Wednesday, September 19, 2007

Downey Financial's Non-Performing Assets Increase Exponentially

On Friday, Downey Financial Corp. (DSL) released their latest THIRTEEN MONTH SELECTED FINANCIAL DATA.

Here are some charts showing data from the latest report and from the quarterly report. (You can click the charts to see larger versions.)

The first chart shows the percentage of loans that are non-performing (that is, more than 90 days past due). You can see that the growth is exponential.

If the growth of non-performing assets (NPAs) continues to follow this exponential function, we can extrapolate that they will reach 4% by the end of 2007, and 12% by next August.

One other interesting point about the NPAs is that they are calculated 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.

This graph shows NPAs as a percentage of only loans. It reveals that calculating NPAs as a percentage of total assets has been steadily understating the increase.

Finally, here is a graph of the dollar amount of delinquent loans, which are loans less than 90-days past due. (And, therefore, still considered performing.)


Anand Shah said...


I have a question...

In the chart, which shows the value of delinquent loans...

Is the value, the total value of loans, or total monthly payments that have not yet come (i.e. does the figure represent 1-3 months of value or the complete value of the loan)

Anonymous said...

DSL is almost impossible to short. Feb 08 $50 puts might be a good alternative.


Anonymous said...

there is plenty of DSL to short via TD Ameritrade..


Anonymous said...

do you have an update on MBI?