Ongoing Trouble with Downey Financial NPAs, Standard Pacific Notes

Downey Financial NPAs

Today Downey released another Thirteen Month Selected Financial Data report. The rate of increase of their non-performing assets increases every time it is reported:

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. It reveals that calculating NPAs as a percentage of total assets has been steadily understating the increase.

I have consistently maintained a "Sell" on Downey since March 15 when it was selling for $64.87. It is down 51% since then.

Take a look at this writeup from April 2007 on Downey's underwriting quality.

I have a prediction: Downey NPAs will be sharply higher in their next data release. You can confirm that using the first chart in this post.

Standard Pacific Troubles

Today we had four people come to Credit Bubble Stocks searching for "Standard Pacific bankruptcy," which has to be some kind of record. Ouch!

The StanPac subordinated note is now yielding over 35%. Take a look at the price action:

Disclosure: I continue be short DSL and SPF.