Downey Financial Corp., the Newport Beach-based parent of Downey Savings, reported a slight decline in third-quarter profits on Tuesday, due in part to increased hedging against loans that could go bad.
The savings and loan operator also saw a 56% drop in loans made or acquired in the quarter, which came in at $1.61 billion.
Downey pointed to California’s slowing housing market for the decline.
The thrift operator reported profit of $57.2 million, down $2.5 million from a year ago.
“Credit quality pressure rears its head,” wrote Paul Miller, an analyst with Friedman , Billings, Ramsey & Co. in Virginia.
Downey’s non-performing assets jumped from $39 million to $66.5 million in the quarter.
The company said it added a $10.4 million provision for credit losses, and saw a $14.7 million decline in gains on sales of loans and other securities sold.
As of Sept. 30, assets totaled $16.9 billion, up $415 million from a year ago but down $113 million from year-end 2005.
