Downey Sees Net Income Drop; Deliquencies Triple
Downey Financial Corp. reported net income for 2006 of $205.2 million ($7.36 per share, diluted), down 5.6 percent from the record $217.4 million ($7.80 per share) reported in 2005. The Calif.-based option ARM specialist said that its decline in net income was due to an increasingly difficult operating environment, including higher provisions for credit losses and a decrease in gains on loan sales. Of the company's $16.2 bllion in total assets at the end of 2006, $11.2 billion were negatively-amortizing loans, representing 85 percent of the company's one-to-four unit residential loan portfolio. Negative-am loans comprised 91 percent of the company's portfolio one year ago. During the fourth quarter of 2006, Downey reported that approximately 29 percent of loan interest income represented negative amortization, up from both 28 percent in the third quarter of 2006 and 21 percent in the year-ago fourth quarter. Non-performing assets increased during the quarter by $44 million to $110 million, the company said, representing 0.68 percent of total assets -- more than triple the non-performing percentage of 0.21 percent reported by Downey Financial at the end of 2005. Loan originations (including purchases) totaled $1.340 billion during the fourth quarter, down $1.736 billion or 56.4 percent from $3.076 billion a year ago. For more information, visit http://www.downeysavings.com.