Fifth paragraph, third sentence of release should read: In comparison, 1,366 loans with balances totaling approximately $644.0 million were scheduled to recast during the first half of 2008 and 1,778 loans with balances totaling approximately $823.0 million were scheduled to recast in the second half of 2007 (sted In comparison, 1,366 loans with balances totaling approximately $644.0 million were scheduled to recast during the first half of 2008 and 1,778 loans with balances totaling approximately $823.0 million are scheduled to recast in the second half of 2008).

The corrected release reads:

FIRSTFED REPORTS RESULTS FOR THE SECOND QUARTER OF 2008

FirstFed Financial Corp. (NYSE:FED), parent company of First Federal Bank of California, today announced lower loan loss provisions and a decline in single family loans less than 90 days delinquent in the second quarter of 2008 compared to the first quarter of 2008. “While there can be no assurance that this trend will continue, it does reflect our efforts to work through the issues in the single family loan portfolio,” said Babette Heimbuch, CEO.

The Company reported a net loss of $35.5 million or $2.60 per diluted share of common stock for the second quarter of 2008 compared to a net loss of $69.8 million or $5.11 per diluted share of common stock for the first quarter of 2008 and net income of $29.1 million or $1.74 per diluted share of common stock for the second quarter of 2007.

The second quarter loss resulted primarily from a $90.2 million provision for loan losses. The loan loss provision was due to ongoing charge-offs and modifications of single family loans as well as higher levels of non-accrual single family loans (loans greater than 90 days delinquent or in foreclosure). The Company recorded a $150.3 million provision for loan losses during the first quarter of 2008 and a $3.1 million loan loss provision during the second quarter of 2007.

The Bank’s higher levels of single family non-accrual loans are the result of the large numbers of adjustable rate mortgages that faced a recast of their payment amount in the latter part of 2007 and early 2008. Non-accrual single family loans increased to $491.7 million as of June 30, 2008 from $393.6 million at March 31, 2008 and $179.7 million as of December 31, 2007 compared to $53.3 million as of June 30, 2007. However, single family loans delinquent less than 90 days have declined as the number of loans facing payment recast have declined during 2008. Single family loans less than 90 days delinquent have decreased to $207.7 million as of June 30, 2008 from $273.3 million as of March 31, 2008 and $236.7 million as of December 31, 2007 compared to $35.2 million as of June 30, 2007.

The level of delinquent loans during 2008 was significantly impacted by adjustable rate mortgages that reached their maximum allowable negative amortization and required an increased payment. The Bank estimates that 594 loans with balances totaling approximately $266.3 million could hit their maximum allowable negative amortization during the rest of 2008. In comparison, 1,366 loans with balances totaling approximately $644.0 million were scheduled to recast during the first half of 2008 and 1,778 loans with balances totaling approximately $823.0 million were scheduled to recast in the second half of 2007. Another 1,422 loans, with balances totaling $653.0 million, could hit their maximum allowable negative amortization during 2009. The Bank has a program to reach out to borrowers faced with loan recasts to encourage them to modify their loans before the recast date.

Total modified loans were $308.7 million as of June 30, 2008. These modified loans are considered troubled debt restructurings (“TDRs”) and valuation allowances of $26.3 million were established as of June 30, 2008. Another $13.2 million in adjustable rate mortgages were modified as of June 30, 2008 but were not considered TDRs and therefore no valuation allowances were established. Modified loans totaled $108.1 million at March 31, 2008 and $1.8 million as of December 31, 2007. There were no modified loans as of June 30, 2007.

Second quarter net earnings were also impacted by lower net interest income which decreased by $4.6 million or 9% compared to the first quarter of 2008 and $25.0 million or 36% compared to the second quarter of 2007. Net interest income decreased due to lower interest-earning assets, increased non-accrual loans and lower interest rate spreads compared to the earlier periods.

On a year-to-date basis, the Company reported a net loss of $105.3 million or $7.71 per diluted share for the first six months of 2008 compared to net income of $61.5 million or $3.66 per diluted share for the first six months of 2007. The year-to-date loss was attributable to the increased loan loss provisions recorded during the first and second quarters and a 35% decrease in net interest income compared to the same period of the prior year.

Net loan charge-offs totaled $80.4 million and $108.9 million for the second quarter and the first six months of 2008 compared to $1.1 million and $1.8 million for the second quarter and the first six months of 2007. The Bank’s non-performing assets to total assets ratio increased to 8.20% at June 30, 2008 from 6.20% at March 31, 2008 and 2.79% at December 31, 2007 compared to 0.85% at June 30, 2007. The increases over the last year were due primarily to increased single family non-accrual loans.

Total allowances for loan losses (general valuation allowances plus allowances for impaired loans) as a percentage of gross loans were 3.96% or $259.7 million at June 30, 2008 compared to 3.83% or $249.9 million as of March 31, 2008, 1.93% or $128.1 million as of December 31, 2007 and 1.62% or $114.9 million as of June 30, 2007. Allowances allocated to single family loans were 5.5% of gross single family loans at June 30, 2008.

Sales of real estate owned resulted in net gains of $3.4 million for the second quarter of 2008 and $3.2 million for the first six months of 2008 compared to net losses of $103 thousand and $189 thousand for the second quarter and first six months of 2007. The gains recorded during 2008 resulted from conservative write downs at the time of foreclosure which created gains upon the ultimate disposition of the properties. Holding costs associated with foreclosed real estate totaled $3.2 million and $4.4 million during the second quarter and first six months of 2008 compared to $369 thousand and $555 thousand during the second quarter and first six months of 2007.

Net interest income was $44.7 million and $94.0 million during the second quarter and the first six months of 2008 compared to $69.7 million and $144.9 million during the second quarter and the first six months of 2007. Net interest income decreased during 2008 compared to 2007 due to declines in average interest-earning assets and lower net interest spreads. Due to loan payoffs, average interest-earning assets decreased by 13% during the second quarter of 2008 compared to the second quarter of 2007 and 18% during the first six months of 2008 compared to same period of 2007. The interest rate spread decreased by 71 basis points during the second quarter of 2008 compared to the second quarter of 2007 and 51 basis points during the first six months of 2008 compared to the first six months of last year. The decreased spreads were primarily caused by interest lost on non-performing loans which lowered the loan yield by 1.15% during the second quarter of 2008 and 0.92% during the first six months of 2008.

Loan originations were $491.6 million and $777.0 million during the second quarter and the first six months of 2008 compared to $180.4 million and $439.9 million during the second quarter and the first six months of 2007. Single family loans comprised 63% of loan originations during the second quarter of 2008 compared with 73% of loan originations during the second quarter of 2007. Multi-family and commercial real estate loans comprised 33% of loan originations for the second quarter of 2008, compared with 21% of loan originations for the second quarter of 2007.

Total assets decreased to $7.2 billion as of June 30, 2008 from $7.7 billion as of June 30, 2007 due to loan payoffs and principal reductions. Due to increased loan originations during the first six months of 2008, total assets at June 30, 2008 were comparable to total assets as of December 31, 2007.

Negative amortization, included in the balance of loans receivable, totaled $302.3 million at June 30, 2008 compared to $301.7 million at December 31, 2007 and $267.5 million at June 30, 2007. Negative amortization represents unpaid interest earned by the Bank that is added to the principal balance of the loan. Negative amortization decreased by $7.1 million for the quarter ended June 30, 2008, but increased by $586 thousand for the first six months ended June 30, 2008 compared to increases of $19.0 million and $51.7 million for the quarter and six months ended June 30, 2007. Negative amortization as a percentage of all single family loans that have negative amortization totaled 8.89% at June 30, 2008 compared to 8.35% at March 31, 2008, 7.68% at December 31, 2007 and 5.19% at June 30, 2007.

The portfolio of single family loans with one-year fixed monthly payments totaled $2.8 billion at June 30, 2008 compared to $3.2 billion at December 31, 2007 and $3.6 billion at June 30, 2007. The portfolio of single family loans with three-to-five year fixed monthly payments totaled $901.3 million at June 30, 2008 compared to $1.1 billion at December 31, 2007 and $1.3 billion at June 30, 2007.

Non-interest expense was $25.1 million and $47.2 million for the second quarter and the first six months of 2008 compared to $20.9 million and $41.8 million for the second quarter and the first six months of 2007. The ratio of non-interest expense to average total assets was 1.41% and 1.32% for the second quarter and the first six months ended June 30, 2008 compared to 1.03% and 0.98% for the quarter and the first six months ended June 30, 2007. The increase in non-interest expense during the second quarter of 2008 compared to the second quarter of 2007 was due primarily to holding costs associated with foreclosed real estate, increased loan incentive costs, and increased federal deposit insurance costs. The increase in non-interest expense during the first six months of 2008 compared to the first six months of 2007 was due to increased holding costs on foreclosed real estate, increased federal deposit insurance costs and increased occupancy costs due to the opening of new branches and a $1.1 million lease write-off for the former corporate headquarters.

The Bank’s risk-based capital ratio was 17.83% at June 30, 2008 and its core and tangible capital ratios were 9.45%, which were in excess of the 10% and 5% ratios, respectively, required by the Bank’s federal regulators to be considered well capitalized.

First Federal Bank of California operates 37 retail banking offices in Southern California. In keeping with the Bank’s retail branch expansion plan, two new retail branches were opened during the second quarter of 2008. The Bank operates two lending offices, one in Southern California and one in Northern California.

This news release contains certain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Act of 1995. These forward-looking statements are subject to various factors, many of which are beyond the Company’s control, which could cause actual results to differ materially from such statements. Such factors include, but are not limited to, the general business environment, interest rate fluctuations that may affect operating margin, changes in laws and regulations affecting the Company’s business, the California real estate market, and competitive conditions in the business and geographic areas in which the Company conducts its business and regulatory actions. In addition, these forward-looking statements are subject to assumptions as to future business strategies and decisions that are subject to change. The Company makes no guarantees or promises regarding future results and assumes no responsibility to update such forward-looking statements.

FirstFed Financial Corp.
Douglas Goddard, Executive Vice President
310-302-1714