Reserves Boosted : FCA 2nd-Quarter Loss Totals $176.8 Million
In a severe but expected setback, Financial Corp. of America reported Thursday that it lost $176.8 million in its second quarter, compared with net income of $11.6 million in the year-ago period.
Much of the loss was attributed to changes in accounting procedures that had the effect of boosting FCA’s reserves against its $1.38-billion in troubled loans. In all, the company added $165.5 million to its loan loss reserve during the quarter. Financial institutions subtract contributions to loan loss reserves from earnings before determining their net income or loss.
FCA’s loss was in line with the company’s projection earlier this month that it would post a deficit of $150 million to $200 million for the quarter. The loss, however, reduced the already sagging capital of the Irvine-based company and its major subsidiary, American Savings & Loan Assn., the nation’s largest S&L.;
The company’s net worth--assets minus liabilities--was cut to $140.3 million at the end of June from $284.85 million a year earlier.
FCA, which has long struggled to build its capital, now needs more than $1.2 billion in new funds to comply with regulatory demands to raise its net worth to 3% of total assets. At the end of June, its net worth ratio was 1.14%, down from 1.78% a year earlier.
The company’s gain on the sale of its mortgage-backed securities--its main source of profits in the last two years--amounted to just $18.3 million in the second quarter, down from $109 million a year earlier.
The bad news for FCA was offset somewhat by its smaller second-quarter operating losses and its reduced level of delinquent and non-paying loans.
FCA’s net operating loss was $9.7 million, against $14.1 million in last year’s second quarter.
For the first six months of 1987, FCA’s net loss was $167.6 million, against net income of $60.7 million in the first half of 1986.
Despite its problems, the company’s assets grew 16.1% by June 30 to $33.9 billion, up from $29.2 billion a year earlier.
