Downey Falls on Income News
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Downey Financial Corp.’s stock slumped 12% on Tuesday after the Newport Beach thrift reported an unexpected drop in third-quarter profit, as low interest rates fueled a mortgage-refinancing wave that cut into its loan-servicing income.
“It was way below consensus,” Dain Rauscher Wessels analyst Mark Agah said.
Downey, which originates residential mortgages and services home loans for other lenders, said net income for the quarter fell 17.4% to $21.8 million, or 77 cents a share, from $26.3 million, or 93 cents per share, a year earlier.
Analysts had expected earnings of $1.11 a share for Downey, the holding company for Downey Savings & Loan.
Downey’s shares fell as low as $33.50 before closing at $36, off $4.99, on the New York Stock Exchange. The stock has lost more than 40% of its value from its all-time high of $61.94 last December.
Net interest income rose 9% to $73.4 million from $67.2 million, but that was offset by $11.8 million Downey had to set aside to cover a projected drop in the value of the loans it services as home owners prepaid mortgages and sought cheaper ones as interest rates fell.
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