NEWPORT BEACH, Calif., Jan. 23 /PRNewswire-FirstCall/ -- Downey Financial Corp. reported a net loss for 2007 of $56.6 million or $2.03 per share on a diluted basis, compared to net income of $199.7 million or $7.16 per share in 2006.
The $439.8 million unfavorable change in pre-tax income/(loss) between years was due primarily to:
-- A $283.5 million increase in provision for credit losses;
-- A $94.8 million or 18.3% decline in net interest income due to a lower
level of interest-earning assets and a lower effective interest rate
spread;
-- A $23.3 million or 53.4% decline in net gains on the sale of loans and
mortgage-backed securities due to both a lower level of loans sold
and gain per dollar of loan sold;
-- A $17.8 million unfavorable change in income from real estate and joint
ventures held for investment, as the current year included writedowns
to reflect declines in the value of single family home lots in which
the company is a joint venture partner and net gains from sales were
below a year ago; and
-- A $14.8 million increase in operating expense, of which $9.2 million
related to higher costs related to the operation of real estate
acquired in settlement of loans.
Rick McGill, President, commented, "We are clearly disappointed with our results. The continued weakening of the housing market and its uncertain future have unfavorably impacted our borrowers and the value of their loan collateral. As a result, single family loan delinquencies, as well as losses from foreclosures, rose significantly during 2007 and led to the large increase to the allowance for loan losses. While we expect the environment to remain challenging in 2008, we enter the year with a strong capital position and stable funding sources from our retail branch franchise. As always, we remain committed to our heritage of providing our customers with excellent service."
For the fourth quarter of 2007, a net loss of $108.8 million or $3.90 per diluted share was recorded, compared to net income of $52.1 million or $1.87 per share in the fourth quarter of 2006. The $274.4 million unfavorable change in pre-tax income/(loss) between fourth quarters primarily reflected:
-- A $218.2 million increase in provision for credit losses;
-- A $40.9 million decline in net interest income due to a lower level of
interest-earning assets and a lower effective interest rate spread;
-- A $8.4 million decline in net gains on sales of loans and mortgage-
backed securities due to both a lower level of loans sold and gain per
dollar of loan sold; and
-- A $5.3 million increase operating expense, of which $4.5 million
related to higher costs associated with the operation of real estate
acquired in settlement of loans.
NET INTEREST INCOME
Net interest income totaled $89.3 million in the fourth quarter of 2007, down $40.9 million or 31.4% from a year ago, reflecting a $2.773 billion or 17.1% decline in average interest-earning assets and a decline in the effective interest rate spread. The average effective interest rate spread was 2.67% in the current quarter, down 0.55% from a year ago and down 0.12% from the third quarter of 2007.
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 48% in the current quarter from 98% a year ago. This decline was primarily the result of a higher proportion of loans being repaid that were no longer subject to prepayment fees primarily due to the increasing age of the loan portfolio. In addition, the current quarter effective interest rate spread was unfavorably impacted by a higher proportion of non-performing assets and a higher proportion of interest-earning assets 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 ago.
For 2007, net interest income totaled $423.8 million, down $94.8 million or 18.3% from a year ago.
PROVISION FOR CREDIT LOSSES
During the current quarter, the provision for credit losses totaled $218.4 million, up $218.2 million from a year ago. Of the current quarter provision for credit losses, $39.5 million is related to the creation of a specific allowance associated with certain troubled debt restructurings resulting from a borrower retention program which is discussed more fully below in the section entitled "Non-Performing Assets."
At December 31, 2007, the allowance for credit losses was $349 million, comprised of $348 million for loan losses and $1 million for unfunded loan commitments which is reported within accounts payable and accrued liabilities. The increase to the allowance this quarter reflected further increases in delinquent loans and declines in the value of underlying home collateral due to the continued weakening and uncertainty relative to the housing market. This has been particularly true in certain geographic areas such as the greater Sacramento, Stockton, Modesto and Monterey areas of Northern California, the Inland Empire and San Diego County. Net loan charge-offs totaled $12.2 million in the current quarter, compared to $0.3 million a year ago. The current quarter net charge-offs are primarily related to residential one-to-four unit loans, with the annualized net charge-off ratio associated with these loans increasing to 0.43% from 0.01% a year ago.
For 2007, the provision for credit losses totaled $310.1 million and net charge-offs were $22.3 million. This compares with a $26.6 million provision for credit losses and net charge-offs of $0.5 million a year ago.
OTHER INCOME
Other income totaled $8.2 million in the current quarter, down $10.0 million or 54.9% from a year ago. The primary factor contributing to the decline between fourth quarters was a $8.4 million decline in net gains on sale of loans and mortgage-backed securities, reflecting both a decline in loans sold and a lower gain per dollar of loan sold. Net gains in the current quarter totaled $0.1 million, including a $0.5 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 was realized equal to 0.31% on secondary market sales of $176 million, compared with the year-ago gain of 1.23% on secondary market sales of $714 million.
For 2007, other income totaled $46.5 million, down $46.7 million or 50.1% from a year ago.
OPERATING EXPENSE
Operating expense totaled $67.3 million in the current quarter, up $5.3 million or 8.5% from a year ago. The increase primarily reflected an increase of $4.5 million in net operations of real estate acquired in the settlement of loans due to a higher number of foreclosed properties. In addition to one property comprising 113 single family lots, the inventory of single family homes available for sale totaled 326 at year end, up from 33 a year ago. General and administrative expense increased $0.8 million or 1.2%. All major categories of general and administrative expense were above year-ago levels except for salaries and related costs, down $1.6 million or 3.9% and advertising expense, down $0.5 million.
For 2007, operating expense totaled $258.0 million, up $14.8 million or 6.1% from a year ago.
INCOME TAXES
The effective tax rate was a benefit of 42.18% in the current quarter and 42.14% for the current year, compared to an expense of 39.49% in the prior fourth quarter and 41.62% in the prior year.
ASSETS, LOAN ORIGINATIONS AND DEPOSITS
At December 31, 2007, assets totaled $13.409 billion, down $2.798 billion or 17.3% from a year ago. During the current quarter, assets declined $1.009 billion due primarily to declines of $592 million in securities available for sale and $569 million in loans held for investment, as loan payoffs exceeded originations. Included within loans held for investment at quarter end were $7.531 billion of single family adjustable rate mortgages subject to negative amortization, down $725 million from September 30, 2007. These loans comprised 69% of the single family residential loan portfolio held for investment at quarter end, compared to 85% a year ago. The amount of negative amortization included in loan balances declined $9 million during the current quarter to $379 million or 5.03% of loans subject to negative amortization. During the current quarter, approximately 24% of loan interest income represented negative amortization, down from 26% in the third quarter of 2007 and 29% in the year-ago fourth quarter.
Loan originations (including purchases) totaled $618 million in the current quarter, down $722 million or 53.9% from $1.340 billion a year ago. Loans originated for sale declined $587 million or 75.3% to $192 million, while single family residential loans originated for portfolio declined $160 million or 28.9% to $394 million. In addition to single family residential loans, $32 million of other loans were originated in the current quarter, up from $7 million a year ago. For 2007, loan originations totaled $3.782 billion, down 51.7% from $7.829 billion in the same period a year ago.
Not included in the above originations are loans in which we modify the terms of the note for borrowers. During the current quarter, we modified $322 million of loans associated with the portfolio retention program, wherein the borrower was current with their loan payments and the new interest rate was no less than that afforded new borrowers, and $9 million of loans at below market interest rates in loan workout situations. For 2007, we modified $421 million associated with the portfolio retention program and $12 million in loan workout situations. Most of the modifications related to option ARM loans were modified into hybrid ARMs where the interest rate is fixed for the first five years or ARMs with interest rates that adjust annually. Both of these products do not permit negative amortization.
Deposits totaled $10.496 billion at quarter end, down $1.289 billion or 10.9% from a year ago. Although deposits declined during the year, the number of checking accounts increased 5.7%. At quarter end, the number of branches totaled 172 (168 in California and four in Arizona). At quarter end, the average deposit size of our 82 traditional branches was $102 million, while the average deposit size of our 90 in-store branches was $24 million. During the year, borrowings declined by $1.413 billion and at year end represented 10.4% of total assets.
NON-PERFORMING ASSETS
Non-performing assets increased during the quarter by $618 million to $1.042 billion and represented 7.77% of total assets, compared with 0.68% at year-end 2006. Of the increase, $321 million or about half represented loans modified as part of a borrower retention program initiated at the beginning of the third quarter of 2007 to provide borrowers who are current with their loan payments a cost effective means to change from an option ARM to a less costly financing alternative. Those loans are considered troubled debt restructurings and have been placed on non-accrual status even though the interest rate following modification was no less than that afforded new borrowers. The reason for this is because the modified interest rate was lower than the interest rate on the original loan and the loan was not re- underwritten to prove that the new interest rate was, in fact, a market interest rate for a borrower with similar credit quality. Interest income will be recorded as these borrowers make their loan payments. If these borrowers perform pursuant to the modified terms for six months, the loans will be placed back on accrual status and, while still reported as troubled debt restructurings, they will no longer be classified as non-performing assets because the borrower will have demonstrated an ability to perform in accordance with the loan modification and the interest rate was no less than those afforded new borrowers at the time of modification.
To the extent borrowers whose loans were modified pursuant to the borrower retention program are current with their loan payments, it is relevant to distinguish those from total non-performing assets because, unlike other loans classified as non-performing assets, these loans are paying interest at interest rates no less than those afforded new borrowers. At year-end 2007, approximately 95% of such borrowers had made all loan payments due. Accordingly, when those performing troubled debt restructurings are excluded from the ratio of non-performing assets to total assets, the adjusted ratio drops to 4.78% compared to the actual ratio of 7.77%.
REGULATORY CAPITAL RATIOS
At December 31, 2007, Downey Financial Corp.'s primary subsidiary, Downey Savings and Loan Association, F.A., had core and tangible capital ratios of 10.18% and a risk-based capital ratio of 19.01%. 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.
DOWNEY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)
Dec. 31,
2007 2006
ASSETS
Cash $ 83,840 $ 124,865
Federal funds 5,900 1
Cash and cash equivalents 89,740 124,866
U.S. Treasury, government sponsored
entities and other investment
securities available for sale, at fair
value 1,549,879 1,433,176
Loans held for sale, at lower of cost or
fair value 103,384 363,215
Mortgage-backed securities available for
sale, at fair value 111 251
Loans held for investment 11,381,327 13,868,227
Allowance for loan losses (348,167) (60,943)
----------- -----------
Loans held for investment, net 11,033,160 13,807,284
Investments in real estate and joint
ventures 68,679 59,843
Real estate acquired in settlement of
loans 115,623 8,524
Premises and equipment, net 115,846 114,052
Federal Home Loan Bank stock, at cost 70,964 152,953
Mortgage servicing rights, net 19,512 21,196
Other assets 120,073 121,746
Deferred tax asset 122,086 276
$13,409,057 $16,207,382
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $10,496,041 $11,784,869
Securities sold under agreements to
repurchase -- 469,971
Federal Home Loan Bank advances 1,197,100 2,140,785
Senior notes 198,445 198,260
Accounts payable and accrued liabilities 183,054 220,262
Total liabilities 12,074,640 14,814,147
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 both
Dec. 31, 2007 and 2006; outstanding
27,853,783 shares at both Dec. 31, 2007
and 2006 282 282
Additional paid-in capital 93,792 93,792
Accumulated other comprehensive income
(loss) 2,768 (5,204)
Retained earnings 1,254,367 1,321,157
Treasury stock, at cost, 381,239 shares
at both Dec. 31, 2007 and 2006 (16,792) (16,792)
Total stockholders' equity 1,334,417 1,393,235
$13,409,057 $16,207,382
=========== ===========
DOWNEY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Data)
Three Months Ended Twelve Months Ended
Dec. 31, Dec. 31,
2007 2006 2007 2006
INTEREST INCOME
Loans $ 194,587 $272,239 $885,456 $1,080,791
U.S. Treasury and
government sponsored
entities securities 22,630 15,775 88,274 43,445
Mortgage-backed securities 3 4 12 13
Other investment
securities 959 2,615 6,355 9,556
Total interest income 218,179 290,633 980,097 1,133,805
INTEREST EXPENSE
Deposits 105,084 115,924 439,061 417,590
Federal Home Loan Bank
advances and other
borrowings 20,497 41,234 103,991 184,343
Senior notes 3,303 3,300 13,207 13,195
Total interest expense 128,884 160,458 556,259 615,128
NET INTEREST INCOME 89,295 130,175 423,838 518,677
PROVISION FOR CREDIT
LOSSES 218,447 245 310,131 26,604
Net interest income
(loss) after provision
for credit losses (129,152) 129,930 113,707 492,073
OTHER INCOME, NET
Loan and deposit related
fees 8,967 9,143 36,054 36,151
Real estate and joint
ventures held for
investment, net 642 780 (6,885) 10,953
Secondary marketing
activities:
Loan servicing loss, net (1,660) (858) (3,179) (594)
Net gains on sales of
loans and mortgage-
backed securities 92 8,495 20,316 43,615
Litigation award 155 608 155 2,233
Other 31 66 15 785
Total other income, net 8,227 18,234 46,476 93,143
OPERATING EXPENSE
Salaries and related costs 38,882 40,464 158,813 161,060
Premises and equipment
costs 10,257 9,207 37,924 34,959
Advertising expense 1,443 1,895 5,912 6,227
Deposit insurance premiums
and regulatory
assessments 2,516 2,193 10,175 6,439
Professional fees 916 297 2,695 1,793
Other general and
administrative expense 8,732 7,920 33,003 32,477
Total general and
administrative expense 62,746 61,976 248,522 242,955
Net operation of real
estate acquired in
settlement of loans 4,583 65 9,486 250
Total operating expense 67,329 62,041 258,008 243,205
INCOME (LOSS) BEFORE
INCOME TAXES (TAX
BENEFITS) (188,254) 86,123 (97,825) 342,011
Income taxes (tax
benefits) (79,409) 34,008 (41,226) 142,355
NET INCOME (LOSS) $(108,845) $ 52,115 $(56,599) $ 199,656
========== ======== ========= ==========
PER SHARE INFORMATION
Basic $ (3.90) $ 1.87 $ (2.03) $ 7.17
Diluted $ (3.90) $ 1.87 $ (2.03) $ 7.16
Cash dividends declared
and paid $ 0.12 $ 0.10 $ 0.48 $ 0.40
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic 27,853,783 27,853,783 27,853,783 27,853,783
Diluted 27,853,783 27,884,770 27,853,783 27,883,867
DOWNEY FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(Dollars in Thousands)
Three Months Ended Twelve Months Ended
Dec. 31, Dec. 31,
2007 2006 2007 2006
NET INCOME (LOSS) BY
BUSINESS SEGMENT
Banking $ (109,282) $ 50,907 $ (53,096) $ 191,349
Real estate
investment 437 1,208 (3,503) 8,307
Total net income
(loss) $ (108,845) $ 52,115 $ (56,599) $ 199,656
=========== ========== =========== ==========
SELECTED FINANCIAL
RATIOS
Effective interest
rate spread 2.67% 3.22% 2.96% 3.09%
Efficiency ratio (a) 64.87 42.15 52.10 40.58
Return on average
assets (3.12) 1.25 (0.38) 1.16
Return on average
equity (30.47) 15.23 (3.92) 15.45
ASSET AND LIABILITY
ACTIVITY
Loans for investment
portfolio:
Originations: (b)
Residential
one-to-four units $ 394,495 $ 554,573 $2,128,607 $4,168,402
All other 31,682 6,605 80,801 185,078
Repayments (747,862) (1,661,536) (4,777,673) (6,215,012)
Loans originated for
sale portfolio (b) 192,053 779,002 1,572,424 3,475,552
Loans and mortgage-
backed securities
sold (175,908) (713,974) (1,797,598) (3,521,410)
Decrease in loans
and mortgage-backed
securities (555,530) (964,793) (3,034,095) (1,651,173)
Decrease in assets (1,008,660) (774,175) (2,798,325) (888,281)
Decrease in deposits (166,577) (160,889) (1,288,828) (91,979)
Decrease in
borrowings (678,070) (533,424) (1,413,471) (946,586)
Dec. 31, Sep. 30, Dec. 31,
2007 2007 2006
CAPITAL RATIOS (BANK ONLY)
Tangible and core 10.18% 10.21% 8.76%
Risk-based 19.01 21.34 17.78
BOOK VALUE PER SHARE $47.91 $51.85 $50.02
NUMBER OF BRANCHES INCLUDING
IN-STORE LOCATIONS 172 172 172
(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) Included loans purchased.
DOWNEY FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL DATA - (Continued)
(Dollars in Thousands)
Three Months Ended Dec. 31,
2007
Average
Average Yield/
Balance Interest Rate
AVERAGE BALANCE SHEET DATA
Interest-earning assets:
Loans:
Loan prepayment fees $ 4,117 0.15%
Write-off of deferred costs and
premiums from loan payoffs (8,541) (0.30)
All other 199,011 6.92
Total loans $11,495,709 194,587 6.77
Mortgage-backed securities 111 3 5.77
Investment securities (a) 1,906,138 23,589 4.91
Total interest-earnings assets 13,401,958 $218,179 6.51%
Non-interest-earning assets 539,099
Total assets $13,941,057
===========
Transaction accounts:
Non-interest-bearing checking (b) $ 676,835 $ -- -%
Interest-bearing checking (b) 467,291 342 0.29
Money market 135,798 354 1.03
Regular passbook 1,058,830 2,523 0.95
Total transaction accounts 2,338,754 3,219 0.55
Certificates of deposit 8,263,836 101,865 4.89
Total deposits 10,602,590 105,084 3.93
FHLB advances and other
borrowings (c) 1,431,431 20,497 5.68
Senior notes 198,428 3,303 6.66
Total deposits and borrowings 12,232,449 128,884 4.18
Other liabilities 279,722
Stockholders' equity 1,428,886
Total liabilities and
stockholders' equity $13,941,057
===========
Net interest income/interest rate
spread $ 89,295 2.33%
Excess of interest-earning assets
over deposits and borrowings $ 1,169,509
Effective interest rate spread 2.67
Three Months Ended Dec. 31,
2006
Average
Average Yield/
Balance Interest Rate
AVERAGE BALANCE SHEET DATA
Interest-earning assets:
Loans:
Loan prepayment fees $ 27,409 0.75%
Write-off of deferred costs and
premiums from loan payoffs (27,893) (0.76)
All other 272,723 7.42
Total loans $14,703,050 272,239 7.41
Mortgage-backed securities 254 4 5.60
Investment securities (a) 1,472,000 18,390 4.96
Total interest-earnings assets 16,175,304 $290,633 7.19%
Non-interest-earning assets 450,768
Total assets $16,626,072
===========
Transaction accounts:
Non-interest-bearing checking (b) $ 776,986 $ -- -%
Interest-bearing checking (b) 488,383 418 0.34
Money market 146,991 384 1.04
Regular passbook 1,311,124 3,225 0.98
Total transaction accounts 2,723,484 4,027 0.59
Certificates of deposit 9,117,252 111,897 4.87
Total deposits 11,840,736 115,924 3.88
FHLB advances and other
borrowings (c) 2,867,151 41,234 5.71
Senior notes 198,245 3,300 6.66
Total deposits and borrowings 14,906,132 160,458 4.27
Other liabilities 351,312
Stockholders' equity 1,368,628
Total liabilities and
stockholders' equity $16,626,072
===========
Net interest income/interest rate
spread $130,175 2.92%
Excess of interest-earning assets
over deposits and borrowings $ 1,269,172
Effective interest rate spread 3.22
Twelve Months Ended Dec. 31,
2007
Average
Average Yield/
Balance Interest Rate
AVERAGE BALANCE SHEET DATA
Interest-earning assets:
Loans:
Loan prepayment fees $ 52,054 0.42%
Write-off of deferred costs and
premiums from loan payoffs (74,995) (0.60)
All other 908,397 7.27
Total loans $12,495,977 885,456 7.09
Mortgage-backed securities 123 12 5.83
Investment securities (a) 1,812,913 94,629 5.22
Total interest-earnings assets 14,309,013 $980,097 6.85%
Non-interest-earning assets 493,573
Total assets $14,802,586
===========
Transaction accounts:
Non-interest-bearing checking (b) $ 740,747 $ -- -%
Interest-bearing checking (b) 478,223 1,459 0.31
Money market 142,805 1,482 1.04
Regular passbook 1,152,565 10,946 0.95
Total transaction accounts 2,514,340 13,887 0.55
Certificates of deposit 8,623,048 425,174 4.93
Total deposits 11,137,388 439,061 3.94
FHLB advances and other
borrowings (c) 1,789,993 103,991 5.81
Senior notes 198,358 13,207 6.66
Total deposits and borrowings 13,125,739 556,259 4.24
Other liabilities 234,682
Stockholders' equity 1,442,165
Total liabilities and
stockholders' equity $14,802,586
===========
Net interest income/interest rate
spread $423,838 2.61%
Excess of interest-earning assets
over deposits and borrowings $ 1,183,274
Effective interest rate spread 2.96
Twelve Months Ended Dec. 31,
2006
Average
Average Yield/
Balance Interest Rate
AVERAGE BALANCE SHEET DATA
Interest-earning assets:
Loans:
Loan prepayment fees $ 101,219 0.64%
Write-off of deferred costs and
premiums from loan payoffs (102,204) (0.65)
All other 1,081,776 6.90
Total loans $15,688,297 1,080,791 6.89
Mortgage-backed securities 264 13 5.17
Investment securities (a) 1,113,878 53,001 4.76
Total interest-earnings assets 16,802,439 $1,133,805 6.75%
Non-interest-earning assets 436,958
Total assets $17,239,397
===========
Transaction accounts:
Non-interest-bearing checking (b) $ 746,401 $ -- -%
Interest-bearing checking (b) 499,978 1,718 0.34
Money market 156,629 1,632 1.04
Regular passbook 1,503,867 15,082 1.00
Total transaction accounts 2,906,875 18,432 0.63
Certificates of deposit 9,055,959 399,158 4.41
Total deposits 11,962,834 417,590 3.49
FHLB advances and other
borrowings (c) 3,457,357 184,343 5.33
Senior notes 198,178 13,195 6.66
Total deposits and borrowings 15,618,369 615,128 3.94
Other liabilities 328,436
Stockholders' equity 1,292,592
Total liabilities and
stockholders' equity $17,239,397
===========
Net interest income/interest rate
spread $ 518,677 2.81%
Excess of interest-earning assets
over deposits and borrowings $ 1,184,070
Effective interest rate spread 3.09
(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.
DOWNEY FINANCIAL CORP. AND SUBSIDIARIES
SELECTED FINANCIAL DATA - (Continued)
(Dollars in Thousands)
Three Months Ended Twelve Months Ended
Dec. 31, Dec. 31,
2007 2006 2007 2006
LOAN AND DEPOSIT RELATED
FEES
Loan related fees $ 467 $ 918 $ 2,700 $ 3,894
Deposit related fees:
Automated teller machine
fees 2,285 2,346 9,317 9,324
Other fees 6,215 5,879 24,037 22,933
Total loan and deposit
related fees $ 8,967 $ 9,143 $36,054 $36,151
LOAN SERVICING INCOME
(LOSS), NET
Net cash servicing fees $ 2,166 $ 1,647 $ 7,028 $ 6,370
Payoff and curtailment
interest cost (a) (544) (1,269) (3,785) (2,533)
Amortization of mortgage
servicing rights (1,085) (1,087) (4,026) (4,370)
Provision for impairment
of mortgage servicing
rights (2,197) (149) (2,396) (61)
Total loan servicing
loss, net $(1,660) $ (858) $(3,179) $ (594)
NET GAINS (LOSSES) ON
SALES OF LOANS AND
MORTGAGE-BACKED
SECURITIES
Mortgage servicing rights $ 945 $ 2,122 $ 5,606 $ 5,266
All other components
excluding SFAS 133 (393) 6,682 14,606 39,457
SFAS 133 (460) (309) 104 (1,108)
Total net gains on sales
of loans and mortgage-
backed securities $ 92 $ 8,495 $20,316 $43,615
Secondary marketing gain
excluding SFAS 133 as a
percentage of associated
sales 0.31% 1.23% 1.12% 1.27%
MORTGAGE SERVICING RIGHTS
ACTIVITY
Gross balance at beginning
of period $22,114 $20,483 $21,435 $21,157
Additions (b) 945 2,122 5,606 5,325
Amortization (1,085) (1,087) (4,026) (4,370)
Sales -- -- (868) --
Impairment write-down (1) (83) (174) (677)
Gross balance at end of
period 21,973 21,435 21,973 21,435
Allowance balance at
beginning of period 265 173 239 855
Provision for impairment 2,197 149 2,396 61
Impairment write-down (1) (83) (174) (677)
Allowance balance at end
of period 2,461 239 2,461 239
Total mortgage servicing
rights, net $19,512 $21,196 $19,512 $21,196
As a percentage of
associated mortgage loans 0.80% 0.89% 0.80% 0.89%
Estimated fair value (c) $20,991 $22,828 $20,991 $22,828
Weighted average expected
life (in months) 53 54 53 54
Custodial account earnings
rate 4.53% 5.28% 4.53% 5.28%
Weighted average discount
rate 11.45 10.28 11.45 10.28
Dec. 31, Sep. 30, Dec