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DOWNEY SAVINGS ANNOUNCES FOURTH QUARTER EARNINGS

 NEWPORT BEACH, Calif., Jan. 28 /PRNewswire/ -- Downey Savings and Loan Association (NYSE/PSE: DSL) today reported net income of $8,652,000 or $0.54 per share for the fourth quarter of 1992, down 21.1 percent from $10,966,000 or $0.68 per share for the same period last year. For the year, net income amounted to $41,850,000 or $2.59 per share in 1992, up 68.2 percent from $24,884,000 or $1.54 per share for 1991.
 Robert L. Kemper, chief executive officer of Downey Savings, commented, "Although the prolonged economic downturn in California is having some effect on Downey, we are pleased with our results. Our return on average assets for the quarter was 0.99 percent, and our return on average equity was 11.15 percent, and for all of 1992 those returns were 1.18 percent and 14.13 percent, respectively. During the quarter, Downey's capital ratios increased further and, at quarter end, Downey had core and tangible capital ratios of 8.19 percent and a risk-based capital ratio of 14.43 percent. These capital levels are well above the "well capitalized" standards recently defined by the regulators of 5 percent for core and tangible capital and 10 percent for risk-based capital. Given the uncertain economic climate, particularly in our primary market of California, we feel it is extremely important to maintain strong capital ratios."
 Kemper continued stating that "Although Downey did not accomplish its required divestitures of excess equity investments in real estate by year end as provided for in Downey's divestiture plan previously approved by the Federal Deposit Insurance Corp. ("FDIC"), significant progress was made during the fourth quarter. At year end, the amount subject to divestiture was $15.1 million, down from $87.8 million at Sept. 30, 1992. This decline primarily resulted from the conversion of certain investments into "Conforming loans" which are subject to a different investment limitation. The amount in excess of the investment limitations represents directly owned real estate projects of the association which must be divested. The association has applied with the FDIC for permission to sell its remaining direct real estate investments to its subsidiary, DSL Service Co., for cash which, if approved by the FDIC, when completed would bring Downey into regulatory compliance. Downey's revised divestiture plan seeks the FDIC's approval to extend the date for the completion of its divestiture to June 30, 1993."
 Kemper further noted that "Non-performing assets increased slightly and comprised 1.90 percent of total assets at Dec. 31, 1992, up from 1.80 percent at Sept. 30, 1992, and 0.97 percent at Dec. 31, 1991. The current quarter increase of $4.2 million in non-performing assets to $65.9 million primarily reflected a $3.6 million increase in one-to-four unit residential loans, with the balance due to new commercial real estate non-performers. It is important to note, however, that Downey's level of non-performing assets as a percent of total assets continues to be well below most financial institutions, particularly those in California."
 Downey's continuing focus on developing its single-family lending operation resulted in $248.0 million of loans originated for portfolio and $43.8 million originated for sale during the fourth quarter of 1992. This compares with $79.2 million and $33.8 million, respectively, in the fourth quarter of 1991, and $217.2 million and $31.9 million, respectively, in the 1992 third quarter. Refinancing activities continued to be a significant factor in single family originations during the current quarter, representing approximately 85 percent of such originations. For the year, single-family originations, including both those for portfolio and those for sale, were $1,036.7 million, almost triple the $347.6 million a year ago. The total loan and mortgage-backed securities portfolio held for investment increased $74.9 million or 2.8 percent during the three months ended Dec. 31, 1992, to $2.7 billion, and was 1.5 percent above the year-end 1991 level. Approximately one-half of the current quarter increase represented the conversion of certain real estate investments into "Conforming loans" as part of the divestiture efforts.
 At Dec. 31, 1992, deposits totaled $3.1 billion, up $36.1 million from Sept. 30, 1992. The current quarter increase reverses the trends earlier in the year in which deposits, primarily certificates of deposit, declined due to low prevailing interest rates. For the year, deposits declined $247.1 million from year-end 1991.
 Net interest income was $27.7 million in the fourth quarter of 1992, down 7.8 percent from $30.0 million for the same period last year. The decline primarily reflected an 8.7 percent decline in average earning assets to $3.2 billion. The effective interest spread was 3.43 percent in the current quarter compared to 3.40 percent in the 1991 fourth quarter and 3.50 percent in the third quarter of 1992. For the year, net interest income totaled $116.5 million, up $1.3 million, or 1.1 percent from 1991.
 Provision for loan losses in the current quarter was $1.5 million, up $1.0 million from the year-ago quarter. The total allowance for possible loan losses was $26.9 million at Dec. 31, 1992, up from $24.5 million at Sept. 30, 1992, and $21.8 million at Dec. 31, 1991. Included in the current quarter-end total allowance of $26.9 million was $21.3 million of general loan valuation allowances. General loan loss allowances as a percent of total loans was 0.78 percent at Dec. 31, 1992, compared to 0.79 percent at Sept. 30, 1992 and 0.73 percent at Dec. 31, 1991. Net charge-offs were $0.2 million in the 1992 fourth quarter bringing the total for the year to $3.5 million. For the year, the provision for loan losses was $9.0 million compared to $5.2 million a year ago.
 Total other income was $2.6 million in the fourth quarter of 1992, compared to $0.5 million in the year-ago period. The improvement between quarters is primarily explained by net gains (losses) on sales of investment securities and market valuations thereof, partially offset by a decrease in real estate and joint venture operations. Although the current quarter did not include any gains (losses) on sales of investment securities, the 1991 fourth quarter reflected a loss of $5.3 million resulting from a $1.7 million loss incurred on the sale of the association's remaining mortgage derivative securities (interest-only strips) and a $3.6 million loss incurred from the sale of $226 million of long-term U.S. Government bonds. The loss from the sale of the U.S. Government bonds was in addition to the $10.9 million market valuation allowance provided for that sale in the third quarter of 1991. The mortgage derivative securities and U.S. Government bonds were sold to significantly reduce the association's exposure to interest rate changes. Due to $2.1 million of real estate valuation allowance additions, a net loss of $0.6 million occurred in real estate and joint venture operations in the current quarter compared to income of $3.1 million in the year-ago quarter. For the year, total other income was $15.3 million compared to a net loss of $11.9 million in 1991.
 Operating expenses increased to $18.5 million during the fourth quarter of 1992 from $17.3 million in the same period of 1991. For the year, operating expenses increased 8.8 percent to $73.2 million. The increase from the year-ago quarter and for the year primarily reflects higher costs associated with higher levels of lending activities.
 Income taxes for the quarter ended Dec. 31, 1992, totaled $1.6 million resulting in an effective tax rate of 15.78 percent compared to $1.8 million and 14.27 percent, respectively, in the year-ago quarter. For the year, tax expense was $7.7 million compared to $6.0 million in 1991, and the effective tax rate was 15.47 percent vs. 19.32 percent last year. These relatively low effective tax rates reflect the continued utilization for federal tax purposes of net operating loss carryforwards available from the 1988 acquisition of Butterfield Savings.
 Downey Savings, with assets of $3.5 billion, has 51 offices throughout California.
 DOWNEY SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARIES
 Consolidated Statements of Income
 (Dollars in thousands)
 Three Months Three Months Year Ended Year Ended
 Ended Dec. 31, Ended Dec. 31, Dec. 31, Dec. 31,
 1992 1991 1992 1991
 Interest
 income:
 Loans
 receivable $52,656 $69,755 $228,076 $284,404
 Investment
 securities 4,583 8,906 21,048 38,155
 Mortgage-backed
 securities 1,011 1,464 9,034 11,257
 FSLIC note
 and yield
 maintenance
 on covered
 assets, net 344 397 1,101 14,528
 Total interest
 income 58,594 80,522 259,259 348,344
 Interest expense:
 Deposits 30,651 49,638 140,755 219,558
 Other borrowings 266 852 2,031 13,592
 Total interest
 expense 30,917 50,490 142,786 233,150
 Net interest
 income 27,677 30,032 116,473 115,194
 Provision for
 loan losses 1,503 492 9,038 5,201
 Net interest
 income after
 provision for
 loan losses 26,174 29,540 107,435 109,993
 Other income, net:
 Loan and
 other fees 1,552 1,493 6,766 5,535
 Real estate and
 joint venture
 operations (558) 3,146 5,479 (4,592)
 Secondary marketing
 activities:
 Loan servicing
 fees 458 586 1,880 2,087
 Net gains
 (losses) on
 sales of loans,
 mortgage-backed
 securities and
 market valuation
 adjustments 688 157 (2,588) 1,488
 Net gains (losses)
 on sales of
 investment
 securities and
 market valuation
 adjustments 0 (5,298) 25 (14,725)
 Provision for loss
 on investment
 in lease residual 0 0 0 (3,200)
 Other 493 435 3,689 1,536
 Total other
 income, net 2,633 519 15,251 (11,871)
 Operating
 expenses:
 Salaries and
 related costs 9,999 9,403 39,670 36,547
 Premises and
 occupancy
 costs 3,073 2,813 11,735 10,865
 SAIF insurance
 premiums and
 special
 assessments 2,017 2,176 8,403 8,628
 Amortization of
 excess of cost
 over fair value
 of net assets
 acquired 134 160 555 620
 Other 3,311 2,716 12,816 10,618
 Total operating
 expenses 18,534 17,268 73,179 67,278
 Income before
 income taxes 10,273 12,791 49,507 30,844
 Income taxes 1,621 1,825 7,657 5,960
 Net income $8,652 $10,966 $41,850 $24,884
 Per share
 information:
 Net income $0.54 $0.68 $2.59 $1.54
 Dividends paid $0.08 $0.08 $0.32 $0.31
 Weighted average
 shares
 outstanding 16,165,068 16,161,482 16,165,068 16,161,453
 DOWNEY SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARIES
 Selected Financial Statistics
 (Dollars in thousands)
 Three months Three months Year ended Year ended
 ended Dec. 31, ended Dec. 31, Dec. 31, Dec. 31,
 1992 1991 1992 1991
 Loans originated
 - portfolio
 1-4 family
 residential
 mortgage $248,042 $79,233 $853,797 $231,277
 All other 40,191 25,685 110,346 118,821
 Loans originated
 - held for sale 43,812 33,833 182,893 116,349
 Loan repayments
 Scheduled (16,545) (15,680) (69,995) (56,743)
 Prepayments (217,746) (148,417) (820,503) (487,073)
 Increase
 (decrease)
 in loans
 (including
 mortgage-backed
 securities) 65,666 120,850 (220,466) (75,457)
 Increase
 (decrease)
 in assets 47,887 (114,111) (299,734) (389,567)
 Increase
 (decrease) in
 savings and
 checking
 accounts 36,138 (142,550) (247,091) (5,921)
 Effective
 interest
 spread 3.43 pct 3.40 pct 3.53 pct 3.16 pct
 Return on
 average
 assets 0.99 pct 1.16 pct 1.18 pct 0.64 pct
 Return on
 average
 equity 11.15 pct 16.21 pct 14.13 pct 9.24 pct
 Dec. 31, Sept. 30, Dec. 31,
 1992 1992 1991
 Non-performing assets:
 Amount $65,938 $61,758 $36,697
 Percent of assets 1.90 pct 1.80 pct 0.97 pct
 Allowance for losses
 Loans $26,853 $24,472 $21,779
 Real estate and
 joint ventures, and
 loans to joint ventures
 (non-conforming) 36,748 36,260 35,256
 Capital ratios:
 Tangible capital 8.19 pct 7.89 pct 6.21 pct
 Core capital 8.19 pct 7.89 pct 6.21 pct
 Risk-based capital 14.43 pct 13.92 pct 12.12 pct
 Book value per share $19.39 $18.94 $17.12
 Number of offices 51 50 51
 DOWNEY SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARIES
 Consolidated Balance Sheets
 (Dollars in thousands)
 Dec. 31, Dec. 31,
 1992 1991
 Assets
 Cash $65,502 $50,774
 Federal funds 8,834 47,890
 Cash and cash equivalents 74,336 98,664
 U.S. Government and agency
 obligations and other
 investment securities
 held for investment,
 at amortized cost (estimated
 market value of $98,937 at
 Dec. 31, 1992 and
 $124,367 at Dec. 31, 1991) 95,248 120,037
 Loans and mortgage-backed
 securities purchased
 under resale agreements 270,000 250,000
 Mortgage-backed securities
 held for trading, at market value 0 245,479
 Loans held for sale, at the lower of
 cost or market 5,387 21,435
 Mortgage-backed securities held for
 investment, at amortized cost
 (estimated market value of $51,603
 at Dec. 31, 1992 and $68,914 at
 Dec. 31, 1991) 49,339 66,254
 Loans receivable
 held for investment 2,695,558 2,637,582
 Accrued interest receivable on loans 16,059 20,283
 Accrued interest receivable
 on other investments 3,611 8,531
 Loans to joint ventures
 (non-conforming) 0 33,554
 Investments in real estate
 and joint ventures 126,871 121,645
 Premises and equipment 98,660 100,557
 Federal Home Loan Bank stock, at cost 23,465 28,691
 Other assets 19,799 25,355
 Total $3,478,333 $3,778,067
 Liabilities and Stockholders' Equity
 Savings deposits $2,816,833 $3,095,683
 Checking accounts 291,553 259,794
 Borrowings 14,508 29,508
 Federal Home Loan Bank advances 0 67,000
 Accounts payable and
 accrued liabilities 36,955 45,015
 Deferred income taxes 5,022 4,283
 Total liabilities 3,164,871 3,501,283
 Stockholders' equity:
 Common stock at stated value 350 350
 Additional paid-in capital 3,532 3,532
 Retained earnings, subject to
 certain restrictions 309,580 272,902
 Total stockholders' equity 313,462 276,784
 Total $3,478,333 $3,778,067
 -0- 1/28/93
 /CONTACT: Thomas E. Prince, executive VP and CFO of Downey Savings and Loan Association, 714-854-3100, ext. 2200/
 (DSL)


CO: Downey Savings and Loan Association ST: California IN: FIN SU: ERN

JL-KJ -- LA002 -- 0102 01/28/93 09:34 EST
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