Downey Savings Posts Record 1st Quarter Net

An unusual amount of securities sales spurred Downey Savings & Loan Assn. in Costa Mesa to post a record net income of $21.3 million for the first quarter--nearly doubling the $11.1 million earned in last year’s first quarter.

The S&L; also said its directors have approved a 3-for-2 stock split and a cash dividend of 8 cents a share on a pre-split basis, both payable on May 30 to holders of record on May 14. The total number of shares after the split will be about 10.6 million.

The cash dividend resumes the company’s policy of issuing regular quarterly dividends, Maurice L. McAlister, president of Downey Savings, said. Regular cash dividends were abandoned in 1980 as interest rates soared and lending institutions tightened their belts.

Last October, Downey Savings declared a 3-for-2 stock split and a special one-time cash dividend of 40 cents a share, both of which were effective in January.

Earnings in the first quarter were boosted by a $16-million net gain on the sale of mortgage-backed securities and about $2 million in loan sales. The S&L; sold an unusual amount of securities at high rates because executives anticipated that the rates would dip, according to John Dennis, a Downey Savings spokesman.

“Our concern will be focused on (making new) loans from here on,” he said. “We expect new loans will be issued at the rate of $50-million to $60-million worth a month.”

McAlister also credited lower interest rates and an improving real estate market for helping increase profits.

Total assets as of March 31 declined 4% to $2.3 billion from $2.4 billion a year earlier. The association’s net worth as a percent of assets at the end of the quarter was 7.2%, substantially higher than the 3% ratio required by federal regulators.

Total loans for the quarter were $1.65 billion, down slightly from $1.7 billion in last year’s first quarter. Total deposits were $2 billion, up from $1.8 billion a year earlier.