-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ofq06vXSneKLoRScJ8192yL8FMf3NwwnXL0CCzZ5lyD1FBz7xsJVHiojssdS8WKr hAY/MvvMqDh1HuugYu9ZRw== 0000810536-02-000081.txt : 20021114 0000810536-02-000081.hdr.sgml : 20021114 20021114165507 ACCESSION NUMBER: 0000810536-02-000081 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTFED FINANCIAL CORP CENTRAL INDEX KEY: 0000810536 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 954087449 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09566 FILM NUMBER: 02825868 BUSINESS ADDRESS: STREET 1: 401 WILSHIRE BOULEVARD CITY: SANTA MONICA STATE: CA ZIP: 90401-1490 BUSINESS PHONE: 3103196000 MAIL ADDRESS: STREET 1: 401 WILSHIRE BOULEVARD CITY: SANTA MONICA STATE: CA ZIP: 90401 10-Q 1 q0902.txt SEPTEMBER 30, 2002 10-Q ===================================================================== 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 September 30, 2002 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 incorporation)(IRS Employer Identification No.) 401 Wilshire Boulevard, Santa Monica, California 90401-1490 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code:(310) 319-6000 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 |_| As of November 1, 2002, 16,929,220 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 3 Condition as of September 30, 2002, December 31, 2001 and September 30, 2001 Consolidated Statements of Operations and 4 Comprehensive Earnings for the three and nine months ended September 30, 2002 and 2001 Consolidated Statements of Cash Flows for 5 the nine months ended September 30, 2002 and 2001 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of 7 Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures 18 About Market Risk Item 4. Controls and Procedures 19 Part II. Other Information (omitted items are inapplicable) Item 6. Exhibits and Reports on Form 8-K 19 Signatures 20 Certification of Chief Executive Officer 21 Certification of Chief Financial Officer 22 Exhibits 99.1 Certification of Chief Executive 23 Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.2 Certification of Chief Financial 24 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) September 30, December 31, September 30, 2002 2001 2001 ---------- ---------- ----------- ASSETS Cash and cash equivalents $ 43,122 $ 174,171 $ 69,050 Investment securities, available-for-sale (at fair value) 109,858 110,444 120,679 Mortgage-backed securities, available-for-sale (at fair value) 218,424 284,079 311,342 Loans receivable, held-for-sale (fair value of $2,861, $5,250 and $3,939) 2,848 5,246 3,920 Loans receivable, net 3,804,495 3,999,643 3,941,950 Accrued interest and dividends receivable 18,567 22,076 25,201 Real estate 506 1,515 819 Office properties and 10,461 10,822 9,615 equipment, net Investment in Federal Home Loan Bank (FHLB) stock, at cost 79,666 91,713 88,891 Other assets 29,335 26,580 22,993 --------- --------- --------- $ 4,317,282 $ 4,726,289 $ 4,594,460 ========= ========= ========= LIABILITIES Deposits $ 2,508,768 $ 2,546,647 $ 2,354,058 FHLB advances 1,247,000 1,597,000 1,639,000 Securities sold under agreements to repurchase 166,567 211,040 228,716 Accrued expenses and other liabilities 36,163 45,924 60,463 --------- --------- --------- 3,958,498 4,400,611 4,282,237 --------- --------- --------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common stock, par value $.01 per share; Authorized 100,000,000 shares; issued 23,390,742 23,362,196 and 23,359,272 shares, outstanding 17,046,446, 17,251,300 and 17,291,782 shares 234 234 233 Additional paid-in capital 34,797 34,670 33,588 Retained earnings - substantially restricted 404,594 363,713 350,803 Unreleased shares to employee stock ownership plans (1,748) -- (210) Treasury stock, at cost, 6,344,296 shares, 6,110,896 and 6,067,490 shares (81,684) (75,930) (75,743) Accumulated other comprehensive gain, net of taxes 2,591 2,991 3,552 --------- --------- --------- 358,784 325,678 312,223 --------- --------- --------- $ 4,317,282 $ 4,726,289 $ 4,594,460 ========= ========= =========
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 Nine months ended September 30, September 30, --------------------- ---------------------- 2002 2001 2002 2001 -------- ---------- ---------- ---------- Interest income: Interest on loans $ 59,941 $ 73,457 $ 185,605 $ 229,328 Interest on mortgage-backed securities 2,026 4,585 7,263 16,086 Interest and dividends on investments 2,774 3,795 8,573 11,883 ---------- ---------- ---------- ---------- Total interest income 64,741 81,837 201,441 257,297 ---------- ---------- ---------- ---------- Interest expense: Interest on deposits 14,645 22,889 47,642 74,690 Interest on borrowings 16,667 26,508 53,401 84,453 ---------- ---------- ---------- ---------- Total interest expense 31,312 49,397 101,043 159,143 ---------- ---------- ---------- ---------- Net interest income 33,429 32,440 100,398 98,154 Provision for loan losses -- -- -- -- ---------- ---------- ---------- ---------- Net interest income after provision for loan losses 33,429 32,440 100,398 98,154 ---------- ---------- ---------- ---------- Non-interest income: Loan servicing and other fees 1,172 1,003 3,062 2,478 Retail office fees 1,173 952 3,348 2,640 Gain on sale of loans 6,195 291 6,564 501 Real estate operations, net (60) 609 133 383 Other operating income 231 164 797 665 ---------- ---------- ---------- ---------- Total other income 8,711 3,019 13,904 6,667 ---------- ---------- ---------- ---------- Non-interest expense: Compensation 8,008 7,595 24,475 22,325 Occupancy 2,249 2,201 6,399 6,180 Amortization of core deposit intangible 499 372 1,464 1,116 Other expenses 3,351 3,570 11,313 9,845 ---------- ---------- ---------- ---------- Total non-interest expense 14,107 13,738 43,651 39,466 ---------- ---------- ---------- ---------- Earnings before income taxes 28,033 21,721 70,651 65,355 Income tax provision 11,807 9,294 29,770 27,963 ---------- ---------- ---------- ---------- Net earnings $ 16,226 $ 12,427 $ 40,881 $ 37,392 ========== ========== ========== ========== Other comprehensive earnings (loss), net of taxes (145) 2,826 (400) 5,710 ---------- ---------- ---------- ---------- Comprehensive earnings $ 16,081 $ 15,253 $ 40,481 $ 43,102 ========== ========== ========== ========== Earnings per share: Basic $ 0.94 $ 0.72 $ 2.37 $ 2.17 ========== ========== ========== ========== Diluted $ 0.92 $ 0.70 $ 2.32 $ 2.12 ========== ========== ========== ========== Weighted average shares outstanding: Basic 17,257,643 17,253,063 17,258,970 17,218,177 ========== ========== ========== ========== Diluted 17,555,150 17,677,749 17,602,324 17,651,674 ========== ========== ========== ==========
See accompanying notes to consolidated financial statements. 4 FirstFed Financial Corp. and Subsidiary Consolidated Statements of Cash Flows (In thousands) (Unaudited) Nine months ended September 30, ------------------------------- 2002 2001 ------------ ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 40,881 $ 37,392 Adjustments to reconcile net earnings to net cash provided by operating activities: Net change in loans held-for-sale 2,398 (1,674) Depreciation 1,222 1,379 Valuation adjustments on real estate sold (204) (259) Amortization of fees and premiums/discounts 2,658 2,853 Decrease in servicing asset 180 180 Change in deferred taxes (4,854) (1,811) Decrease in interest and dividends receivable 3,509 3,287 Decrease in interest payable (5,891) (4,538) Amortization of core deposit intangible asset 1,464 1,117 Increase in other assets (7,494) (4,057) Increase (decrease) in accrued expenses and other liabilities (3,870) 5,161 ------------ ------------- Total adjustments (10,882) 1,638 ------------ ------------- Net cash provided by operating activities 29,999 39,030 ------------ ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Loans made to customers and principal collections on loans 194,996 (186,452) Loans purchased -- (132,625) Proceeds from sales of real estate owned 2,746 4,154 Proceeds from maturities and principal payments of investment securities, available-for-sale 61,458 38,889 Principal reductions on mortgage-backed securities, available for sale 65,147 70,009 Purchase of investment securities, available for sale (61,241) (19,964) Redemption (purchase) of FHLB stock 15,573 (4,025) Other -- (2,308) ------------ ------------- Net cash provided by (used by) investing activities 278,679 (232,322) CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in deposits (37,879) 189,011 Net decrease in short term borrowings (544,473) (5,394) Increase in long term borrowings 150,000 -- Purchases of treasury stock (5,754) -- Other (1,621) 1,048 ------------ ------------- Net cash provided by (used by) financing activities (439,727) 184,665 ------------ ------------- Net decrease in cash and cash equivalents (131,049) (8,627) Cash and cash equivalents at beginning of period 174,171 77,677 ------------ ------------- Cash and cash equivalents at end of period $ 43,122 $ 69,050 ============ =============
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 indiciative 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. Recent Accounting Pronouncements On July 30, 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities ("SFAS No. 146"). SFAS No. 146 will be effective for exit or disposal activities initiated after December 31, 2002, with early adoption encouraged. Management does not expect implementation of SFAS No. 146 to have a material impact on its consolidated financial statements. On October 1, 2002, the FASB issued Statement No. 147, Acquisitions of Certain Financial Institutions ("SFAS No. 147"), which requires most financial services companies to subject all their goodwill to annual impairment tests instead of amortizing some of it (the so-called Statement 72 goodwill). SFAS No. 147 applies to all new and past financial-institution acquisitions, including "branch acquisitions" that qualify as acquisitions of a business, but excluding acquisitions between mutual institutions. All acquisitions within the scope of the new Statement will now be governed by the requirements in Statements 141 and 142. Management does not expect that the adoption of Statement 147 will have a material impact on its consolidated financial statements. 6 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 2001 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, 2001, and for the year then ended. Therefore, only material changes in financial condition and results of operations are discussed here. 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, financial information about the Company can be obtained at the Company's web site, www.firstfedca.com. Note regarding forward looking statements: This quarterly report contains certain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Act of 1995. These forward-looking statements are subject to various factors, many of which are beyond the Company's control, which could cause actual results to differ materially from such statements. Such factors include, but are not limited to, the general business environment, interest rate fluctuations that may affect operating 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 September 30, 2002, FirstFed Financial Corp. (the "Company"), holding company for First Federal Bank of California and its subsidiaries (the "Bank"), had consolidated stockholders' equity of $358.8 million compared to $325.7 million at December 31, 2001 and $312.2 million at September 30, 2001. Consolidated total assets at September 30, 2002 were $4.3 billion compared to $4.7 billion at December 31, 2001 and $4.6 billion at September 30, 2001. The reduction in total assets for the period ended September 30, 2002 is primarily attributable to a decrease in the portfolio of loans and mortgage-backed securities. The loan portfolio, including mortgage-backed securities, decreased to $4.0 billion at September 30, 2002 from $4.3 billion at December 31, 2001 and $4.3 billion at September 30, 2001. The decrease is primarily due to loan payoffs and principal reductions, which were $1.1 billion during the first nine months of 2002 compared to $931.3 million during the first nine months of 2001. Payoff activity increased during the first nine months of 2002 as borrowers continued to refinance existing loans into new loans at lower rates. Payoffs increased because borrowers have opted for 15-year or 30-year fixed rate mortgages which the Bank does not keep in its portfolio. The decrease was partially offset by loan originations of $871.1 million during the first nine months of 2002. The Bank's financial results are primarily influenced by the Southern California real estate market. The Southern California real estate market has continued to improve during 2002 due to a low interest rate environment and a limited supply of new housing. According to the UCLA Anderson Forecast for California, September 2002 Report (the "Forecast"), "Despite the sluggish growth of the local and national economy, the real estate market continues on its rapid upward trajectory." Also, according to the Forecast, home prices in Southern California are expected to increase by 15.8% during 2002, compared to 10.9% in 2001. An increase of only 4.0% is expected during 2003. 7 The following tables summarize loan originations and purchases as of the dates indicated: Property Type Loan Type Nine months ended Nine months ended September 30, September 30, 2002 2001 2002 2001 --------- --------- -------- ---------- (In thousands) (In thousands) Single family $444,766 $ 798,130 Multi-family and 399,990 300,084 Adjustable $494,887 $ 292,081 commercial Other 26,303 132,383 Fixed (1) 376,172 938,516 -------- --------- -------- ---------- Total $871,059 $1,230,597 Total $871,059 $1,230,597 ======== ========== ======== ==========
(1) This loan type includes fixed/adjustable hybrid loan products with initial repricing periods ranging from three to ten years. The Bank's portfolio of multi-family and commercial real estate loans has grown to 52.79% of the loan portfolio as of September 30, 2002 from 46.01% as of December 31, 2001 and 43.44% as of September 30, 2001. Rental and vacancy rates are critical factors in assessing the Bank's multi-family and commercial real estate loan portfolios. According to market research data for Los Angeles and Orange Counties, rates of increase in rental growth have decreased over the last two years, but are expected to grow over the next 12 months by 2% and 3% for Los Angeles and Orange Counties, respectively. However, vacancy rates in Los Angeles and Orange Counties have increased slightly over the last two years. Vacancy rates over the next 12 months are expected to remain stable in Los Angeles County and are expected to decrease slightly in Orange County. The Bank's non-performing assets to total assets ratio was 0.11% as of September 30, 2002, compared to 0.17% as of December 31, 2001 and 0.23% as of September 30, 2001. (See "Non-performing Assets" for further discussion.) The Bank recorded net loan charge-offs of $271 thousand and net loan recoveries of $900 thousand for the third quarter and first nine months of 2002, respectively. For the comparable period of last year, the Bank recorded net loan recoveries of $55 thousand and net loan charge-offs of $170 thousand for the third quarter and first nine months of 2001, respectively. The Bank did not record a provision for loan loss during the first nine months of 2002 or for the comparable 2001 period. Allowances for loan losses (including general valuation allowances and valuation allowances for impaired loans) totaled $75.7 million or 1.94% of the loan portfolio at September 30, 2002. This compares with $74.8 million or 1.82% at December 31, 2001 and $72.4 million or 1.80% at September 30, 2001. The increase in allowances from September 30, 2001 to September 30, 2002 is due to $1.2 million in net loan recoveries and $2.1 million in allowances obtained in the acquisition of two financial institutions in November of 2001. 8 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: September 30, December 31, September 30, 2002 2001 2001 ---------- ----------- ------------ (In thousands) REAL ESTATE LOANS First trust deed residential loans One to four units $ 1,770,416 $ 2,121,899 $ 2,230,456 Five or more units 1,655,642 1,525,749 1,437,704 --------- --------- --------- Residential loans 3,426,058 3,647,648 3,668,160 OTHER REAL ESTATE LOANS Commercial and industrial 401,800 358,159 313,227 Second trust deeds 8,396 9,472 9,322 Other 11,276 39,541 940 --------- --------- --------- Real estate loans 3,847,530 4,054,820 3,991,649 NON-REAL ESTATE LOANS: Deposit accounts 1,182 1,267 576 Commercial business loans 16,255 18,882 20,077 Consumer 32,208 19,546 18,683 --------- --------- --------- Loans Receivable 3,897,175 4,094,515 4,030,985 LESS: General valuation allowances - loan portfolio 73,515 72,919 70,581 Valuation allowances - impaired loans 2,154 1,850 1,850 Unearned loan fees 14,163 14,857 12,684 --------- --------- --------- Net loans receivable 3,807,343 4,004,889 3,945,870 FHLMC AND FNMA MORTGAGE-BACKED SECURITIES (at fair value): Secured by single family dwellings 209,975 272,419 298,959 Secured by multi-family dwellings 8,449 11,660 12,383 --------- --------- -------- Mortgage-backed securities 218,424 284,079 311,342 --------- --------- --------- TOTAL $ 4,025,767 $ 4,288,968 $ 4,257,212 ========= ========= =========
The mortgage-backed securities portfolio, classified as available-for-sale, was recorded at fair value as of September 30, 2002. An unrealized gain of $1.6 million, net of taxes, was recorded in stockholders' equity as of September 30, 2002. This compares to net unrealized gains of $1.9 million as of December 31, 2001 and $2.2 million as of September 30, 2001. The investment securities portfolio, classified as available-for-sale, was recorded at fair value as of September 30, 2002. An unrealized gain of $1.0 million, net of taxes, was reflected in stockholders' equity as of September 30, 2002. This compares to net unrealized gains of $1.1 million as of December 31, 2001 and $1.4 million as of September 30, 2001. 9 Asset/Liability Management Market risk is the risk of loss from adverse changes in market prices and rates. The Bank's market risk arises primarily from the interest rate risk inherent in its lending and liability funding activities. The composition of the Bank's financial instruments subject to market risk has not changed materially since December 31, 2001. At September 30, 2002 over 70% of the Bank's loan portfolio was invested in adjustable rate products. The one year GAP (the difference between rate-sensitive assets and liabilities repricing within one year or less) was a positive $62.3 million or 1.44% of total assets at September 30, 2002. In comparison, the one year GAP was a negative $288.7 million or 6.1% of total assets at December 31, 2001. The change to a positive GAP at September 30, 2002 from a negative GAP at December 31, 2001 is due to the fact that the Bank extended the maturities of its FHLB advances in order to match the fixed interest rate period of its hybrid loans. 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 the FHLB Eleventh District Cost of Funds Index (the "COFI") can be implemented with respect to the Bank's adjustable rate loans. Over 61% of the Bank's loans are adjustable based on changes in the COFI. Therefore, during a period immediately following interest rate decreases, the Bank's cost of funds tends to decrease faster than the rates on its adjustable rate loan portfolio. 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 September 30, 2002: Tangible Core Risk-based Capital Capital Capital --------- --------- ---------- (Dollars in thousands) Actual Capital: Amount $ 344,506 $ 344,506 $ 377,249 Ratio 8.00% 8.00% 14.63% Minimum required capital Amount $ 64,584 $ 172,225 $ 206,294 Ratio 1.50% 4.00% 8.00% Well capitalized required capital: Amount $ -- $ 215,282 $ 257,867 Ratio --% 5.00% 10.00%
The Company repurchased 233,400 shares of Company common stock during the third quarter of 2002 and an additional 119,600 shares through November 1, 2002. There remain 536,016 shares eligible for repurchase under the Company's stock repurchase program as of November 1, 2002. Results of Operations Consolidated net earnings for the third quarter of 2002 were $16.2 million or $0.92 per diluted common share compared to net earnings of $12.3 million or $0.70 per diluted common share for the second quarter of 2002 and $12.4 million or $0.70 per diluted common share for the third quarter of September 2001. Consolidated net earnings for the first nine months of 2002 were $40.9 million or $2.32 per diluted common share, compared to $37.4 million or $2.12 per diluted common share for the first nine months of 2001. 10 Net earnings for the third quarter and first nine months of 2002 include $5.9 million resulting from a revised estimate of the Bank's repurchase liability for loans sold with recourse. The reduced liability reflects the fact that the total portfolio of loans sold with recourse has experienced significant payoffs and has had better credit experience than previously estimated. The remaining liability for loans sold with recourse totaled $6.9 million or 5.99% of loans sold with recourse as of September 30, 2002, compared to $12.8 million or 10.1% as of December 31, 2001 and $12.8 million or 9.68% as of September 30, 2001. The balance of loans sold with recourse totaled $115.1 million, $126.4 million and $132.4 million as of September 30, 2002, December 31, 2001 and September 30, 2001, respectively. After tax, quarterly and year-to-date earnings were increased by $3.4 million or $0.19 per diluted common share during 2002 due to this revised estimate. 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: Nine Months Ended September 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 (374) -- (374) Other - non-real estate (195) -- (195) --------- --------- -------- Total charge-offs (569) -- (569) Recoveries 1,469 -- 1,469 --------- --------- -------- Net recoveries 900 -- 900 --------- --------- -------- Balance at September 30,2002 $ 73,515 $ 2,154 $ 75,669 ========= ========= ========
Nine Months Ended September 30, 2001 ------------------------------------ General Impaired Valuation Valuation Allowances Allowances Total ---------- ---------- -------- (In thousands) Balance at December 31, 2000 $ 70,809 $ 1,792 $ 72,601 Transfers (58) 58 -- Charge-offs: Single family (259) -- (259) Multifamily (52) -- (52) Other - non-real estate (53) -- (53) --------- -------- -------- Total charge-offs (364) -- (364) Recoveries 194 -- 194 --------- -------- -------- Net recoveries (170) -- (170) --------- -------- -------- Balance at September 30,2001 $ 70,581 $ 1,850 $ 72,431 ========= ======== ========
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. 11 The Bank also maintains a general valuation allowance for real estate acquired by foreclosure, which totaled $350 thousand at September 30, 2002, December 31, 2001 and September 30, 2001, respectively. This allowance is used to offset any further deterioration in property value after acquisition of the foreclosed real estate. See "Non-performing Assets" for additional discussion on foreclosed real estate. Net Interest Income Net interest income increased to $100.4 million during the first nine months of 2002 compared to $98.2 million for the first nine months of 2001 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 2.83% compared to 2.67% for the same period 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 Net interest income increased to $33.4 million during the third quarter of 2002 compared to $32.4 million for the third quarter of 2001 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 2.95% compared to 2.70% for the same period 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 Nine Months Ended September 30, ----------------------- 2002 2001 ---------- ----------- (Dollars in thousands) Average loans and mortgage-backed securities $4,135,266 $4,166,834 Average investment securities 180,418 191,132 ---------- ---------- Average interest-earning assets 4,315,684 4,357,966 ---------- ---------- Average savings deposits 2,520,321 2,279,646 Average borrowings 1,574,076 1,903,414 ---------- ---------- Average interest-bearing liabilities 4,094,397 4,183,060 ---------- ---------- Excess of interest-earning assets over interest-bearing liabilities $ 221,287 $ 174,906 ========== ========== Yields earned on average interest- earning assets 6.11% 7.75% Rates paid on average interest-bearing liabilities 3.28 5.08 Net interest rate spread 2.83 2.67 Effective net spread (1) 3.00 2.88 Total interest income $ 197,766 $ 253,403 Total interest expense 100,722 159,117 ---------- ----------- 97,044 94,286 Total other items (2) 3,354 3,868 ---------- ----------- Net interest income $ 100,398 $ 98,154 ========== ===========
(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 micellaneous items. 12 During the Three Months Ended September 30, ----------------------- 2002 2001 ---------- ----------- (Dollars in thousands) Average loans and mortgage-backed securities $4,067,612 $4,237,617 Average investment securities 152,573 174,266 --------- --------- Average interest-earning assets 4,220,185 4,411,883 --------- --------- Average savings deposits 2,521,587 2,335,125 Average borrowings 1,461,129 1,895,224 --------- --------- Average interest-bearing liabilities 3,982,716 4,230,349 --------- --------- Excess of interest-earning assets over interest-bearing liabilities $ 237,469 $ 181,534 ========= ========= Yields earned on average interest- earning assets 6.03% 7.32% Rates paid on average interest-bearing liabilities 3.08 4.63 Net interest rate spread 2.95 2.70 Effective net spread (1) 3.12 2.89 Total interest income $ 63,619 $ 80,786 Total interest expense 30,667 49,389 ---------- ----------- 32,952 31,397 Total other items (2) 477 1,043 ---------- ----------- Net interest income $ 33,429 $ 32,440 ========== ===========
(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 micellaneous items. Non-Interest Income and Expense Loan servicing and other fees were $1.2 million and $3.1 million for the third quarter and first nine months of 2002 compared to $1.0 million and $2.5 million for the same periods of 2001. The increase is primarily the result of increased prepayment fees as borrowers paid off loans early to refinance at lower rates. This increase was reduced by a decline in loan servicing fees resulting from payoffs of loans serviced for others. Retail office fees were $1.2 million and $3.3 million for the third quarter and first nine months of 2002 compared to $952 thousand and $2.6 million for the same periods of 2001. The increase is primarily the result of additional fees generated from four retail savings branches acquired in November of 2001, increased business service fees and an increase in retail service fees. Gains on sale of loans were $6.2 million and $6.6 million for the third quarter and first nine months of 2002 compared to gains of $291 thousand and $501 thousand for the same periods of 2001. Activity during the third quarter of 2002 includes $5.9 million resulting from a revised estimate of the Bank's repurchase liability for loans sold with recourse. The Bank revised its estimate of repurchase liability because its portfolio of loans sold with recourse has been experiencing greater payoffs and better credit performance than previously estimated. The volume of loans sold totaled $19.3 million and $53.5 million during the third quarter and first nine months of 2002 compared to $17.7 million and $48.6 million for the same periods of 2001. Real estate operations resulted in a net loss of $60 thousand and a net gain of $133 thousand for the third quarter and first nine months of 2002. This compares to net gains of $609 thousand and $383 thousand for the same periods of 2001. Real estate operations 13 include gains and losses on the sale of foreclosed properties as well as rental income and operating expense during the holding period. Gains on sale typically result from legal fee and insurance recoveries associated with foreclosed properties sold. Non-interest expense increased to $14.1 million and $43.7 million during the third quarter and first nine months of 2002. This compares with $13.7 million and $39.5 million during the third quarter and first nine months of 2001. The increase in non-interest expense during the third quarter of 2002 compared to the same period last year resulted from higher compensation costs primarily due to the acquisition of two financial institutions in November of 2001. The increase in non-interest expense during the first nine months of 2002 compared to the same period last year resulted from higher compensation costs, branch operating costs and legal expenses. Additionally, amortization of the Bank's core deposit intangible increased due to the acquisition of two financial institutions in November of 2001. Due to the increase in non-interest expense and decrease in average assets, the ratio of non-interest expense to average assets increased to 1.26% and 1.27%, respectively, for the third quarter and first nine months of 2002 from 1.20% and 1.17%, respectively, during the comparable 2001 period. 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 $4.5 million at September 30, 2002 compared to $6.5 million at December 31, 2001 and $10.1 million at September 30, 2001. The amount of interest allowance for loans 90 days or more delinquent or in foreclosure was $339 thousand, $504 thousand, and $585 thousand as of September 30, 2002, December 31, 2001, and September 30, 2001, respectively. Delinquent loans as a percentage of the Bank's total gross loan portfolio for the periods indicated are as follows: September 30, December 31, September 30, 2002 2001 2001 ----------- ----------- ------------ (Percentage of Gross Loans) Period of delinquency 1 monthly payment 0.27% 0.29% 0.34% 2 monthly payments 0.06% 0.06% 0.01% 3 or more monthly payments or in foreclosure 0.11% 0.16% 0.25%
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 September 30, 2002, the Bank had net modified loans totaling $5.2 million. No modified loans were 90 days or more delinquent as of September 30, 2002. 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 (single family loans and commercial business loans with an outstanding principal amount greater than or equal to $500 thousand and multi-family and commercial real estate 14 loans with an outstanding principal amount greater than or equal to $750 thousand), 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: September 30, December 31, September 30, 2002 2001 2001 ------------ ----------- ----------- (In thousands) Non-accrual loans $ -- $ 978 $ 3,603 Modified loans 5,197 6,416 6,478 ----------- ----------- ----------- $ 5,197 $ 7,394 $ 10,081 ============ =========== ===========
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 September 30, 2002, December 31, 2001 and September 30, 2001, respectively. Impaired loans for which valuation allowances had been established totaled $3.6 million for the quarter ended September 30, 2002, $3.5 million for the quarter ended December 31, 2001 and $3.5 million for the quarter ended September 30, 2001. Impaired loans for which there was no valuation allowance established totaled $1.6 million for the quarter ended September 30, 2002, $3.9 million for the quarter ended December 31, 2001 and $6.6 million for the quarter ended September 30, 2001. See "Results of Operations" for an analysis of activity in the valuation allowance for impaired loans. The Bank had no impaired non-performing loans as of September 30, 2002. Impaired non-performing loans were $978 thousand and $3.6 million at December 31, 2001 and September 30, 2001, respectively. 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 $5.2 million for the quarter ended September 30, 2002, $7.4 million for the quarter ended December 31, 2001 and $10.1 million for the quarter ended September 30, 2001. The amount of interest income recognized on the cash basis for impaired loans during the quarters ended September 30, 2002, December 31, 2001 and September 30, 2001 was $69 thousand, $116 thousand and $128 thousand, respectively. Interest income recognized under the accrual basis for the quarters ended September 30, 2002, December 31, 2001 and September 30, 2001 was $74 thousand, $113 thousand and $124 thousand, respectively. 15 Asset Quality The following table sets forth certain asset quality ratios of the Bank at the periods indicated: September 30, December 31, September 30, 2002 2001 2001 ------------ ----------- ------------ Non-Performing Loans to 0.11% 0.16% 0.25% loans Receivable (1) Non-Performing Assets to Total Assets (2) 0.11% 0.17% 0.23% Allowances for Loan Losses to Non-Performing Loans (3) 1,693% 1,151% 720% Allowances for Loan Losses to Loans Receivable (4) 1.94% 1.82% 1.80%
__________________________ (1) Non-performing loans are net of valuation allowances related to those loans. Loans receivable exclude mortgage-backed securities and are before deducting unrealized loan fees, general valuation allowances and valuation allowances for impaired loans. (2) Non-performing assets are net of valuation allowances related to those assets. (3) The Bank's loan loss allowances, including any valuation allowances for non-performing loans, impaired loans and the general valuation allowance. Non-performing loans are before deducting valuation allowances related to those loans. (4) The Bank's general valuation allowances plus the allowance for impaired loans as a percentage of gross loans receivable. 16 Non-performing Assets The Bank defines non-performing assets as loans delinquent over 90 days (non-accrual loans), loans in foreclosure and real estate acquired by foreclosure (real estate owned). The following is an analysis of non-performing assets as of the periods indicated: September 30, December 31, September 30, 2002 2001 2001 ------------ ----------- ------------ (In thousands) Real estate owned: Single family $ 827 $ 1,671 $ 1,140 Multi-family -- 164 -- Less: General valuation allowance (350) (350) (350) --------- --------- --------- Total real estate owned 477 1,485 790 --------- --------- --------- Non-accrual loans: Single family 3,306 6,062 9,075 Multi-family 919 422 989 Other 245 16 12 Less: Valuation allowances (1) -- (57) (79) --------- -------- --------- Total non-accrual loans 4,470 6,443 9,997 --------- -------- --------- Total non-performing assets $ 4,947 $ 7,928 $ 10,787 ========= ======== =========
__________________________ (1) Includes loss allowances on other non-performing loans requiring fair value adjustments. 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 and decreased rental values. 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 increased by $15.4 million and decreased by $37.9 million during the third quarter and first nine months of 2002, respectively. The decrease in deposits for the first nine months of 2002 is attributable to a reduction in deposits acquired from national brokerage firms ("brokered deposits") and telemarketing deposits. 17 Brokered deposits decreased by $46.1 million and $145.3 million during the third quarter and first nine months of 2002. Due to increased liquidity from loan payoffs, the Bank decreased its use of brokered deposits during the third quarter and first nine months of 2002. 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. At September 30, 2002, brokered deposits comprised 8% of total deposits. Deposits accepted by retail banking offices increased by $61.7 million during the third quarter of 2002 and increased $154.2 million during the first nine months of 2002. Management attributes the nine-month increase to customer demand for safe, liquid investments due to volatility in the equity markets. Retail deposits comprised 90% of total savings deposits as of September 30, 2002. Telemarketing deposits decreased by $233 thousand and $46.8 million during the third quarter and first nine months of 2002. 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 2% of total deposits at September 30, 2002. Total borrowings decreased by $104.6 million during the third quarter of 2002 due to a $95.0 million net decrease in advances from the FHLB and net payoffs of $9.6 million in repurchase agreements. Total borrowings decreased by $394.5 million during the first nine months of 2002 due to a $350.0 million net decrease in advances from the FHLB and net payoffs of $44.5 million in repurchase agreements. The reduction in borrowings is primarily attributable to increased cash available as a result of increased loan payoff activity. 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. Total principal payments on loans and mortgage-backed securities were $352.6 million and $1.1 billion, respectively, for the third quarter and first nine months of 2002. This compares with principal payments of $365.8 million and $931.3 million for the third quarter and first nine months of 2001. The increase is primarily attributable to increased payoff activity as borrowers continue to refinance existing loans into new loans at lower rates. Loan sales were $19.3 million and $53.5 million, respectively, for the third quarter and first nine months of 2002, compared with sales of $17.7 million and $48.6 million, respectively, for the third quarter and first nine months of 2001. Loan sale activity varies based upon borrower demand for 15-year and 30-year fixed rate loans, which are only originated for sale. 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. 18 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. Within the 90-day period prior to the filing date of this report, the Company 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 Control 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. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form-8K (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 12, 2002 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) Bonus Plan filed as Exhibit 10(iii)(A)(2) to Form 10 dated November 2, 1993 and incorporated by reference. (10.3) 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. (10.4) 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. (10.5) 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. (24) Power of Attorney. (99.1) Certification of Chief Executive Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes -Oxley Act of 2002. (99.2) Certification of Chief Financial Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes -Oxley Act of 2002. (b) Reports on Form 8-K The Company filed current reports on Form 8-K during the quarter ended September 30, 2002 on the following dates: July 25, 2002, August 22, 2002, September 20, 2002 and September 23, 2002. These reports are related to the release of the Company's disclosure of certain other financial data. 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIRSTFED FINANCIAL CORP. Registrant Date: November 14, 2002 By: /s/ Douglas J. Goddard Douglas J. Goddard Chief Financial Officer and Executive Vice President 20 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-14 and 15d-14) for the registrant and have: (i) Designed such disclosure controls and procedures 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 as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (iii) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; (5) The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, 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 in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (ii) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and (6) The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated this 14th day of November 2002. By: /s/ Babette E. Heimbuch Babette E. Heimbuch Chief Executive Officer 21 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-14 and 15d-14) for the registrant and have: (i) Designed such disclosure controls and procedures 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 as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (iii) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; (5) The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, 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 in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (ii) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and (6) The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated this 14th day of November 2002. By: /s/ Douglas Goddard Douglas Goddard Chief Financial Officer 22 EXHIBIT 99.1 Exhibit 99.1 CEO CERTIFICATION The undersigned, as Chief Executive Officer hereby certifies, to the best of her knowledge and belief, that: (1) the Form 10-Q of FirstFed Financial Corp. (the "Company") for the quarterly period ended September 30, 2002 (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: November 14, 2002 By: /s/ Babette E. Heimbuch Babette E. Heimbuch Chief Executive Officer 23 EXHIBIT 99.2 Exhibit 99.2 CFO CERTIFICATION The undersigned, as Chief Financial Officer hereby certifies, to the best of his knowledge and belief, that: (3) the Form 10-Q of FirstFed Financial Corp. (the "Company") for the quarterly period ended September 30, 2002 (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 (4) 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: November 14, 2002 By: /s/ Douglas J. Goddard Douglas J. Goddard Chief Financial Officer and Executive Vice President 24 -----END PRIVACY-ENHANCED MESSAGE-----