Delta Financial (DFC) Delayed Financials Update

Delta Financial (DFC) filed a report with the SEC saying why their earnings were delayed:
Delta Financial Corporation (the “Registrant”) was unable to complete and timely file its Form 10-Q (the “Form 10-Q”) for the three months ended June 30, 2007 without unreasonable effort or expense. While completing the proposed filing, the Company began to negotiate one or more arrangements to add new sources of capital, and the results of these negotiations would directly and materially impact the disclosures and financial condition of the Company to be set forth in the Form 10-Q. The Registrant expects to file the Form 10-Q within 5 days of the date hereof.

So it looks like they were having problems raising capital for their loans. This was my guess and it remains to be seen what the impact of this will be. Since DFC, like most mortgage lenders, has very low equity relative to debt, issuing shares is very expensive--especially at the current depressed prices. I don't think the company is anywhere near bankruptcy but it needs to find sources of capital.

The SEC filing also gave their earnings for the recent quarter. The earnings declined substantially and I'm not sure what the market was expecting.
The Company’s net income for the three months ended June 30, 2007 was $777,000, or $0.03 per share basic and $0.03 per share diluted, compared to net income of $7.2 million, or $0.32 per share basic and $0.31 per share diluted, for the three months ended June 30, 2006. The Company’s net income for the six months ended June 30, 2007 was $5.7 million, or $0.24 per share basic and $0.23 per share diluted, compared to net income of $13.8 million, or $0.64 per share basic and $0.61 per share diluted, for the six months ended June 30, 2006.

The company says it will file a full report within 5 days. I think a lot of the bad earnings news is already priced into the stock. The real question is the liquidity issue. Where are they going to find capital? Do they have to dilute shareholders? Going to be interesting tomorrow. I can see the stock going either way.

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