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DOWNEY SAVINGS ANNOUNCES THIRD QUARTER EARNINGS

 DOWNEY SAVINGS ANNOUNCES THIRD QUARTER EARNINGS
 NEWPORT BEACH, Calif. Oct. 29 /PRNewswire/ -- Downey Savings and


Loan Association (NYSE: DSL) today reported net income of $10.5 million or $0.65 per share for the third quarter of 1992. This compares to a net loss of $9.6 million or $0.59 per share for the same period last year. For the nine months ended Sept. 30, 1992, net income amounted to $33.2 million or $2.05 per share, up 139 percent from $13.9 million or $0.86 per share for the like period of 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 1.20 percent, and our return on average equity was 13.92 percent. During the quarter, Downey's capital ratios increased further, and, at quarter end, Downey had core and tangible capital ratios of 7.89 percent and a risk-based capital ratio of 13.92 percent. These capital levels are well above the 'well capitalized' capital 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 "the quarter's results contained two significant items. Additions totaling $11.9 million were made to valuation reserves in the quarter, of which $7.6 million represented additions for real estate investments which are carried at the lower of cost or fair value inasmuch as they are subject to divestiture. These allowance additions, however, were substantially offset by the recognition of $10.0 million of income as the factors initially requiring the deferral of a gain from a prior period sale of a neighborhood shopping center were eliminated in the quarter."
 Kemper further commented that "non-performing assets increased and comprised 1.80 percent of total assets at Sept. 30, 1992, up from 1.50 percent at June 30, 1992, and 0.68 percent at Sept. 30, 1991. The current quarter increase of $9.0 million in non-performing assets to $61.8 million primarily reflected a $5.9 million increase in one- to-four unit residential loans, with the balance due to new commercial real estate non-performers. Although it did not impact total non-performing assets during the quarter, loans totaling approximately $13 million were reclassified from non-accrual to in- substance foreclosure. 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 the industry average."
 Downey's continuing focus on developing its single family lending operations resulted in $217.2 million of loans originated for portfolio and $31.9 million originated for sale during the third quarter of 1992. This compares with $63.9 million and $22.5 million, respectively, in the third quarter of 1991, and $265.9 million and $27.4 million, respectively, in the 1992 second quarter. Refinancing activities continued to be a significant factor in single family originations during the current quarter, representing approximately 80 percent of such originations. On a year-to-date basis, single family originations, including both those for portfolio and those for sale, were $744.8 million, slightly more than triple the $234.6 million a year ago. The total loan and mortgage-backed securities portfolio held for investment increased 1.3 percent during the three months ended Sept. 30, 1992, to $2.7 billion, but was 1.3 percent below the year-end 1991 level due to the portfolio decline in the first quarter of the year when the rapid rate of prepayments exceeded originations.
 At Sept. 30, 1992, deposits totaled $3.1 billion, down $71 million from June 30, 1992, and $283 million from year-end 1991. The declines were primarily in certificates of deposit due to low prevailing interest rates.
 Net interest income was $28.3 million in the third quarter of 1992, down 5 percent from $29.9 million for the same period last year. The decline primarily reflected a 13 percent decline in average earning assets to $3.3 billion. The effective interest spread was 3.50 percent in the current quarter compared to 3.21 percent in the 1991 third quarter and 3.55 percent in the second quarter of 1992.
 Provision for loan losses in the current quarter was $3.7 million, essentially unchanged from the year-ago quarter. The total allowance for possible loan losses was $24.5 million at Sept. 30, 1992, down slightly from $25.6 million at June 30, 1992, but up from $21.4 million at Sept. 30, 1991. Included in the current quarter-end total allowance was $20.9 million of general loan valuation allowances. General loan valuation allowances as a percent of total loans was 0.79 percent at Sept. 30, 1992, compared to 0.78 percent at June 30, 1992, and 0.76 percent at Sept. 30, 1991. Net charge-offs were $3.3 million in the 1992 third quarter, of which $3.1 million was associated with a single loan now carried as an in- substance foreclosure at fair value.
 Total other income was $5.7 million in the third quarter of 1992, compared to a net loss of $17.8 million in the year-ago period. The improvement primarily occurred in net gains (losses) on sales of investment securities and market valuation adjustments thereof, real estate and joint venture operations, and the lack this year of a $3.2 million provision to establish a lease financing valuation allowance. Although the current quarter did not include any gains (losses) on sales of investment securities, the 1991 third quarter did reflect a loss of $10.9 million as a market valuation allowance was established in that quarter due to the Association classifying $227 million of long-term U.S. government bonds as held for trading prior to their sale in October of 1991. Income from real estate and joint venture operations totaled $2.1 million in the third quarter of 1992, compared to a net loss of $7.1 million in the year-ago quarter when valuation allowances were established for various projects. Included in the current quarter result is the recognition of the previously mentioned $10.0 million deferred gain associated with the prior period sale of a neighborhood shopping center. This gain was partially offset, however, by $8.2 million of real estate valuation allowance additions. Included in the all other income category this quarter was $0.5 million of income associated with the settlement of a dispute.
 The aggregate of Downey's loans to and investments in joint ventures, and its direct real estate investments totaled $160 million at Sept. 30, 1992, with $88 million subject to divestiture to be in compliance with regulations. The amount subject to divestiture is down from $135 million at Dec. 31, 1991 and $482 million at Dec. 31, 1989. As reported in its second quarter 1992 report, Downey received a letter from the FDIC indicating that the request for extension of its deadline for divestiture from Dec. 31, 1992 to June 30, 1994 was deemed premature and could not be accepted at that time. After further discussion with the FDIC, Downey was advised that it could submit a further request for an extension of the divestiture date during November 1992, and Downey presently intends to do so. As previously reported, the FDIC has indicated that although regulatory action is possible if Downey fails to meet the current divestiture date, consideration of any action would include an in-depth review coordinated with the Office of Thrift Supervision as to Downey's good faith efforts and the circumstances causing the failure to meet the current deadline.
 Operating expenses increased to $17.8 million during the third quarter of 1992 from $16.6 million in the same period of 1991, but were below the second quarter 1992 level of $18.5 million. The increase from the year-ago quarter primarily reflects higher costs associated with higher levels of lending activities.
 Income taxes for the quarter ended Sept. 30, 1992, totaled $2.0 million resulting in an effective tax rate of 16.13 percent. This relatively low effective tax rate reflects the continued utilization for federal tax purposes of net operating loss carryforwards available from the 1988 acquisition of Butterfield Savings. In the like quarter of a year ago, income taxes totaled $1.4 million despite a pre-tax loss of $8.2 million as the quarter included a 1991 to-date state tax accrual due to a change in California's tax code which suspended utilization of net operating losses for all taxpayers for state income tax purposes for years ending in 1991 and 1992.
 Downey Savings, with assets of $3.4 billion, has 50 offices throughout California.
 DOWNEY SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARIES
 Consolidated Balance Sheets
 (Dollars in thousands)
 Sept. 30, Dec. 31, Sept. 30,
 1992 1991 1991
 Assets
 Cash $44,696 $50,774 $57,239
 Federal funds 14,484 47,890 171,676
 Cash and cash
 equivalents 59,180 98,664 228,915
 U.S. government and
 agency obligations and
 other investment
 securities held for
 investment, at amortized
 cost (estimated market
 value of $120,954 at
 Sept. 30, 1992,
 $124,367 at Dec. 31,
 1991, and $98,114 at
 Sept. 30, 1991) 115,206 120,037 98,685
 Loans and mortgage-
 backed securities
 purchased under resale
 agreements 240,000 250,000 130,000
 Assets held for trading,
 at market value:
 U.S. government and
 agency obligations --- --- 215,909
 Mortgage-backed
 securities --- 245,479 ---
 Loans held for sale, at
 the lower of cost or
 market 14,631 21,435 122,564
 Mortgage-backed securities
 held for investment, at
 amortized cost (estimated
 market value of $56,372
 at Sept. 30, 1992,
 $68,914 at Dec. 31,
 1991, and $69,636 at
 Sept. 30, 1991) 53,571 66,254 69,155
 Loans receivable held
 for investment 2,616,416 2,637,582 2,658,181
 Accrued interest
 receivable on loans 17,552 20,283 21,020
 Accrued interest
 receivable on other
 investments 8,353 8,531 12,682
 Loans to joint ventures
 (nonconforming) 34,074 33,554 35,213
 Investments in real
 estate and joint
 ventures 126,260 121,645 141,716
 Premises and equipment 99,674 100,557 100,966
 Federal Home Loan Bank
 stock, at cost 23,465 28,691 28,285
 Other assets 22,064 25,355 28,887
 Total $3,430,446 $3,778,067 $3,892,178
 Liabilities and
 Stockholders'
 Equity
 Savings deposits $2,802,494 $3,095,683 $3,242,070
 Checking accounts 269,754 259,794 255,957
 Borrowings 14,632 29,508 65,189
 Federal Home Loan Bank
 advances --- 67,000 10,000
 Accounts payable and
 accrued liabilities 32,430 45,015 47,139
 Deferred income taxes 5,033 4,283 4,701
 Total liabilities 3,124,343 3,501,283 3,625,056
 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 302,221 272,902 263,254
 Total stockholders'
 equity 306,103 276,784 267,122
 Total $3,430,446 $3,778,067 $3,892,178
 DOWNEY SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARIES
 Consolidated Statements of Income
 (Dollars in thousands)
 Three months ended Nine months ended
 Sept. 30, Sept. 30,
 1992 1991 1992 1991
 Interest income:
 Loans receivable $55,389 $71,217 $175,420 $214,649
 Investment securities 4,907 9,754 16,465 29,249
 Mortgage-backed
 securities 1,107 2,012 8,023 9,793
 FSLIC note and yield
 maintenance on
 covered assets, net 332 4,906 757 14,131
 Total interest income 61,735 87,889 200,665 267,822
 Interest expense:
 Deposits 33,039 55,237 110,104 169,920
 Other borrowings 364 2,788 1,765 12,740
 Total interest expense 33,403 58,025 111,869 182,660
 Net interest income 28,332 29,864 88,796 85,162
 Provision for loan
 losses 3,734 3,679 7,535 4,709
 Net interest income
 after provision for
 loan losses 24,598 26,185 81,261 80,453
 Other income, net:
 Loan and other fees 1,642 1,476 5,214 4,042
 Real estate and joint
 venture operations 2,112 (7,084) 6,037 (7,738)
 Secondary marketing
 activities:
 Loan servicing fees 432 511 1,422 1,501
 Net gains (losses) on
 sales of loans,
 mortgage-backed
 securities and market
 valuation adjustments 295 923 (3,276) 1,331
 Net gains (losses) on
 sales of investment
 securities and market
 valuation adjustments --- (10,923) 25 (9,427)
 Provision for loss on
 investment in lease
 residual --- (3,200) --- (3,200)
 Other 1,238 482 3,196 1,101
 Total other income,
 net 5,719 (17,815) 12,618 (12,390)
 DOWNEY SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARIES
 Consolidated Statements of Income
 (Dollars in thousands)
 Three months ended Nine months ended
 Sept. 30, Sept. 30,
 1992 1991 1992 1991
 Operating expenses:
 Salaries and
 related costs 9,677 8,935 29,671 27,144
 Premises and
 occupancy costs 2,916 2,519 8,662 8,052
 SAIF insurance
 premiums and
 special assessments 2,103 2,177 6,386 6,452
 Amortization of excess
 of cost over fair
 value of net assets
 acquired 133 153 421 460
 Other 2,981 2,813 9,505 7,902
 Total operating
 expenses 17,810 16,597 54,645 50,010
 Income (loss) before
 income taxes 12,507 (8,227) 39,234 18,053
 Income taxes 2,017 1,360 6,036 4,135
 Net income (loss) $10,490 ($9,587) $33,198 $13,918
 Per share information:
 Net income (loss) $0.65 ($0.59) $2.05 $0.86
 Dividends paid $0.08 $0.08 $0.24 $0.23
 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 Nine Months Ended
 Sept. 30, Sept. 30,
 1992 1991 1992 1991
 Loans originated -
 portfolio
 1-4 family
 residential
 mortgage $217,233 $63,935 $605,755 $152,044
 All other 33,709 20,338 70,155 93,136
 Loans originated -
 held for sale 31,867 22,476 139,081 82,516
 Loan repayments
 Scheduled (16,128) (17,567) (53,450) (52,456)
 Prepayments (181,693) (115,205) (602,757) (327,779)
 Increase (decrease)
 in loans (including
 mortgage-backed
 securities) 39,174 (35,214) (286,132) (196,307)
 Decrease in assets (86,501) (187,092) (347,621) (275,456)
 Increase (decrease)
 in savings and
 checking accounts (71,026) (23,732) (283,229) 136,629
 Effective interest
 spread 3.50 pct 3.21 pct 3.57 pct 3.08 pct
 Return on average
 assets 1.20 pct (0.96 pct) 1.25 pct 0.47 pct
 Return on average
 equity 13.92 pct (14.14 pct) 15.18 pct 6.91 pct
 Sept. 30, Dec. 31, Sept. 30,
 1992 1991 1991
 Non-performing assets:
 Amount $61,758 $36,697 $26,552
 Percent of assets 1.80 pct 0.97 pct 0.68 pct
 Allowance for losses:
 Loans $24,472 $21,779 $21,354
 Real estate and joint
 ventures, and loans to
 joint ventures (non-
 conforming) 36,260 35,256 35,615
 Capital ratios:
 Tangible capital 7.89 pct 6.21 pct 5.14 pct
 Core capital 7.89 pct 6.21 pct 5.14 pct
 Risk-based capital 13.92 pct 12.12 pct 10.56 pct
 Book value per share $18.94 $17.12 $16.53
 Number of offices 50 51 51
 -0- 10/29/92
 /CONTACT: Thomas E. Prince, CFO of Downey Savings, 714-854-3100, ext. 2200/
 (DSL) CO: Downey Savings and Loan Association ST: California IN: FIN SU: ERN


JL-LS -- LA004 -- 6406 10/29/92 08:49 EST
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