October 10, 2007 / 1:33 PM / 10 years ago

UPDATE 1-Downey Financial sees Q3 operating loss

(Recasts, adds details)

Oct 10 (Reuters) - Downey Financial Corp (DSL.N) said it expects a third-quarter operating loss of about $23 million, or 84 cents a share, as it increased allowances for loan losses due to loan delinquencies and losses from foreclosures in a continued weak housing market.

The savings and loan holding company said in the quarter it posted an about $82 million pretax provision for credit losses, which boosted the allowance for loan losses to about $144 million.

For the third quarter, analysts on average expect Downey to earn $1.08 a share, before exceptional items, according to Reuters Estimates.

Downey said the housing market issues, disruption in the secondary mortgage markets, hurt its borrowers and the value of their loan collateral in the quarter.

"This has been particularly true in certain geographic areas such as the greater Sacramento and Stockton areas of Northern California and San Diego County," Chief Executive Officer Daniel Rosenthal said in a statement.

The single family loan delinquencies and losses from foreclosures rose significantly during the third quarter, Rosenthal added.

The company, however, said it was in a position to continue funding quality loans because of its strong capital position. (Reporting by Dilipp S. Nag in Bangalore)

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