Newport Beach-based Downey Financial Corp. said Monday that its customers began withdrawing money at a faster pace last month.
The savings and loan operator also said it might not be able to handle its mounting debts, according to a filing with the Securities and Exchange Commission.
Losses from bad loans have been increasing each month for Downey, mostly from borrowers who took out adjustable rate mortgages that became unaffordable when they reset at higher rates.
At the end of June, 15.5% of its assets, mostly loans, were reported as non-performing.
The Office of Thrift Supervision said it was limiting some of Downey’s activity including paying dividends. It is also being charged more for deposit insurance by the Federal Deposit Insurance Corp.
For the second quarter, the company posted a loss of $218.9 million, which prompted it to hire financial adviser Sandler O’Neil Partners LP to explore options.
It also announced the departure of its cofounder, chairman and dominant owner, Maurice McAlister, who was replaced by independent director Michael D. Bozrath.
And Chief Operating Officer Thomas Prince replaced chief executive Daniel Rosenthal on an interim basis.
Downey’s stock was down more than 6% at close of trading Monday before the announcement, giving it a market value of about $60 million.
Most of Downey’s loans were to borrowers in the Alt-A category who had credit grades above subprime but below prime.
