Downey S&L;’s Home-Loan Effort Prompts Rise in Profit to $41.85 Million
Downey Savings & Loan posted earnings of $41.85 million last year as it reaped the benefits of an aggressive effort to make home loans.
The Newport Beach thrift, during its first year under new management, also transformed nearly $73 million worth of ownership interests it held in real estate developments into loans that conform to standards set up by thrift regulators.
The company is seeking regulatory approval to sell its remaining $15.1-million stake in joint ventures to its subsidiary, DSL Service Co. Such a sale would put Downey in early compliance with a federal law that requires thrifts to reduce direct investments in real estate and other ventures to 2% of assets by mid-1994.
Under founders Maurice L. McAlister and Gerald H. McQuarrie, Downey became the leading developer of neighborhood shopping centers in California and Arizona. It had as much as 30% of its assets in real estate projects.
But a 1989 law that restricts direct investments also led regulators to force McAlister and McQuarrie, both near retirement age, to find successors. In September, 1991, veteran banker Robert L. Kemper was hired as Downey’s chief executive and longtime thrift executive F. Anthony Kurtz as president.
The annual profit--one of the S&L;’s highest--amounted to $2.59 a share and was two-thirds greater than the previous year’s earnings of $24.9 million, or $1.54 a share. Annual revenue, however, fell 18% to $274.5 million from $336.5 million.
Kemper downplayed the big earnings increase. He pointed out that 1991’s net income was lower because of onetime charges during the second half.
For the latest three months, the S&L; posted lower earnings: $8.7 million, or 54 cents a share. That was 21% less than the $11 million, or 68 cents a share, that the company earned for the final quarter of 1991. Fourth-quarter revenue dropped 24% to $61.2 million from $81 million.
Analysts lauded Downey’s overall financial results for a year that saw the Newport Beach thrift transform itself from a savings and loan with a great deal of real estate investments to one that is essentially a home mortgage lender.
“It was a great year for them, all things considered,” said Campbell K. Chaney at Sutro & Co. in San Francisco. “The company is weathering the economic recession quite well.”
Downey’s assets fell 8% to $3.5 billion at year’s end from $3.8 billion 12 months earlier. The reduction helped its capital--the final cushion against losses--grow as a percentage of assets to well above federal requirements, making it one of the state’s stronger financial institutions.
