Downey Financial Misses 4th Q Target

Downey Financial Corp. here reported that net income for the fourth quarter fell to $23.8 million, or $0.85 per share, from $40 million, or $1.43 per share in the fourth quarter of 2002.

Net income for the full year was also down, totaling $101.7 million last year compared with $112.3 million in 2002.

Downey said a decline in the effective interest rate spread, an 11% increase in administrative expense, and a $10 million loss from trading securities that were intended to hedge mortgage servicing rights contributed to the decline.

However, Downey also said that the performance of loan servicing improved last year due to a decline in the valuation allowance for MSRs.

Loan servicing income benefited from a $7.7 million recapture of the valuation allowance for mortgage servicing rights during the fourth quarter. The company serviced a $9.27 billion portfolio at the end of last year and valued the servicing rights at $82 million, or 0.89% of the outstanding balance.

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