Downey Financial 8-K Earnings Release and Table Listing

EXHIBIT 99.1

Table of Contents

Earnings Release and Table Listing

• Earnings Release Narrative
• Consolidated Balance Sheets
• Consolidated Statements of Income
• Selected Financial Data
  • Net income by business segment
  • Selected financial ratios
  • Asset activity
  • Capital ratios (Bank only)
  • Book value per share
  • Number of branches including in-store locations
  • Average balance sheet data
  • Loan and deposit related fees
  • Net gains (losses) on sales of loans and mortgage-backed securities
  • Loan servicing income (loss), net
  • Mortgage servicing rights activity
  • Mortgage loans serviced for others
  • Loans held for investment
  • Loans held for sale, net
  • Delinquent loans
  • Non-performing assets

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 50% INCREASE IN SECOND QUARTER EARNINGS

          Newport Beach, California - July 19, 2004 - Downey Financial Corp. (NYSE: DSL) reported that net income for the second quarter of 2004 totaled $27.8 million or $0.99 per share on a diluted basis, up 50.3% from $18.5 million or $0.66 per share in the year-ago second quarter. No shares of common stock were repurchased during the current quarter, and $38 million of the previously announced $50 million authorization remains available for future share repurchases.

          The increase in net income between second quarters primarily reflected:

• A $35.5 million improvement in loan servicing income reflecting a positive change in both provision for impairment and amortization of mortgage servicing rights;
• A $5.0 million increase in income from real estate and joint ventures held for investment due primarily to higher gains from sales;
• A $3.0 million increase in net gains on sales of loans and mortgage-backed securities due primarily to a favorable change in the SFAS 133 impact of valuing derivatives associated with the sale of loans; and
• A $2.4 million increase in net interest income due to higher average interest-earning assets.

Those positive factors were partially offset by:

• A $21.9 million unfavorable change in securities gains/losses (both investment and trading) that were acquired as a partial economic hedge against value changes of mortgage servicing rights;
• A $6.0 million increase in operating expense primarily reflecting higher salaries and related costs; and
• A $2.1 million increase in provision for loan losses primarily reflecting growth in the loan portfolio during the current quarter.

          For the first six months of 2004, net income totaled $36.7 million or $1.31 per share on a diluted basis, down from $48.7 million or $1.74 for the first six months of 2003.

          Marangal I. Domingo, President and Chief Executive Officer, commented, "We continue to experience strong loan growth this year, as borrower preference switched towards the end of 2003 from fixed rate to adjustable rate loans. Since year end, our loan portfolio has increased by 22% and that growth is benefiting our net interest income. Given our record production of portfolio loans and current outlook for continued strong demand, we will sell, to the extent necessary, some of our production of adjustable rate loans into the secondary market to manage the balance sheet to remain in compliance with our regulatory capital requirements."

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          Mr. Domingo continued by stating, "Towards the end of the second quarter, we issued $200 million of 10-year senior notes. A portion of the net proceeds from that issue will be used to redeem all of our outstanding junior subordinated debentures. As a result, we will annually save about $4.2 million of interest expense. However, since the debentures are being redeemed prior to their maturity, we will need to write-off approximately $4.1 million of deferred issuance costs in the third quarter. The balance of the net proceeds from the senior debt issue are being used for general corporate purposes and may include in the future capital contributions to the Bank."

Net Interest Income

          Net interest income totaled $76.6 million in the second quarter of 2004, up $2.4 million or 3.2% between second quarters. The increase reflected higher interest-earning assets, which averaged $12.963 billion in the current quarter, up 17.7% from a year ago. The effective interest rate spread averaged 2.36% in the current quarter, down from 2.70% a year ago. The decline between second quarters was due to the yield on interest-earning assets declining more rapidly than the cost of funds. The more rapid decline in the yield on interest-earning assets primarily reflected a positive interest rate gap (i.e., more interest-earning assets reprice to market interest rates within one year than do interest-bearing liabilities). In addition, the decline in the effective interest rate spread also reflected a higher proportion of MTA ARMs that currently have lower fully-indexed yields than COFI ARMs and a lower percentage of higher yielding subprime loans.

          For the first six months of 2004, net interest income totaled $146.0 million, down $9.1 million from a year ago.

Provision for Loan Losses

          During the current quarter, provision for loan losses totaled $1.5 million, compared to a $0.6 million reversal in the year-ago second quarter. The higher provision was due to growth in the loan portfolio, whereas the reversal a year ago primarily reflected an improvement in credit quality. The allowance for loan losses was $33 million at June 30, 2004, compared to $30 million at year-end 2003 and $32 million at June 30, 2003. Net charge-offs totaled $0.1 million in the second quarter of 2004, compared to $0.2 million in the year-ago quarter.

          For the first six months of 2004, provision for loan losses totaled $3.3 million and net charge-offs were $0.1 million. That compares to a $2.3 million reversal and net charge-offs of $0.4 million in the year-ago period.

Other Income

          Other income totaled $30.2 million in the second quarter of 2004, up $21.7 million from a year ago. Contributing to the increase between second quarters was:

• A $35.5 million improvement in loan servicing income, as income of $13.8 million was recorded in the current quarter, compared to a loss of $21.7 million a year-ago. The primary reason for the improvement was a positive change associated with the valuation allowance for mortgage servicing rights. The current quarter included a $14.3 million reduction of impairment, whereas the year-ago quarter included a provision of $13.2 million. In addition, loan servicing results benefited between second quarters from a decline in the amortization of mortgage servicing rights of $5.9 million due to a decline in prepayment speeds. At June 30, 2004, mortgage servicing rights, net of a $4 million valuation allowance, totaled $92 million or 1.00% of the $9.243 billion of associated loans serviced for others.

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• A $5.0 million increase in income from real estate and joint ventures held for investment. Gains from sales totaled $6.2 million in the current quarter, up $5.0 million from a year ago.
• A $3.0 million increase in net gains from sales of loans and mortgage-backed securities. The increase was primarily due to the SFAS 133 impact of valuing derivatives associated with the sale of loans. The current quarter included a SFAS 133 gain of $3.4 million, whereas the year-ago quarter included a $2.9 million SFAS 133 loss. Excluding the impact of SFAS 133, a gain equal to $12.3 million or 1.08% on secondary marketing sales of $1.139 billion was realized, compared to the year-ago gain of $15.6 million or 0.75% on secondary market sales of $2.078 billion.

Partially offsetting those favorable items was a $21.9 million unfavorable change in securities gains/losses. The current quarter included losses of $21.3 million from sales of investment securities, whereas the year-ago quarter included gains of $0.6 million from trading securities. Both the investment securities and trading securities were originally purchased as a partial economic hedge against value changes of mortgage servicing rights. At March 31, 2004, securities available for sale included $517 million associated with that partial economic hedge. As interest rates began to increase during the current quarter, the price sensitivity of the mortgage servicing rights changed and approximately half of the securities were sold at a loss to reset the hedge. At June 30, 2004, securities available for sale included $239 million, net of an $8 million unrealized loss, associated with the partial economic hedge.

Operating Expense

          Operating expense totaled $57.2 million in the current quarter, up $6.0 million or 11.7% from the second quarter of 2003, due to higher general and administrative expense. The increase was primarily in salaries and related costs, up $4.5 million or 13.8%.

Assets, Loan Originations and Deposits

          At June 30, 2004, assets totaled $14.222 billion, up 19.0% from a year ago and up $2.576 billion or 22.1% from December 31, 2003. During the current quarter, portfolio originations exceeded loan payoffs, resulting in an increase of $1.245 billion in loans held for investment and loans held for sale increased by $132 million. Those increases were partially offset by a decline of $241 million in securities available for sale due primarily to the previously mentioned sale of securities and a decline in other assets, which included a receivable at March 31, 2004, related to securities sold the last day of the first quarter for which proceeds were received the next business day.

          Loan originations (including purchases) totaled a record $3.869 billion in the second quarter of 2004, up from $3.527 billion in the second quarter of 2003. Loans originated for sale declined $882 million to $1.279 billion, while single family loans originated for portfolio increased by $1.102 billion to a quarterly record of $2.390 billion. Of the current quarter total originated for portfolio, $205 million represented subprime credits. At quarter end, the subprime portfolio totaled $1.077 billion, with an average loan-to-value ratio at origination of 72% and, of the total, 93% represented "Alt. A and A-" credits. In addition to single family loans, $200 million of other loans were originated in the quarter.

          Deposits totaled $8.948 billion at June 30, 2004, up 0.6% from the year-ago level and up $654 million or 7.9% since year-end 2003. During the quarter:

• One traditional branch was opened as a replacement for an in-store branch that was closed during first quarter 2004 due to the sale of the grocery store in which it was located;
• One traditional branch was closed due to its consolidation into a nearby branch; and

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• Four in-store branches were closed due to the closure of the grocery stores in which they were located. In the interim, the associated deposits have been moved to other branch locations. Three replacement locations have been identified for these closed branches which are expected to open by October. Previously, a fifth in-store branch was identified for closure due to the closure of the grocery store, but as of yet, no closure date has been established by the grocery chain.

This brings the total number of branches to 167, of which 164 are in California and three are in Arizona. At quarter end, the average deposit size of our 72 traditional branches was $102 million, while the average deposit size of our 95 in-store branches was $17 million.

Non-Performing Assets

          Non-performing assets declined $14 million during the quarter to $40 million, or 0.28% of total assets, compared to 0.42% at year-end 2003. The decline occurred in both prime and subprime single family credits.

Regulatory Capital Ratios

          At June 30, 2004, Downey Financial Corp.’s primary subsidiary, Downey Savings and Loan Association, F.A., had core and tangible capital ratios of 6.68% and a risk-based capital ratio of 13.13%. 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 risks and uncertainties. Forward-looking statements do not relate strictly to historical information or current facts. Some forward-looking statements may be identified by use of terms such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could" or "may." 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. Downey does not update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements were made.

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DOWNEY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

		June 30,			December 31,			June 30,
(Dollars in Thousands, Except Per Share Data)		2004			2003			2003
Assets
Cash		$	126,361		$	111,667		$	136,423
Federal funds			-			1,500			89,210
	Cash and cash equivalents		126,361			113,167			225,633
Trading securities, at fair value			-			-			201,781
U.S. Treasury securities, agency obligations and other investment
	securities available for sale, at fair value		630,785			690,347			276,971
Municipal securities held to maturity, at amortized cost (estimated
	fair value of $6,135 at June 30, 2003)		-			-			6,148
Loans and securities purchased under resale agreements			-			-			60,000
Loans held for sale, at lower of cost or fair value			661,481			279,657			721,929
Mortgage-backed securities available for sale, at fair value			321			334			1,736
Loans receivable held for investment			12,309,935			10,116,519			10,049,361
Investments in real estate and joint ventures			31,517			35,716			36,297
Real estate acquired in settlement of loans			2,424			5,803			9,464
Premises and equipment			107,277			110,316			113,434
Federal Home Loan Bank stock, at cost			167,797			123,089			120,517
Investment in Downey Financial Capital Trust I			3,711			3,711			3,711
Mortgage servicing rights, net			92,049			82,175			48,722
Other assets			88,689			85,146			75,573
		$	14,222,347		$	11,645,980		$	11,951,277
Liabilities and Stockholders’ Equity
Deposits		$	8,948,238		$	8,293,758		$	8,895,452
Securities sold under agreements to repurchase			239,688			-			-
Federal Home Loan Bank advances			3,556,087			2,125,150			1,672,850
Real estate notes			-			4,161			3,121
Senior notes			198,179			-			-
Junior subordinated debentures			123,711			123,711			123,711
Accounts payable and accrued liabilities			88,608			63,584			303,937
Deferred income taxes			125,384			118,598			82,841
	Total liabilities		13,279,895			10,728,962			11,081,912
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, 2004, December 31, 2003 and
	June 30, 2003; outstanding 27,968,283 shares at June 30, 2004 and
	27,928,722 shares at both December 31, 2003 and June 30, 2003		282			282			282
Additional paid-in capital			93,792			93,792			93,792
Accumulated other comprehensive income (loss)			(5,745	)		807			1,135
Retained earnings			864,704			834,307			786,326
Treasury stock, at cost, 266,739 shares at June 30, 2004 and 306,300 shares
	at both December 31, 2003 and June 30, 2003		(10,581	)		(12,170	)		(12,170	)
	Total stockholders’ equity		942,452			917,018			869,365
		$	14,222,347		$	11,645,980		$	11,951,277

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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)		2004			2003			2004			2003
Interest income
Loans receivable		$	123,313		$	130,884		$	238,843		$	273,373
U.S. Treasury securities and agency obligations			6,332			1,886			10,396			5,023
Mortgage-backed securities			3			19			6			35
Other investments			1,594			1,485			2,792			3,140
	Total interest income		131,242			134,274			252,037			281,571
Interest expense
Deposits			34,662			42,369			67,262			90,219
Federal Home Loan Bank advances and other borrowings			16,543			14,559			32,248			29,976
Senior notes			292			-			292			-
Junior subordinated debentures			3,134			3,134			6,268			6,268
	Total interest expense		54,631			60,062			106,070			126,463
Net interest income			76,611			74,212			145,967			155,108
Provision for (reduction of) loan losses			1,458			(624	)		3,262			(2,333	)
	Net interest income after provision for (reduction of) loan losses		75,153			74,836			142,705			157,441
Other income, net
Loan and deposit related fees			14,419			13,649			26,875			25,627
Real estate and joint ventures held for investment, net			7,048			2,069			7,974			3,012
Secondary marketing activities:
	Loan servicing income (loss), net		13,786			(21,692	)		(459	)		(35,378	)
	Net gains on sales of loans and mortgage-backed securities		15,675			12,652			17,047			32,415
	Net gains on sales of mortgage servicing rights		-			18			-			23
Net gains on trading securities			-			591			-			591
Net gains (losses) on sales of investment securities			(21,271	)		-			(19,159	)		8
Litigation award			-			265			-			2,717
Other			523			938			855			1,517
	Total other income, net		30,180			8,490			33,133			30,532
Operating expense
Salaries and related costs			37,575			33,028			73,144			67,154
Premises and equipment costs			8,200			7,971			16,408			15,684
Advertising expense			1,165			1,016			2,873			1,809
SAIF insurance premiums and regulatory assessments			744			825			1,501			1,656
Professional fees			356			418			724			1,046
Other general and administrative expense			9,432			8,111			17,914			16,004
	Total general and administrative expense		57,472			51,369			112,564			103,353
Net operation of real estate acquired in settlement of loans			(237	)		(111	)		(309	)		186
	Total operating expense		57,235			51,258			112,255			103,539
Income before income taxes			48,098			32,068			63,583			84,434
Income taxes			20,277			13,553			26,850			35,702
	Net income	$	27,821		$	18,515		$	36,733		$	48,732
PER SHARE INFORMATION
Basic		$	0.99		$	0.66		$	1.31		$	1.74
Diluted		$	0.99		$	0.66		$	1.31		$	1.74
Cash dividends declared and paid		$	0.10		$	0.09		$	0.20		$	0.18
Weighted average diluted shares outstanding		27,990,588			27,970,022			27,985,565			27,968,194

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DOWNEY FINANCIAL CORP. AND SUBSIDIARIES

SELECTED FINANCIAL DATA

			Three Months Ended						Six Months Ended
			June 30,						June 30,
(Dollars in Thousands)			2004			2003			2004			2003
Net income by business segment
Banking			$	23,726		$	17,145		$	32,113		$	46,650
Real estate investment				4,095			1,370			4,620			2,082
	Total net income		$	27,821		$	18,515		$	36,733		$	48,732
Selected financial ratios
Effective interest rate spread				2.36	%		2.70	%		2.39	%		2.78	%
Efficiency ratio(a)				57.62			63.92			65.78			57.45
Return on average assets				0.83			0.65			0.58			0.84
Return on average equity				11.95			8.64			7.94			11.49
Asset activity
Loans for investment portfolio: (b)
	Originations:
		Residential one-to-four units	$	2,185,061		$	1,223,368		$	3,915,531		$	1,929,628
		Residential one-to-four units — subprime		204,688			63,976			377,233			140,464
		All other		200,017			78,407			325,408			129,562
	Repayments			(1,294,340	)		(1,352,321	)		(2,358,633	)		(2,479,933	)
Loans originated for sale portfolio(b)				1,279,208			2,161,154			2,206,985			3,768,301
Loans and mortgage-backed securities sold(c)				(1,139,029	)		(2,078,371	)		(1,817,775	)		(3,702,537	)
Increase (decrease) in loans (including
	mortgage-backed securities)			1,377,639			97,469			2,575,227			(203,916	)
Increase (decrease) in assets				697,218			509,627			2,576,367			(30,601	)
Increase (decrease) in deposits				131,065			(102,106	)		654,480			(342,898	)
Increase in borrowings				1,058,553			375,121			1,864,643			51,887

	June 30,			December 31,			June 30,
	2004			2003			2003
Capital ratios (Bank only)
Tangible		6.68	%		7.96	%		7.20	%
Core		6.68			7.96			7.20
Risk-based		13.13			15.55			14.23
Book value per share	$	33.70		$	32.83		$	31.13
Number of branches including in-store locations		167			172			170

^(a) The amount of general and administrative expense expressed as a percentage of net interest income plus other income, excluding income associated with real estate held for investment and litigation award.
^(b) Includes loans purchased.
^(c) Includes $2.7 million of non-mortgage commercial loans in 2003.

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DOWNEY FINANCIAL CORP. AND SUBSIDIARIES

SELECTED FINANCIAL DATA – (Continued)

				Three Months Ended June 30,
				2004						2003
				Average			Average			Average			Average
(Dollars in Thousands)				Balance		Interest	Yield/Rate			Balance		Interest	Yield/Rate
Average balance sheet data
Interest-earning assets:
	Loans		$	12,120,003	$	123,313	4.07	%	$	10,517,236	$	130,884	4.98	%
	Mortgage-backed securities			325		3	3.69			1,802		19	4.22
	Investment and trading securities			842,703		7,926	3.78			492,782		3,371	2.74
		Total interest-earning assets		12,963,031		131,242	4.05			11,011,820		134,274	4.88
Non-interest-earning assets				415,503						411,925
	Total assets		$	13,378,534					$	11,423,745
Transaction accounts:
	Non-interest-bearing checking		$	496,445	$	-	-	%	$	402,183	$	-	-	%
	Interest-bearing checking(a)			550,258		536	0.39			439,909		283	0.26
	Money market			144,344		376	1.05			127,162		355	1.12
	Regular passbook			3,844,436		10,283	1.08			3,896,717		13,253	1.36
		Total transaction accounts		5,035,483		11,195	0.89			4,865,971		13,891	1.15
Certificates of deposit				3,851,486		23,467	2.45			4,018,803		28,478	2.84
	Total deposits			8,886,969		34,662	1.57			8,884,774		42,369	1.91
FHLB advances and other borrowings(b)				3,251,957		16,543	2.05			1,384,203		14,559	4.22
Senior notes and junior subordinated debentures(c)				141,419		3,426	9.69			123,711		3,134	10.13
	Total deposits and borrowings			12,280,345		54,631	1.79			10,392,688		60,062	2.32
Other liabilities				166,886						173,451
Stockholders’ equity				931,303						857,606
	Total liabilities and stockholders’ equity		$	13,378,534					$	11,423,745
Net interest income/interest rate spread					$	76,611	2.26	%			$	74,212	2.56	%
Excess of interest-earning assets over deposits and borrowings			$	682,686					$	619,132
Effective interest rate spread							2.36						2.70

				Six Months Ended June 30,
Interest-earning assets:
	Loans		$	11,472,856	$	238,843	4.16	%	$	10,638,317	$	273,373	5.14	%
	Mortgage-backed securities			328		6	3.66			1,907		35	3.67
	Investment and trading securities			751,726		13,188	3.53			515,083		8,163	3.20
		Total interest-earning assets		12,224,910		252,037	4.12			11,155,307		281,571	5.05
Non-interest-earning assets				410,796						409,674
	Total assets		$	12,635,706					$	11,564,981
Transaction accounts:
	Non-interest-bearing checking		$	471,031	$	-	-	%	$	393,135	$	-	-	%
	Interest-bearing checking(a)			534,915		996	0.37			432,860		582	0.27
	Money market			142,199		740	1.05			125,678		769	1.23
	Regular passbook			3,880,975		21,145	1.10			3,830,620		28,082	1.48
		Total transaction accounts		5,029,120		22,881	0.91			4,782,293		29,433	1.24
Certificates of deposit				3,655,960		44,381	2.44			4,147,842		60,786	2.96
	Total deposits			8,685,080		67,262	1.56			8,930,135		90,219	2.04
FHLB advances and other borrowings(b)				2,729,433		32,248	2.38			1,491,649		29,976	4.05
Senior notes and junior subordinated debentures(c)				132,565		6,560	9.90			123,711		6,268	10.13
	Total deposits and borrowings			11,547,078		106,070	1.85			10,545,495		126,463	2.42
Other liabilities				163,118						171,364
Stockholders’ equity				925,510						848,122
	Total liabilities and stockholders’ equity		$	12,635,706					$	11,564,981
Net interest income/interest rate spread					$	145,967	2.27	%			$	155,108	2.63	%
Excess of interest-earning assets over deposits and borrowings s			$	677,832					$	609,812
Effective interest rate spread							2.39						2.78

^(a) Included amounts swept into money market deposit accounts.
^(b) Starting in the first quarter of 2004, the impact of interest rate swap contracts was included, with notional amounts totaling $430 million of receive-fixed, pay-3-month LIBOR variable interest, which contracts serve as a permitted hedge against a portion of our FHLB advances.
^(c) We will redeem our junior subordinated debentures before their maturity on July 23, 2004.

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DOWNEY FINANCIAL CORP. AND SUBSIDIARIES

SELECTED FINANCIAL DATA – (Continued)

			Three Months Ended						Six Months Ended
			June 30,						June 30,
(Dollars in Thousands)			2004			2003			2004			2003
Loan and deposit related fees
Loan related fees:
	Prepayment fees		$	5,090		$	4,291		$	8,889		$	7,704
	Other fees			2,215			2,925			4,215			5,499
Deposit related fees:
	Automated teller machine fees			2,455			2,180			4,698			4,266
	Other fees			4,659			4,253			9,073			8,158
		Total loan and deposit related fees	$	14,419		$	13,649		$	26,875		$	25,627
Net gains (losses) on sales of loans and mortgage-backed
	securities
Mortgage servicing rights			$	12,074		$	15,405		$	18,042		$	30,359
All other components excluding SFAS 133				249			183			(1,065	)		5,131
SFAS 133				3,352			(2,936	)		70			(3,075	)
	Total net gains on sales of loans and
		mortgage-backed securities	$	15,675		$	12,652		$	17,047		$	32,415
Secondary marketing gain excluding SFAS 133 as a
	percentage of associated sales			1.08	%		0.75	%		0.93	%		0.96	%
Loan servicing income (loss), net
Net cash servicing fees			$	5,615		$	5,117		$	11,319		$	10,133
Payoff and curtailment interest cost(a)				(2,083	)		(3,620	)		(3,610	)		(6,145	)
Amortization of MSRs				(4,082	)		(9,951	)		(9,601	)		(14,722	)
(Provision for) reduction of impairment of MSRs				14,336			(13,238	)		1,433			(24,644	)
	Total loan servicing income (loss), net		$	13,786		$	(21,692	)	$	(459	)	$	(35,378	)
Mortgage servicing rights activity
Gross balance at beginning of period			$	91,766		$	92,178		$	95,183		$	90,584
Additions				12,074			15,405			18,042			30,359
Amortization				(4,082	)		(9,951	)		(9,601	)		(14,722	)
Sales				-			-			-			-
Impairment write-down				(3,945	)		(7,684	)		(7,811	)		(16,273	)
	Gross balance at end of period			95,813			89,948			95,813			89,948
Allowance balance at beginning of period				22,045			35,672			13,008			32,855
Provision for (reduction of) impairment				(14,336	)		13,238			(1,433	)		24,644
Impairment write-down				(3,945	)		(7,684	)		(7,811	)		(16,273	)
	Allowance balance at end of period			3,764			41,226			3,764			41,226
		Total mortgage servicing rights, net	$	92,049		$	48,722		$	92,049		$	48,722
As a percentage of associated mortgage loans				1.00	%		0.55	%		1.00	%		0.55	%
Estimated fair value(b)			$	92,483		$	48,722		$	92,483		$	48,722
Weighted average expected life (in months)				67			31			67			31
Custodial account earnings rate				2.10	%		1.26	%		2.10	%		1.26	%
Weighted average discount rate				8.97			7.47			8.97			7.47

		June 30,			December 31,			June 30,
(Dollars in Thousands)		2004			2003			2003
Mortgage loans serviced for others
Total		$	9,279,359		$	9,313,948		$	8,980,037
With capitalized mortgage servicing rights: (b)
	Amount		9,242,641			9,268,308			8,916,259
	Weighted average interest rate		5.61	%		5.79	%		6.12	%
Custodial account balances		$	238,914		$	232,562		$	548,142

^(a) Represents the difference between the contractual obligation to pay interest to the investor for an entire month, less the actual interest received when a loan prepays prior to the end of the month. This does not include the benefit of the use of repaid loan funds to increase 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.

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DOWNEY FINANCIAL CORP. AND SUBSIDIARIES

SELECTED FINANCIAL DATA – (Continued)

			June 30,			December 31,			June 30,
(Dollars in Thousands)			2004			2003			2003
Loans held for investment
Loans secured by real estate:
	Residential one-to-four units		$	10,721,816		$	8,737,471		$	8,544,276
	Residential one-to-four units — subprime			1,076,523			988,039			1,196,162
		Total residential one-to-four units		11,798,339			9,725,510			9,740,438
	Residential five or more units			104,016			92,928			43,255
	Commercial real estate			42,540			49,286			53,031
	Construction			80,608			105,706			105,858
	Land			26,770			16,855			20,090
Non-mortgage:
	Commercial			5,083			4,975			6,493
	Automobile			1,911			3,823			6,959
	Other consumer			179,793			95,319			68,012
		Total loans held for investment		12,239,060			10,094,402			10,044,136
Increase (decrease) for:
	Undisbursed loan funds and net deferred costs and premiums			104,325			52,447			37,472
	Allowance for losses			(33,450	)		(30,330	)		(32,247	)
		Total loans held for investment, net	$	12,309,935		$	10,116,519		$	10,049,361
Loans held for sale, net
Residential one-to-four units			$	662,321		$	276,295		$	716,477
Other consumer				64			3,090			-
Capitalized basis adjustment(a)				(904	)		272			5,452
	Total loans held for sale		$	661,481		$	279,657		$	721,929
Delinquent loans
30-59 days			$	16,088		$	21,660		$	22,444
60-89 days				8,784			10,071			9,866
90+ days(b)				26,333			29,887			42,448
	Total delinquent loans		$	51,205		$	61,618		$	74,758
Delinquencies as a percentage of total loans				0.40	%		0.59	%		0.69	%
Non-performing assets
Non-accrual loans:
	Residential one-to-four units		$	24,445		$	26,325		$	29,758
	Residential one-to-four units — subprime			12,615			15,980			26,568
	Other			475			523			646
		Total non-accrual loans		37,535			42,828			56,972
Real estate acquired in settlement of loans				2,424			5,803			9,464
Repossessed automobiles				9			-			3
	Total non-performing assets		$	39,968		$	48,631		$	66,439
Non-performing assets as a percentage of total assets				0.28	%		0.42	%		0.56	%

^(a) Reflected 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.

Note: Certain prior period amounts have been reclassified to conform to the current presentation.

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