Simply put, investors were freaking out early Monday morning after Doral Financial (NYSE:DRL) announced that it was unable to file its quarterly 10-Q on time. Doral didn't help the air of uncertainty by announcing that this move puts the company in technical default on two of its bonds.

Doral did offer a smattering of information about the quarter -- cash was up from year's end, deposits were down just slightly, the mortgage portfolio was up a bit, and loan production increased more than 20% from the year-ago level. That's not a lot of information for investors, but at least loan production has stayed positive. Regulatory filings also indicate that the banking unit improved its profitability from the December quarter, which suggests to me that business hasn't completely fallen apart.

Doral also announced that the writedown associated with the company's IO (interest-only) strip valuation would total around $600 million -- the high end of the company's prior guidance of $400 to $600 million.

While I don't want to add to any panic, the company's language in the 8-K seems uncertain -- management doesn't yet know how to divide the writedown over the past five years, so it's possible that the number could still be adjusted higher. There might also be additional non-cash charges related to other accounting inaccuracies.

In any case, the amount of the adjustment ($600 million) is roughly half of the company's reported net income from 2000 to 2004. That's a big figure. Analyzing this company today has almost as much to do with Ouija boards and tea leaves as hard, cold financial data -- but I'll give it a try.

Let's say that Doral ends up adjusting 2004 net earnings downward by $250 million. That would mean that the fully diluted EPS would go from $3.95 to about $1.72. With the current stock price, that extremely over-simplified analysis would mean a trailing P/E of about 6. Folks, that's not bad -- especially for a growing business with significant brand value in its home market.

I'd also like to take a page from my Foolish mentor Bill Mann. Bill found a great play on Delta Airlines (NYSE:DAL) a short time ago -- buying some publicly traded Delta debt (NYSE:DNT). Investors looking at Doral would seem to have a similar option, buying any of the three publicly-traded preferred stock offerings currently trading as (NASDAQ:DRLNE), (NASDAQ:DRLOE), and (NASDAQ:DRLPE).

These stocks won't offer one-to-one parity with the moves of the common stock, but there will definitely be some linkage. Investors can also collect a healthy dividend so long as the company is still able to pay it.

The question regarding Doral shares is quickly becoming binary -- is this a real bank with real prospects, or a balloon inflated by questionable accounting that is now about to pop?

I'm not pleased with management's prior methods of valuating the IO strips, nor how it has forced investors to bear the pain of that mistake. But I have a hard time believing that this company is all just smoke and mirrors -- after all, it does have a major slice of the Puerto Rican mortgage market, and that has got to be worth something.

We don't know the full truth yet. The problems with Doral could be much worse than even the most bearish short-sellers imagine. On the flip side, this could be a rare opportunity to buy a profitable company at a going-out-of-business price.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).