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Struggling Bank Turns to Former CFO in Shakeup

Downey Financial has been a big casualty of the real estate collapse, dropping $219 million in the second quarter.
Stephen TaubJuly 24, 2008

Downey Financial Corporation’s former chief financial officer will head the struggling bank on an interim basis amid a management shake-up.

The Newport Beach, Calif.-based bank, which Thursday reported a loss of $219 million in the second quarter, in contrast to a profit of $33 million in the comparable period in 2007, named its former long-term CFO Thomas Prince, as the interim chief executive officer of the company and Downey Savings and Loan Association, F.A.

Prince, who in March 2006 became executive vice president and chief operating officer of both Downey Financial and the S&L, had served as finance chief since 1992. He succeeds Daniel Rosenthal, who has retired as CEO and vice chairman. Prince has also been appointed to the boards of both entities. The company said it has launched a search for a permanent CEO.

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Before May 1992, Prince spent 24 years at Security Pacific Corp. and Security Pacific National Bank in various financial posts, the last eight years of which as Senior Vice President and Controller.

“Tom is a seasoned executive with a strong background in banking and over 16 years with Downey,” said Michael Bozarth, an independent director who has just been appointed board chairman. “He has the experience and capability to manage the Company through this transition. Under Tom’s leadership, we will navigate the current difficult market environment with shareholder value as our guiding principle.”

Bozarth replaces the retiring Maurice McAlister, the company’s 83-year-old founder and largest shareholder as chairman. Gary Brummett, has been named vice chairman.

Downey has been a big casualty of the real estate collapse, which has hit parts of California particularly heavily. In the second quarter, the bank incurred a $249 million increase in its provision for credit losses and a $26 million increase in operating expense that mainly stemmed from higher costs associated the operation of real estate acquired in loan settlements.

For the first six months of 2008, the company’s net loss totaled $466.6 million, in contrast to the net income of $75.6 million it enjoyed for the first six months of 2007. Downey also cut its quarterly dividend to a penny per share from 12 cents per share.