<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-9566
FIRSTFED FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4087449
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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
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 OCTOBER 31, 1998, 21,127,426 SHARES OF THE REGISTRANT'S $.01 PAR VALUE
COMMON STOCK WERE OUTSTANDING.
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<PAGE> 2
FIRSTFED FINANCIAL CORP.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition
as of September 30, 1998, December 31, 1997
and September 30, 1997 3
Consolidated Statements of Earnings and Comprehensive
Earnings for the three months and nine months ended
September 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. Other Information (omitted items are inapplicable)
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
FIRSTFED FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1998 1997 1997
------------- ----------- -------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 143,197 $ 163,135 $ 92,437
Investment securities, available-for-sale
(at fair value) 42,411 48,910 50,165
Mortgage-backed securities, available-for-sale
(at fair value) 604,344 676,058 691,550
Loans receivable, held-for-sale (fair value of
$37,330, $40,800 and $20,783) 37,040 40,382 20,547
Loans receivable, net 2,877,018 3,104,782 3,124,048
Accrued interest and dividends receivable 23,807 26,990 27,027
Real estate 5,719 10,257 9,386
Office properties and equipment, net 11,824 9,868 9,468
Investment in Federal Home Loan Bank
(FHLB) stock, at cost 71,645 68,592 67,504
Other assets 9,774 11,141 12,515
----------- ----------- -----------
$ 3,826,779 $ 4,160,115 $ 4,104,647
=========== =========== ===========
LIABILITIES
Deposits $ 2,106,672 $ 1,943,647 $ 1,961,757
FHLB advances and other borrowings 949,500 1,364,000 1,287,500
Securities sold under agreements to repurchase 477,239 577,670 588,839
Accrued expenses and other liabilities 43,458 52,011 54,715
----------- ----------- -----------
3,576,869 3,937,328 3,892,811
----------- ----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share;
authorized 25,000,000 shares; issued 23,072,539
23,022,276, and 23,017,132 shares, outstanding
21,187,799, 21,175,236 and 21,170,092 shares(1) 231 230 230
Additional paid-in capital 29,946 29,513 29,416
Retained earnings - substantially restricted 232,675 207,065 200,452
Loan to employee stock ownership plan (1,811) (1,744) (2,214)
Treasury stock, at cost, 1,884,740, 1,847,040
and 1,847,040 shares(1) (12,443) (11,885) (11,885)
Accumulated other comprehensive earnings -
unrealized gain (loss) on investment securities,
available-for-sale, net of taxes 1,312 (392) (4,163)
----------- ----------- -----------
249,910 222,787 211,836
----------- ----------- -----------
$ 3,826,779 $ 4,160,115 $ 4,104,647
=========== =========== ===========
</TABLE>
(1) All per share amounts have been adjusted to reflect the two-for-one stock
split declared June 25, 1998.
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
FIRSTFED FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Interest on loans $ 58,939 $ 60,468 $ 180,516 $ 176,690
Interest on mortgage-backed securities 8,965 11,993 31,404 36,898
Interest and dividends on investments 3,308 3,090 8,834 9,594
----------- ----------- ----------- -----------
Total interest income 71,212 75,551 220,754 223,182
----------- ----------- ----------- -----------
Interest expense:
Interest on deposits 24,667 22,905 73,749 69,770
Interest on borrowings 21,735 28,957 69,830 82,661
----------- ----------- ----------- -----------
Total interest expense 46,402 51,862 143,579 152,431
----------- ----------- ----------- -----------
Net interest income 24,810 23,689 77,175 70,751
Provision for loan losses 1,600 5,000 6,200 16,500
----------- ----------- ----------- -----------
Net interest income
after provision for losses 23,210 18,689 70,975 54,251
----------- ----------- ----------- -----------
Other income:
Loan and other fees 1,264 1,560 2,871 4,564
Gain on sale of loans 1,084 45 2,947 75
Real estate operations, net 385 106 1,050 1,204
Other operating income 1,135 854 3,229 2,513
----------- ----------- ----------- -----------
Total other income 3,868 2,565 10,097 8,356
----------- ----------- ----------- -----------
Non-interest expense 11,698 10,784 36,372 33,692
----------- ----------- ----------- -----------
Earnings before income taxes 15,380 10,470 44,700 28,915
Income tax provision 6,550 4,499 19,090 12,428
----------- ----------- ----------- -----------
Net earnings $ 8,830 $ 5,971 $ 25,610 $ 16,487
=========== =========== =========== ===========
Other comprehensive earnings -
unrealized gain on securities
available-for-sale, net of taxes 1,260 3,315 1,704 27
----------- ----------- ----------- -----------
Comprehensive earnings $ 10,090 $ 9,286 $ 27,314 $ 16,514
=========== =========== =========== ===========
Earnings per share:(1)(2)
Basic $ 0.42 $ 0.28 $ 1.21 $ 0.78
=========== =========== =========== ===========
Diluted $ 0.41 $ 0.28 $ 1.18 $ 0.77
=========== =========== =========== ===========
Weighted average shares outstanding:(1)(2)
Basic 21,209,722 21,164,714 21,198,988 21,127,786
=========== =========== =========== ===========
Diluted 21,611,834 21,547,310 21,632,873 21,455,984
=========== =========== =========== ===========
</TABLE>
(1) All per share amounts have been adjusted to reflect the two-for-one stock
split declared June 25, 1998.
(2) Earnings per share and weighted average shares outstanding for 1997 have
been restated to reflect the adoption of Statement of Financial Accounting
Standards No. 128.
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
FIRSTFED FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 25,610 $ 16,487
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Net change in loans-held-for-sale 3,342 (14,352)
Provision for loan losses 6,200 16,500
Provision for REO losses 573 1,046
Valuation adjustments on real estate sold (1,832) (148)
Amortization of fees and discounts 246 (1,127)
Increase in negative amortization (678) (1,961)
Increase (decrease) in taxes payable (5,175) 12,428
(Increase) decrease in interest and dividends
receivable 3,183 (117)
Increase in interest payable 3,570 1,345
Other (7,428) 4,948
--------- ---------
Total adjustments 2,001 18,562
--------- ---------
Net cash provided by (used in) operating activities 27,611 35,049
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans made to customers net of principal
collection on loans 209,052 (129,720)
Loans repurchased (1,585) (6,166)
Proceeds from sales of real estate 20,851 49,926
Principal reductions on mortgage-backed securities 74,483 54,965
Proceeds from maturities and principal payments
on investment securities 22,820 36,626
Purchase of investment securities (16,045) (28,400)
Purchase of FHLB stock -- (2,186)
Treasury stock purchases (558) --
Other (2,799) (646)
--------- ---------
Net cash provided by (used in) investing activities 306,219 (25,601)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in savings deposits 163,025 4,309
Net decrease in short term borrowings (969,931) (14,143)
Increase in long term borrowings 455,000 --
Repayment of long term borrowings -- (50,000)
Payment of prior period taxes and interest (2,296) (12,638)
Other 434 (6,941)
--------- ---------
Net cash used in financing activities (353,768) (79,413)
--------- ---------
Net decrease in cash and cash equivalents (19,938) (69,965)
Cash and cash equivalents at beginning of period 163,135 162,402
--------- ---------
Cash and cash equivalents at end of period $ 143,197 $ 92,437
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
FIRSTFED FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The unaudited 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 generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The Company believes that the
disclosures are adequate to make the information presented not misleading.
It is suggested that these condensed financial statements be read in conjunction
with the financial statements and the notes thereto included in the Company's
latest annual report on Form 10-K. The results for the periods covered hereby
are not necessarily indicative of the operating results for a full year.
2. Earnings per share and weighted average shares outstanding for the three and
nine month periods of 1998 have been restated to reflect the adoption of
Statement of Financial Accounting Standards No. 128 (SFAS No. 128.) Earnings per
share were computed by dividing net earnings by the weighted average number of
shares of common stock outstanding for the period, plus the effect of stock
options, if dilutive.
The Board of Directors of FirstFed Financial Corp. declared a two-for-one stock
split on June 25, 1998 to shareholders of record on July 15, 1998. The
additional shares were distributed on July 30, 1998. All per share computations
have been adjusted for the stock split.
3. For purposes of reporting cash flows on the "Consolidated Statement 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. In 1998, the Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS No. 130"), which establishes
standard for reporting and display of comprehensive income and its components in
a full set of general purpose financial statements. Accordingly, for both the
1998 and 1997 periods, the Consolidated Statements of Earnings have been
expanded to include other comprehensive earnings in arriving at comprehensive
earnings and, accordingly, have been renamed Consolidated Statements of Earnings
and Comprehensive Earnings. Neither net earnings nor earnings per share have
been affected by the adoption of SFAS No. 130.
6
<PAGE> 7
FIRSTFED FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. Recent Accounting Pronouncements
In June of 1988, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"), which establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires recognition of all derivatives as either assets or
liabilities in the statement of financial condition and the measurement of those
instruments at fair value. Recognition of changes in fair value will be
recognized into income or as a component of other comprehensive income depending
upon the type of the derivative and its related hedge, if any. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
Management has not yet determined the impact of implementing this statement on
its financial condition or results of operations.
In October of 1998, the FASB issued Statement of Financial Accounting Standards
No. 134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise"
("SFAS No. 134".) SFAS No. 134 requires that, after the securitization of a
mortgage loan held for sale, an entity engaged in mortgage banking activities
classify the resulting mortgage-backed security as a trading security. SFAS No
134 further requires that, after the securitization of mortgage loans, an entity
engaged in mortgage banking activities classify the resulting mortgage-backed
securities or other related interests based on its ability and intent to sell or
hold those investments. SFAS No. 134 conforms the subsequent accounting for
securities retained after the securitization of mortgage loans by a mortgage
banking enterprise with the subsequent accounting for securities retained after
the securitization of other types of assets by a non-mortgage banking
enterprise. SFAS is effective the first quarter beginning after December 15,
1998. Management does not expect the implementation of this statement to have a
material affect on the Company's financial condition or results of operations.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
At September 30, 1998, FirstFed Financial Corp. (the "Company"), holding company
for First Federal Bank of California and its subsidiaries (the "Bank"), had
consolidated assets totaling $3.8 billion, compared to $4.2 billion at December
31, 1997 and $4.1 billion at September 30, 1997.
The Bank's primary market area is Southern California, which has been undergoing
a period of economic expansion over the last few years. According to a
California Association of Realtors news release dated October 26, 1998, home
prices and real estate sales activity in the Los Angeles area increased by 10.8%
and 6.5%, respectively, in September 1998, compared to the same period of 1997.
The improved economy and real estate market positively impacted several areas of
the Bank's operations during 1998. The ratio of non-performing assets to total
assets decreased to 0.73% as of September 30, 1998 from 0.95% as of December 31,
1998 and 1.18% as of September 30, 1997. (See "Non-performing Assets" for
further discussion.)
Net loan charge-offs decreased to $2.6 million during the first nine months of
1998 compared to $9.8 million during the same period of 1997. The Bank's general
valuation allowance was $67.3 million or 2.14% of total loans and real estate
owned with loss exposure at September 30, 1998. This compares with $61.7 million
or 1.86% as of December 31, 1997 and $58.4 million or 1.79% at September 30,
1997. The Bank also maintains valuation allowances for impaired loans, which
totaled $7.8 million at September 30, 1998, $9.8 million at December 31, 1997
and $11.5 million at September 30, 1997.
The decrease in total assets during 1998 is attributable to accelerated payoffs
of adjustable rate loans and mortgage-backed securities due to the availability
of fixed rate loans at low interest rates. According to the Federal Home Loan
Mortgage Corp., interest rates on thirty-year fixed rate mortgages averaged
6.72% during September 1998, down from 7.43% during September 1997, while
adjustable mortgage interest rates decreased only slightly to an average of
5.47% in September 1998 from 5.55% in September 1997. The Bank continues its
longstanding policy of originating fixed rate loans primarily for sale in the
secondary mortgage market. Fixed rate loans comprised 51% of $482 million in
loans originated during the first nine months of 1998 compared to 8% of $341
million in loans originated during 1997. As a result, loan sales and the
corresponding gain on sale of loans increased to $293 million and $2.9 million,
respectively, during the first nine months of 1998 compared to $14 million and
$75 thousand during the same period of 1997.
The Bank's portfolio of loans, including mortgage-backed securities, decreased
to $3.5 billion as of September 30, 1998 from $3.8 billion at December 31, 1997
and $3.8 billion at September 30, 1997. Because the Bank structures
mortgage-backed securities with loans from its own portfolio, mortgage-backed
securities generally have the same experience with respect to prepayment,
repayment, delinquencies and other factors as the remainder of the Bank's loan
portfolio. No new mortgage-backed securities were created with the Bank's loans
during 1997 or 1998.
The mortgage-backed securities portfolio, classified as available-for-sale, was
recorded at fair value as of September 30, 1998. An unrealized gain of $1.5
million, net of taxes, was reflected in stockholders' equity as of September 30,
1998. This compares to a net unrealized loss of $75 thousand as of December 31,
1997.
8
<PAGE> 9
The following table shows the components of the Bank's portfolio of loans
(including loans held for sale) and mortgage-backed securities by collateral
type as of the dates indicated:
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1998 1997 1997
------------- ------------ -------------
(Dollars in thousands)
<S> <C> <C> <C>
REAL ESTATE LOANS:
First trust deed residential loans:
One to four units $1,662,916 $1,791,936 $1,765,062
Five or more units 1,138,585 1,217,577 1,238,887
---------- ---------- ----------
Residential loans 2,801,501 3,009,513 3,003,949
OTHER REAL ESTATE LOANS:
Commercial and industrial 180,748 196,575 202,735
Second trust deeds 14,527 15,441 15,928
Other 3,396 6,303 6,364
---------- ---------- ----------
Real estate loans 3,000,172 3,227,832 3,228,976
NON-REAL ESTATE LOANS:
Manufactured housing 944 1,154 1,197
Deposit accounts 994 1,644 1,313
Consumer 125 185 111
---------- ---------- ----------
Loans receivable 3,002,235 3,230,815 3,231,597
LESS:
General valuation allowances-
loan portfolio 66,827 61,237 57,900
Valuation allowances - impaired loans 7,829 9,775 11,456
Unrealized loan fees 13,521 14,639 17,646
---------- ---------- ----------
Net loans receivable 2,914,058 3,145,164 3,144,595
FHLMC AND FNMA MORTGAGE-
BACKED SECURITIES (at fair value):
Secured by single family dwellings 584,678 657,342 672,687
Secured by multi-family dwellings 19,666 18,716 18,863
---------- ---------- ----------
Mortgage-backed securities 604,344 676,058 691,550
---------- ---------- ----------
TOTAL $3,518,402 $3,821,222 $3,836,145
========== ========== ==========
</TABLE>
The investment securities portfolio, classified as available-for-sale, was
recorded at fair value as of September 30, 1998. An unrealized loss of $217
thousand, net of taxes, was reflected in stockholders' equity as of September
30, 1998. This compares to an unrealized loss of $317 thousand, net of taxes, as
of December 31, 1997.
Asset/Liability Management
Market risk is the risk of loss from adverse changes in market prices and rates.
The Company's market risk arises primarily from interest rate risk inherent in
its lending and deposit taking activities. Management actively monitors its
interest rate risk exposure. The Company does not engage in trading activities.
Nothing has occurred since December 31, 1997 that materially affects the
Company's market risk.
9
<PAGE> 10
The one year GAP (the difference between rate-sensitive assets and liabilities
repricing within one year or less) was a positive $554 million or 14.49% of
total assets at September 30, 1998. In comparison, the one year GAP was a
positive $172 million or 4.14% of total assets as of December 31, 1997 and a
positive $211 million or 5.13% of total assets as of September 30, 1997.
Over 98% of the Bank's rate-sensitive assets reprice within one year. More than
93% of its loans adjust monthly based upon changes in the Eleventh District Cost
of Funds Index ("COFI Index"). Therefore, the Bank's one year GAP generally
varies based upon the extent to which the maturities of its deposits and
borrowings exceed one year. The increase in the one year GAP from the year end
and prior year levels is due to a $455 million increase in long term borrowings
during the first nine months of 1998 due to favorable interest rates.
A positive GAP normally benefits a financial institution in times of increasing
interest rates. However, the Bank's net interest income typically declines
during periods of increasing interest rates because of a three month time lag
before changes in COFI Index can be implemented with respect to the Bank's
loans.
Capital
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and percentage of total capital to
risk-weighted 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,
1998:
<TABLE>
<CAPTION>
Tangible Core Risk-based
Capital Capital Capital
--------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Actual Capital:
Amount $ 284,133 $ 284,133 $ 311,517
Ratio 7.39% 7.39% 14.48%
Minimum required capital:
Amount $ 57,674 $ 153,798 $ 172,109
Ratio 1.50% 4.00% 8.00%
Well capitalized required capital:
Amount -- $ 192,247 $ 215,136
Ratio -- 5.00% 10.00%
</TABLE>
Pursuant to a Board of Directors' resolution in 1987, the Company was authorized
to repurchase up to 10% of its then outstanding shares of common stock. During
the first nine months of 1998, the Company repurchased 37,700 shares at an
average price of $14.80 per share. In October of 1998, the Company repurchased
another 63,100 shares at an average price of $14.44 per share. Including all
repurchase activity to date, a cumulative total of 1,947,840 shares had been
repurchased at an average price of $6.86 per share which left 173,200 shares
eligible for repurchase under the 1987 authorization. On October 21, 1998, the
Board of Directors authorized the repurchase of an additional 5% of the shares
outstanding on that date. After the additional authorization in October of 1998,
1,229,435 shares were eligible for repurchase.
Year 2000 Issue
The Year 2000 issue arises because many computer systems identify dates using
only the last two digits of the year. These systems are unable to distinguish
between dates in the year 2000 and dates in the year 1900. If not corrected,
these systems could fail or provide incorrect information after December 31,
1999 or when using dates after December 31, 1999. Any such failure on the Bank's
systems could have a material
10
<PAGE> 11
adverse impact on the Company and its ability to process customer transactions
or to provide customer service.
Early in 1997, the Bank developed a process for addressing the Year 2000 issue
for the Bank's major computer systems and applications. An internal committee
was formed to address the issue and a formal project plan was developed. During
the initial phases of the plan, the Company identified and prioritized systems,
software and equipment. All significant vendors have been contacted regarding
their Year 2000 readiness. In each case where the Bank is vulnerable to a third
party's failure to remedy its own year 2000 issues, the Bank has developed
contingency plans to utilize other vendors or alternative work flows if adequate
response and verification is not received from the vendor in a timely fashion.
The Bank's major computer applications are owned and operated by third party
vendors. Therefore, the Bank's challenge is to ensure that its vendors are ready
for the Year 2000 or have plans to become ready before the Year 2000. Because
the Bank had plans to convert its major data processing to new systems during
1997 and 1998, requirements for Year 2000 compliance have been included in all
major systems contracts. Contractual arrangements with the Bank's major data
processing vendors provide for regular monitoring of the vendors' Year 2000
project, substantial system compliance by the end of 1998 and testing and
verification in early 1999.
The Bank has begun the process of testing systems for which all Year 2000
changes and reprogramming have been completed by the vendor. In the case of the
Bank's principal third party data processing providers, this has included
participating with other systems users in the review and development of test
scripts, and active participation in the testing process. All significant
systems are scheduled to have been made Year 2000 ready by the end of 1998. The
Bank's verification of the testing process for the third party provider systems
will continue through the middle of 1999. The process of monitoring the
renovation of systems by third party providers and validating the results
through active participation in the system testing is proceeding on schedule
without any significant deviation from the original plans developed by the
Bank's management.
Because of the third party nature of its major data processing relationships,
the Bank is not expected to bear any programming cost of making its systems Year
2000 ready. All of these costs will be borne by the vendors. The Bank's major
cost of becoming Year 2000 ready is related to staff and management time spent
planning, monitoring and testing the systems. Therefore, Year 2000 issues are
expected to have an immaterial impact on the Company's results of operations,
liquidity and capital expenditures.
RESULTS OF OPERATIONS
The Company reported consolidated net earnings of $8.8 million for the third
quarter of 1998 compared to net earnings of $6.0 million for the third quarter
of 1997. The improved earnings resulted primarily from a decrease in the
provision for loan losses to $1.6 million for the third quarter of 1998 from
$5.0 million for the third quarter of 1997. Third quarter results also benefited
from increases in net interest income and gain on the sale of loans but were
partially offset by increased non-interest expense.
The Company reported consolidated net earnings of $25.6 million for the first
nine months of 1998 compared to $16.5 million for the same period last year. The
provision for loan losses for the first nine months of 1998 was $6.2 million
compared to $16.5 million for the first nine months of 1997. Year-to-date
results were also favorably impacted by increases in net interest income and
gain on sale of loans and were partially offset by an increase in non-interest
expense.
Management is unable to predict future levels of loan loss provisions. Among
other things, future loan loss provisions are based on the level of loan
charge-offs, foreclosure activity, and management's perceptions of the economic
climate in Southern California.
11
<PAGE> 12
Loan Loss Allowances
Listed below is a summary of the activity in the general valuation allowance and
the valuation allowance for impaired loans for the Bank's loan portfolio during
the periods indicated:
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998
---------------------------------------
General Impaired
Valuation Valuation
Allowances Allowances Total
---------- ---------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Balance at December 31, 1997 $ 61,237 $ 9,775 $ 71,012
Provision for loan losses 5,624 576 6,200
Charge-offs:
Single family (1,030) (294) (1,324)
Multi-family (881) (1,614) (2,495)
Commercial (137) (137)
Non-real estate (1) -- (1)
-------- -------- --------
Total charge-offs (2,049) (1,908) (3,957)
Recoveries 1,401 -- 1,401
Impaired loan recoveries 614 (614) --
-------- -------- --------
Net charge-offs (34) (2,522) (2,556)
-------- -------- --------
Balance at September 30, 1998 $ 66,827 $ 7,829 $ 74,656
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1997
---------------------------------------
General Impaired
Valuation Valuation
Allowances Allowances Total
---------- ---------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Balance at December 31, 1996 $ 54,900 $ 12,350 $ 67,250
Provision for loan losses 9,519 6,981 16,500
Charge-offs:
Single family (4,759) (179) (4,938)
Multi-family (2,659) (6,954) (9,613)
Commercial (471) (616) (1,087)
Non-real estate (21) -- (21)
-------- -------- --------
Total charge-offs (7,910) (7,749) (15,659)
Recoveries 3,785 -- 3,785
Adjustments and reclassifications 1,840 (126) 1,714
-------- -------- --------
Net charge-offs (2,285) (7,875) (10,160)
-------- -------- --------
Transfers to general valuation allowance
for loans sold with recourse (4,234) -- (4,234)
-------- -------- --------
Balance at September 30, 1997 $ 57,900 $ 11,456 $ 69,356
======== ======== ========
</TABLE>
The Bank also maintains a valuation allowance for loans sold with recourse,
recorded as a liability. This allowance was 6.26% of loans sold with recourse as
of September 30, 1998, compared to 5.97% as of December 31, 1997 and 5.89% as of
September 30, 1997. The balance of loans sold with recourse totaled $208
million, $218 million and $220 million as of September 30, 1998, December 31,
1997 and September 30, 1997, respectively. The Bank has not entered into any new
recourse arrangements since 1989. Listed below is a summary of the activity in
the valuation allowance for loans sold with recourse during the periods
indicated:
12
<PAGE> 13
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1998 1997
-------- --------
(Dollars in thousands)
<S> <C> <C>
Balance at beginning of period $ 13,029 $ 8,398
Charge-offs -- (70)
Recoveries -- 392
Transfers from general loan
valuation allowance -- 4,234
-------- --------
Balance at end of period $ 13,029 $ 12,954
======== ========
</TABLE>
The following table summarizes the activity in the general valuation allowance
for real estate acquired by foreclosure for the periods indicated:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1998 1997
-------- --------
(Dollars in thousands)
<S> <C> <C>
Balance at beginning of period $ 500 $ 520
Provision for losses 573 1,046
Charge-offs (573) (1,066)
-------- --------
Balance at end of period $ 500 $ 500
======== ========
</TABLE>
Net Interest Income
The Company's interest rate margin increased to 2.41% for the third quarter of
1998 from 2.15% for the third quarter of last year. During the first nine months
of 1998, the interest rate margin increased to 2.39% from 2.11% for the same
period of last year. The COFI Index (on a lagged basis) determines the yield on
over 93% of the loan portfolio. The Index in effect during the three months and
nine months ended September 30, 1998 increased by 0.04% and 0.11%, respectively
compared to the same periods of the prior year. However, during the same time
period, the Bank's cost of funds decreased by 0.24% and 0.11%, respectively,
compared to the same periods of the prior year. The Company's interest rate
margin also benefited from an improvement in delinquent loans compared to the
prior year. Loans delinquent greater than 90 days decreased to $25.8 million as
of September 30, 1998 from $34.1 million as of the beginning of the year.
The following table 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:
<TABLE>
<CAPTION>
During the Three Months Ended
September 30,
----------------------------
1998 1997
---------- ----------
(Dollars in thousands)
<S> <C> <C>
Average loans and mortgage-backed
securities $3,589,487 $3,824,892
Average investment securities 162,493 159,755
---------- ----------
Average interest-earning assets 3,751,980 3,984,647
---------- ----------
Average savings deposits 2,126,383 1,933,402
Average borrowings 1,487,588 1,936,304
---------- ----------
Average interest-bearing liabilities 3,613,971 3,869,706
---------- ----------
Excess of interest-earning assets over
interest-bearing liabilities $ 138,009 $ 114,941
========== ==========
</TABLE>
13
<PAGE> 14
<TABLE>
<S> <C> <C>
Yields earned on average interest
earning assets 7.48% 7.46%
Rates paid on average interest-
bearing liabilities 5.07 5.31
Net interest rate spread 2.41 2.15
Effective net spread(1) 2.59 2.30
Total interest income $ 70,170 $ 74,287
Total interest expense 46,216 51,853
---------- ----------
23,954 22,434
Total other items(2) 856 1,255
---------- ----------
Net interest income $ 24,810 $ 23,689
========== ==========
</TABLE>
<TABLE>
<CAPTION>
During the Nine Months Ended
September 30,
----------------------------
1998 1997
---------- ----------
(Dollars in thousands)
<S> <C> <C>
Average loans and mortgage-backed
securities $3,706,371 $3,804,603
Average investment securities 142,840 162,725
---------- ----------
Average interest-earning assets 3,849,211 3,967,328
---------- ----------
Average savings deposits 2,119,247 1,983,330
Average borrowings 1,599,187 1,876,446
---------- ----------
Average interest-bearing liabilities 3,718,434 3,859,776
---------- ----------
Excess of interest-earning assets over
interest-bearing liabilities $ 130,777 $ 107,552
========== ==========
Yields earned on average interest
earning assets 7.54% 7.37%
Rates paid on average interest-
bearing liabilities 5.15 5.26
Net interest rate spread 2.39 2.11
Effective net spread(1) 2.56 2.25
Total interest income $ 217,448 $ 219,212
Total interest expense 143,117 152,196
---------- ----------
74,331 67,016
Total other items(2) 2,844 3,735
---------- ----------
Net interest income $ 77,175 $ 70,751
========== ==========
</TABLE>
- -----------------
(1) The effective net spread is a fraction, the denominator of which is the
average dollar amount of interest-earning assets, and the numerator of
which is net interest income (excluding stock dividends and miscellaneous
interest income).
(2) Includes Federal Home Loan Bank Stock dividends and other miscellaneous
items.
NON-INTEREST INCOME AND EXPENSE
Loan and other fees were $1.3 million and $2.9 million for the third quarter and
first nine months of 1998, compared to $1.6 million and $4.6 million for the
same periods of 1997. The decrease in year-to-date fees is due to a $1.4 million
provision for impairment of the Bank's servicing assets recognized in the first
quarter of 1998. Servicing assets are normally amortized in proportion to and
over the period of net servicing income. The provision, recorded as an
adjustment to loan servicing fees, reflects the impact of higher expected
prepayment rates on the existing adjustable rate loan portfolio due to the
availability of lower interest rates on fixed rate loans.
14
<PAGE> 15
Gain on the sale of loans results primarily from loan fees recognized at the
time of sale and increased to $1.1 million and $2.9 million for the third
quarter and first nine months of 1998 from $45 thousand and $75 thousand for the
same periods of the prior year. The volume of loans sold totaled $107 million
and $293 million during the third quarter and first nine months of 1998 compared
to $11 million and $14 million for the same periods of the prior year. The
increase in loans sold results from the increased origination of fixed rate
loans, which were available to borrowers at historically low interest rates. The
Bank originates fixed rate loans primarily for sale in the secondary mortgage
markets.
Real estate operations resulted in net gains of $385 thousand and $1.1 million
for the third quarter and first nine months of 1998. This compares to net gains
of $106 thousand and $1.2 million for the same periods of the prior year. Real
estate operations include gains and losses on the sale of foreclosed properties
as well as operational income and expense during the holding period. Gains on
sale typically result from the recovery of excess valuation allowances
associated with foreclosed properties sold.
Other operating income increased to $1.1 million and $3.2 million during the
third quarter and first nine months of 1998 compared to $854 thousand and $2.5
million for the same periods of 1997. The improved amounts are due to increased
fees collected for services rendered at the retail savings branches and
increased ATM fees.
The ratio of non-interest expense to average assets increased to 1.19% of
average assets for the third quarter of 1998 from 1.04% during the comparable
1997 period. The ratio increased to 1.21% for the first nine months of 1998
compared to 1.08% for the first nine months of 1997. The increased expenses
resulted from investments in new operating systems and the development of new
business products and services. Also, incentive compensation increased due to
the growth in deposits and increased mortgage banking activity compared to the
prior year 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 but establishes a specific interest
allowance for each loan which becomes 90 days or more past due or is in
foreclosure. Loans on which delinquent interest allowances had been established
(non-accrual loans) totaled $25.8 million at September 30, 1998 compared to
$34.1 million at December 31, 1997 and $46.9 million at September 30, 1997.
The amount of interest that has been provided for loans 90 days or more
delinquent or in foreclosure was $1.7 million at September 30, 1998, $1.8
million at December 31, 1997 and $2.7 million at September 30, 1997.
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, 1998, the Bank had modified loans totaling
$6.7 million, net of loan loss allowances totaling $3.5 million. No modified
loans were 90 days or more delinquent as of September 30, 1998.
Pursuant to Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan" ("SFAS No. 114"), the Bank considers a loan
to be impaired when management believes that it is probable that the Bank will
be unable 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 with an outstanding principal
amount greater than or equal to $500 thousand and multi-family and commercial
real estate loans with an outstanding principal amount greater than or equal to
$750 thousand), modified loans,
15
<PAGE> 16
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 dates indicated:
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1998 1997 1997
------------- ------------ -------------
(Dollars in thousands)
<S> <C> <C> <C>
Non-accrual loans $ 5,609 $ 8,260 $16,054
Modified loans 5,885 8,090 10,984
Other impaired loans 5,654 9,335 9,468
------- ------- -------
$17,148 $25,685 $36,506
======= ======= =======
</TABLE>
The Bank evaluates loans for impairment whenever the collectibility of
contractual principal and interest payments is questionable. Large groups of
smaller balance homogenous loans that are collectively evaluated for impairment,
including residential mortgage loans, are not subject to the application of SFAS
No. 114.
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 probable of foreclosure, 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. The following summary details loans measured using the fair
value method and loans measured based on the present value of expected future
cash flows discounted at the effective interest rate of the loan as of the dates
indicated:
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1998 1997 1997
------------- ------------ -------------
(Dollars in thousands)
<S> <C> <C> <C>
Fair value method $16,081 $24,618 $35,439
Present value method 1,067 1,067 1,067
------- ------- -------
Total impaired loans $17,148 $25,685 $36,506
======= ======= =======
</TABLE>
All impaired loans as of September 30, 1998 had an associated valuation
allowance. Impaired loans for which there was no valuation allowance established
totaled $2.5 million and $4.4 million as of December 31, 1997, and September 30,
1997, respectively. See "Results of Operations" for an analysis of activity in
the valuation allowance for impaired loans.
The table below shows the Bank's net investment in non-performing loans that
were determined to be impaired by property type, as of the dates indicated:
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1998 1997 1997
------------- ------------ -------------
(Dollars in thousands)
<S> <C> <C> <C>
Single family $ -- $ 856 $ 1,220
Multi-family 5,134 6,893 14,337
Commercial 475 511 497
------- ------- -------
$ 5,609 $ 8,260 $16,054
======= ======= =======
</TABLE>
16
<PAGE> 17
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 during the quarters ended
September 30, 1998, December 31, 1997, and September 30, 1997 was $17.2 million,
$24.5 million and $38.6 million, respectively. The amount of interest income
recognized on the cash basis for impaired loans during the quarters ended
September 30, 1998, December 31, 1997 and September 30, 1997 was $296 thousand,
$433 thousand and $527 thousand, respectively. Interest income recognized under
the accrual basis for the quarters ended September 30, 1998, December 31, 1997
and September 30, 1997 was $289 thousand, $433 thousand and $527 thousand,
respectively.
ASSET QUALITY
The following table sets forth certain asset quality ratios of the Bank at the
dates indicated:
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1998 1997 1997
------------- ------------ -------------
<S> <C> <C> <C>
Non-Performing Loans to
Loans Receivable(1) 0.75% 0.91% 1.21%
Non-Performing Assets to
Total Assets(2) 0.73% 0.95% 1.18%
Loan Loss Allowances to
Non-Performing Loans(3) 272.01% 193.38% 139.81%
General Loss Allowances to
Assets with Loss Exposure(4) 2.14% 1.86% 1.79%
General Loss Allowances to
Total Assets with Loss
Exposure(5) 2.39% 2.12% 2.05%
</TABLE>
- ----------------
(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 valuation allowances for
non-performing loans and general valuation allowances but excluding general
valuation allowances for loans sold by the Bank with full or limited
recourse. Non-performing loans are before deducting valuation allowances
related to those loans.
(4) The Bank's general valuation allowances, excluding general valuation
allowances for loans sold with full or limited recourse. The Bank's assets
with loss exposure include primarily loans and real estate owned, but
exclude mortgage-backed securities.
(5) The Bank's general valuation allowances, including general valuation
allowances for loans sold with full or limited recourse. Assets with loss
exposure include the Bank's portfolio plus loans sold with recourse, but
exclude mortgage-backed securities.
17
<PAGE> 18
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). An analysis of non-performing assets follows as
of the dates indicated:
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1998 1997 1997
------------- ------------ -------------
(Dollars in thousands)
<S> <C> <C> <C>
Real estate owned:
Single family $ 3,747 $ 5,806 $ 6,422
Multi-family 1,914 4,034 2,726
Commercial 469 826 680
Other 52 52 19
Less:
General valuation allowance (500) (500) (500)
-------- -------- --------
Total real estate owned 5,682 10,218 9,347
-------- -------- --------
Non-accrual loans:
Single family 13,305 16,799 16,027
Multi-family 10,350 15,785 28,500
Commercial 2,183 1,533 2,332
Other -- -- 34
Less:
Valuation allowances (1) (3,456) (4,738) (7,661)
-------- -------- --------
Total non-accrual loans 22,382 29,379 39,232
-------- -------- --------
Total non-performing assets $ 28,064 $ 39,597 $ 48,579
======== ======== ========
</TABLE>
- -----------------------------
(1) Includes valuation allowances for impaired loans and loss allowances on
other non-performing loans requiring fair value adjustments.
Real estate owned at September 30, 1998 decreased 44% compared to the December
31, 1997 level and 39% compared to the September 30, 1997 level due to
improvement in the Southern California real estate market. Due to the improved
real estate values in Southern California, Bank foreclosures have decreased.
Additionally, foreclosed properties are selling more quickly compared to the
prior year.
Non-accrual loans, net of valuation allowances, at September 30, 1998 decreased
24% compared to the level at December 31, 1997 and decreased 43% from the level
one year ago. Substantial improvement in multi-family and single family
delinquencies was noted compared to the year ago levels.
SOURCES OF FUNDS
External sources of funds include savings deposits from several sources,
advances from the Federal Home Loan Bank of San Francisco ("FHLB"), securitized
borrowings and unsecured term funds.
Savings deposits are accepted from retail banking offices, telemarketing
efforts, and national deposit brokers. Total savings deposits decreased by $32
million, net of interest credited of $20 million, during the third quarter of
1998 due to increased competition from local institutions. For the first nine
months of 1998, total deposits increased by $163 million, including interest
credited of $58 million.
18
<PAGE> 19
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
generally offered by the Bank and other depository institutions, the Bank will
seek 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.
Deposits accepted by retail banking offices decreased by $13 million during the
third quarter of 1998 but increased by $20 million during the first nine months
of the year. The Bank is focusing its marketing efforts on attracting liquid
accounts and short-term certificate of deposits. Retail deposits comprised 70%
of total savings deposits as of September 30, 1998.
Telemarketing deposits decreased by $10 million and $694 thousand during the
third quarter and first nine months of 1998. 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 rates available to investors on alternative investments.
Telemarketing deposits comprised 5% of total deposits at September 30, 1998.
Deposits acquired from national brokerage firms ("brokered deposits") decreased
by $9 million during the third quarter of 1998 but increased by $144 million
during the first nine months of 1998. The Bank has used brokered deposits for
over 10 years and considers these deposits a stable source of funds. 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, 1998, brokered deposits
comprised 25% of total deposits.
Total borrowings decreased by $157 million during the third quarter of 1998 due
to net payoffs of $78 million in reverse repurchase agreements, $80 million in
advances from the FHLB, offset by $1 million increase in additional unsecured
term funds. Total borrowings decreased by $515 million during the first nine
months of 1998 due to net payoffs of $100 million in reverse repurchase
agreements and $415 million in advances from the FHLB, offset by $500 thousand
in additional unsecured term funds.
Internal sources of funds include both principal payments and payoffs on loans
and mortgage-backed securities, loan sales, and positive cash flows from
operations. Principal payments include amortized principal and prepayments that
are a function of real estate activity and the general level of interest rates.
Total principal payments on loans and mortgage-backed securities were $130
million and $515 million for the third quarter and first nine months of 1998,
respectively. This compares with principal payments of $69 million and $150
million for the third quarter and first nine months of 1997, respectively.
Loan sales were $107 million and $293 million for the third quarter and the
first nine months of 1998, respectively, compared with sales of $11 million and
$14 million for the third quarter and first nine months of 1997. The amount of
salable product originated during 1998 increased due to borrower preference for
fixed rate loan products that are not maintained in the Bank's portfolio.
19
<PAGE> 20
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
(3.) Certificate of Incorporation and By Laws filed as Exhibit
(1)(a) to Form 8-A dated June 4, 1987 and incorporated by
reference.
(4.1) Amended and Restated Rights Agreement filed as Exhibit 4.1
to Form 8-A/A dated June 25, 1998 and incorporated by reference.
(4.2) Indenture filed as Exhibit 4 to Amendment No. 3 to Form S-3
dated September 20, 1994 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) Amended Supplemental Executive Retirement Plan dated May
30, 1998 and incorporated by reference.
(10.3) Form of Change in Control Employment Agreement effective
September 26, 1996 filed as Exhibit 10.4 to Form 10-Q for the
quarter ended September 30, 1996 and incorporated by reference.
(10.4) Form of Directors Stock Incentive Plan effective January 1,
1997 filed as Appendix A to Proxy Statement dated March 18, 1997
for Annual Meeting of Stockholders and incorporated by reference.
(11.1) Computation of earnings per share. Part I hereof is
incorporated by reference.
b) Reports on Form 8-K
No reports on Form 8-K were filed during the period ended
September 30, 1998.
20
<PAGE> 21
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 16, 1998
By /s/ BABETTE E. HEIMBUCH
------------------------------------
Babette E. Heimbuch
President and
Chief Executive Officer
By /s/ DOUGLAS J. GODDARD
------------------------------------
Douglas J. Goddard
Chief Financial Officer and
Executive Vice President
21
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 47,197
<INT-BEARING-DEPOSITS> 96,000
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 646,755
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 2,914,058
<ALLOWANCE> 74,656
<TOTAL-ASSETS> 3,826,779
<DEPOSITS> 2,106,672
<SHORT-TERM> 921,739
<LIABILITIES-OTHER> 43,458
<LONG-TERM> 505,000
0
0
<COMMON> 231
<OTHER-SE> 249,679
<TOTAL-LIABILITIES-AND-EQUITY> 3,826,779
<INTEREST-LOAN> 211,920
<INTEREST-INVEST> 8,834
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 220,754
<INTEREST-DEPOSIT> 73,749
<INTEREST-EXPENSE> 143,579
<INTEREST-INCOME-NET> 70,975
<LOAN-LOSSES> 6,200
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 36,372
<INCOME-PRETAX> 44,700
<INCOME-PRE-EXTRAORDINARY> 44,700
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,610
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.18
<YIELD-ACTUAL> 2.56
<LOANS-NON> 22,382
<LOANS-PAST> 0
<LOANS-TROUBLED> 5,609
<LOANS-PROBLEM> 5,654
<ALLOWANCE-OPEN> 84,041
<CHARGE-OFFS> 3,957
<RECOVERIES> 1,401
<ALLOWANCE-CLOSE> 87,685
<ALLOWANCE-DOMESTIC> 87,685
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 37,437
<INT-BEARING-DEPOSITS> 55,000
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 741,715
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 3,144,595
<ALLOWANCE> 69,356
<TOTAL-ASSETS> 4,104,647
<DEPOSITS> 1,961,757
<SHORT-TERM> 1,826,339
<LIABILITIES-OTHER> 54,715
<LONG-TERM> 50,000
0
0
<COMMON> 115
<OTHER-SE> 211,721
<TOTAL-LIABILITIES-AND-EQUITY> 4,104,647
<INTEREST-LOAN> 214,218
<INTEREST-INVEST> 9,594
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 223,182
<INTEREST-DEPOSIT> 69,770
<INTEREST-EXPENSE> 152,431
<INTEREST-INCOME-NET> 70,751
<LOAN-LOSSES> 16,500
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 33,692
<INCOME-PRETAX> 28,915
<INCOME-PRE-EXTRAORDINARY> 28,915
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,487
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 1.54
<YIELD-ACTUAL> 2.25
<LOANS-NON> 39,232
<LOANS-PAST> 0
<LOANS-TROUBLED> 16,054
<LOANS-PROBLEM> 9,468
<ALLOWANCE-OPEN> 75,648
<CHARGE-OFFS> 15,729
<RECOVERIES> 5,891
<ALLOWANCE-CLOSE> 82,310
<ALLOWANCE-DOMESTIC> 82,310
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
