The preliminary fourth-quarter report Doral Financial Corp. filed Wednesday with the Federal Reserve Board showed a sharp deterioration in results.
The San Juan, Puerto Rico, company swung to a $51 million loss, compared with a $1.7 million profit a year earlier, as it continued to shrink its balance sheet. It also cited an increase in loan-loss provisions.
The company had reported a $28.7 million loss according to generally accepted accounting principles for the third quarter, its last formal earnings filing.
Analysts said they were surprised by the magnitude of the fourth-quarter loss.
A spokeswoman for the $11.9 billion-asset Doral said that it has not set a date for its formal earnings report.
The results in the filing were not calculated according to generally accepted accounting principles. Those requirements would strip out $8.6 million of dividends on preferred shares; analysts said those dividends would increase the fourth-quarter loss $59.2 million.
“This is very, very serious,” Anthony Polini of Soleil Securities Group Inc., said in an interview. “This company is at the edge of a cliff. They need to turn around now.”
In a research report, he wrote that the loss per share came in at 59 cents. The three analysts who had put out earnings estimates had expected a loss of 20 to 38 cents, according to Thomson Financial.
According to the Fed numbers, Doral lost $117.5 million last year, compared with a 2005 profit of $43.4 million. Revenue dropped 55.6%, to $164.1 million, while the provision for loan losses jumped 72%, to $30.7 million.
Chargeoffs improved 32.7%, to $5.8 million, while loans held for sale rose 35.9%, to $3.4 billion, and loans on the company’s book almost doubled, to $60.6 million. But nonperforming assets jumped 37.4%, to $375 million.
Deposits were virtually unchanged, at $4.2 billion.
Doral also filed results for its Puerto Rican bank subsidiary and its New York thrift with the Federal Deposit Insurance Corp. The $9.2 billion-asset Puerto Rican bank’s net income fell 67.8%, to $30.7 million, though the $598.6 million-asset New York thrift swung to a $1 million profit, from a $864,000 loss a year earlier.
It has been nearly two years since Doral made its decision to revise the valuation of its portfolio of interest-only securities. The accounting review led to the reversal of a substantial number of loan sales and the restatement of years of earnings.
Doral has to refinance $625 million of corporate debt that will mature in July, but Mr. Polini said that the results appear to make that task much harder.
