Downey Savings & Loan’s troubles raise eyebrows in the I.E.

     The hammered banking industry is creating shock waves throughout San Bernardino and Riverside counties.
     First it was Pasadena-based IndyMac. The failed institution’s branches drew local customers eager to yank their money out of accounts just as the federal government took over the bank’s operations.
     Now it’s Downey Savings & Loan.
     The bank hasn’t failed, but it’s holding people’s money at more than 25 full-service and in-store branches in the two-county region.
     Investors and banking analysts are speculating whether Downey will have to close certain branches because it’s falling on hard times.
     The bank’s Newport Beach-based holding company, Downey Financial Corp. (NYSE: DSL), reported on Thursday that it lost $466 million over the first six months of this year compared to about $75 million in profit gained over the same period in 2007. Downey made risky mortgage loans to home buyers during the real-estate rush.
     There could be a silver lining, though. Downey owns 174 retail branches that held $9.9 billion in customer deposits by second quarter’s end. The financial base might help Downey whether hard times, some financial experts say.
     But others disagree. Paul Miller, analyst with FBR Capital Markets Corp., said in a Thursday research note that Downey’s deposit’s will only help so much, given California’s deteriorating housing market.
     Customer deposits dropped 12 percent between now and a year ago, the company reported.
     –matthew.wrye@inlandnewspapers.com

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