Downey Financial 8K Earnings Release and Table Listing | SEC 18 Oct 05

EXHIBIT 99.1

Earnings Release and Table Listing

Earnings Release Narrative
Consolidated Balance Sheets
Consolidated Statements of Income
Selected Financial Data

DOWNEY FINANCIAL CORP.
N E W S R E L E A S E		For further information contact: Thomas E. Prince Chief Operating Officer and Chief Financial Officer (949) 509-4440

DOWNEY ANNOUNCES HIGHER QUARTERLY EARNINGS

Newport Beach, California - October 18, 2005 - Downey Financial Corp. (NYSE: DSL) reported that net income for the third quarter of 2005 totaled $59.7 million or $2.14 per share on a diluted basis, up 143.7% from $24.5 million or $0.88 per share in the year-ago third quarter.

The increase in net income between third quarters primarily reflected:

A $19.1 million favorable change in loan servicing activities, as the year-ago quarter included a $16.7 million addition to the valuation allowance for mortgage servicing rights, compared to a $1.9 million recapture in the current quarter;
A $16.5 million increase in loan and deposit related fees primarily reflecting higher loan prepayment fees;
A $14.9 million increase in net gains on sales of loans and mortgage-backed securities due to a higher volume and gain per each dollar of loan sold;
A $5.4 million or 6.6% increase in net interest income reflecting a higher level of interest-earning assets; and
A $4.1 million favorable change in loss on extinguishment of debt, as the year-ago third quarter included the recognition of deferred issuance costs associated with the early redemption of junior subordinated debentures.

Those favorable items were partially offset by an increase in the effective tax rate from 25.55% to 38.80%. Both the current and year-ago third quarters included reductions to federal income tax expense from the settlement of prior-year tax returns. However, the current quarter reduction of $3.2 million was below the $5.6 million of a year-ago.

For the first nine months of 2005, net income totaled $175.5 million or $6.30 per share on a diluted basis, up from $61.2 million or $2.19 per share for the first nine months of 2004.

Daniel D. Rosenthal, President and Chief Executive Officer, commented, "Our earnings compared to a year ago continue to benefit from strong secondary marketing activities, growth in net interest and fee income, and improved operating efficiency. Also, our loan credit quality remains good, as evidenced by our continued low level of non-performing assets."

Page 1

Net Interest Income

Net interest income totaled $87.3 million in the third quarter of 2005, up $5.4 million or 6.6% from a year ago. The increase primarily reflected growth of 11.4% in average interest-earning assets to $16.133 billion in the current quarter. The effective interest rate spread averaged 2.16% in the current quarter, down from 2.26% a year ago and 2.27% in the second quarter of 2005. The decline in the effective interest rate spread was due to a higher level of deferred loan origination costs being written-off related to loan repayments. Those write-offs were, in part, offset by higher loan prepayment fees recognized in other income.

For the first nine months of 2005, net interest income totaled $275.4 million, up $47.5 million from a year ago.

Provision for Loan Losses

During the current quarter, $0.8 million of provision for loan losses was reversed, a favorable change of $1.9 million from the year-ago third quarter. The current quarter reversal reflected a recovery of $0.4 million of a prior charge-off and a decline in non-one-to-four unit residential loans against which higher loss allowances are maintained. At quarter end, the allowance for loan losses was $36 million, compared to $35 million at both December 31, and September 30, 2004.

For the first nine months of 2005, provision for loan losses totaled $1.9 million and net charge-offs were $0.6 million. That compares to a $4.4 million provision for loan losses and net charge-offs of $0.2 million in the year-ago period.

Other Income

Other income totaled $68.2 million in the third quarter of 2005, up $58.0 million from a year ago. Contributing to the increase between third quarters was:

A $19.1 million favorable change in loan servicing activities, as income of $2.2 million was recorded in the current quarter, compared to a loss of $16.9 million in the year-ago quarter. The primary reason for the favorable change was that the current quarter included a $1.9 million recapture of valuation allowance for mortgage servicing rights, compared to a $16.7 million addition in the year-ago quarter. At September 30, 2005, mortgage servicing rights, net of a $2 million valuation allowance, totaled $19 million or 0.83% of the $2.311 billion of associated loans serviced for others (this excludes the $9.111 billion of loans sub-serviced for others on a fixed fee basis per loan).
A $16.5 million increase in loan and deposit related fees due primarily to an increase of $15.5 million in loan prepayment fees. Deposit related fees were up $0.8 million or 11.3%.
A $14.9 million increase in net gains from sales of loans and mortgage-backed securities. Net gains in the current quarter totaled $29.5 million, including a $1.4 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 1.47% on secondary market sales of $2.108 billion was realized, compared to the year-ago gain of 0.64% on secondary market sales of $1.871 billion.

Page 2

A $4.1 million favorable change in loss on extinguishment of debt, as the year-ago quarter included the recognition of deferred issuance costs associated with the $124 million of junior subordinated debentures that were redeemed prior to their maturity.
A $2.9 million increase in income from real estate held for investment due primarily to higher gains from sales and the recapture of valuation allowances. The current quarter included gains of $1.4 million, compared to virtually none a year ago, and a recapture of $1.3 million of valuation allowances.

For the first nine months of 2005, other income totaled $199.8 million, up $156.4 million from the same period a year ago.

Operating Expense

Operating expense totaled $58.7 million in the current quarter, up $0.7 million from a year ago due to a 1.0% increase in general and administrative expense. Included in the current quarter was a $1.0 million contribution to the American Red Cross to help the victims of Hurricane Katrina. Excluding that contribution, general and administrative expense would have been down $0.4 million or 0.7%.

For the first nine months of 2005, operating expense totaled $175.2 million, up $4.9 million from the same period a year ago.

Assets, Loan Originations and Deposits

At September 30, 2005, assets totaled $16.566 billion, up 5.9% from a year ago and up $917 million or 5.9% from year-end 2004. During the current quarter, assets declined $46 million due primarily to a $419 million decline in loans held for sale that more than offset an increase of $355 million in loans held for investment. At quarter end, $12.661 billion of one-to-four unit adjustable rate mortgages in loans held for investment were subject to negative amortization, of which $99 million or 0.8% represented the amount of negative amortization included in the loan balance. At origination, these loans had a weighted average loan-to-value ratio of 69%.

Loan originations (including purchases) totaled $3.644 billion in the current quarter, down 15.1% from $4.290 billion a year ago. Loans originated for sale declined $355 million to $1.700 billion and single family loans originated for portfolio decreased $161 million to $1.912 billion. Of the current quarter total originated for portfolio, $102 million represented subprime credits. At quarter end, the subprime portfolio totaled $1.175 billion, with an average loan-to-value ratio at origination of 70% and, of the total, 96.8% represented "Alt. A and A-" credits. In addition to single family loans, $32 million of other loans were originated in the current quarter.

Deposits totaled $11.752 billion at quarter end, up 23.0% from the year-ago level and $2.094 billion or 21.7% since year-end 2004. During the quarter, no new branches were opened, thereby leaving the total number of branches unchanged at 172 (168 in California and four in Arizona). At quarter end, the average deposit size of our 80 traditional branches was $117 million, while the average deposit size of our 92 in-store branches was $26 million. Since the end of 2004, borrowings have declined by $1.397 billion, as deposit growth has exceeded the growth in assets.

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Non-Performing Assets

Non-performing assets increased $5 million during the quarter to $30 million or 0.18% of total assets, compared to 0.22% at year-end 2004.

Regulatory Capital Ratios

At September 30, 2005, Downey Financial Corp.’s primary subsidiary, Downey Savings and Loan Association, F.A., had core and tangible capital ratios of 7.66% and a risk-based capital ratio of 14.82%. 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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Earnings Release and Table Listing

DOWNEY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

			September 30,			December 31,			September 30,
(Dollars in Thousands, Except Per Share Data)			2005			2004			2004

Assets
Cash			$	171,225		$	119,502		$	107,038
Federal funds				2			-			-

	Cash and cash equivalents			171,227			119,502			107,038
U.S. Treasury, agency and other investment securities available for sale,
	at fair value			550,621			497,009			732,878
Loans held for sale, at lower of cost or fair value				495,035			1,118,475			845,913
Mortgage-backed securities available for sale, at fair value				284			304			315
Loans held for investment				14,883,882			13,458,713			13,445,697
Allowance for loan losses				(35,998	)		(34,714	)		(34,551	)

		Loans held for investment, net		14,847,884			13,423,999			13,411,146
Investments in real estate and joint ventures				49,351			55,411			44,242
Real estate acquired in settlement of loans				2,323			2,555			2,819
Premises and equipment				105,996			106,238			107,429
Federal Home Loan Bank stock, at cost				222,228			243,613			209,063
Mortgage servicing rights, net				19,117			17,964			82,295
Other assets				101,795			63,738			96,326

			$	16,565,861		$	15,648,808		$	15,639,464

Liabilities and Stockholders’ Equity
Deposits			$	11,752,236		$	9,657,978		$	9,551,333
Securities sold under agreements to repurchase				-			-			251,875
Federal Home Loan Bank advances				3,162,808			4,559,622			4,418,729
Senior notes				198,045			197,924			197,886
Accounts payable and accrued liabilities				150,361			108,217			115,971
Deferred income taxes				130,883			117,416			138,045

	Total liabilities			15,394,333			14,641,157			14,673,839

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 September 30, 2005, December 31, 2004 and
	September 30, 2004; outstanding 27,853,783 shares at September 30, 2005,
	December 31, 2004 and September 30, 2004			282			282			282
Additional paid-in capital				93,792			93,792			93,792
Accumulated other comprehensive income (loss)				(2,995	)		318			1,926
Retained earnings				1,097,241			930,051			886,417
Treasury stock, at cost, 381,239 shares at September 30, 2005,
	December 31, 2004 and September 30, 2004			(16,792	)		(16,792	)		(16,792	)

	Total stockholders’ equity			1,171,528			1,007,651			965,625

			$	16,565,861		$	15,648,808		$	15,639,464

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Earnings Release and Table Listing

DOWNEY FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

		Three Months Ended						Nine Months Ended
		September 30,						September 30,

(Dollars in Thousands, Except Per Share Data)		2005			2004			2005		2004

Interest income
Loans		$	191,357		$	141,458		$	554,005	$	380,301
U.S. Treasury and agency securities			5,331			5,765			15,198		16,161
Mortgage-backed securities			3			3			9		9
Other investment securities			2,374			1,975			8,032		4,767

	Total interest income		199,065			149,201			577,244		401,238

Interest expense
Deposits			74,900			40,715			184,885		107,977
Federal Home Loan Bank advances and other borrowings			33,554			22,490			107,106		54,738
Senior notes			3,296			3,294			9,887		3,586
Junior subordinated debentures			-			765			-		7,033

	Total interest expense		111,750			67,264			301,878		173,334

Net interest income			87,315			81,937			275,366		227,904
Provision for (reduction of) loan losses			(751	)		1,186			1,870		4,448

	Net interest income after provision for (reduction of) loan losses		88,066			80,751			273,496		223,456

Other income, net
Loan and deposit related fees			32,284			15,828			77,436		42,703
Real estate and joint ventures held for investment, net			3,307			365			7,615		8,339
Secondary marketing activities:
	Loan servicing income (loss), net		2,166			(16,890	)		1,121		(17,349	)
	Net gains on sales of loans and mortgage-backed securities		29,499			14,637			108,962		31,684
	Net gains on sales of mortgage servicing rights		19			-			1,000		-
Net gains (losses) on sales of investment securities			-			-			28		(19,159	)
Litigation award			-			-			1,767		-
Loss on extinguishment of debt			-			(4,111	)		-		(4,111	)
Other			971			393			1,830		1,248

	Total other income, net		68,246			10,222			199,759		43,355

Operating expense
Salaries and related costs			38,155			36,629			116,352		109,773
Premises and equipment costs			8,079			8,771			23,970		25,179
Advertising expense			1,557			1,494			4,458		4,367
SAIF insurance premiums and regulatory assessments			957			825			2,811		2,326
Professional fees			(69	)		387			612		1,111
Other general and administrative expense			9,938			9,909			26,935		27,823

	Total general and administrative expense		58,617			58,015			175,138		170,579
Net operation of real estate acquired in settlement of loans			91			36			76		(273	)

	Total operating expense		58,708			58,051			175,214		170,306

Income before income taxes			97,604			32,922			298,041		96,505
Income taxes			37,868			8,412			122,496		35,262

	Net income	$	59,736		$	24,510		$	175,545	$	61,243

Per share information
Basic		$	2.14		$	0.88		$	6.30	$	2.19
Diluted		$	2.14		$	0.88		$	6.30	$	2.19
Cash dividends declared and paid		$	0.10		$	0.10		$	0.30	$	0.30
Weighted average shares outstanding
Basic		27,853,783			27,918,124			27,853,783		27,941,520
Diluted		27,884,352			27,943,512			27,883,489		27,970,788

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Earnings Release and Table Listing

DOWNEY FINANCIAL CORP. AND SUBSIDIARIES

SELECTED FINANCIAL DATA

			Three Months Ended						Nine Months Ended
			September 30,						September 30,

(Dollars in Thousands)			2005			2004			2005			2004

Net income by business segment
Banking			$	57,687		$	24,262		$	170,829		$	56,375
Real estate investment				2,049			248			4,716			4,868

	Total net income		$	59,736		$	24,510		$	175,545		$	61,243


Selected financial ratios
Effective interest rate spread				2.16	%		2.26	%		2.27	%		2.34	%
Efficiency ratio^(a)				38.50			60.49			37.60			63.88
Return on average assets				1.44			0.66			1.41			0.61
Return on average equity				20.92			10.30			21.56			8.74


Asset and liability activity
Loans for investment portfolio:
	Originations:^(b)
		Residential one-to-four units	$	1,809,817		$	1,840,624		$	4,692,567		$	5,756,155
		Residential one-to-four units — subprime		102,304			232,248			408,264			609,481
		All other		31,620			162,069			277,804			487,477
	Repayments			(1,691,123	)		(1,123,307	)		(4,120,375	)		(3,481,940	)

Loans originated for sale portfolio^(b)				1,699,900			2,054,632			6,647,339			4,261,617

Loans and mortgage-backed securities sold				(2,108,001	)		(1,871,226	)		(7,230,561	)		(3,689,001	)

Increase (decrease) in loans (including mortgage-backed
	securities)			(63,752	)		1,285,637			800,425			3,860,864

Increase (decrease) in assets				(46,266	)		1,417,117			917,053			3,993,484

Increase in deposits				710,164			603,095			2,094,258			1,257,575

Increase (decrease) in borrowings				(839,908	)		750,825			(1,396,693	)		2,615,468

Earnings Release and Table Listing

	September 30,			December 31,			September 30,
	2005			2004			2004

Capital ratios (Bank only)
Tangible and core		7.66	%		7.09	%		6.94	%
Risk-based		14.82			13.71			13.62

Book value per share	$	42.06		$	36.18		$	34.67

Number of branches including in-store locations		172			169			168

^(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.

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Earnings Release and Table Listing

DOWNEY FINANCIAL CORP. AND SUBSIDIARIES

SELECTED FINANCIAL DATA – (Continued)

			Three Months Ended September 30,

			2005							2004

			Average				Average			Average			Average
(Dollars in Thousands)			Balance			Interest	Yield/Rate			Balance		Interest	Yield/Rate

Average balance sheet data
Interest-earning assets:
	Loans		$	15,370,378	$	191,357	4.98	%	$	13,653,221	$	141,458	4.14	%
	Mortgage-backed securities			288		3	4.17			319		3	3.76
	Investment securities^(a)			762,543		7,705	4.01			829,598		7,740	3.71

		Total interest-earning assets		16,133,209		199,065	4.94			14,483,138		149,201	4.12
Non-interest-earning assets				435,116						417,840

	Total assets		$	16,568,325					$	14,900,978

Transaction accounts:
	Non-interest-bearing checking		$	833,616	$	-	-	%	$	501,808	$	-	-	%
	Interest-bearing checking^(b)			527,892		474	0.36			541,225		512	0.38
	Money market			161,275		425	1.05			148,072		390	1.05
	Regular passbook			2,059,920		5,464	1.05			3,306,857		9,056	1.09

		Total transaction accounts		3,582,703		6,363	0.70			4,497,962		9,958	0.88
Certificates of deposit				7,916,147		68,537	3.43			4,847,385		30,757	2.52

	Total deposits			11,498,850		74,900	2.58			9,345,347		40,715	1.73
FHLB advances and other borrowings^(c)				3,485,347		33,554	3.82			4,167,680		22,490	2.15
Senior notes and junior subordinated debentures^(d)				198,031		3,296	6.66			227,245		4,059	7.14

	Total deposits and borrowings			15,182,228		111,750	2.92			13,740,272		67,264	1.95
Other liabilities				244,113						208,535
Stockholders’ equity				1,141,984						952,171

	Total liabilities and stockholders’ equity		$	16,568,325					$	14,900,978

Net interest income/interest rate spread					$	87,315	2.02	%			$	81,937	2.17	%
Excess of interest-earning assets over deposits and borrowings			$	950,981					$	742,866
Effective interest rate spread							2.16						2.26

			Nine Months Ended September 30,


Interest-earning assets:
	Loans		$	15,404,317	$	554,005	4.80	%	$	12,199,645	$	380,301	4.16	%
	Mortgage-backed securities			295		9	4.07			325		9	3.69
	Investment securities^(a)			760,572		23,230	4.08			777,683		20,928	3.59

		Total interest-earning assets		16,165,184		577,244	4.76			12,977,653		401,238	4.12
Non-interest-earning assets				410,747						413,144

	Total assets		$	16,575,931					$	13,390,797

Transaction accounts:
	Non-interest-bearing checking		$	715,853	$	-	-	%	$	481,290	$	-	-	%
	Interest-bearing checking^(b)			532,438		1,430	0.36			537,018		1,507	0.37
	Money market			159,176		1,245	1.05			144,157		1,130	1.05
	Regular passbook			2,328,477		18,759	1.08			3,689,602		30,201	1.09

		Total transaction accounts		3,735,944		21,434	0.77			4,852,067		32,838	0.90
Certificates of deposit				6,951,553		163,451	3.14			4,053,102		75,139	2.48

	Total deposits			10,687,497		184,885	2.31			8,905,169		107,977	1.62
FHLB advances and other borrowings^(c)				4,368,285		107,106	3.28			3,208,849		54,738	2.28
Senior notes and junior subordinated debentures^(d)				197,989		9,887	6.66			164,125		10,619	8.63

	Total deposits and borrowings			15,253,771		301,878	2.65			12,278,143		173,334	1.89
Other liabilities				236,472						178,257
Stockholders’ equity				1,085,688						934,397

	Total liabilities and stockholders’ equity		$	16,575,931					$	13,390,797

Net interest income/interest rate spread					$	275,366	2.11	%			$	227,904	2.23	%
Excess of interest-earning assets over deposits and borrowings			$	911,413					$	699,510
Effective interest rate spread							2.27						2.34

^(a) Yields for investment securities available for sale are calculated using historical cost balances and do not give effect to changes in fair value that are reflected as a component of stockholders’ equity.
^(b) Included amounts swept into money market deposit accounts.
^(c) Starting in the first quarter of 2004, the impact of 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.
^(d) In June 2004, we issued $200 million of 6.5% 10-year senior notes. In July 2004, we redeemed our junior subordinated debentures before their maturity.

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Earnings Release and Table Listing

DOWNEY FINANCIAL CORP. AND SUBSIDIARIES

SELECTED FINANCIAL DATA – (Continued)

				Three Months Ended						Nine Months Ended
				September 30,						September 30,

(Dollars in Thousands)				2005			2004			2005			2004

Loan and deposit related fees
Loan related fees:
	Prepayment fees			$	21,947		$	6,435		$	47,945		$	15,324
	Other fees				2,302			2,175			6,251			6,390
Deposit related fees:
	Automated teller machine fees				2,770			2,418			8,135			7,116
	Other fees				5,265			4,800			15,105			13,873

			Total loan and deposit related fees	$	32,284		$	15,828		$	77,436		$	42,703

Loan servicing income (loss), net
Net cash servicing fees				$	1,968		$	6,031		$	5,348		$	17,350
Payoff and curtailment interest cost^(a)					(315	)		(1,053	)		(797	)		(4,663	)
Amortization of mortgage servicing rights					(1,346	)		(5,190	)		(3,904	)		(14,791	)
(Provision for) reduction of impairment of mortgage servicing rights					1,859			(16,678	)		474			(15,245	)

		Total loan servicing income (loss), net		$	2,166		$	(16,890	)	$	1,121		$	(17,349	)

Net gains (losses) on sales of loans and mortgage-backed securities
Mortgage servicing rights				$	1,858		$	12,114		$	4,684		$	30,156
All other components excluding SFAS 133					29,041			(72	)		101,507			(1,137	)
SFAS 133					(1,400	)		2,595			2,771			2,665

	Total net gains on sales of loans and mortgage-backed securities			$	29,499		$	14,637		$	108,962		$	31,684

Secondary marketing gain excluding SFAS 133 as a
	percentage of associated sales				1.47	%		0.64	%		1.47	%		0.79	%

Mortgage servicing rights activity
Gross balance at beginning of period				$	20,626		$	95,813		$	20,502		$	95,183
Additions					1,858			12,114			4,684			30,156
Amortization					(1,346	)		(5,190	)		(3,904	)		(14,791	)
Sales					(87	)		-			(101	)		-
Impairment write-down					(134	)		(3,610	)		(264	)		(11,421	)

	Gross balance at end of period				20,917			99,127			20,917			99,127

Allowance balance at beginning of period					3,793			3,764			2,538			13,008
Provision for (reduction of) impairment					(1,859	)		16,678			(474	)		15,245
Impairment write-down					(134	)		(3,610	)		(264	)		(11,421	)

	Allowance balance at end of period				1,800			16,832			1,800			16,832

			Total mortgage servicing rights, net	$	19,117		$	82,295		$	19,117		$	82,295

As a percentage of associated mortgage loans					0.83	%		0.82	%		0.83	%		0.82	%
Estimated fair value^(b)				$	19,139		$	82,401		$	19,139		$	82,401
Weighted average expected life (in months)					47			57			47			57
Custodial account earnings rate					3.99	%		2.24	%		3.99	%		2.24	%
Weighted average discount rate					9.20			9.27			9.20			9.27

Earnings Release and Table Listing

		September 30,			December 31,			September 30,
(Dollars in Thousands)		2005			2004			2004

Mortgage loans serviced for others
Total		$	11,444,758		$	6,672,984		$	10,568,339
With capitalized mortgage servicing rights:^(b)
	Amount		2,310,726			2,100,452			10,075,028
	Weighted average interest rate		5.57	%		5.59	%		5.52	%
Total loans sub-serviced without mortgage servicing rights:^(c)
	Term – less than six months	$	292,480		$	610,263		$	-
	Term – indefinite		8,818,890			3,931,483			459,307

Custodial account balances		$	326,906		$	143,765		$	229,074

^(a) Represents the difference between the contractual obligation to pay interest to the investor for an entire month and 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 sub-serviced without capitalized mortgage servicing rights.
^(c) Servicing is performed for a fixed fee per loan each month.

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Earnings Release and Table Listing

DOWNEY FINANCIAL CORP. AND SUBSIDIARIES

SELECTED FINANCIAL DATA – (Continued)

			September 30,			December 31,			September 30,
(Dollars in Thousands)			2005			2004			2004

Loans held for investment
Loans secured by real estate:
	Residential one-to-four units		$	12,964,860		$	11,509,067		$	11,645,362
	Residential one-to-four units — subprime			1,175,043			1,254,452			1,167,565

		Total residential one-to-four units		14,139,903			12,763,519			12,812,927
	Residential five or more units			70,230			96,587			97,363
	Commercial real estate			29,023			32,678			42,479
	Construction			89,337			67,519			72,599
	Land			41,361			25,569			25,764
Non-mortgage:
	Commercial			4,223			4,997			5,990
	Automobile			204			858			1,297
	Other consumer			306,756			283,798			235,113

		Total loans held for investment		14,681,037			13,275,525			13,293,532
Increase (decrease) for:
	Undisbursed loan funds and net deferred costs and premiums			202,845			183,188			152,165
	Allowance for losses			(35,998	)		(34,714	)		(34,551	)

		Total loans held for investment, net	$	14,847,884		$	13,423,999		$	13,411,146


Loans held for sale
Residential one-to-four units			$	495,156		$	1,122,534		$	842,853
Other consumer				-			-			63
Capitalized basis adjustment^(a)				(121	)		(4,059	)		2,997

	Total loans held for sale		$	495,035		$	1,118,475		$	845,913


Residential one-to-four unit loans subject to negative amortization
Held for investment:
	Amount		$	12,660,520		$	10,463,214		$	10,297,567
	Negative amortization included in the loan balance			99,043			37,338			32,713
	Negative amortization as a percentage of the associated loan balance			0.78	%		0.36	%		0.32	%
Held for sale:
	Amount		$	293,995		$	849,869		$	543,540
	Negative amortization included in the loan balance			4			6			2


Non-performing assets
Non-accrual loans:
	Residential one-to-four units		$	18,373		$	20,470		$	23,091
	Residential one-to-four units — subprime			9,018			10,696			12,870
	Other			634			468			464

		Total non-accrual loans		28,025			31,634			36,425
Real estate acquired in settlement of loans				2,323			2,555			2,819

	Total non-performing assets		$	30,348		$	34,189		$	39,244

Non-performing assets as a percentage of total assets				0.18	%		0.22	%		0.25	%


Delinquent loans
30-59 days			$	20,268		$	17,255		$	14,539
60-89 days				10,596			6,278			10,341
90+ days^(b)				15,343			23,415			22,687

	Total delinquent loans		$	46,207		$	46,948		$	47,567

Delinquencies as a percentage of total loans				0.30	%		0.33	%		0.34	%

^(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.

Page 10

Downey Financial Inactive 8-KEarnings Release and Table Listing