Lokey Leaves Downey Financial; Rosenthal Named as New CEO

The chief executive officer of Downey Financial Corp., the parent company of the largest Orange County-based thrift, resigned unexpectedly on Friday, marking the second top-level departure in less than two years.

James Lokey stepped down after about 21 months as CEO. Lokey had been named to succeed Stephen W. Prough, who also quit with little advance notice. Lokey could not be reached for comment.

Daniel D. Rosenthal was named to succeed Lokey as chief executive and president of Downey Financial and its thrift institution, Downey Savings & Loan. Rosenthal has been with Downey more than 20 years.

The chief executive’s office has seen a number of occupants since chairman Maurice McAlister stepped down as CEO in 1991. No successor has held the position more than three years.

Analysts said most of the top executives came from large institutions, and have had a difficult time adjusting to Downey’s culture, which reflects McAlister’s entrepreneurial, hands-on style.

“McAlister’s a smart guy and Downey has done well. But he runs the company like it’s his company,” said Dennis Aigner, a UC Irvine professor who resigned from the board in a dispute with McAlister.

“Even though he claims to be retired, he can’t let go and let the chief executive officer run the company,” Aigner said.

McAlister was unavailable for comment.

Lokey, who came to Downey after 23 years at First Interstate Bank, departed before his contract expired. In a prepared statement, he gave no reason for his departure, saying merely that he looked forward to “new challenges.” He could not be reached for comment.

He was asked to diversify Downey beyond its core business of consumer lending and mortgage loans and to increase its commercial lending.

The strategy would allow Downey to tap more sources of revenue during downturns in the housing market.

But with the housing market surging, the institution may not have as much incentive now to diversify, analysts noted.

With Rosenthal, an insider, taking over, Downey would stay focused on its core businesses, analysts said. One board member, L.C. Smull, believes now the company’s top-level revolving door will end. “We should see a stability at Downey in executive operations,” he said.

Rosenthal, 45, has been chief operating officer and previously served as president of the company’s DSL Service unit, where he played a key role in the company’s real estate finance business.

“The person who stands the best chance for success is someone who works well with McAlister, and is well-known to the people in the company,” said Edward Carpenter, chairman of Carpenter & Co. , an Irvine-based investment bank. “The key officers have been there many years and are more likely to support someone from within.”

The company also named Paul Woollatt to succeed Rosenthal as chief operating officer.

The management changes were announced after the market closed. The stock was up 38 cents to $23.69 on the New York Stock Exchange.