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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.
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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