Downey Savings & Loan Assn. on Thursday reported that an accounting change boosted its first-quarter profit dramatically to $22.3 million, compared to $11.3 million a year earlier.
Without the $15.1 million in income generated by the accounting change, which was related to income taxes, Downey would have posted a $7.1-million profit.
“That’s a healthy number because they’re a smaller company than they were a year ago,” said Campbell K. Chaney at the Sutro & Co. brokerage in San Francisco. The one-time accounting change “is good news for the company because it increases its tangible equity,” Chaney said. “It also makes it easier to (understand) the company because tax accounting and (general) accounting principles are now the same.”
Downey executives are still awaiting Federal Deposit Insurance Corp. permission to sell the company’s remaining $16-million stake in real estate projects to a subsidiary, DSL Service Co. Downey and other thrifts have been ordered to reduce their direct investments in real estate and other ventures to 2% of total assets by mid-1994.
Downey reported that its federally mandated capital ratios were strengthened during the quarter. Based on current rules, Downey had core and tangible capital ratios of 8.83% and a risk-based capital ratio of 15.51%. “Those are very strong capital ratios,” Chaney said.
Downey, based in Newport Beach, has $3.5 billion in assets and operates 51 offices across California.
In Thursday’s trading on the New York Stock Exchange, the company’s stock moved up 62.5 cents a share to close at $16.375.