Wednesday, January 23, 2008

Analysis of Downey Financial's (DSL) 2007 Earnings

Downey Announces Full-Year 2007 Results: "Downey Financial Corp. (DSL) reported a net loss for 2007 of $56.6 million or $2.03 per share on a diluted basis, compared to net income of $199.7 million or $7.16 per share in 2006."

I'm pressed for time, so I'll give you four very interesting charts, with a brief commentary on the fourth chart.

Downey reports NPAs as a percentage of total assets. But not all of a bank's assets are loans. So, to make the NPA statistic more easily comparable, you can back out Downey's cash, investment securities, FHLB stock, and other assets that are not loans from the calculation.

The graph above shows NPAs as a percentage of only loans.

Suppose that Downey was to go back to reserving 50% of their non-accrual loans. That would require adding an additional $114.9 million to the allowance for losses.

Doing that would have blown out their loss for 2007 from -$2.03 to -$6.16. (27.85M shares outstanding)


Anonymous said...

How much of their income was due to interest accrual?

Ben Bittrolff said...

Get short (again) on the bounce.
Charts for the Big Bounce bounce that's developing: (