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DOWNEY SAVINGS ANNOUNCES FIRST QUARTER EARNINGS

    NEWPORT BEACH, Calif., April 29 /PRNewswire/ -- Downey Savings and Loan Association (NYSE: DSL) today reported net income of $22,251,000, or $1.38 per share, for the first quarter of 1993, compared to $11,281,000, or $0.70 per share, in the 1992 first quarter.
    Earnings in the first quarter of 1993 benefited from the implementation of Statement of Financial Accounting Standards No. 109 ("SFAS 109"), Accounting for Income Taxes.  The implementation of SFAS 109 resulted in a one-time credit which increased net income by $15.1 million, or $0.94 per share, and represented the cumulative change in income taxes for years prior to 1993.
    Robert L. Kemper, chief executive officer of Downey Savings, commented, "Downey has benefited in recent years from the reduction to income tax expense associated with the utilization of net operating loss carryforwards derived from its 1988 acquisition of Butterfield Savings.  With the adoption of the new income tax accounting standard, Downey's income tax expense no longer benefits from those net operating loss carryforwards, as the unused portion at Jan. 1, 1993, was recognized in the current quarter SFAS 109 credit to net income per the requirements of the standard.  Accordingly, Downey's effective tax rate increased to 40.85 percent in the first quarter, compared to 15.47 percent for all of 1992."
    Kemper continued, stating that, "Downey's capital ratios increased further during the quarter and, based on rules currently in effect, Downey had core and tangible capital ratios of 8.83 percent and a risk-based capital ratio of 15.51 percent.  These capital levels are well above the `well capitalized' standards of 5 percent and 10 percent, respectively, defined by the regulators.  More importantly, on a fully phased-in basis where the full amount of Downey's investment in real estate as defined by the regulators is deducted from capital, the capital ratios also exceeded the `well capitalized' standards.  On a fully phased-in basis, the core and tangible capital ratios were 6.61 percent and the risk-based capital ratio was 11.63 percent."
    Kemper further noted that, "Although encouraged by discussions to date, final approval has not yet been received from the Federal Deposit Insurance Corp. (`FDIC') regarding Downey's submission of a revised divestiture plan.  The proposed revised plan seeks permission for the association to sell its remaining direct real estate investments to its subsidiary, DSL Service Co., for cash.  Such a sale, when completed, would bring Downey into compliance with the statutory provisions of FIRREA with respect to its investments in real estate.  Also, the proposed revised plan seeks approval from the FDIC to extend the date for the completion of its required divestitures to June 30, 1993.  At quarter end, the amount of the association's direct real estate holdings which must be divested totaled $16.0 million."
    During the first quarter of 1993, Downey's single-family lending operation originated $179.9 million of adjustable rate loans for portfolio, up from $122.6 million in the year ago quarter.  In addition, $16.1 million of fixed-rate single-family loans were originated for sale, down from $79.8 million in the first quarter of 1992.  Refinancing activities continued to be a significant factor in single-family originations during the current quarter, representing approximately 80 percent of such originations.  Despite the high percentage of refinancing activity, the amount of single-family loan repayments declined from $212.0 million in the year-ago first quarter to $116.9 million in the first quarter of 1993.  The total loan and mortgage-backed securities portfolio held for investment increased $78 million, or 2.8 percent, during the three months ended March 31, 1993, to $2.8 billion, and was 9.3 percent above the March 31, 1992, level.
    At March 31, 1993, deposits totaled $3.1 billion which was virtually unchanged from Dec. 31, 1992, but down 3.8 percent from a year ago.
    Net interest income was $28.8 million in the first quarter of 1993, down 7.5 percent from $31.1 million for the same period last year.  The decline primarily reflected a 5.3 percent decline in average earning assets to $3.2 billion.  The effective interest spread was 3.57 percent in the current quarter compared to 3.66 percent in the 1992 first quarter and 3.43 percent in the fourth quarter of 1992.
    Provision for loan losses in the current quarter was $0.8 million, up from $29,000 in the year-ago quarter.  The total allowance for possible loan losses was $26.7 million at March 31, 1993, compared to $26.9 million at Dec. 31, 1992, and $21.8 million at March 31, 1992.  Included in the current quarter-end total allowance of $26.7 million was $22.9 million of general loan valuation allowances.  Net charge-offs totaled $0.8 million in the 1993 first quarter compared to $0.1 million a year ago.  Current quarter net charge-offs included $0.5 million for a commercial real estate loan.
    Non-performing assets increased only $1.4 million during the quarter to $67.4 million and comprised 1.93 percent of total assets at March 31, 1993, up from 1.90 percent at Dec. 31, 1992, and 1.17 percent at March 31, 1992.  During the quarter, non-accrual loans declined $3.8 million to $42.2 million.  That decline, however, was more than offset by an increase in real estate acquired through foreclosure, including in-substance foreclosures, of $5.2 million to $25.2 million at quarter end.  It is important to note that Downey's level of non-performing assets as a percent of total assets continues to be well below that of most financial institutions, particularly those in California.
    Total other income was $1.3 million in the first quarter of 1993, compared to $0.4 million in the year-ago period.  The change between first quarters reflected improvements in net gains (losses) on sales of loans and mortgage-backed securities and in the "other" category, partially offset by declines in income from real estate and joint venture operations and in loan and deposit related fees.  Gains (losses) on sales of loans and mortgage backed securities totaled $0.1 million in the first quarter of 1993, compared to a net loss of $3.8 million in the 1992 first quarter.  The year-ago first quarter included a $3.6 million market valuation loss on $245 million of mortgage-backed securities held for trading.  The "other" category increased $1.0 million to $1.1 million.  Approximately one half of the increase reflected higher rental income from third party tenants at Downey's headquarters building.  The balance of the improvement in the "other" category is explained by a non-recurring loss in the 1992 first quarter associated with the sale of a retail deposit branch office.  A net loss of $1.9 million was recognized in the 1993 first quarter from real estate and joint venture operations, as income from rental operations was more than offset by losses on the equity in joint ventures and a $0.9 million valuation loss provision.  In the year-ago first quarter, real estate and joint venture operations reflected income of $1.4 million, of which $1.3 million represented a reduction in provisions for valuation losses.  Loan and deposit related fees totaled $1.5 million in the first quarter of 1993 compared to $2.1 million a year ago, with the majority of the decline in loan related categories.
    Operating expense declined $1.2 million or 6.3 percent from the first quarter of 1992 to $17.2 million in the 1993 first quarter, reflecting declines in most categories.
    Downey Savings, with assets of $3.5 billion, has 51 offices throughout California.
        DOWNEY SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARIES
                     Consolidated Balance Sheets
                       (Dollars in Thousands)
                                   March 31,   Dec. 31,    March 31,
                                     1993        1992        1992
    Assets                       (Unaudited)  (Audited)   (Unaudited)
    Cash                           $47,883     $65,502     $63,919
    Federal funds                   12,777       8,834      41,596
     Cash and cash equivalents      60,660      74,336     105,515
    U.S. Government and agency
     obligations and other
     investment securities held for
     investment, at amortized cost
     (estimated market value of
     $99,029 at March 31, 1993,
     $98,937 at Dec. 31, 1992,
     and $118,570 at March 31,
     1992, respectively)            94,367      95,248     117,016
    Loans and mortgage-backed
     securities purchased under
     resale agreements             190,000     270,000     195,000
    Mortgage-backed securities
     held for trading, at
     market value                      ---         ---     222,353
    Loans held for sale, at the
     lower of cost or market        10,942       5,387      25,287
    Mortgage-backed securities
     held for investment, at
     amortized cost (estimated
     market value of $68,809
     at March 31, 1993, $51,603 at
     Dec. 31, 1992, and $62,719 at
     March 31, 1992, respectively)  65,579      49,339      62,358
    Loans receivable held for
     investment                  2,757,128   2,695,558   2,519,224
    Accrued interest receivable     20,471      19,669      29,102
    Loans to joint ventures
     (non-conforming)                  ---         ---      33,382
    Investments in real estate and
     joint ventures                136,346      26,871     125,863
    Premises and equipment          98,006      98,660     100,162
    Federal Home Loan Bank stock,
     at cost                        23,995      23,465      29,041
    Deferred income tax receivable   7,504         ---         ---
    Other assets                    21,757      19,800      31,106
    Total                       $3,486,755  $3,478,333  $3,595,409
    Liabilities and Stockholders'
     Equity
    Savings deposits            $2,824,237  $2,816,833  $2,950,262
    Checking accounts              281,743     291,553     277,009
     Total deposits              3,105,980   3,108,386   3,227,271
    Borrowings                      13,862      14,508      29,380
    Accounts payable and accrued
     liabilities                    32,493      36,955      47,453
    Deferred income taxes              ---       5,022       4,533
    Total liabilities            3,152,335   3,164,871   3,308,637
    Stockholders' equity:
    Common stock at stated value       350         350         350
    Additional paid-in capital       3,532       3,532       3,532
    Retained earnings, subject to
     certain restrictions          330,538     309,580     282,890
    Total stockholders' equity     334,420     313,462     286,772
    Total                       $3,486,755  $3,478,333  $3,595,409
        DOWNEY SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARIES
                  Consolidated Statements of Income
            (Dollars in Thousands, Except Per Share Data)
                             (Unaudited)
                                         Three Months Ended March 31,
                                               1993            1992
    Interest income:
     Loans receivable                       $51,914         $62,004
     Investment securities                    3,919           5,137
     Mortgage-backed securities               1,164           5,738
     Yield maintenance on covered assets, net   323             (61)
      Total interest income                  57,320          72,818
    Interest expense:
     Deposits                                28,301          40,956
     Other borrowings                           234             757
      Total interest expense                 28,535          41,713
     Net interest income                     28,785          31,105
     Provision for loan losses                  808              29
      Net interest income after provision
       for loan losses                       27,977          31,076
    Other income, net:
     Loan and deposit related fees            1,457           2,104
     Real estate and joint venture
     operations                              (1,944)          1,433
     Secondary marketing activities:
      Loan servicing fees                       518             487
      Net gains (losses) on sales of loans,
       mortgage-backed securities and market
       valuation adjustments                    137          (3,762)
      Net gains on sales of investment
       securities and market valuation
       adjustments                              ---              11
     Other                                    1,125             117
      Total other income, net                 1,293             390
    Operating expenses:
     Salaries and related costs               9,611           9,898
     Premises and equipment costs             2,833           2,828
     SAIF insurance premiums and regulatory
      assessments                             2,190           2,167
     Amortization of excess of cost over
      fair value of net assets acquired         133             155
     Other                                    2,440           3,323
    Total operating expenses                 17,207          18,371
    Income before income taxes and cumulative
     effect of an accounting change          12,063          13,095
    Income taxes                              4,928           1,814
    Income before cumulative effect of an
     accounting change                        7,135          11,281
    Cumulative benefit of change in the
     method of accounting for income taxes   15,116             ---
    Net income                              $22,251         $11,281
    Per Share Information:
    Income before cumulative effect of an
     accounting change                        $0.44           $0.70
    Cumulative benefit of change in the
     method of accounting for income taxes     0.94             ---
    Net income                                $1.38           $0.70
    Dividends paid                            $0.08           $0.08
    Weighted average shares outstanding  16,165,068      16,165,068
        DOWNEY SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARIES
                    Selected Financial Statistics
                       (Dollars in Thousands)
                                                  Three Months Ended
                                                      March 31,
                                                   1993        1992
    Loans originated for portfolio,
     One-to-four family residential mortgages   $179,962    $122,632
     All other                                    49,049      19,254
    Loans originated for sale                     16,129      79,817
    Loan repayments:
     Scheduled                                   (15,124)    (19,886)
     Prepayments                                (116,481)   (213,897)
    Increase (decrease) in loans (including
     mortgage-backed securities)                  83,365    (141,528)
    Increase (decrease) in assets                  8,422    (182,658)
    Decrease in savings and checking accounts     (2,406)   (128,206)
    Effective interest spread                   3.57 pct    3.66 pct
    Return on average assets(a)                 2.56 pct    1.24 pct
    Return on average equity(a)                27.17 pct   16.04 pct
                                     March 31,   Dec. 31,   March 31,
                                       1993       1992        1992
    Non-performing assets:
     Non-accrual loans:
      One-to-four unit residential    $31,304    $27,742     $16,762
      Other                            10,900     18,215      20,462
       Total non-accrual loans         42,204     45,957      37,224
      Real estate acquired in
       settlement of loans, net         9,202      4,757       4,326
      In-substance foreclosures, net   15,976     15,224         683
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Date:Apr 29, 1993
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