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Downey Financial names new CEO

September 23, 2008|From Bloomberg News

Downey Financial Corp. named Charles Rinehart chief executive to help the Newport Beach savings and loan try to rebound from four straight quarterly losses.

Rinehart, 61, will assume the duties of Thomas Prince, who was interim chief executive since July, when Daniel Rosenthal stepped down, the company said Monday in a Securities and Exchange Commission filing. Prince will remain as senior executive vice president.

"Our industry currently confronts an environment as difficult as any we have ever seen," Rinehart said in the statement. "We will focus on making the changes necessary to generate value for our shareholders" while serving customers.

Rinehart is assuming control of a bank that has lost about $600 million in the last year because of delinquent home loans. He has less than a month to submit a long-term business plan to Downey's chief regulator, the Office of Thrift Supervision, which ordered the bank on Sept. 5 to raise cash by the end of the year and halt dividend payments.

Downey shares rose 12 cents, or 4%, to $3.11. After more than doubling in the last three trading days, the stock is still down 90% this year.

Downey was among the biggest sellers of option adjustable-rate mortgages, which allow the borrower to defer part of the monthly mortgage payment and add it to the principal.

Downey said it held $6.9 billion in option ARMs at the end of the second quarter. That makes it the fourth-largest such lender, according to industry publication Inside Mortgage Finance.

Rinehart is a former chief executive of savings and loan H.F. Ahmanson, which was acquired by Washington Mutual Inc. in 1998. He sits on the board of Safeco Corp. and is chairman of VeriFone Holdings Inc.

He will receive a $2.5-million signing bonus, a $1-million salary and an annual bonus targeted at 150% of his salary beginning in 2009, Downey said in the filing. Rinehart was granted 1.23 million shares of restricted stock.

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