<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 11-K
(Mark One)
[x] Annual Report pursuant to Section 15(d) of the Securities Exchange of 1934
(Fee Required)
For the fiscal year ended December 31, 1996
OR
[ ] Transition Report pursuant to Section 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the transition period from to
----- -----
Commission File Number 1-13578
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
DOWNEY FINANCIAL CORP.
3501 Jamboree Road
Newport Beach, CA 92660
================================================================================
<PAGE>
REQUIRED INFORMATION
I. Financial Statements.
Financial statements and schedules prepared in accordance with the
financial reporting requirements of the Employee Retirement Income Security
Act of 1974, together with independent auditors' report thereon.
II. Exhibits:
Consent of Independent Auditors.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused this annual
report to be signed on its behalf by the undersigned, hereunto duly authorized.
DOWNEY SAVINGS AND LOAN
ASSOCIATION, F.A. EMPLOYEES'
RETIREMENT AND SAVINGS PLAN
Date: September 3, 1997 By: /s/ THOMAS E. PRINCE
----------------------------- -----------------------------------
Thomas E. Prince
Member, Administrative Committee
<PAGE>
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Financial Statements and Supplemental Schedules
December 31, 1996 and 1995
(With Independent Auditors' Report Thereon)
<PAGE>
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Index to Financial Statements and Supplemental Schedules
Page
Independent Auditors' Report 1
Independent Auditors' Report 2
Statements of Net Assets Available for Plan Benefits -
December 31, 1996 and 1995 3
Statements of Changes in Net Assets Available for Plan Benefits -
Years ended December 31, 1996 and 1995 4
Notes to Financial Statements 5
Schedule
Item 27a - Schedule of Assets Held for Investment Purposes -
December 31, 1996 1
Item 27d - Schedule of Reportable Transactions - Year ended
December 31, 1996 2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Administrative Committee
Downey Savings and Loan Association, F.A.
Employees' Retirement and Savings Plan:
We have audited the accompanying statement of net assets available for Plan
benefits of the Downey Savings and Loan Association, F.A. Employees' Retirement
and Savings Plan (the Plan) as of December 31, 1996 and the related statement of
changes in net assets available for Plan benefits for the year ended December
31, 1996. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a responsible basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for Plan benefits of the Plan as
of December 31, 1996 and the changes in net assets available for Plan benefits
for the year then ended in conformity with generally accepted accounting
principles.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes, schedule of loans or fixed income obligations and
schedule of reportable transactions are presented for the purpose of additional
analysis and are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedules have been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ KPMG Peat Marwick
Los Angeles, California
June 26, 1997
1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Administrative Committee
of Downey Savings and Loan Association, F.A.
Employees' Retirement and Savings Plan
We have audited the Statements of Net Assets Available for Plan Benefits
(combined and by fund) of the Downey Savings and Loan Association, F.A.
Employees' Retirement and Savings Plan as of December 31, 1995 and the related
Statements of Changes in Net Assets Available for Plan Benefits (combined and by
fund) for the year then ended. These financial statements are the responsibility
of the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Downey
Savings and Loan Association, F.A. Employees' Retirement and Savings Plan as of
December 31, 1995 and the changes in net assets available for plan benefits for
the year then ended in conformity with generally accepted accounting principles.
/s/ Scott, Bankhead & Co.
June 26, 1997
2
<PAGE>
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 1996 and 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
------------ ------------
<S> <C> <C>
Investments, at fair value:
Mutual funds ............................... $ 6,803,984 $ 4,989,614
Money Market Funds ......................... 3,253,991 2,870,320
Downey Financial Corp. common stock ........ 1,917,726 1,263,784
Participant loans .......................... 439,034 312,367
------------ ------------
12,414,735 9,436,085
------------ ------------
Receivables:
Employer's contribution .................... 1,174,191 908,361
Employees' contributions ................... 54,556 --
Investment income .......................... 3,183 24,532
Other ...................................... 6,202 --
------------ ------------
1,238,132 932,893
------------ ------------
Cash ........................................ 5,961 122,569
------------ ------------
Total assets ............................. 13,658,828 10,491,547
------------ ------------
LIABILITIES
Note payable ................................ -- (19,850)
Other ....................................... (1,348) --
------------ ------------
Total liabilities ........................ (1,348) (19,850)
------------ ------------
Net assets available for Plan benefits ... $ 13,657,480 $ 10,471,697
============ ============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Statements of Changes in Net Assets Available for Plan Benefits
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Additions to net assets attributed to:
Dividends .............................. $ 29,518 $ 25,166
Interest and realized and unrealized
gains and losses ...................... 1,373,202 1,405,044
------------ ------------
1,402,720 1,430,210
Contributions:
Employer .............................. 1,336,683 1,158,329
Employee .............................. 1,556,387 1,349,427
------------ ------------
Total additions ..................... 4,295,790 3,937,966
------------ ------------
Deductions from net assets attributed to:
Benefits paid to participants .......... (1,110,007) (859,397)
Administrative expenses ................ -- (5,210)
------------ ------------
Total deductions .................... (1,110,007) (864,607)
------------ ------------
Net increase ........................ 3,185,783 3,073,359
Net assets available for Plan benefits:
Beginning of year ...................... 10,471,697 7,398,338
------------ ------------
End of year ............................ $ 13,657,480 $ 10,471,697
============ ============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 1996 and 1995
(1) DESCRIPTION OF THE PLAN
GENERAL
The Downey Savings and Loan Association, F.A. Employees' Retirement and
Savings Plan (the Plan) was established as a profit sharing plan on January
1, 1978 and was originally called the Employees' Profit Sharing Plan of
Downey Savings and Loan Association. The Plan was restated as of August 1,
1993 to qualify as both a profit sharing plan and a qualified cash or
deferred arrangement under Internal Revenue Code Sections 401(a) and
401(k). The following description provides only general information.
Participants should refer to the Plan agreement for a more complete
description of the Plan's provisions.
The Plan is a defined contribution plan which provides retirement benefits
for eligible employees of Downey Savings and Loan Association, F.A., its
affiliates and subsidiaries (Downey). It is subject to the provisions of
the Employee Retirement Income Security Act of 1974 (ERISA).
ADMINISTRATION OF THE PLAN
The Plan is administered by Downey (the Plan Administrator). Downey Savings
and Loan Association, F.A. Administrative Committee (the Committee) also
administers the Plan and consists of at least three members and has the
authority to control and manage the operation and administration of the
Plan. The assets of the Plan are held in a nondiscretionary trust by
Charles Schwab Trust Company as trustee and are administered under a trust
agreement which requires that the trustee hold, administer and distribute
the funds of the Plan in accordance with the text of the Plan and the
instructions of the Plan Administrator, the Committee or its designees.
CONTRIBUTIONS
All employees of Downey are eligible to participate in the Plan provided
they are 21 years of age and have completed one year of service. Each year,
participants may contribute up to 15% of their compensation, as defined in
the Plan. Participants may not roll over into the Plan amounts representing
distributions from other qualified plans.
Each quarter, Downey makes a matching contribution equal to 25% of the
participant's pretax contributions for the quarter which do not exceed 4%
of the participant's compensation for that quarter. In addition, Downey
makes annual contributions based upon the participant's annual compensation
and a participant age-weighted factor. Contributions are subject to certain
limitations.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contributions
and allocations of Downey's matching and discretionary contributions and
the Plan's earnings and losses. Allocations are based on participant
earnings or account balances, as defined. Forfeitures reduce the amount of
employer contributions. For the year ended December 31, 1996, participant
forfeitures totaled $30,646.
5
<PAGE>
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements, Continued
VESTING
Participants are immediately vested in their contributions plus actual
earnings thereon. Vesting in Downey's matching and discretionary
contributions plus actual earnings thereon is based on years of continuous
service. A participant vests at the rate of 20% after one year of credited
service and 20% each year thereafter until 100% vesting is reached after
five years of credited service.
INVESTMENT OPTIONS
Contributions may be invested at the participant's direction as follows:
Stock Fund - The fund provides Plan participants with an opportunity to
invest in Downey Financial Corp.
Schwab Institutional Advantage Money Market Fund - The fund seeks to
preserve capital and maintain a high degree of liquidity while providing
current income. This fund is managed by Charles Schwab Investment
Management Inc. The fund will use a variety of securities whose maturities
range from 30 to 75 days.
PIMCO Low Duration Fund - The fund seeks total return - both income and
capital appreciation - consistent with prudent investment management.
Templeton Foreign Fund - The fund seeks long-term growth of capital.
Neuberger & Berman Guardian Fund - The fund is a growth and income fund
that emphasizes investments in stocks of established, high quality
companies considered to be undervalued in comparison to stocks of similar
companies.
Dodge & Cox Balanced Fund - The fund seeks income, conservation of
principal and long-term growth of principal income.
Wasatch Aggressive Equity Fund - The fund seeks long-term growth of capital
and income.
PARTICIPANT LOANS
Participants may borrow from their fund accounts in the event of financial
hardship, as defined within the Plan. Loan transactions are treated as a
transfer to (from) the investment funds. The loans are secured by the
balance in the participant's account and bear interest at a rate
commensurate with local prevailing rates as determined by the Plan
Administrator. Principal and interest are paid ratably through payroll
deductions.
PAYMENTS OF BENEFITS
Upon termination of service, a participant may elect to receive either a
single sum payment in cash or Company Stock equal to the value of the
vested interest in his or her account, or a series of substantially equal
annual or more frequent installments over a period not to exceed five
years.
6
<PAGE>
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements, Continued
PLAN TERMINATION
Although they have not expressed any intent to do so, the Employers have
the right under the Plan to discontinue contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event of Plan
termination, participants will become 100% vested in their accounts.
(2) SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Plan have been prepared on the accrual
basis of accounting.
INVESTMENTS
Publicly traded securities are carried at fair value based on the published
market quotations. Purchases and sales of investments are recorded on a
trade-date basis.
ADMINISTRATIVE EXPENSES
All administrative costs of the Plan, excluding investment management fees,
are paid by Downey.
USE OF ESTIMATES
The Plan Administrator has made a number of estimates and assumptions
relating to the reporting of assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Accordingly, actual results may differ from those estimates.
RECLASSIFICATION
Certain reclassifications of the prior year's reported amounts have been
made to conform to the current year's reporting format.
7
<PAGE>
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements, Continued
(3) NET ASSETS AVAILABLE FOR PLAN BENEFITS
The following presents net assets available for Plan benefits for each fund
as of December 31, 1996:
<TABLE>
<CAPTION>
PIMCO NEUBERGER & DODGE & WASATCH
MONEY LOW TEMPLETON BERMAN COX AGGRESSIVE
STOCK MARKET DURATION FOREIGN GUARDIAN LOAN BALANCED EQUITY
FUND FUND FUND FUND FUND FUND FUND FUND TOTAL
---------- --------- -------- --------- ----------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments at
fair value:
Mutual funds .... $ -- -- 958,470 105,393 2,927,325 -- 2,221,422 591,374 6,803,984
Money Market
Funds .......... 53,575 3,200,416 -- -- -- -- -- -- 3,253,991
Downey Financial
Corp. common
stock .......... 1,917,726 -- -- -- -- -- -- -- 1,917,726
Participant loans -- -- -- -- -- 439,034 -- -- 439,034
---------- ---------- ---------- -------- ----------- -------- ----------- -------- -----------
1,971,301 3,200,416 958,470 105,393 2,927,325 439,034 2,221,422 591,374 12,414,735
---------- ---------- ---------- -------- ----------- -------- ----------- -------- -----------
Receivables:
Employer's
contribution ..... 147,531 309,270 91,763 10,188 277,325 -- 240,635 97,479 1,174,191
Employees'
contributions .... 6,168 13,182 4,023 963 14,548 -- 9,753 5,919 54,556
Investments sold
(purchased) ...... 17,842 -- -- -- (13,392) -- -- (4,450) --
Investment income . 3,009 -- 9 10 86 -- (21) 90 3,183
Other ............. 660 1,225 336 45 2,109 -- 1,513 314 6,202
---------- ---------- ---------- -------- ----------- -------- ----------- -------- -----------
175,210 323,677 96,131 11,206 280,676 -- 251,880 99,352 1,238,132
---------- ---------- ---------- -------- ----------- -------- ----------- -------- -----------
Cash ............... 4,385 1,386 -- -- 38 -- 152 -- 5,961
---------- ---------- ---------- -------- ----------- -------- ----------- -------- -----------
Total assets .... 2,150,896 3,525,479 1,054,601 116,599 3,208,039 439,034 2,473,454 690,726 13,658,828
Liabilities - other (835) (257) (50) -- (203) -- (3) -- (1,348)
---------- ---------- ---------- -------- ----------- -------- ----------- -------- -----------
Net assets
available for
Plan benefits .. $ 2,150,061 3,525,222 1,054,551 116,599 3,207,836 439,034 2,473,451 690,726 13,657,480
=========== =========== =========== ======== =========== ======== =========== ======== ===========
</TABLE>
8
<PAGE>
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements, Continued
The following presents net assets available for Plan benefits for each fund
as of December 31, 1995:
<TABLE>
<CAPTION>
PIMCO NEUBERGER & DODGE & WASATCH
MONEY LOW FIDELITY BERMAN COX AGGRESSIVE
STOCK MARKET DURATION BALANCED GUARDIAN LOAN BALANCED EQUITY
FUND FUND FUND FUND FUND FUND FUND FUND TOTAL
---------- --------- --------- --------- ----------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments at
fair value:
Mutual funds ... $ -- -- 822,011 1,478,919 2,053,483 -- 297,336 337,865 4,989,614
Money Market
Funds ......... -- 2,870,320 -- -- -- -- -- -- 2,870,320
Downey Financial
Corp.common
stock ......... 1,263,784 -- -- -- -- -- -- -- 1,263,784
Participant
loans ......... -- 1,062 -- -- -- 311,305 -- -- 312,367
----------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
1,263,784 2,871,382 822,011 1,478,919 2,053,483 311,305 297,336 337,865 9,436,085
----------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
Receivables:
Employer's
contribution .... 107,823 183,520 101,955 192,532 234,596 -- 28,351 59,584 908,361
Investment income -- 19,709 4,823 -- -- -- -- -- 24,532
----------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
107,823 203,229 106,778 192,532 234,596 -- 28,351 59,584 932,893
----------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
Cash .............. 40,924 14,052 10,785 17,879 25,991 -- 3,542 9,396 122,569
----------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
Total assets .. 1,412,531 3,088,663 939,574 1,689,330 2,314,070 311,305 329,229 406,845 10,491,547
Liabilities - note
payable .......... -- (19,850) -- -- -- -- -- -- (19,850)
----------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
Net assets
available
for Plan
benefits ..... $ 1,412,531 3,068,813 939,574 1,689,330 2,314,070 311,305 329,229 406,845 10,471,697
=========== =========== ========== ========== ========== ========== ========== ========== ===========
</TABLE>
9
<PAGE>
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements, Continued
(4) CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
The following presents changes in net assets available for Plan benefits
for each fund for the year ended December 31, 1996:
<TABLE>
<CAPTION>
PIMCO
MONEY LOW TEMPLETON FIDELITY
STOCK MARKET DURATION FOREIGN BALANCED
FUND FUND FUND FUND FUND
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Dividends ............................ $ 29,518 -- -- -- --
Interest and realized and
unrealized gains and losses ......... 474,033 156,878 50,324 8,411 (26,926)
----------- ----------- ----------- ----------- -----------
503,551 156,878 50,324 8,411 (26,926)
Contributions:
Employer ............................. 163,672 349,465 106,814 10,880 9,854
Employee ............................. 168,754 354,893 130,103 12,580 89,342
----------- ----------- ----------- ----------- -----------
Total additions .................... 835,977 861,236 287,241 31,871 72,270
Deductions from net assets
attributed to - benefits paid
to participants ...................... (270,092) (305,756) (89,610) -- (35,751)
Interfund transfers ................... 171,645 (99,071) (82,654) 84,728 (1,725,849)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) ............ 737,530 456,409 114,977 116,599 (1,689,330)
Net assets available for Plan benefits:
Beginning of year .................... 1,412,531 3,068,813 939,574 -- 1,689,330
----------- ----------- ----------- ----------- -----------
End of year .......................... $ 2,150,061 3,525,222 1,054,551 116,599 --
=========== =========== =========== =========== ===========
NEUBERGER & DODGE & WASATCH
BERMAN COX AGGRESSIVE
GUARDIAN LOAN BALANCED EQUITY
FUND FUND FUND FUND TOTAL
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed
to:
Dividends ......................... $ -- -- -- -- 29,518
Interest and realized and
unrealized gains and losses ..... 431,941 36,973 223,580 17,988 1,373,202
----------- ----------- ----------- ----------- -----------
431,941 36,973 223,580 17,988 1,402,720
Contributions:
Employer .......................... 318,736 -- 264,045 113,217 1,336,683
Employee .......................... 402,002 -- 228,549 170,164 1,556,387
----------- ----------- ----------- ----------- -----------
Total additions ............ 1,152,679 36,973 716,174 301,369 4,295,790
Deductions from net assets
attributed to - benefits paid
to participants ................... (184,383) (24,708) (162,217) (37,490) (1,110,007)
Interfund transfers ................... (74,530) 115,464 1,590,265 20,002 --
----------- ----------- ----------- ----------- -----------
Net increase (decrease) .... 893,766 127,729 2,144,222 283,881 3,185,783
Net assets available for Plan benefits:
Beginning of year ................. 2,314,070 311,305 329,229 406,845 10,471,697
----------- ----------- ----------- ----------- -----------
End of year ....................... $ 3,207,836 439,034 2,473,451 690,726 13,657,480
=========== =========== =========== =========== ===========
</TABLE>
10
<PAGE>
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements, Continued
The following presents changes in net assets available for Plan benefits
for each fund for the year ended December 31, 1995:
<TABLE>
<CAPTION>
PIMCO NEUBERGER &
MONEY LOW FIDELITY BERMAN
STOCK MARKET DURATION BALANCED GUARDIAN
FUND FUND FUND FUND FUND
------------- ------------- ----------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Dividends .............................. $ 25,166 -- -- -- --
Interest and realized and
unrealized gains and losses ........... 413,300 147,404 85,599 210,683 497,422
----------- ----------- ----------- ----------- -----------
438,466 147,404 85,599 210,683 497,422
Contributions:
Employer ............................... 126,836 294,461 123,985 231,969 285,097
Employee ............................... 142,537 370,717 138,915 280,779 360,275
----------- ----------- ----------- ----------- -----------
Total additions ...................... 707,839 812,582 348,499 723,431 1,142,794
Deductions from net assets attributed to:
Benefits paid to participants .......... (73,732) (252,076) (71,027) (208,832) (247,143)
Administrative expenses ................ -- (5,210) -- -- --
----------- ----------- ----------- ----------- -----------
Total deductions ..................... (73,732) (257,286) (71,027) (208,832) (247,143)
Interfund transfers ..................... 14,316 (84,000) (132,335) (403,358) (144,505)
----------- ----------- ----------- ----------- -----------
Net increase ......................... 648,423 471,296 145,137 111,241 751,146
Net assets available for Plan benefits:
Beginning of year ...................... 764,108 2,597,517 794,437 1,578,089 1,562,924
----------- ----------- ----------- ----------- -----------
End of year ......................... $ 1,412,531 3,068,813 939,574 1,689,330 2,314,070
=========== =========== =========== =========== ===========
DODGE & WASATCH
COX AGGRESSIVE
LOAN BALANCED EQUITY
FUND FUND FUND TOTAL
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Additions to net assets attributed to:
Dividends .............................. $ -- -- -- 25,166
Interest and realized and
unrealized gains and losses .......... 17,237 17,032 16,367 1,405,044
----------- ----------- ----------- -----------
17,237 17,032 16,367 1,430,210
Contributions:
Employer ............................... -- 30,897 65,084 1,158,329
Employee ............................... -- 20,191 36,013 1,349,427
----------- ----------- ----------- -----------
Total additions ...................... 17,237 68,120 117,464 3,937,966
Deductions from net assets attributed to:
Benefits paid to participants .......... (6,587) -- -- (859,397)
Administrative expenses ................ -- -- -- (5,210)
----------- ----------- ----------- -----------
Total deductions ..................... (6,587) -- -- (864,607)
Interfund transfers ..................... 199,392 261,109 289,381 --
----------- ----------- ----------- -----------
Net increase ......................... 210,042 329,229 406,845 3,073,359
Net assets available for Plan benefits:
Beginning of year ...................... 101,263 -- -- 7,398,338
----------- ----------- ----------- -----------
End of year ............................ $ 311,305 329,229 406,845 10,471,697
=========== =========== =========== ===========
</TABLE>
11
<PAGE>
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements, Continued
(5) INVESTMENTS
In accordance with the terms of the Plan's Investment Policies, Guidelines
and Objectives, the Plan will offer a minimum of five investment options.
Plan participants select the options they prefer and allocate their
contributions between options as they deem appropriate.
Participant loans are included in the statements of net assets available
for Plan benefits at cost, which approximates fair value of the notes. The
notes are payable through payroll deductions in installments of principal
plus interest at rates varying from 6.35% to 11.0%, with final payments due
between February 1997 and November 2001, and are secured by the
participants' vested account balances.
The fair value of investments that represent 5% or more of the Plan's net
assets consisted of:
<TABLE>
<CAPTION>
INVESTMENT DESCRIPTION OF INVESTMENT 1996 1995
-------------------------------- ---------------------------- ------------ -----------
<S> <C> <C>
Schwab Institutional Advantage Open-Ended Money Market Fund
Money Fund $ 3,253,991 2,870,320
Downey Financial Corp. Common stock ............... 1,917,726 1,263,784
PIMCO Low Duration Fund Open-Ended Mutual Fund ..... 958,470 822,011
Fidelity Balanced Fund Open-Ended Mutual Fund ..... -- 1,478,918
Neuberger & Berman Guardian Fund
Open-Ended Mutual Fund ..... 2,927,325 2,053,482
Dodge & Cox Balanced Fund Open-Ended Mutual Fund ..... 2,221,422 297,338
------------ -----------
$ 11,278,934 8,785,853
============ ===========
</TABLE>
The following table presents the cost and fair value of Plan investments as
of December 31, 1996:
<TABLE>
<CAPTION>
COST FAIR VALUE
----------- -----------
<S> <C> <C>
Mutual funds ...................... $ 6,171,014 6,803,984
Money Market Funds ................ 3,253,991 3,253,991
Downey Financial Corp. common stock 1,230,755 1,917,726
Participant loans ................. 439,034 439,034
----------- -----------
Total investments ........ $11,094,794 12,414,735
=========== ===========
</TABLE>
12
<PAGE>
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements, Continued
The following table presents the cost and fair value of Plan investments as
of December 31, 1995:
<TABLE>
<CAPTION>
COST FAIR VALUE
---------- ----------
<S> <C> <C>
Mutual funds ...................... $4,631,962 4,989,614
Money Market Funds ................ 2,870,320 2,870,320
Downey Financial Corp. common stock 963,153 1,263,784
Participant loans ................. 312,367 312,367
---------- ----------
Total investments ........ $8,777,802 9,436,085
========== ==========
</TABLE>
(6) FEDERAL INCOME TAXES
Downey received a favorable tax determination letter on February 15, 1996
from the Internal Revenue Service stating that the Plan, as amended and
adopted on September 27, 1994, qualified under Section 401 of the Internal
Revenue Code of 1954 that the Plan is exempt from Federal income taxes
under provisions of Section 401(a).
The Plan has been subsequently amended since September 27, 1994. The
subsequent amendment of the Plan was adopted on April 23, 1997. In the
opinion of management, the Plan continues to meet the requirements of the
Internal Revenue Code.
(7) RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by Charles
Schwab Investment Management, Inc., a wholly owned subsidiary of the
Charles Schwab Corporation. Charles Schwab Trust Company, a wholly owned
subsidiary of the Charles Schwab Corporation, is the trustee as defined by
the Plan and, therefore, these transactions qualify as party-in-interest.
Fees for the investment management services are paid by Downey.
13
<PAGE>
Schedule 1
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1996
<TABLE>
<CAPTION>
DESCRIPTION OF INVESTMENT INCLUDING
IDENTITY OF ISSUER BORROWER, MATURITY DATE, RATE OF INTEREST, CURRENT
LESSOR OR SIMILAR PARTY COLLATERAL, PAR OR MATURITY VALUE COST VALUE
-------------------------------- -------------------------------------- ----------- ----------
<S> <C> <C>
* Schwab Institutional Advantage
Money Fund Money Market Fund $ 3,253,991 3,253,991
* Downey Financial Corp. 97,719 shares common stock 1,230,755 1,917,726
PIMCO Low Duration Fund 95,370 shares mutual fund 957,611 958,470
Templeton Foreign Fund 10,173 shares mutual fund 101,250 105,393
Neuberger & Berman Guardian Fund 114,215 shares mutual fund
2,433,609 2,927,325
Dodge & Cox Balanced Fund 37,135 shares mutual fund 2,082,995 2,221,422
Wasatch Aggressive Equity Fund
24,785 shares mutual fund 595,549 591,374
Participant loans Participant loans; interest rates
varying from 6.35% to 11%; and
maturing between February 1997 and
November 2001 -- 439,034
=========== ==========
</TABLE>
* Denotes a party-in-interest.
See accompanying independent auditors' report.
<PAGE>
Schedule 2
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Item 27d - Schedule of Reportable Transactions
Year ended December 31, 1996
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
CURRENT
EXPENSE VALUE
SELLING/ INCURRED OF ASSET ON NET
IDENTITY OF PARTY DESCRIPTION PURCHASE REDEMPTION LEASE WITH COST OF TRANSACTION GAIN
INVOLVED OF ASSETS PRICE PRICE RENTAL TRANSACTION ASSETS DATE (LOSS)
- ------------------ ------------------- ----------- ---------- ------- ----------- --------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Fidelity Balanced Mutual fund series
Fund of 26 purchases $ 354,970 -- -- -- 354,970 -- --
Fidelity Balanced Mutual fund series
Fund of 27 sales -- 1,787,380 -- -- 1,790,260 1,787,380 (2,880)
Neuberger & Berman Mutual Fund Series
Gardian Fund of 114 purchases 1,089,365 -- -- -- 1,089,365 -- --
Neuberger & Berman Mutual fund series
Gardian Fund of 91 sales -- 486,386 -- -- 411,699 486,386 74,687
PIMCO Low Duration Mutual fund series
Fund of 94 purchases 431,580 -- -- -- 431,580 -- --
PIMCO Low Duration Mutual fund series
Fund of 69 sales -- 288,966 -- -- 291,812 288,966 (2,846)
Dodge & Cox Mutual fund series
Balanced Fune of 103 purchases 2,210,827 -- -- -- 2,210,827 -- --
Dodge & Cox Mutual fund series
Balanced Fund of 71 sales -- 427,240 -- -- 417,690 427,240 9,550
Downey Financial Common stock series
Corp. of 45 purchases 533,838 -- -- -- 533,838 -- --
Downey Financial Common stock series
Corp. of 29 sales -- 219,763 -- -- 163,374 219,763 56,389
Wasatch Aggressive Mutual fund series
Equity Fund of 95 purchases 487,686 -- -- -- 487,686 -- --
Wasatch Aggressive Mutual fund series
Equity Fund of 54 sales -- 225,574 -- -- 224,066 225,574 1,508
Schwab Money Market Fund
Institutional series of 184
Advantage Money purchased
Fund 1,308,571 -- -- -- 1,308,571 -- --
Schwab Money Market Fund
Institutional series of 136
Advantage Money sales
Fund -- 924,899 -- -- 924,899 924,899 --
========== ========= ====== ====== ========= ========= ======
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF KPMG Peat Marwick
<PAGE>
Independent Auditors' Consent
The Administrative Committee
Downey Savings and Loan Association, F.A.
Employees' Retirement and Savings Plan:
We consent to the incorporation by reference in the Registration Statement (No.
33-0483) on Form S-8 of Downey Financial Corp. of our report dated June 26, 1997
relating to the statement of net assets available for plan benefits and the
statement of changes in net assets available for plan benefits of the Downey
Savings and Loan Association, F.A. Employees' Retirement and Savings Plan as of
and for the year ended December 31, 1996, and all related schedules, which
report appears in the December 31, 1996, annual report on Form 11-K of Downey
Savings and Loan Association, F.A. Employees' Retirement and Savings Plan.
/s/ KPMG Peat Marwick
Los Angeles, California
September 3, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF SCOTT BANKHEAD & CO.
<PAGE>
Board of Directors
Downey Financial Corp.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use of our report dated June 26, 1997 relating to the
financial statements of Downey Savings and Loan Association, F.A. Employees'
Retirement and Savings Plan for the year ended December 31, 1995 and to the
incorporation by reference of the Form 11-K Plan's Registration Statement under
the Securities Act of 1933, as amended.
/s/ Scott, Bankhead & Co.
June 26, 1997
