosed in this quarterly report any change in the registrant's
internal control over financial reporting that occurred in the
registrant's most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect the registrant's internal
control over financial reporting; and
(5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons fulfilling the equivalent function):
(i) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(ii) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting
Dated this 14th day of August 2003.
By: /s/ Douglas Goddard
Douglas Goddard
Chief Financial Officer
34
EXHIBIT 32
EXHIBIT 32
CEO AND CFO CERTIFICATIONS
The undersigned, as Chief Executive Officer and Chief Financial Officer,
respectively, hereby certify, to the best of her/his knowledge and belief, that:
(1) the Form 10-Q of FirstFed Financial Corp. (the "Company") for
the quarterly period ended June 30, 2003 (the "Report ")
accompanying this certification fully complies with the
requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2) the information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company for such period.
This certification is made solely for purposes of complying with the provisions
of Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
FIRSTFED FINANCIAL CORP.
Registrant
Date: August 14, 2003
By: /s/ Babette E. Heimbuch
Babette E. Heimbuch
Chief Executive Officer
By: /s/ Douglas J. Goddard
Douglas J. Goddard
Chief Financial Officer and
Executive Vice President
35