Downey Savings Says Deposit Activity Stable

August 15, 2008 No Comments »


Working to ease investor nerves, Downey Savings today reported that heightened deposit withdrawals in July had so far stabilized in August.

Last month, deposits declined by $507 million to $9.4 billion, which management likened to concerns over FDIC insurance coverage related to the Indymac bank failure.

But the Newport Beach, CA-based bank and mortgage lender said about 45 percent of its net deposit outflow from July had been recovered, partially thanks to the re-launch of deposit-based advertising.

Downey said the bulk of its deposit inflow is in CDs with six to 18 month durations.

Late last month, the company reported a second quarter net loss of $218.9 million, compared with earnings of $32.7 million during the same period a year earlier.

The company said option arm loans represented just 65 percent of their single family loans, down from 81 percent a year prior.

Downey also said credit quality had improved, noting that loans originated during the quarter had an average loan-to-value ratio of 65 percent and average credit score of 745, compared to 67 percent and 721 in the second quarter of 2007.

Unfortunately, loan originations have also fallen by nearly 50 percent from a year ago and non-performing assets accounted for 15.08 percent of total assets as of July 31, up from 1.81 percent a year ago.

Downey Financial Corp. was up 6 cents, or 3.06%, to $2.02 in late trading Friday on Wall Street, well below its 52-week high of $63.17.

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