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 and liability 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
  • Loan servicing income (loss), net
  • Net gains (losses) on sales of loans and mortgage-backed securities
  • Mortgage servicing rights activity
  • Mortgage loans serviced for others
  • Loans held for investment
  • Loans held for sale
  • Residential one-to-four unit loans subject to negative amortization
  • Non-performing assets
  • Delinquent loans

DOWNEY FINANCIAL CORP.
N E W S   R E L E A S E	For further information contact: Brian E. Côté Chief Financial Officer (949) 509-4420

DOWNEY ANNOUNCES SECOND QUARTER 2007 EARNINGS

          Newport Beach, California - July 18, 2007 - Downey Financial Corp. (NYSE: DSL) reported net income for the second quarter of 2007 of $32.7 million or $1.17 per share on a diluted basis, down 32.1% from $48.2 million or $1.73 per share in the second quarter of 2006.

The decline in net income between second quarters was due primarily to:

• A $20.9 million decline in net interest income due to a lower level of interest-earning assets;
• A $2.8 million increase in the provision for credit losses;
• A $2.7 million decline in income from real estate and joint ventures held for investment;
• A $1.2 million decline in income from loan servicing activities; and
• A $0.9 million increase in the net operation of real estate acquired in settlement of loans.

          For the first six months of 2007, net income totaled $75.6 million or $2.71 per share on a diluted basis, down 17.7% from the $91.9 million or $3.30 per share for the first six months of 2006.

          Daniel D. Rosenthal, President and Chief Executive Officer, commented, "The ongoing softening of the housing market, coupled with a challenging interest rate environment, have contributed to continued declines in our loan portfolio and increases in our non-performing loans. However, we continue to have a very strong capital position which will allow us to take advantage of opportunities as they arise."

Net Interest Income

          Net interest income totaled $111.5 million in the second quarter of 2007, down $20.9 million or 15.8% from a year ago. The decline reflected a $2.725 billion or 15.8% decline in average interest-earning assets. However, the effective interest rate spread of 3.07% in the current quarter remained unchanged from a year ago.

          Compared to a year ago, the current quarter effective interest rate spread was unfavorably impacted by a lower proportion of loan prepayment fees to the amount of deferred loan origination costs written-off as a result of those payoffs, which declined to 72.3% in the current quarter from 99.5% a year ago. This decline was the result of a higher proportion of loans being repaid that were no longer subject to a prepayment fee primarily due to the increasing age of the loan portfolio. In addition, current quarter effective interest rate spread was unfavorably impacted by a higher proportion of earning assets being comprised of investment securities and hybrid adjustable rate mortgage loans, both of which have lower yields than those of option ARM loans that comprised a larger proportion of interest-earning assets a year

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ago. However, these unfavorable items were essentially offset by a higher proportion of interest-earning assets being funded with interest free funds (the excess of interest-earning assets over interest-bearing deposits and borrowings) and the value of those funds was worth more than a year ago due to the higher interest rates prevalent during the current quarter.

          For the first six months of 2007, net interest income totaled $236.6 million, down $21.7 million or 8.4% from the year-ago period.

Provision for Credit Losses

          During the current quarter, the provision for credit losses totaled $9.5 million, up $2.8 million from a year ago. At June 30, 2007, the allowance for credit losses was $70.4 million, comprised of $69.1 million for loan losses and $1.3 million for unfunded loan commitments which is reported within accounts payable and accrued liabilities. The increase to the allowance this quarter reflected the continued weakness of the California residential real estate market. In addition, a shift in the yield curve has resulted in higher mortgage interest rates which negatively affects the ability of certain borrowers to refinance which, in turn, increases their probability of default. Net charge-offs totaled $1.0 million in the current quarter, compared to virtually none a year ago.

          For the first six months of 2007, the provision for credit losses totaled $10.1 million and net charge-offs were $1.7 million. This compares with a $16.7 million provision for credit losses and net charge-offs of $0.1 million a year ago.

Other Income

          Other income totaled $17.5 million in the current quarter, down $3.5 million or 16.7% from a year ago. Contributing to the decline between second quarters was:

• A $2.7 million decline in income from real estate and joint ventures held for investment, primarily due to lower gains from sales as well as a $0.4 million provision for losses on real estate and joint ventures. Gains from sales totaled $0.4 million in the current quarter, compared to $2.6 million a year ago; and
• A $1.2 million unfavorable change in income from loan servicing activities, as the current quarter reflected a loss of $0.8 million compared to income of $0.4 million a year ago. The unfavorable change primarily reflected a $1.2 million increase in payoff and curtailment interest costs, which 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. It should be noted that this cost does not include the benefit derived from the use of repaid loan funds until remitted to the investor which results in an increase in net interest income.

          For the first six months of 2007, other income totaled $35.2 million, down $9.0 million or 20.4% from a year ago.

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Operating Expense

          Operating expense totaled $62.4 million in the current quarter, up $1.4 million or 2.3% from a year ago. The increase reflected increases of $0.9 million in net operations of real estate owned due to a higher number of foreclosed properties and $0.5 million in general and administrative expense. All major categories of general and administrative expense were unchanged or above a year ago except for the other general and administrative expense category, with the largest increases being $1.5 million in deposit insurance premiums and regulatory assessments and $0.7 million in premises and equipment costs. The other general and administrative expense category was $2.1 million below a year ago, primarily due to an adjustment to reserves associated with workers’ compensation insurance claims.

          For the first six months of 2007, operating expense totaled $128.0 million, up $5.5 million or 4.5% from a year ago.

Income Taxes

          The effective tax rate in the current quarter was 42.67%, compared to 43.78% in the year-ago quarter. For the first six months of 2007, the effective tax rate was 43.43%, compared to 43.71% a year ago.

Assets, Loan Originations and Deposits

          At June 30, 2007, assets totaled $14.903 billion, down $2.562 billion or 14.7% from a year ago and down $1.304 billion or 8.0% from year-end 2006. During the current quarter, assets declined $335 million due primarily to declines of $738 million in loans held for investment and $80 million in loans held for sale. Those declines were partially offset by an increase of $506 million in securities available for sale. Included within loans held for investment at quarter end were $8.914 billion of single family adjustable rate mortgages subject to negative amortization, down $1.140 billion from March 31, 2007. These loans comprised 76% of the single family residential loan portfolio at quarter end, compared to 89% a year ago. The amount of negative amortization included in loan balances increased $20 million during the current quarter to $377 million or 4.23% of loans subject to negative amortization. During the current quarter, approximately 29% of loan interest income represented negative amortization, down from 31% in the first quarter of 2007 but up from 26% in the year-ago second quarter.

          Loan originations (including purchases) totaled $1.209 billion in the current quarter, down $862 million or 41.6% from $2.071 billion a year ago. Loans originated for sale declined $397 million or 44.5% to $495 million, while single family residential loans originated for portfolio declined $431 million or 38.1% to $699 million. In addition to single family residential loans, $15 million of other loans were originated in the current quarter. For the first six months of 2007, loan originations totaled $2.470 billion, down 49.4% from $4.884 billion in the same period a year ago.

          Deposits totaled $11.247 billion at quarter end, down $641 million or 5.4% from a year ago and down $538 million or 4.6% from year-end 2006. At quarter end, the number of branches totaled 172 (168 in California and four in Arizona), down one branch from March 31, 2007 due to the closure of the store in which it was located. At quarter end, the average deposit size of our 82 traditional branches was $108 million, while the average deposit size of our 90 in-store branches was $26 million. Since the end of 2006, borrowings have declined by $919 million and represented at the end of the current quarter 12.7% of total assets.

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Non-Performing Assets

          Non-performing assets increased during the quarter by $84 million or 58.5% to $227 million and represented 1.53% of total assets, compared with 0.68% at year-end 2006 and 0.23% a year ago. Of the increase in the current quarter, $76 million was related to single family residential loans, while $7 million represented a construction loan to build single family homes on which no significant loss is expected at this time.

Regulatory Capital Ratios

          At June 30, 2007, Downey Financial Corp.’s primary subsidiary, Downey Savings and Loan Association, F.A., had core and tangible capital ratios of 10.08% and a risk-based capital ratio of 20.86%. 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, the outcome of ongoing audits by taxing authorities 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.

          For further information, contact: Brian E. Côté, Chief Financial Officer at (949)509-4420.

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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)		2007			2006			2006
Assets
Cash		$	149,308		$	124,865		$	152,957
Federal funds			-			1			2
	Cash and cash equivalents		149,308			124,866			152,959
U.S. Treasury, government sponsored entities and other investment
	securities available for sale, at fair value		1,917,603			1,433,176			892,172
Loans held for sale, at lower of cost or fair value			187,752			363,215			417,691
Mortgage-backed securities available for sale, at fair value			114			251			263
Loans held for investment			12,273,307			13,868,227			15,571,817
Allowance for loan losses			(69,107	)		(60,943	)		(51,198	)
	Loans held for investment, net		12,204,200			13,807,284			15,520,619
Investments in real estate and joint ventures			64,997			59,843			49,237
Real estate acquired in settlement of loans			29,925			8,524			1,254
Premises and equipment			115,823			114,052			110,537
Federal Home Loan Bank stock, at cost			72,429			152,953			184,796
Mortgage servicing rights, net			21,619			21,196			20,561
Other assets			139,200			122,022			114,691
		$	14,902,970		$	16,207,382		$	17,464,780
Liabilities and Stockholders’ Equity
Deposits		$	11,246,806		$	11,784,869		$	11,887,739
Securities sold under agreements to repurchase			587,544			469,971			255,042
Federal Home Loan Bank advances			1,104,373			2,140,785			3,499,450
Senior notes			198,351			198,260			198,172
Accounts payable and accrued liabilities			289,937			220,262			327,181
Deferred income taxes			11,486			-			13,111
	Total liabilities		13,438,497			14,814,147			16,180,695
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, 2007, December 31, 2006 and
	June 30, 2006; outstanding 27,853,783 shares at June 30, 2007,
	December 31, 2006 and June 30, 2006		282			282			282
Additional paid-in capital			93,792			93,792			93,792
Accumulated other comprehensive loss			(6,068	)		(5,204	)		(12,189	)
Retained earnings			1,393,259			1,321,157			1,218,992
Treasury stock, at cost, 381,239 shares at June 30, 2007,
	December 31, 2006 and June 30, 2006		(16,792	)		(16,792	)		(16,792	)
	Total stockholders’ equity		1,464,473			1,393,235			1,284,085
		$	14,902,970		$	16,207,382		$	17,464,780

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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)		2007			2006		2007			2006
Interest income
Loans		$	230,383		$	275,233	$	482,555		$	530,578
U.S. Treasury and government sponsored entities securities			20,120			8,930		39,294			16,266
Mortgage-backed securities			3			3		6			6
Other investment securities			1,718			2,243		4,189			4,522
	Total interest income		252,224			286,409		526,044			551,372
Interest expense
Deposits			111,888			99,798		225,463			191,633
Federal Home Loan Bank advances and other borrowings			25,576			50,966		57,406			94,880
Senior notes			3,301			3,298		6,602			6,596
	Total interest expense		140,765			154,062		289,471			293,109
Net interest income			111,459			132,347		236,573			258,263
Provision for credit losses			9,505			6,662		10,122			16,719
	Net interest income after provision for credit losses		101,954			125,685		226,451			241,544
Other income, net
Loan and deposit related fees			9,338			9,171		18,174			17,729
Real estate and joint ventures held for investment, net			(111	)		2,553		365			4,842
Secondary marketing activities:
	Loan servicing income (loss), net		(789	)		452		(1,225	)		641
	Net gains on sales of loans and mortgage-backed securities		8,978			8,619		17,718			20,273
Other			109			235		181			755
	Total other income, net		17,525			21,030		35,213			44,240
Operating expense
Salaries and related costs			40,998			40,873		83,232			81,653
Premises and equipment costs			9,122			8,410		17,931			16,948
Advertising expense			1,878			1,879		3,069			3,121
Deposit insurance premiums and regulatory assessments			2,482			1,008		5,246			2,022
Professional fees			731			450		1,290			1,242
Other general and administrative expense			6,201			8,295		15,996			17,470
	Total general and administrative expense		61,412			60,915		126,764			122,456
Net operation of real estate acquired in settlement of loans			948			28		1,239			19
	Total operating expense		62,360			60,943		128,003			122,475
Income before income taxes			57,119			85,772		133,661			163,309
Income taxes			24,375			37,548		58,054			71,388
	Net income	$	32,744		$	48,224	$	75,607		$	91,921
Per share information
Basic		$	1.17		$	1.73	$	2.71		$	3.30
Diluted		$	1.17		$	1.73	$	2.71		$	3.30
Cash dividends declared and paid		$	0.12		$	0.10	$	0.24		$	0.20
Weighted average shares outstanding
Basic		27,853,783			27,853,783		27,853,783			27,853,783
Diluted		27,884,062			27,884,281		27,884,046			27,883,751

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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)			2007			2006			2007			2006
Net income by business segment
Banking			$	32,614		$	46,494		$	75,037		$	89,010
Real estate investment				130			1,730			570			2,911
	Total net income		$	32,744		$	48,224		$	75,607		$	91,921
Selected financial ratios
Effective interest rate spread				3.07	%		3.07	%		3.18	%		3.02	%
Efficiency ratio(a)				47.57			40.39			46.70			41.14
Return on average assets				0.87			1.09			0.98			1.05
Return on average equity				9.01			15.25			10.54			14.78
Asset and liability activity
Loans for investment portfolio:
	Originations:(b)
		Residential one-to-four units	$	698,952		$	1,129,715		$	1,301,850		$	2,849,083
		All other		14,876			49,059			32,376			162,729
	Repayments			(1,489,999	)		(1,596,002	)		(3,050,186	)		(2,989,959	)
Loans originated for sale portfolio(b)				494,871			892,314			1,135,540			1,872,478
Loans and mortgage-backed securities sold				(569,940	)		(1,027,994	)		(1,284,370	)		(1,904,280	)
Increase (decrease) in loans and mortgage-backed securities				(817,950	)		(491,023	)		(1,778,684	)		116,650
Increase (decrease) in assets				(334,899	)		(337,979	)		(1,304,412	)		369,117
Increase (decrease) in deposits				(400,625	)		(311,164	)		(538,063	)		10,891
Increase (decrease) in borrowings				(153,104	)		(71,276	)		(918,748	)		197,062

	June 30,			December 31,			June 30,
	2007			2006			2006
Capital ratios (Bank only)
Tangible and core		10.08	%		8.76	%		7.88	%
Risk-based		20.86			17.78			15.71
Book value per share	$	52.58		$	50.02		$	46.10
Number of branches including in-store locations		172			172			171

^(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.
^(b) Included loans purchased.

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DOWNEY FINANCIAL CORP. AND SUBSIDIARIES

SELECTED FINANCIAL DATA – (Continued)

				Three Months Ended June 30,
				2007							2006
				Average					Average		Average					Average
(Dollars in Thousands)				Balance		Interest			Yield/Rate		Balance		Interest			Yield/Rate
Average balance sheet data
Interest-earning assets:
	Loans:
		Loan prepayment fees				$	17,591		0.55	%			$	25,888		0.64	%
		Write-off of deferred costs and
			premiums from loan payoffs				(24,325	)	(0.76	)				(26,019	)	(0.64	)
		All other					237,117		7.39					275,364		6.76
			Total loans	$	12,835,907		230,383		7.18		$	16,283,301		275,233		6.76
	Mortgage-backed securities				116		3		5.92			267		3		4.49
	Investment securities(a)				1,698,378		21,838		5.16			975,373		11,173		4.59
		Total interest-earnings assets			14,534,401	$	252,224		6.94	%		17,258,941	$	286,409		6.64	%
Non-interest-earning assets					480,034							426,727
	Total assets			$	15,014,435						$	17,685,668
Transaction accounts:
	Non-interest-bearing checking			$	800,910	$	-		-	%	$	744,440	$	-		-	%
	Interest-bearing checking(b)				486,909		382		0.31			508,205		439		0.35
	Money market				145,230		376		1.04			161,537		421		1.05
	Regular passbook				1,190,524		2,814		0.95			1,563,990		3,940		1.01
		Total transaction accounts			2,623,573		3,572		0.55			2,978,172		4,800		0.65
Certificates of deposit					8,768,716		108,316		4.95			9,033,473		94,998		4.22
	Total deposits				11,392,289		111,888		3.94			12,011,645		99,798		3.33
FHLB advances and other borrowings(c)					1,734,014		25,576		5.92			3,886,870		50,966		5.26
Senior notes					198,333		3,301		6.66			198,157		3,298		6.66
	Total deposits and borrowings				13,324,636		140,765		4.24			16,096,672		154,062		3.84
Other liabilities					235,991							324,475
Stockholders’ equity					1,453,808							1,264,521
	Total liabilities and stockholders’ equity			$	15,014,435						$	17,685,668
Net interest income/interest rate spread						$	111,459		2.70	%			$	132,347		2.80	%
Excess of interest-earning assets over
	deposits and borrowings			$	1,209,765						$	1,162,269
Effective interest rate spread									3.07							3.07

^(a) Yields for securities available for sale are calculated using historical cost balances and are not adjusted for changes in fair value that are reflected as a separate component of stockholders’ equity.
^(b) Included amounts swept into money market deposit accounts.
^(c) The impact of interest rate swap contracts was included, with notional amounts totaling $430 million of receive-fixed, pay-3-month London Inter-Bank Offered Rate ("LIBOR") variable interest, which contracts serve as a permitted hedge against a portion of our FHLB advances.

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DOWNEY FINANCIAL CORP. AND SUBSIDIARIES

SELECTED FINANCIAL DATA – (Continued)

				Six Months Ended June 30,
				2007							2006
				Average					Average		Average					Average
(Dollars in Thousands)				Balance		Interest			Yield/Rate		Balance		Interest			Yield/Rate
Average balance sheet data
Interest-earning assets:
	Loans:
		Loan prepayment fees				$	39,395		0.59	%			$	47,359		0.58	%
		Write-off of deferred costs and
			premiums from loan payoffs				(50,139	)	(0.75	)				(48,063	)	(0.59	)
		All other					493,299		7.44					531,282		6.55
			Total loans	$	13,257,340		482,555		7.28		$	16,210,406		530,578		6.55
	Mortgage-backed securities				134		6		5.89			272		6		4.41
	Investment securities(a)				1,638,663		43,483		5.35			911,916		20,788		4.60
		Total interest-earnings assets			14,896,137	$	526,044		7.06	%		17,122,594	$	551,372		6.44	%
Non-interest-earning assets					474,773							422,893
	Total assets			$	15,370,910						$	17,545,487
Transaction accounts:
	Non-interest-bearing checking			$	777,986	$	-		-	%	$	722,205	$	-		-	%
	Interest-bearing checking(b)				487,542		777		0.32			511,861		874		0.34
	Money market				147,807		761		1.04			162,875		844		1.04
	Regular passbook				1,217,173		5,763		0.95			1,645,512		8,324		1.02
		Total transaction accounts			2,630,508		7,301		0.56			3,042,453		10,042		0.67
Certificates of deposit					8,886,450		218,162		4.95			8,968,856		181,591		4.08
	Total deposits				11,516,958		225,463		3.95			12,011,309		191,633		3.22
FHLB advances and other borrowings(c)					1,980,803		57,406		5.84			3,788,128		94,880		5.05
Senior notes					198,311		6,602		6.66			198,135		6,596		6.66
	Total deposits and borrowings				13,696,072		289,471		4.26			15,997,572		293,109		3.69
Other liabilities					239,531							303,766
Stockholders’ equity					1,435,307							1,244,149
	Total liabilities and stockholders’ equity			$	15,370,910						$	17,545,487
Net interest income/interest rate spread						$	236,573		2.80	%			$	258,263		2.75	%
Excess of interest-earning assets over
	deposits and borrowings			$	1,200,065						$	1,125,022
Effective interest rate spread									3.18							3.02

^(a) Yields for securities available for sale are calculated using historical cost balances and are not adjusted for changes in fair value that are reflected as a separate component of stockholders’ equity.
^(b) Included amounts swept into money market deposit accounts.
^(c) 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.

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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)			2007			2006			2007			2006
Loan and deposit related fees
Loan related fees			$	819		$	1,009		$	1,661		$	2,075
Deposit related fees:
	Automated teller machine fees			2,440			2,410			4,745			4,559
	Other fees			6,079			5,752			11,768			11,095
		Total loan and deposit related fees	$	9,338		$	9,171		$	18,174		$	17,729
Loan servicing income (loss), net
Net cash servicing fees			$	1,598		$	1,574		$	3,205		$	3,140
Payoff and curtailment interest cost(a)				(1,391	)		(233	)		(2,454	)		(451	)
Amortization of mortgage servicing rights				(967	)		(1,029	)		(1,991	)		(2,227	)
(Provision for) reduction of impairment of mortgage servicing rights				(29	)		140			15			179
	Total loan servicing income (loss), net		$	(789	)	$	452		$	(1,225	)	$	641
Net gains (losses) on sales of loans and mortgage-backed securities
Mortgage servicing rights			$	1,926		$	1,285		$	3,267		$	2,307
All other components excluding SFAS 133				6,186			8,067			13,334			18,461
SFAS 133				866			(733	)		1,117			(495	)
	Total net gains on sales of loans and mortgage-backed securities		$	8,978		$	8,619		$	17,718		$	20,273
Secondary marketing gain excluding SFAS 133 as a
	percentage of associated sales			1.42	%		0.91	%		1.29	%		1.09	%
Mortgage servicing rights activity
Gross balance at beginning of period			$	20,871		$	20,420		$	21,435		$	21,157
Additions(b)				1,926			1,285			3,267			2,307
Amortization				(967	)		(1,029	)		(1,991	)		(2,227	)
Sales				-			-			(868	)		-
Impairment write-down				(123	)		(11	)		(136	)		(572	)
	Gross balance at end of period			21,707			20,665			21,707			20,665
Allowance balance at beginning of period				182			255			239			855
Provision for (reduction of) impairment				29			(140	)		(15	)		(179	)
Impairment write-down				(123	)		(11	)		(136	)		(572	)
	Allowance balance at end of period			88			104			88			104
		Total mortgage servicing rights, net	$	21,619		$	20,561		$	21,619		$	20,561
As a percentage of associated mortgage loans				0.91	%		0.87	%		0.91	%		0.87	%
Estimated fair value (c)			$	25,080		$	23,644		$	25,080		$	23,644
Weighted average expected life (in months)				65			56			65			56
Custodial account earnings rate				5.35	%		5.39	%		5.35	%		5.39	%
Weighted average discount rate				10.13			9.39			10.13			9.39

		June 30,			December 31,			June 30,
(Dollars in Thousands)		2007			2006			2006
Mortgage loans serviced for others
Total		$	6,002,907		$	5,908,233		$	6,377,737
With capitalized mortgage servicing rights: (c)
	Amount		2,383,290			2,394,754			2,369,543
	Weighted average interest rate		5.79	%		5.75	%		5.66	%
Total loans sub-serviced without mortgage servicing rights:(d)
	Term – less than six months	$	398,530		$	93,074		$	228,455
	Term – indefinite		3,207,087			3,404,342			3,760,642
Custodial account balances		$	156,433		$	172,462		$	147,831

^(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. However, loan servicing activities do not include the benefit of the use of total loan repayments to increase net interest income.
^(b) Included minor amounts repurchased.
^(c) 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.
^(d) Servicing is performed for a fixed fee per loan each month.

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DOWNEY FINANCIAL CORP. AND SUBSIDIARIES

SELECTED FINANCIAL DATA – (Continued)

			June 30,			December 31,			June 30,
(Dollars in Thousands)			2007			2006			2006
Loans held for investment
Loans secured by real estate:
	Residential one-to-four units		$	11,714,635		$	13,227,004		$	14,839,479
	Home equity loans and lines of credit			154,980			187,939			232,746
	Residential five or more units			108,302			113,488			118,100
	Commercial real estate			26,767			26,700			27,091
	Construction			52,699			52,922			67,609
	Land			64,262			58,910			59,682
Non-mortgage:
	Commercial			2,700			2,400			3,400
	Consumer			6,346			6,778			6,303
		Total loans held for investment		12,130,691			13,676,141			15,354,410
Increase (decrease) for:
	Undisbursed loan funds and net deferred costs and premiums			142,616			192,086			217,407
	Allowance for losses			(69,107	)		(60,943	)		(51,198	)
		Total loans held for investment, net	$	12,204,200		$	13,807,284		$	15,520,619
Loans held for sale
Residential one-to-four units			$	189,189		$	358,128		$	411,086
Net deferred costs and premiums				285			4,789			6,851
Capitalized basis adjustment(a)				(1,722	)		298			(246	)
	Total loans held for sale, net		$	187,752		$	363,215		$	417,691
Residential one-to-four unit loans subject to negative amortization
Held for investment:
	Amount		$	8,914,448		$	11,199,870		$	13,221,683
	Amount as a percentage of total residential one-to-four unit loans			76	%		85	%		89	%
	Negative amortization included in the loan balance			377,327			320,466			229,052
	Negative amortization as a percentage of the associated loan balance			4.23	%		2.86	%		1.73	%
Non-performing assets
Non-accrual loans:
	Residential one-to-four units		$	178,504		$	90,218		$	38,074
	Construction			7,067			-			-
	Land			11,345			11,345			-
	Other			525			275			-
		Total non-accrual loans		197,441			101,838			38,074
Real estate acquired in settlement of loans				29,925			8,524			1,254
	Total non-performing assets		$	227,366		$	110,362		$	39,328
Non-performing assets as a percentage of total assets				1.53	%		0.68	%		0.23	%
Delinquent loans
30-59 days			$	77,527		$	57,042		$	28,420
60-89 days				57,076			24,313			11,908
90+ days(b)				125,283			63,162			23,879
	Total delinquent loans		$	259,886		$	144,517		$	64,207
Delinquencies as a percentage of total loans				2.11	%		1.03	%		0.41	%

^(a) Reflected the change in fair value of the interest rate lock derivative from the date of rate lock 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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