Downey S&L; Posts Record Profits for ’85

Buoyed by declining interest rates and heightened loan volume, Downey Savings & Loan Assn. said Wednesday that it posted record net earnings on increased revenues and doubled its net worth during the year ended Dec. 31.

For the full year, Downey posted net earnings of $54 million, more than four times the $12.2-million reported for 1984. Revenues for the year climbed a more modest 24% to $297.3 million, from $238.6-million a year earlier.

The improved performance last year reflected the decline in interest rates, which prompted many borrowers to pay off old real estate loans early in order to refinance at better rates, said John Dennis, a spokesman for the Costa Mesa-based S&L.;

During 1985, Downey booked $805.7 million in new loans, up 96%, compared to $411 million in 1984. More than half of the association’s loan portfolio consists of real estate loans, most of which had adjustable interest rates, Dennis said.

Downey, which has attracted wide attention from investors by posting a 346.7% increase in stock price during the last year, said Wednesday that shareholders’ equity more than doubled during 1985, going from $48.5 million to more than $100 million. Although no goal has been set, Downey plans to further improve the bottom line during 1986, Dennis said.

“There is no specific target, but we think we can increase our net worth this year,” he said. “We can’t double it again. It’s going to be a more modest increase than doubling, but I’m sure the stockholders won’t mind.”

For the fourth quarter, Downey had net earnings of $10 million, up 316% compared to net earnings of $2.4 million during the same quarter of 1984. Revenues for the three months grew by 9% to $70 million, from $64.3 million a year earlier.

Late in the third quarter of last year, Downey assumed the day-to-day management of Butterfield Savings & Loan Assn. under an agreement with the Federal Home Loan Bank Board. Management fees from running the insolvent S&L; accounted for an “insignificant” $132,000 of Downey’s fourth-quarter revenues, Dennis said.

Although progress has been made at Butterfield, which Downey operates under a succession of monthlong extensions of its original agreement with the FHLBB, Downey managers will continue to be present at Butterfield during the near term, Dennis said.

“It depends on how quickly we can turn things around over there,” he said. “It looks like we’ll be there for the next three or four months anyway, unless someone else comes in and takes them over.”