Newport Beach-based savings and loan operator Downey Financial Corp. said on Wednesday that bad loans will bring a loss to its third-quarter results.
The company said it expects a $23 million loss for the quarter, versus a profit of $57 million a year earlier. Wall Street had expected a profit of $30 million for the third quarter.
“We are clearly disappointed with our third quarter results,” said Daniel Rosenthal, Downey’s chief executive.
The company’s results are due Oct. 17.
Downey’s stock closed down 11% on Wednesday with a market value of about $1.48 million.
Losses from foreclosures and loans where borrowers are behind in payments forced Downey to up its cash reserves, Rosenthal said.
Downey said it would make an $82 million provision for credit losses. About $9 million was lost from real estate thrift holds.
The company said it has further tightened its lending guidelines and will work with borrowers to modify loans.
Downey said delinquencies and foreclosures were highest in Sacramento and Stockton and in San Diego County.
