Newport Beach-based Downey Financial Corp. said it lost $109 million in the fourth quarter as housing market woes continue to punish the savings and loan operator.
The loss was compared to profit of $52 million for the same quarter a year earlier.
“We are clearly disappointed with our results. The continued weakening of the housing market and its uncertain future have unfavorably impacted our borrowers and the value of their loan collateral,” President Rick McGill said.
Downey said its earnings suffered from having to increase its provisions for credit losses. The company set aside $218 million in the fourth quarter to cushion itself from bad loans.
About $40 million was lost in net interest income due to less interest bearing assets, and a lower interest rate spread between deposits and assets.
In a statement of its full year results for 2007, the company said it lost $57 million compared to a profit of $200 million in 2006.
“While we expect the environment to remain challenging in 2008, we enter the year with a strong capital position and stable funding sources from our retail branch franchise,” McGill said.
The company’s stock, which is down 60% in the past year, was up 15% Wednesday on a market value of about $825 million. Downey and other mortgage-related stocks have rallied since the Federal Reserve’s rate cut on Tuesday.
