Newport Beach-based Downey Financial Corp. says it has more bad loans than it stated earlier after reclassifying its balance sheet.
Shares of Downey fell 13% on Monday, bringing its market value to about $680 million.
Nearly $100 million of the company’s loans that were part of a refinancing program for troubled borrowers were reclassified as nonperforming assets, according to Downey.
The loans were part of a “borrower retention program”, which in December the company’s accountant KPMG LLP said should be considered nonperforming after initially saying in September that they were being accounted for correctly, according to a press release.
Downey’s chief financial officer, Brian Cote, said the company’s nonperforming assets made up 7.8% of its assets as of Dec. 31. This is a 40% increase after the change.
In November Downey said nonperforming loans were 5.77% of its total assets. In October it said it had $323 million in nonperforming loans.
The retention program allowed borrowers facing higher costs in their adjustable rate mortgages to refinance.
The program was made available only to borrowers who were up to date in their payments, according to the release.
Downey posted a $23 million loss in the third quarter after suffering from delinquencies and foreclosures.
