by Calculated Risk on 8/14/2008 11:06:00 AM

From S&P: Downey Financial Corp. Downgraded To 'B+/C'; Still On CreditWatch Negative

... deposit outflows in July and the recent drawing down of most of its FHLB lines have reduced Downey's liquidity and available lines of credit. ... We are concerned that depositors in Downey's footprint (think California and Arizona) have a heightened sensitivity to potential bank failures after recent experience and publicity (think IndyMac), which increases the possibility that Downey could experience further material deposit outflows.

S&P also suggests withdrawals could "overwhelm Downey's liquidity" and possibly trigger an "adverse regulatory action" (FDIC?). S&P is also concerned that further NPA growth may "overwhelm" Downey.