Woodbury mortgagor postpones 2nd quarter report

BY JAMES BERNSTEIN | james.bernstein@newsday.com

August 9, 2007

Delta Financial Corp. of Woodbury, which originates and sells subprime mortgage loans, abruptly postponed its second-quarter earnings report yesterday, stunning investors who had already been expecting disappointing results.

The news sent shares tumbling. Volume was 15 times usual and the drop was 40 percent, or $3.20, to $4.75. For the year, it is down more than 50 percent.

The company, Long Island's 20th largest in terms of revenues, announced on its Web site it was postponing its earnings release. It issued no news release or other type of communication.

Delta's unexplained earnings delay comes during a crisis in the mortgage industry. Dozens of lenders have gone out of business this year, including the now-bankrupt American Home Mortgage Investment Corp. that was until recently the sixth-largest company on Long Island and one of the top 10 mortgage banks in the country. American Home, of Melville, began bankruptcy court proceedings Tuesday.

Larry Karpen, a Delta vice president, offered no reason for the postponement and declined to say when second-quarter earnings would be released.

Richard Eckert, who follows the mortgage-lending industry for Roth Capital Partners in Los Angeles, said the postponement came as a major surprise.

"I'm wondering what they know today that they didn't know yesterday or two days ago," Eckert said. "If they were planning to postpone the earnings report, why didn't they issue a press release? Why wait until this morning?

"While not unprecedented, this behavior is rare," Eckert said. He said he has a hold rating on the stock. Eckert said most investor were anticipating disappointing results, given the state of the mortgage industry.

The company's earnings report was scheduled to be released at 8 a.m. yesterday, 90 minutes before markets open.

Delta had about $512 million in sales last year and it has about 1,395 employees. Delta specializes in mortgages that do not conform to the standards of government-sponsored enterprises like Fannie Mae or Freddie Mac. It offers subprime loans to borrowers who may have risky credit.

However, the company focuses on fixed-rate mortgages and has steered clear of the type of loans that have gotten some other lenders into trouble this year. Despite some rocky periods in the past, Delta has said it was safe from big problems.

In May, Delta reported lower earnings in the first quarter, a result of the slowdown in the national housing market. Delta said it had earned $4.9 million in the first quarter, compared with $6.6 million in the same period last year.

"While we are not immune to the effects of the current challenging market conditions and potential future market disruptions, we believe we are well positioned to continue to grow as we believe the demand for subprime loans remains strong," Hugh Miller, Delta's president and chief executive, said in a statement accompanying the first quarter earnings report.