Security Pacific Reports a $172.4-Million Loss

Security Pacific has posted a second-quarter net loss of $172.4 million, the big California banking company announced Thursday, reflecting the effect of the previously announced $500-million addition to its reserve for loan losses.

Without the special provision, net income would have climbed about 6% to $99.1 million.

Despite the provision, Richard J. Flamson III, chairman and chief executive, projected a profit for all of 1987 of about $150 million--”a clear testimonial,” he said, “to the strength of our diversified sources of earnings.” Security Pacific is the state’s second-largest bank holding company, after BankAmerica, and the nation’s sixth largest.

Following the lead of Citicorp, most major banking companies made big additions to their loan-loss reserves in the second quarter to cover anticipated losses in loans to developing nations.

Wells Fargo & Co. is expected to announce a similar provision when it releases its second-quarter results next week.

In a statement released Thursday from bank headquarters in Los Angeles, Flamson said: “It is important to emphasize that we are not writing off loans to the developing countries, but rather adding to our reserves to allow us greater flexibility in dealing with these credits in the future.”

Staff expense spurted 33% in the period, while net interest income rose 14% and non-interest income climbed 28%. About a third of the increase in staff expense reflected Security Pacific’s recent acquisitions of Arizona Bancwest and Orbanco Financial Services.

For the first half of the year, Security Pacific posted a net loss of $73.8 million, compared to net income of $181.4 million a year ago.

Total assets at the end of the first half stood at $64.7 billion, up 21%.

Separately, Bank of Boston Corp. posted a second-quarter net loss of $83.7 million, including a $300-million special addition to its reserve for losses in developing nations. In the year-ago period, Bank of Boston had net income of $53.3 million.