Newport Beach- based Downey Financial Corp., the parent company of Downey Savings and Loan Association reported a loss for its second quarter in 2008.

For the April to June period, the company posted a loss of $218.9 million, or $7.86 per share, as compared to a profit of $32.7 million, or $1.17 per share a year-ago.

The huge loss in the second quarter was accompanied by a $258.9 million provision for credit losses, up from $9.5 million a year ago and a $26.2 million increase in operation expenses, due to higher costs related to the operation of real estate acquired in the settlement of loans. In the quarter, the net interest income or income generated from loans and deposits fell 26 percent to $82.9 million.

The decline in net interest income was primarily due to higher proportion of non-performing assets. As the borrowers were not making payments, the non-performing assets increased to $1.96 billion, representing 15.5 percent of Downey’s total assets of $12.6 billion. The percentage was up from 1.5 percent a year ago.

The company has recently made some changes in its executive lineups, as its chairman and chief executive have both stepped down.

Chairman Maurice L. McAlister, 83, Downey’s co- founder and largest shareholder stepped down and he was replaced by independent director Michael D. Bozarth. Director Gary W. Brummett became vice chairman.

The company’s chief executive Daniel Rosenthal was replaced by Chief Operating Officer Thomas Prince as interim chief executive. However, the company plans to search for a permanent CEO.

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