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DOWNEY SAVINGS ANNOUNCES SECOND QUARTER EARNINGS

 DOWNEY SAVINGS ANNOUNCES SECOND QUARTER EARNINGS
 NEWPORT BEACH, Calif., July 30 /PRNewswire/ -- Downey Savings and


Loan Association (NYSE: DSL) today reported net income of $11,427,000 or $0.70 per share for the second quarter of 1992, up 3.5 percent from $11,042,000 or $0.68 per share for the same period last year. For the six months ended June 30, 1992, net income amounted to $22,708,000 or $1.40 per share, as compared to $23,505,000 or $1.45 per share for the like period in 1991.
 Robert L. Kemper, chief executive officer of Downey Savings, commented, "We are pleased with the second quarter results. The regulators have recently defined the 'well-capitalized' capital standards as 5 percent for core and tangible capital and 10 percent for risk-based capital, and Downey was solidly above those requirements at June 30, 1992. Core and tangible capital ratios were 7.51 percent, and the risk-based capital ratio was 13.91 percent. Return on average assets for the current quarter was 1.29 percent, and return on average equity for the same period was 15.67 percent. Non-performing assets comprised 1.50 percent of total assets at June 30, 1992, up from the March 31, 1992, figure of 1.17 percent, and the June 30, 1991, figure of 0.52 percent. The current quarter increase was due primarily to two commercial loans totaling $11.6 million which were put on non-accrual status. However, Downey's level of non-performing assets continues to be well below the industry average."
 Downey's focus on developing its single-family lending operation resulted in $265.9 million of loans originated for portfolio and $27.4 million originated for sale during the second quarter of 1992, as compared with $50.1 million originated for portfolio and $45.5 million originated for sale for the same quarter in 1991. Total year-to-date single-family originations, including both those for portfolio and those for sale, were $495.7 million, comparing favorably to $148.1 million in the 1991 period. Although the total loan and mortgage-backed securities portfolio held for investment declined between the December 1991 and March 1992 quarters because of the rapid rate of prepayments, the portfolio increased 2 percent to $2.6 billion at June 30, 1992, from March 31, 1992.
 At June 30, 1992, deposits totaled $3.1 billion, a decrease of $212 million since Dec. 31, 1991, but only an $84 million decrease since March 31, 1992. Certificates of deposit, which comprised the majority of the decrease, continued to flow to other forms of investment.
 Net interest income remained stable at $29.4 million for the quarter ended June 30, 1992, as compared to $29.5 million for the same period last year. Although earning assets average $3.3 billion or 9 percent lower in the second quarter of 1992 than a year ago, that decline was offset by a higher effective interest spread. The effective interest spread was 3.55 percent in the current quarter, compared with 3.25 percent in the year-ago quarter.
 Provision for loan losses for the quarter ended June 30, 1992, increased $3.7 million from the June 1991 quarter to $3.8 million. General loan loss allowances as a percentage of total loans increased to 0.78 percent from 0.63 percent at June 30, 1991. Net recoveries for the current quarter totaled $31,000.
 Total other income increased $5.4 million from the year-ago quarter reflecting increases in all major categories. The more significant increases were $2.5 million in income from real estate and joint venture operations, $1.2 million in the all other category, and $0.9 million in net gains on sales of loans and mortgage-backed securities and market valuation adjustments because of a $0.7 million loss last year. The increase in income from real estate and joint venture operations reflected a $2.6 million reduction in loss allowances on such real estate during the current quarter.
 The aggregate of Downey's loans to and investments in joint ventures, and its direct real estate totaled $158.7 million at June 30, 1992. In May of 1992, Downey requested the FDIC to approve an extension of the date for divestiture of excess equity investments from Dec. 31, 1992, to June 30, 1994. No final decision has been obtained. At June 30, 1992, the amount subject to divestiture to be in compliance with regulation was $81 million.
 Operating expenses increased to $18.5 million during the second quarter of 1992 from $17.7 million in the same period of 1991. This increase is primarily within the all other category and reflects higher expenses associated with lending activities, to include advertising.
 Income taxes for the quarter ended June 30, 1992, increased to $2.2 million when compared to $1.7 million for the like quarter in 1991. The effective tax rate for the second quarter of 1992 was 16.18 percent, as compared with 13.51 percent for the second quarter of 1991. This rate increase reflects a lower level of tax-free interest, because of the RTC's repayment of the FSLIC note in September of 1991. In addition, in the third quarter of 1991, the state of California changed its tax code and suspended utilization of net operating losses for all taxpayers for state income tax purposes for years ending in 1991 and 1992. However, Downey continues to maintain a relatively low effective tax rate as a result of the federal tax net operating losses available in connection with its 1988 acquisition of Butterfield Savings.
 Downey Savings, with assets of $3.5 billion, has 50 offices throughout California.
 DOWNEY SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARIES
 Consolidated Balance Sheets
 (Dollars in thousands)
 June 30, 1992 Dec. 31, 1991 June 30, 1991
 Assets
 Cash $53,141 $50,774 $64,813
 Federal funds 12,592 47,890 247
 U.S. government and
 agency obligations and
 other investment
 securities held for
 investment, at
 amortized cost
 (estimated market
 value of $118,196
 at June 30, 1992,
 $124,367 at Dec. 31, 1991
 and $351,435 at
 June 30,1991) 115,177 120,037 381,224
 FSLIC note receivable --- --- 185,807
 Loans and mortgage-
 backed securities
 purchased under
 resale agreements 350,000 250,000 113,925
 Assets held for trading,
 at market value:
 U.S. government &
 agency obligations --- --- 33,531
 Mortgage-backed
 securities --- 245,479 ---
 Assets held for sale,
 at the lower of cost
 or market:
 Loans 8,606 21,435 81,645
 Mortgage-backed
 securities --- --- 46,207
 Other investment
 securities --- --- 8,281
 Mortgage-backed securities
 held for investment, at
 amortized cost (estimated
 market vale of $59,041
 at June 30, 1992,
 $68,914 at Dec. 31, 1991,
 and $68,314 at
 June 30, 1991) 57,372 66,254 70,343
 Loans receivable held
 for investment 2,579,466 2,637,582 2,686,920
 Accrued interest
 receivable on loans 18,550 20,283 22,702
 Accrued interest
 receivable on other
 investments 7,394 8,531 25,039
 Loans to joint ventures
 (nonconforming) 34,635 33,554 40,580
 Investments in real
 estate and joint
 ventures 124,094 121,645 151,478
 Premises and equipment 99,243 100,557 100,966
 Federal Home Loan Bank
 stock, at cost 29,266 28,691 27,872
 Other assets 27,411 25,355 37,690
 Total $3,516,947 $3,778,067 $4,079,270
 Liabilities and
 Stockholders' Equity
 Savings deposits $2,876,871 $3,095,683 $3,267,225
 Checking accounts 266,403 259,794 254,534
 Borrowings 29,835 29,508 213,015
 Federal Home Loan Bank
 advances --- 67,000 13,000
 Accounts payable and
 accrued liabilities 42,074 45,015 50,236
 Deferred income taxes 4,858 4,283 3,258
 Total liabilities 3,220,041 3,501,283 3,801,268
 Stockholders' equity:
 Common stock at
 stated value 350 350 350
 Additional paid-in
 capital 3,532 3,532 3,518
 Retained earnings,
 subject to certain
 restrictions 293,024 272,902 274,134
 Total stockholders'
 equity 296,906 276,784 278,002
 Total $3,516,947 $3,778,067 $4,079,270
 DOWNEY SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARIES
 Consolidated Statements of Income
 (Dollars in thousands)
 Three Months Ended Six Months Ended
 June 30, June 30,
 1992 1991 1992 1991
 Interest income:
 Loans receivable $58,027 $71,855 $120,031 $143,432
 Investment
 securities 6,421 10,049 11,558 19,495
 Mortgage-backed
 securities 1,178 2,709 6,916 7,781
 FSLIC note and yield
 maintenance on
 covered assets, net 486 4,481 425 9,225
 Total interest
 income 66,112 89,094 138,930 179,933
 Interest expense:
 Deposits 36,109 55,777 77,065 114,683
 Other borrowings 644 3,825 1,401 9,952
 Total interest
 expense 36,753 59,602 78,466 124,635
 Net interest income 29,359 29,492 60,464 55,298
 Provision for
 loan losses 3,772 113 3,845 1,654
 Net interest
 income after
 provision for
 loan losses 25,587 29,379 56,619 53,644
 Other income, net:
 Loan and other fees 1,750 1,343 3,572 2,566
 Real estate and
 joint venture
 operations 2,492 (31) 3,969 (30)
 Mortgage banking
 activities:
 Loan servicing fees 503 498 990 990
 Net gains (losses)
 on sales of loans,
 mortgage-backed
 securities and market
 valuation adjustments 191 (742) (3,571) 408
 Net gains (losses)
 on sales of
 investment securities
 and market valuation
 adjustments 14 (297) 25 1,496
 Other 1,559 346 1,958 619
 Total other income,
 net 6,509 1,117 6,943 6,049
 Operating expenses:
 Salaries and
 related costs 9,981 10,031 19,994 18,209
 Premises and
 occupancy costs 2,918 2,783 5,746 5,533
 SAIF insurance
 premiums and
 special assessments 2,116 2,141 4,283 4,275
 Amortization of
 excess of cost
 over fair value of
 net assets acquired 133 154 288 307
 Other 3,316 2,620 6,524 5,089
 Total operating
 expenses 18,464 17,729 36,835 33,413
 Income before
 income taxes 13,632 12,767 26,727 26,280
 Income taxes 2,205 1,725 4,019 2,775
 Net income $11,427 $11,042 $22,708 $23,505
 Per share information:
 Net income $0.70 $0.68 $1.40 $1.45
 Dividends paid $0.08 $0.08 $0.16 $0.15
 Weighted average
 shares
 outstanding 16,165,068 16,161,443 16,165,068 16,161,443
 DOWNEY SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARIES
 Selected Financial Statistics
 (dollars in thousands)
 Three Months Ended Six Months Ended
 June 30, June 30,
 1992 1991 1992 1991
 Loans originated --
 portfolio
 1-4 family residential
 mortgage $265,890 $50,070 $388,522 $88,109
 All other 17,192 64,144 36,446 72,798
 Loans originated --
 held for sale 27,397 45,490 107,214 60,040
 Loan repayments:
 Scheduled (30,248) (17,732) (50,134) (34,889)
 Prepayments (197,579) (144,237) (411,476) (212,574)
 Decrease In Loans
 (including mortgage-
 backed securities) (183,778) (83,208) (325,306) (163,225)
 Decrease in assets (78,462) (65,961) (261,120) (88,364)
 Increase (decrease)
 in savings and
 checking accounts (83,997) 145,833 (212,203) 160,361
 Effective interest
 spread 3.55 pct. 3.25 pct. 3.60 pct. 3.02 pct.
 Return on average
 assets 1.29 pct. 1.13 pct. 1.26 pct. 1.19 pct.
 Return on average
 equity 15.67 pct. 16.16 pct. 15.85 pct. 17.53 pct.
 June 30, Dec. 31, June 30,
 1992 1991 1991
 Non-performing
 assets:
 Amount $52,753 $36,697 $21,150
 Percent of
 assets 1.50 pct. 0.97 pct. 0.52 pct.
 Allowance for
 losses:
 Loans $25,557 $21,779 $20,104
 Real estate and
 joint ventures and
 loans to joint
 ventures
 (non-conforming) 31,377 32,256 25,906
 Capital ratios:
 Tangible capital 7.51 pct. 6.21 pct. 5.82 pct.
 Core capital 7.51 pct. 6.21 pct. 5.82 pct.
 Risk-based capital 13.91 pct. 12.12 pct. 12.23 pct.
 Book value per
 share $18.37 $17.12 $17.20
 Number of offices 50 51 51
 -0- 7/30/92
 /CONTACT: Angelika Mayman of Downey Savings, 714-854-3100, ext. 3259/
 (DSL) CO: Downey Savings and Loan Association ST: California IN: FIN SU: ERN


LS-JL -- LA009 -- 4941 07/30/92 09:05 EDT
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Date:Jul 30, 1992
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