Earnings Drop at Downey Financial

Thrift operator Downey Financial Corp. reported a 16% drop in third-quarter earnings Monday, citing setbacks in its home-loan servicing business, declining sales of mortgages, higher expenses and lower income from real-estate transactions.

The Newport Beach-based parent of Downey Savings & Loan Assn. earned $24.5 million, or 88 cents a share, on revenue of $159.4 million, down from year-earlier profit of $29.3 million, or $1.05 a share, on $157.3 million in revenue.

Lending income rose by $13.7 million, with Downey’s loan portfolio up about a third from the end of 2003, said its chief executive and president, Daniel D. Rosenthal. After the third quarter ended, Downey agreed to sell about 80% of its business of keeping records and collecting payments on home loans made by other companies. Moving away from that mortgage-servicing business will decrease the volatility of Downey’s earnings, Rosenthal said.

Analysts had expected profit of 94 cents a share, and Downey’s stock fell by 32 cents to $55.27 on the New York Stock Exchange.

In another Southern California banking development, organizers of the planned First Vietnamese American Bank said that the California Department of Financial Institutions had approved their application to set up the bank in Westminster. Bank executives are waiting for regulators’ go-ahead for the sales circulars that will be distributed to potential investors. The goal is to raise $11 million in start-up capital.

The bank said it would be the only community lender in the nation with a core customer base of Vietnamese immigrants. But Chief Executive Hieu Nguyen said he would encourage business with other ethnic communities to keep from becoming too dependent on a single market.