EXHIBIT 99.1
Table of Contents
Earnings Release and Table Listing
Earnings Release and Table Listing
DOWNEY FINANCIAL CORP. |
N E W S R E L E A S E | | For further information contact:
Thomas E. Prince
Chief Financial Officer
(949)509-4440 |
|
DOWNEY ANNOUNCES SECOND QUARTER EARNINGS
Newport Beach, California - July 17, 2003 - Downey Financial Corp. (NYSE: DSL) reported that net income for the second quarter of 2003 totaled $18.5 million, down from $20.4 million in the year-ago second quarter. On a diluted per share basis, net income was $0.66 in the current quarter, down 8.3% from $0.72 a year ago. No shares of common stock were repurchased during the second quarter of 2003, and $38 million of the previously announced $50 million authorization remains for future share repurchases.
The decline in net income between second quarters reflected:
- A $6.4 million increase in general and administrative expense;
- A $6.1 million increase in the loss from loan servicing activities;
- A $0.8 million decline in net interest income; and
- A $0.5 million decline in the reversal of provision for loan losses.
Those unfavorable items were partially offset by:
- A $5.8 million increase in gains from sales of loans and mortgage-backed securities;
- A $2.3 million increase in loan and deposit related fees;
- A $1.1 million increase in income from real estate and joint ventures held for investment;
- A $0.6 million increase in gains from trading securities; and
- A $0.5 million sales tax refund.
For the first six months of 2003, net income totaled $48.7 million or $1.74 per share on a diluted basis, down from $57.8 million or $2.04 per share for the first six months of 2002.
Net Interest Income
Net interest income totaled $74.3 million in the second quarter of 2003, down $0.8 million or 1.1% between second quarters. Interest-earning assets, which averaged $11.0 billion in the current quarter, were up 4.9% from a year ago. The favorable impact of higher interest-earning assets was more than offset by a decline in the effective interest rate spread. The effective interest rate spread averaged 2.70% in the second quarter, down from 2.86% a year ago and down from 2.87% in the first quarter of 2003. The decline between second quarters was due to the yield on interest-earning assets declining more than the cost of funds, as more assets repriced to current lower interest rate levels than did liabilities.
For the first six months of 2003, net interest income totaled $155.3 million, up $0.2 million from a year ago.
Provision for Loan Losses
During the current quarter, $0.6 million of provision for loan losses was reversed, compared to a reversal of $1.1 million in the year-ago second quarter. The current quarter reversal reflected an improvement in credit quality. The allowance for loan losses was $32 million at June 30, 2003, compared to $35 million at year-end 2002. Net charge-offs totaled $0.2 million in the second quarter of 2003, compared to $0.4 million a year-ago.
For the first six months of 2003, $2.3 million of provision for loan losses was reversed and net charge-offs were $0.4 million. That compares to a provision for loan losses of $0.3 million and net charge-offs of $0.6 million in the year-ago period.
Other Income
Other income totaled $8.4 million in the second quarter, up from $4.1 million a year ago. Contributing to the $4.3 million increase between second quarters was:
- A $5.8 million increase in net gains from sales of loans and mortgage-backed securities. The second quarter net gain totaled $12.7 million, including a $2.9 million loss due to the SFAS 133 impact of valuing derivatives associated with the sale of loans. Excluding the impact of SFAS 133, a gain equal to 0.75% of secondary market sales was realized which compares favorably to the year-ago gain of 0.68%.
- A $2.3 million increase in loan and deposit related fees.
- A $1.1 million increase in income from real estate and joint ventures held for investment due primarily to higher gains from sales.
- A $0.6 million increase in gains from trading securities, which served as a partial hedge against mortgage servicing rights.
- A $0.5 million sales tax refund related to the lending activities of Downey Auto Finance, a former subsidiary that was sold in 2000.
Those increases in other income were partially offset by a $6.1 million increase in the loss from loan servicing to $21.7 million. Negatively impacting loan servicing between second quarters were increases of $6.7 million in the amortization of mortgage servicing rights and $3.0 million in payoff and curtailment interest costs. Those unfavorable items were partially offset by a $2.5 million reduction in the addition to the valuation allowance for mortgage servicing rights and a $1.1 million increase in net cash servicing fees. During the current quarter, $13.2 million was added to the valuation allowance for mortgage servicing rights. This addition reflected higher actual loan prepayments during the second quarter than originally projected as well as a higher projected rate at which loans we service for others are expected to prepay in the future, thereby shortening their expected average life. At June 30, 2003, mortgage servicing rights, net of a $41 million valuation allowance, totale d $49 million or 0.55% of the $8.9 billion of associated loans serviced for others.
For the first six months of 2003, other income totaled $30.3 million, down $5.1 million from a year ago.
Operating Expense
Operating expense totaled $51.3 million in the current quarter, up $6.2 million or 13.8% from the second quarter of 2002, due primarily to higher general and administrative expense associated with an increased number of branch locations and the continued high level of lending activity.
For the first six months of 2003, operating expense totaled $103.5 million, up $13.4 million or 14.9% from a year ago.
Assets, Loan Originations and Deposits
At June 30, 2003, assets totaled $11.9 billion, up 7.3% from a year ago but virtually unchanged from year-end 2002. Continued low interest rates caused refinance activity to remain high, as borrowers were attracted to low fixed rate mortgages. As a result, loan repayments exceeded portfolio originations and loans held for investment declined $273 million since year end. That decline, however, was essentially offset by increases of $202 million in trading securities and $70 million in loans held for sale. During the quarter, the single family unfunded loan application pipeline increased 14.3% to $3.0 billion, of which 73% represented applications for loans expected to be sold in the secondary markets.
Single family loan originations (including purchases) totaled $3.448 billion in the second quarter of 2003, up from the $2.179 billion in the second quarter of 2002. Single family loans originated for sale increased $1.096 billion to $2.161 billion reflecting continued borrower interest in low fixed rate loans, while single family loans originated for portfolio increased by $173 million to $1.287 billion. Of the current quarter total originated for portfolio, $64 million represented subprime credits. At quarter end, the subprime portfolio totaled $1.2 billion, with an average loan-to-value ratio at origination of 74% and, of the total, 89% represented "A-" credits. In addition to single family loans, $78 million of other loans were originated in the quarter.
Deposits totaled $8.9 billion at June 30, 2003, up 2.4% from the year-ago level, but down 3.7% from year-end 2002. During the quarter, five new in-store branches were opened, one being the first in-store branch in Arizona. This brings the total number of branches to 170, of which 167 are in California and three are in Arizona. At quarter end, the average deposit size of our 72 traditional branches was $103 million, while the average deposit size of our 98 in-store branches was $15 million ($18 million excluding the 20 new in-store branches opened within the past 12 months).
Non-Performing Assets
Non-performing assets declined $9 million during the quarter to $66 million, or 0.56% of total assets compared to 0.67% at year-end 2002. The decline during the quarter reflected decreases of $5 million in prime residential loans and $4 million in subprime residential loans.
Regulatory Capital Ratios
At March 31, 2003, Downey Financial Corp.’s primary subsidiary, Downey Savings and Loan Association, F.A., had core and tangible capital ratios of 7.20% and a risk-based capital ratio of 14.23%. These capital levels were well above the "well capitalized" standards of 5% and 10%, respectively, as defined by regulation.
Certain statements in this release may constitute "forward looking statements" under the Private Securities Litigation Reform Act of 1995, which involve risk and uncertainties. Downey’s actual results may differ significantly from the results discussed in such forward-looking statements. Factors that might cause such a difference include, but are not limited to, economic conditions, competition in the geographic and business areas in which Downey conducts its operations, fluctuations in interest rates, credit quality and government regulation.
For further information contact: Thomas E. Prince, Executive Vice President and Chief Financial Officer at (949)509-4440.
Earnings Release and Table Listing
DOWNEY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | June 30, |
(Dollars in Thousands, Except Per Share Data) | 2003 | 2002 | 2002 |
|
Assets | | | | | | | | | |
Cash | $ | 136,423 | | $ | 123,524 | | $ | 117,788 | |
Federal funds | | 89,210 | | | 2,555 | | | 16,401 | |
|
| Cash and cash equivalents | | 225,633 | | | 126,079 | | | 134,189 | |
Trading securities, at fair value | | 201,781 | | | - | | | - | |
U.S. Treasury securities, agency obligations and other investment | | | | | | | | | |
| securities available for sale, at fair value | | 276,904 | | | 457,797 | | | 292,832 | |
Municipal securities held to maturity, at amortized cost (estimated | | | | | | | | | |
| fair value of $6,202 at June 30, 2003 and December 31, 2002, | | | | | | | | | |
| and $6,373 at June 30, 2002) | | 6,215 | | | 6,216 | | | 6,387 | |
Loans and securities purchased under resale agreements | | 60,000 | | | - | | | - | |
Loans held for sale, at lower of cost or fair value | | 721,929 | | | 652,052 | | | 381,465 | |
Mortgage-backed securities available for sale, at fair value | | 1,736 | | | 2,253 | | | 58,122 | |
Loans receivable held for investment | | 10,049,361 | | | 10,322,637 | | | 9,846,446 | |
Investments in real estate and joint ventures | | 36,297 | | | 33,890 | | | 40,283 | |
Real estate acquired in settlement of loans | | 9,464 | | | 12,360 | | | 13,528 | |
Premises and equipment | | 113,434 | | | 113,536 | | | 113,417 | |
Federal Home Loan Bank stock, at cost | | 120,517 | | | 117,563 | | | 114,452 | |
Mortgage servicing rights, net | | 48,722 | | | 57,729 | | | 59,771 | |
Other assets | | 75,557 | | | 76,039 | | | 69,536 | |
|
| $ | 11,947,550 | | $ | 11,978,151 | | $ | 11,130,428 | |
|
Liabilities and Stockholders’ Equity | | | | | | | | | |
Deposits | $ | 8,895,452 | | $ | 9,238,350 | | $ | 8,690,558 | |
Federal Home Loan Bank advances and other borrowings | | 1,675,971 | | | 1,624,084 | | | 1,413,607 | |
Company obligated mandatorily redeemable capital securities of | | | | | | | | | |
| subsidiary trust holding solely junior subordinated debentures | | | | | | | | | |
| of the Company ("Capital Securities") | | 120,000 | | | 120,000 | | | 120,000 | |
Accounts payable and accrued liabilities | | 303,921 | | | 102,533 | | | 64,709 | |
Deferred income taxes | | 82,841 | | | 70,080 | | | 54,118 | |
|
| Total liabilities | | 11,078,185 | | | 11,155,047 | | | 10,342,992 | |
|
Stockholders’ equity: | | | | | | | | | |
Preferred stock, par value of $0.01 per share; authorized 5,000,000 | | | | | | | | | |
| shares; outstanding none | | - | | | - | | | - | |
Common stock, par value of $0.01 per share; authorized 50,000,000 | | | | | | | | | |
| shares; issued 28,235,022 shares at June 30, 2003, December 31, 2002, | | | | | | | | | |
| and June 30, 2002 | | 282 | | | 282 | | | 282 | |
Additional paid-in capital | | 93,792 | | | 93,792 | | | 93,792 | |
Accumulated other comprehensive income (loss) | | 1,135 | | | (1,422 | ) | | 236 | |
Retained earnings | | 786,326 | | | 742,622 | | | 693,126 | |
Treasury stock, at cost, 306,300 shares at June 30, 2003 and | | | | | | | | | |
| December 31, 2002 | | (12,170 | ) | | (12,170 | ) | | - | |
|
| Total stockholders’ equity | | 869,365 | | | 823,104 | | | 787,436 | |
|
| $ | 11,947,550 | | $ | 11,978,151 | | $ | 11,130,428 | |
|
Earnings Release and Table Listing
DOWNEY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
| Three Months Ended | Six Months Ended |
| June 30, | June 30, |
|
|
(Dollars in Thousands, Except Per Share Data) | 2003 | 2002 | 2003 | 2002 |
|
Interest income | | | | | | | | | | | | |
Loans receivable | $ | 130,884 | | $ | 148,448 | | $ | 273,373 | | $ | 308,725 | |
U.S. Treasury securities and agency obligations | | 1,886 | | | 2,163 | | | 5,023 | | | 5,196 | |
Mortgage-backed securities | | 19 | | | 942 | | | 35 | | | 2,216 | |
Other investments | | 1,485 | | | 1,872 | | | 3,140 | | | 3,686 | |
|
| Total interest income | | 134,274 | | | 153,425 | | | 281,571 | | | 319,823 | |
|
Interest expense | | | | | | | | | | | | |
Deposits | | 42,369 | | | 60,397 | | | 90,219 | | | 128,756 | |
Borrowings | | 14,559 | | | 14,859 | | | 29,976 | | | 29,912 | |
Capital securities | | 3,041 | | | 3,041 | | | 6,082 | | | 6,082 | |
|
| Total interest expense | | 59,969 | | | 78,297 | | | 126,277 | | | 164,750 | |
|
Net interest income | | 74,305 | | | 75,128 | | | 155,294 | | | 155,073 | |
Provision for (reduction of) loan losses | | (624 | ) | | (1,106 | ) | | (2,333 | ) | | 341 | |
|
| Net interest income after provision for (reduction of) loan losses | | 74,929 | | | 76,234 | | | 157,627 | | | 154,732 | |
|
Other income, net | | | | | | | | | | | | |
Loan and deposit related fees | | 13,649 | | | 11,396 | | | 25,627 | | | 22,914 | |
Real estate and joint ventures held for investment, net | | 2,069 | | | 1,016 | | | 3,012 | | | 4,013 | |
Secondary marketing activities: | | | | | | | | | | | | |
| Loan servicing loss, net | | (21,692 | ) | | (15,617 | ) | | (35,378 | ) | | (16,205 | ) |
| Net gains on sales of loans and mortgage-backed securities | | 12,652 | | | 6,896 | | | 32,415 | | | 23,097 | |
| Net gains on sales of mortgage servicing rights | | 18 | | | 12 | | | 23 | | | 306 | |
Net gains on trading securities | | 591 | | | - | | | 591 | | | - | |
Net gains on sales of investment securities | | - | | | 19 | | | 8 | | | 209 | |
Litigation award | | 265 | | | - | | | 2,717 | | | - | |
Other | | 845 | | | 380 | | | 1,331 | | | 1,121 | |
|
| Total other income, net | | 8,397 | | | 4,102 | | | 30,346 | | | 35,455 | |
|
Operating expense | | | | | | | | | | | | |
Salaries and related costs | | 33,028 | | | 28,315 | | | 67,154 | | | 57,752 | |
Premises and equipment costs | | 7,971 | | | 7,754 | | | 15,684 | | | 14,887 | |
Advertising expense | | 1,016 | | | 1,582 | | | 1,809 | | | 2,626 | |
SAIF insurance premiums and regulatory assessments | | 825 | | | 762 | | | 1,656 | | | 1,548 | |
Professional fees | | 418 | | | 233 | | | 1,046 | | | 797 | |
Other general and administrative expense | | 8,111 | | | 6,350 | | | 16,004 | | | 12,561 | |
|
| Total general and administrative expense | | 51,369 | | | 44,996 | | | 103,353 | | | 90,171 | |
Net operation of real estate acquired in settlement of loans | | (111 | ) | | 27 | | | 186 | | | (31 | ) |
|
| Total operating expense | | 51,258 | | | 45,023 | | | 103,539 | | | 90,140 | |
|
Income before income taxes | | 32,068 | | | 35,313 | | | 84,434 | | | 100,047 | |
Income taxes | | 13,553 | | | 14,938 | | | 35,702 | | | 42,294 | |
|
| Net income | $ | 18,515 | | $ | 20,375 | | $ | 48,732 | | $ | 57,753 | |
|
PER SHARE INFORMATION | | | | | | | | | | | | |
|
Basic | $ | 0.66 | | $ | 0.72 | | $ | 1.74 | | $ | 2.04 | |
|
Diluted | $ | 0.66 | | $ | 0.72 | | $ | 1.74 | | $ | 2.04 | |
|
Cash dividends declared and paid | $ | 0.09 | | $ | 0.09 | | $ | 0.18 | | $ | 0.18 | |
|
Weighted average diluted shares outstanding | 27,970,022 | | 28,284,493 | | 27,968,194 | | 28,277,833 | |
|
Earnings Release and Table Listing
DOWNEY FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
| Three Months Ended | Six Months Ended |
| June 30, | June 30, |
|
|
(Dollars in Thousands) | 2003 | 2002 | 2003 | 2002 |
|
Net income by business segment | | | | | | | | | | | | |
Banking | $ | 17,145 | | $ | 19,790 | | $ | 46,650 | | $ | 55,411 | |
Real estate investment | | 1,370 | | | 585 | | | 2,082 | | | 2,342 | |
|
| Total net income | $ | 18,515 | | $ | 20,375 | | $ | 48,732 | | $ | 57,753 | |
|
| | | | | | | | | | | | |
Selected financial ratios | | | | | | | | | | | | |
Effective interest rate spread | | 2.70 | % | | 2.86 | % | | 2.78 | % | | 2.95 | % |
Efficiency ratio(a) | | 63.92 | | | 57.54 | | | 57.45 | | | 48.40 | |
Return on average assets | | 0.65 | | | 0.75 | | | 0.84 | | | 1.06 | |
Return on average equity | | 8.64 | | | 10.51 | | | 11.49 | | | 15.16 | |
|
| | | | | | | | | | | | |
Asset activity | | | | | | | | | | | | |
Loans for investment portfolio: (b) | | | | | | | | | | | | |
| Originations: | | | | | | | | | | | | |
| | Residential one-to-four units | $ | 1,223,368 | | $ | 964,100 | | $ | 1,929,628 | | $ | 1,849,195 | |
| | Residential one-to-four units — subprime | | 63,976 | | | 149,822 | | | 140,464 | | | 257,156 | |
| | All other | | 78,407 | | | 119,970 | | | 129,562 | | | 165,722 | |
| Repayments | | (1,352,321 | ) | | (950,438 | ) | | (2,479,933 | ) | | (1,893,249 | ) |
| | | | | | | | | | | | |
Loans originated for sale portfolio(b) | | 2,161,154 | | | 1,065,360 | | | 3,768,301 | | | 2,331,790 | |
| | | | | | | | | | | | |
Loans and mortgage-backed securities sold(c) | | (2,078,371 | ) | | (1,093,454 | ) | | (3,702,537 | ) | | (2,474,903 | ) |
| | | | | | | | | | | | |
Increase (decrease) in loans (including | | | | | | | | | | | | |
| mortgage-backed securities) | | 97,469 | | | 197,920 | | | (203,916 | ) | | 153,620 | |
| | | | | | | | | | | | |
Increase (decrease) in assets | | 509,627 | | | 217,316 | | | (30,601 | ) | | 25,398 | |
| | | | | | | | | | | | |
Increase (decrease) in deposits | | (102,106 | ) | | 91,668 | | | (342,898 | ) | | 70,992 | |
| | | | | | | | | | | | |
Increase (decrease) in borrowings | | 375,121 | | | 93,221 | | | 51,887 | | | (109,105 | ) |
|
Earnings Release and Table Listing
| June 30, | December 31, | June 30, |
| 2003 | 2002 | 2002 |
|
Capital ratios (Bank only) | | | | | | | | | |
Tangible | | 7.20 | % | | 6.92 | % | | 7.51 | % |
Core | | 7.20 | | | 6.92 | | | 7.51 | |
Risk-based | | 14.23 | | | 14.08 | | | 15.16 | |
| | | | | | | | | |
Book value per share | $ | 31.13 | | $ | 29.47 | | $ | 27.89 | |
| | | | | | | | | |
Number of branches including in-store locations | | 170 | | | 165 | | | 148 | |
|
(a) The amount of general and administrative expense incurred for each $1 of net interest income plus other income, except for income associated with real estate held for investment, litigation award and investment securities gains or losses.
(b) Includes loans purchased.
(c) Includes $2.7 million of non-mortgage commercial loans.
Earnings Release and Table Listing
DOWNEY FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL DATA – (Continued)
| Three Months Ended June 30, |
|
|
| 2003 | | 2002 |
|
|
| | | | Average | | | | | | Average | |
| Average | | | Yield/ | | | Average | | | Yield/ | |
(Dollars in Thousands) | Balance | | Interest | Rate | | | Balance | | Interest | Rate | |
|
Average balance sheet data | | | | | | | | | | | | |
Interest-earning assets: | | | | | | | | | | | | |
| Loans | $ | 10,517,236 | $ | 130,884 | 4.98 | % | $ | 10,035,071 | $ | 148,448 | 5.92 | % |
| Mortgage-backed securities | | 1,802 | | 19 | 4.22 | | | 80,873 | | 942 | 4.66 | |
| Investment and trading securities | | 492,782 | | 3,371 | 2.74 | | | 385,738 | | 4,035 | 4.20 | |
|
| | Total interest-earning assets | | 11,011,820 | | 134,274 | 4.88 | | | 10,501,682 | | 153,425 | 5.84 | |
Non-interest-earning assets | | 408,167 | | | | | | 392,072 | | | | |
|
| Total assets | $ | 11,419,987 | | | | | $ | 10,893,754 | | | | |
|
Transaction accounts: | | | | | | | | | | | | |
| Non-interest-bearing checking | $ | 402,183 | $ | - | - | % | $ | 295,568 | $ | - | - | % |
| Interest-bearing checking(a) | | 439,909 | | 283 | 0.26 | | | 425,609 | | 329 | 0.31 | |
| Money market | | 127,162 | | 355 | 1.12 | | | 113,231 | | 503 | 1.78 | |
| Regular passbook | | 3,896,717 | | 13,253 | 1.36 | | | 2,962,758 | | 18,543 | 2.51 | |
|
| | Total transaction accounts | | 4,865,971 | | 13,891 | 1.15 | | | 3,797,166 | | 19,375 | 2.05 | |
Certificates of deposit | | 4,018,803 | | 28,478 | 2.84 | | | 4,763,479 | | 41,022 | 3.45 | |
|
| Total deposits | | 8,884,774 | | 42,369 | 1.91 | | | 8,560,645 | | 60,397 | 2.83 | |
Borrowings | | 1,384,203 | | 14,559 | 4.22 | | | 1,299,644 | | 14,859 | 4.59 | |
Capital securities | | 120,000 | | 3,041 | 10.14 | | | 120,000 | | 3,041 | 10.14 | |
|
| Total deposits, borrowings and capital securities | | 10,388,977 | | 59,969 | 2.32 | | | 9,980,289 | | 78,297 | 3.15 | |
Other liabilities | | 173,404 | | | | | | 137,735 | | | | |
Stockholders’ equity | | 857,606 | | | | | | 775,730 | | | | |
|
| Total liabilities and stockholders’ equity | $ | 11,419,987 | | | | | $ | 10,893,754 | | | | |
|
Net interest income/interest rate spread | | | $ | 74,305 | 2.56 | % | | | $ | 75,128 | 2.69 | % |
Excess of interest-earning assets over deposits, | | | | | | | | | | | | |
| borrowings and capital securities | $ | 622,843 | | | | | $ | 521,393 | | | | |
Effective interest rate spread | | | | | 2.70 | | | | | | 2.86 | |
|
| Six Months Ended June 30, | |
|
|
Interest-earning assets: | | | | | | | | | | | | |
| Loans | $ | 10,638,317 | $ | 273,373 | 5.14 | % | $ | 10,004,439 | $ | 308,725 | 6.17 | % |
| Mortgage-backed securities | | 1,907 | | 35 | 3.67 | | | 93,624 | | 2,216 | 4.73 | |
| Investment and trading securities | | 515,083 | | 8,163 | 3.20 | | | 425,093 | | 8,882 | 4.21 | |
|
| | Total interest-earning assets | | 11,155,307 | | 281,571 | 5.05 | | | 10,523,156 | | 319,823 | 6.08 | |
Non-interest-earning assets | | 405,916 | | | | | | 395,318 | | | | |
|
| Total assets | $ | 11,561,223 | | | | | $ | 10,918,474 | | | | |
|
Transaction accounts: | | | | | | | | | | | | |
| Non-interest-bearing checking | $ | 393,135 | $ | - | - | % | $ | 290,362 | $ | - | - | % |
| Interest-bearing checking(a) | | 432,860 | | 582 | 0.27 | | | 425,386 | | 744 | 0.35 | |
| Money market | | 125,678 | | 769 | 1.23 | | | 111,973 | | 1,010 | 1.82 | |
| Regular passbook | | 3,830,620 | | 28,082 | 1.48 | | | 2,702,876 | | 33,936 | 2.53 | |
|
| | Total transaction accounts | | 4,782,293 | | 29,433 | 1.24 | | | 3,530,597 | | 35,690 | 2.04 | |
Certificates of deposit | | 4,147,842 | | 60,786 | 2.96 | | | 5,011,329 | | 93,066 | 3.75 | |
|
| Total deposits | | 8,930,135 | | 90,219 | 2.04 | | | 8,541,926 | | 128,756 | 3.04 | |
Borrowings | | 1,491,649 | | 29,976 | 4.05 | | | 1,362,761 | | 29,912 | 4.43 | |
Capital securities | | 120,000 | | 6,082 | 10.14 | | | 120,000 | | 6,082 | 10.14 | |
|
| Total deposits, borrowings and capital securities | | 10,541,784 | | 126,277 | 2.42 | | | 10,024,687 | | 164,750 | 3.31 | |
Other liabilities | | 171,317 | | | | | | 131,929 | | | | |
Stockholders’ equity | | 848,122 | | | | | | 761,858 | | | | |
|
| Total liabilities and stockholders’ equity | $ | 11,561,223 | | | | | $ | 10,918,474 | | | | |
|
Net interest income/interest rate spread | | | $ | 155,294 | 2.63 | % | | | $ | 155,073 | 2.77 | % |
Excess of interest-earning assets over deposits, | | | | | | | | | | | | |
| borrowings and capital securities | $ | 613,523 | | | | | $ | 498,469 | | | | |
Effective interest rate spread | | | | | 2.78 | | | | | | 2.95 | |
|
(a) Included amounts swept into money market deposit accounts.
Earnings Release and Table Listing
DOWNEY FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL DATA – (Continued)
| Three Months Ended | Six Months Ended |
| June 30, | June 30, |
|
|
(Dollars in Thousands) | 2003 | 2002 | 2003 | 2002 |
|
Loan and deposit related fees | | | | | | | | | | | | |
Loan related fees: | | | | | | | | | | | | |
| Prepayment fees | $ | 4,291 | | $ | 4,140 | | $ | 7,704 | | $ | 8,826 | |
| Other fees | | 2,925 | | | 1,992 | | | 5,499 | | | 4,159 | |
Deposit related fees: | | | | | | | | | | | | |
| Automated teller machine fees | | 2,180 | | | 1,668 | | | 4,266 | | | 3,211 | |
| Other fees | | 4,253 | | | 3,596 | | | 8,158 | | | 6,718 | |
|
| | Total loan and deposit related fees | $ | 13,649 | | $ | 11,396 | | $ | 25,627 | | $ | 22,914 | |
|
Net gains (losses) on sales of loans and mortgage-backed | | | | | | | | | | | | |
| securities | | | | | | | | | | | | |
Mortgage servicing rights | $ | 15,405 | | $ | 10,156 | | $ | 30,359 | | $ | 25,153 | |
All other components excluding SFAS 133 | | 183 | | | (2,870 | ) | | 5,131 | | | (6,530 | ) |
SFAS 133 | | (2,936 | ) | | (390 | ) | | (3,075 | ) | | 4,474 | |
|
| Total net gains on sales of loans and | | | | | | | | | | | | |
| | mortgage-backed securities | $ | 12,652 | | $ | 6,896 | | $ | 32,415 | | $ | 23,097 | |
|
Secondary marketing gain excluding SFAS 133 as a | | | | | | | | | | | | |
| percentage of associated sales | | 0.75 | % | | 0.68 | % | | 0.96 | % | | 0.76 | % |
|
Loan servicing income (loss), net | | | | | | | | | | | | |
Net cash servicing fees | $ | 5,117 | | $ | 4,020 | | $ | 10,133 | | $ | 7,474 | |
Payoff and curtailment interest cost(a) | | (3,620 | ) | | (671 | ) | | (6,145 | ) | | (1,437 | ) |
Amortization of MSRs | | (9,951 | ) | | (3,253 | ) | | (14,722 | ) | | (6,169 | ) |
Provision for impairment of MSRs | | (13,238 | ) | | (15,713 | ) | | (24,644 | ) | | (16,073 | ) |
|
| Total loan servicing loss, net | $ | (21,692 | ) | $ | (15,617 | ) | $ | (35,378 | ) | $ | (16,205 | ) |
|
Mortgage servicing rights activity | | | | | | | | | | | | |
Gross balance at beginning of period | $ | 92,178 | | $ | 74,914 | | $ | 90,584 | | $ | 65,630 | |
Additions | | 15,405 | | | 10,156 | | | 30,359 | | | 25,153 | |
Amortization | | (9,951 | ) | | (3,253 | ) | | (14,722 | ) | | (6,169 | ) |
Sales | | - | | | - | | | - | | | (35 | ) |
Impairment write-down | | (7,684 | ) | | (717 | ) | | (16,273 | ) | | (3,479 | ) |
|
| Gross balance at end of period | | 89,948 | | | 81,100 | | | 89,948 | | | 81,100 | |
|
Allowance balance at beginning of period | | 35,672 | | | 6,333 | | | 32,855 | | | 8,735 | |
Provision for impairment | | 13,238 | | | 15,713 | | | 24,644 | | | 16,073 | |
Impairment write-down | | (7,684 | ) | | (717 | ) | | (16,273 | ) | | (3,479 | ) |
|
| Allowance balance at end of period | | 41,226 | | | 21,329 | | | 41,226 | | | 21,329 | |
|
| | Total mortgage servicing rights, net | $ | 48,722 | | $ | 59,771 | | $ | 48,722 | | $ | 59,771 | |
|
As a percentage of associated mortgage loans | | 0.55 | % | | 0.88 | % | | 0.55 | % | | 0.88 | % |
Estimated fair value(b) | $ | 48,722 | | $ | 59,771 | | $ | 48,722 | | $ | 59,771 | |
Weighted average expected life (in months) | | 31 | | | 61 | | | 31 | | | 61 | |
Custodial account earnings rate | | 1.26 | % | | 3.82 | % | | 1.26 | % | | 3.82 | % |
Weighted average discount rate | | 7.47 | | | 9.10 | | | 7.47 | | | 9.10 | |
|
Earnings Release and Table Listing
| June 30, | December 31, | June 30, |
(Dollars in Thousands) | 2003 | 2002 | 2002 |
|
Mortgage loans serviced for others | | | | | | | | | |
Total | $ | 8,980,037 | | $ | 8,316,236 | | $ | 6,962,403 | |
With capitalized mortgage servicing rights: (b) | | | | | | | | | |
| Amount | | 8,916,259 | | | 8,036,393 | | | 6,807,306 | |
| Weighted average interest rate | | 6.12 | % | | 6.51 | % | | 6.80 | % |
|
Custodial escrow balances | $ | 16,527 | | $ | 15,243 | | $ | 13,044 | |
|
(a) Represents Downey contractual obligation to pay interest at the borrower’s loan rate from the date the loan is repaid until the funds are remitted to the investor. This does not include the benefit of the use of repaid loan funds to reduce borrowings and its associated interest expense, which is reported in net interest income.
(b) The estimated fair value may exceed book value for certain asset strata and excluded loans sold or securitized prior to 1996 and loans temporarily sub-serviced without capitalized mortgage servicing rights.
Earnings Release and Table Listing
DOWNEY FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL DATA – (Continued)
| June 30, | December 31, | June 30, |
(Dollars in Thousands) | 2003 | 2002 | 2002 |
|
Loans held for investment | | | | | | | | | |
Loans secured by real estate: | | | | | | | | | |
| Residential one-to-four units | $ | 8,544,276 | | $ | 8,647,197 | | $ | 8,122,908 | |
| Residential one-to-four units — subprime | | 1,196,162 | | | 1,386,113 | | | 1,417,915 | |
|
| | Total residential one-to-four units | | 9,740,438 | | | 10,033,310 | | | 9,540,823 | |
| Residential five or more units | | 43,255 | | | 10,640 | | | 8,727 | |
| Commercial real estate | | 53,031 | | | 71,415 | | | 81,722 | |
| Construction | | 105,858 | | | 103,547 | | | 124,318 | |
| Land | | 20,090 | | | 53,538 | | | 62,182 | |
Non-mortgage: | | | | | | | | | |
| Commercial | | 6,493 | | | 15,021 | | | 17,371 | |
| Automobile | | 6,959 | | | 11,641 | | | 17,667 | |
| Other consumer | | 68,012 | | | 56,782 | | | 50,101 | |
|
| | Total loans held for investment | | 10,044,136 | | | 10,355,894 | | | 9,902,911 | |
Increase (decrease) for: | | | | | | | | | |
| Undisbursed loan funds and net deferred costs and premiums | | 37,472 | | | 1,742 | | | (20,631 | ) |
| Allowance for losses | | (32,247 | ) | | (34,999 | ) | | (35,834 | ) |
|
| | Total loans held for investment, net | $ | 10,049,361 | | $ | 10,322,637 | | $ | 9,846,446 | |
|
| | | | | | | | | |
Loans held for sale, net | | | | | | | | | |
Residential one-to-four units | $ | 716,477 | | $ | 649,964 | | $ | 39,796 | |
Capitalized basis adjustment(a) | | 5,452 | | | 2,088 | | | 1,669 | |
|
| Total loans held for sale | $ | 721,929 | | $ | 652,052 | | $ | 381,465 | |
|
| | | | | | | | | |
Delinquent loans | | | | | | | | | |
30-59 days | $ | 22,444 | | $ | 28,998 | | $ | 31,729 | |
60-89 days | | 9,866 | | | 14,070 | | | 9,914 | |
90+ days(b) | | 42,448 | | | 51,845 | | | 52,362 | |
|
| Total delinquent loans | $ | 74,758 | | $ | 94,913 | | $ | 94,005 | |
|
Delinquencies as a percentage of total loans | | 0.69 | % | | 0.86 | % | | 0.91 | % |
|
| | | | | | | | | |
Non-performing assets | | | | | | | | | |
Non-accrual loans: | | | | | | | | | |
| Residential one-to-four units | $ | 29,758 | | $ | 34,504 | | $ | 33,827 | |
| Residential one-to-four units — subprime | | 26,568 | | | 32,263 | | | 31,540 | |
| Other | | 646 | | | 681 | | | 4,305 | |
|
| | Total non-accrual loans | | 56,972 | | | 67,448 | | | 69,672 | |
Troubled debt restructure — below market rate(c) | | - | | | - | | | 203 | |
Real estate acquired in settlement of loans | | 9,464 | | | 12,360 | | | 13,528 | |
Repossessed automobiles | | 3 | | | 6 | | | 16 | |
|
| Total non-performing assets | $ | 66,439 | | $ | 79,814 | | $ | 83,419 | |
|
Non-performing assets as a percentage of total assets | | 0.56 | % | | 0.67 | % | | 0.75 | % |
|
(a) Reflects the change in fair value of the rate lock derivative from the date of commitment to the date of funding.
(b) All 90 day or greater delinquencies are on non-accrual status and reported as part of non-performing assets.
(c) Represents one residential one-to-four unit loan.
Note: Certain prior period amounts have been reclassified to conform to the current presentation.