<em>*ring ring*</em>
Hello, and thank you for calling Downey Savings, how would you like to withdraw your money, er I mean help you.
Hello, this is the Office of Thrift Supervision, and we need for you to stop lending, call and ask us if you can pay a dividend, and limit your asset growth.
What?! Why?!
Uh... what are you stupid? You have had a run to the tune of $219 million, 15% of your "assets" are non-performing, and you have been borrowing from the Fed like gambling addict in Vegas.
Oh... is that bad? Hold on... let me see if I can transfer you to our CEO, oh no wait... he quit last week. Uh... maybe I can find someone, can I put you on hold?
<a href="http://www.marketwatch.com/news/story/downey-says-regulators-limit-some/story.aspx?guid={E42720CE-B4FB-48E5-8959-9CE189BFFC2C}">Regulators limit some Downey activities</a>
Bank sees net deposit inflows after period of 'elevated' withdrawals
By Alistair Barr, MarketWatch
Last update: 6:23 p.m. EDT Aug. 11, 2008
SAN FRANCISCO (MarketWatch) -- Downey Financial Corp.'s main regulator has imposed several restrictions on the lender's activities, including limits on dividends, asset growth and new borrowing, according to a filing Monday.
Downey also said that it's experienced "elevated" levels of deposit withdrawals after reporting a $218.9 million second-quarter net loss in late July. The company stressed that net deposit inflows returned more recently, but also warned that if outflows resume it would have to raise new capital or borrow more to meet liquidity needs.
Shares of Downey fell 8.1% to $1.93 during after-hours trading on Monday. The stock dropped 6.3% in regular trading.
Since Downey reported its second-quarter loss on July 24, the Office of Thrift Supervision, its main regulator, has imposed several restrictions, the company said in its quarterly filing with the Securities and Exchange Commission.
The Newport Beach, Calif.-based thrift has been hit hard by a surge in bad loans. Nonperforming assets made up more than 15% of total loans at the end of June. The company said earlier this year that it has set up a special committee of directors to explore strategic alternatives, including raising more capital. See related story.
Downey can't pay dividends without checking with the Office of Thrift Supervision first. The company's bank can't increase assets beyond net interest credited on deposits without OTS approval. It can only renew debt or borrow more money if the OTS doesn't object, according to the filing.
Downey also can't pay certain types of compensation and severance; it must tell the OTS before changing directors or executives, and before going ahead with transactions between any of its affiliates or subsidiaries, the filing also disclosed.
"We don't comment on supervision of individual companies," said William Ruberry, an OTS spokesman. Downey Chief Financial Officer Brian C?t? declined to comment.
A search of formal, public-enforcement actions by the OTS in relation to Downey on the regulator's Web site yielded two actions from 1999 and Aug. 30 last year.
Downey's main source of borrowing is the Federal Home Loan Banks, or FHLB. At the end of June, the thrift said it had borrowed $1.5 billion from the FHLB, which was a little more than 12% of total assets.
By the end of Friday, Downey's FHLB borrowing had jumped to $2.8 billion. It's allowed to borrow another $200 million, Downey noted in its quarterly SEC filing.
Downey also said its bank is allowed to borrow up to $1.5 billion from the Federal Reserve Bank of San Francisco. At the end of Friday, it hadn't borrowed any money from this source, according to the filing.
