Newport Beach-based savings and loan operator Downey Financial Corp. delivered a third-quarter loss Wednesday, as it warned investors about a week earlier.
Downey said it lost $23.4 million, compared to a profit of $55.6 million a year ago.
“We are clearly disappointed with our third-quarter results,” said Daniel Rosenthal, Downey’s chief executive.
Downey’s stock was up slightly following the news, after falling more than 20% last week when it warned of lower earnings.
An increase in home foreclosures and mortgages where borrowers are behind in payments have taken their toll on the company.
With $11.7 billion in loans on its books, Downey has set aside an $82 million provision for loan losses, a sharp increase from less than $10 million a year ago.
Net interest income, or what Downey makes off of money it borrows to issue loans, was down 25% from a year ago to $98 million.
Sales of loans and mortgage-backed securities were off $12 million, or 83%, as Downey made fewer loans and got less for them in sales as bonds.
A loss of $9 million also was also stated from the declining value of real estate it owns as part of a joint venture.
The loss from Downey’s real estate holdings was a 14% decline, and may be one of many accounting adjustments it will make in the coming quarters, according to Amit Chokshi, managing member of Kinnaras Capital Management LLC in Stamford, Conn., a hedge fund manager.
