Downey Savings OKs Dividend, Stock Split

Encouraged by its third-quarter results and its stock market activity, Downey Savings & Loan Assn. will be giving shareholders a special cash dividend bonus totaling $1.9 million along with a 3-for-2 stock split, its first stock split in six years, the Costa Mesa-based institution said Wednesday.

After 12 straight quarters of growth, Downey Savings also has decided that it will resume its quarterly cash dividend program next year, spokesman John Dennis said. Regular pay-outs of cash dividends were abandoned in 1980 as interest rates soared and lending institutions tightened their belts, he said.

The S&L; reported net earnings of $12.8 million for the quarter ending Sept. 30, a 64.8% increase over profits of nearly $7.5 million for last year’s third quarter. For the nine-month period ending Sept. 30, Downey Savings earned $43.3 million, nearly five times the $9.7 million in earnings reported for the same period last year.

Meantime, Downey Savings has seen its stock rise steadily since it switched to the New York Stock Exchange from the American Stock Exchange on Oct. 4. The stock has risen in value from $23.50 a share on its first day of listing on the Big Board to $31 a share Wednesday.

“If interest rates remain at current or somewhat higher levels, we can anticipate profitable activity and growth well into 1986,” said Maurice L. McAlister, the S&L;’s president.

Responding to last January’s new federal regulation limiting the annual growth of most S&Ls; to 25% of assets, Downey Savings has sold more securities and loans than it would normally, Dennis said. That has increased profits and controlled growth, he said. Assets as of Sept. 30 were $2.27 billion, a 4.4% increase over the $2.17 billion in assets a year ago.

Downey Savings’ profits also come from its real estate division, where investments have made the S&L; one of the largest owners of shopping centers in California and Arizona.

The special cash dividend bonus, 40 cents per share, will be paid Jan. 3 to holders of record as of Dec. 16 before the stock split. The stock will then split the same day for holders of record as of Dec. 16, raising the number of shares to 7,087,500 from the current 4,725,000 shares. Downey Savings has had six stock splits, the latest in 1979, and a new issue of 200,000 shares since it was formed in 1958.