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EARNINGS

FCA Posts Profit Despite Bigger Loan-Loss Reserve

October 24, 1985|JOHN M. BRODER

Financial Corp. of America reported a modest profit in the third quarter, despite a large addition to loan-loss reserves and a drop in deposits at its main operating unit, American Savings & Loan Assn.

FCA said it earned $12.3 million in the three months ended Sept. 30, compared to earnings of $1.2 million for the period a year ago. It was the first time that the company has operated profitably in seven quarters since the 1984 third-quarter profit was from the sale of assets.

Irvine-based FCA, with assets of $27.6 billion, is the nation's largest S&L holding company.

The firm added $140 million in loans, mostly real estate credits, to its portfolio of troubled loans, which now stands at $1.7 billion. It added $25.6 million to its loan-loss reserves, which financial institutions set aside to take care of expected loan losses and which directly reduce earnings.

"We believe the addition to loan-loss reserves at this time is both prudent and necessary, largely because a sluggish real estate market has increased delinquencies and foreclosures in our portfolio of single-family mortgages," FCA Chairman William J. Popejoy said.

The company said that, during the first nine months of 1985, it had sold $266 million of foreclosed real estate and troubled mortgage loans booked during the tenure of former Chairman Charles W. Knapp.

Popejoy said the asset sale was proceeding more slowly than hoped.

Also, the company said that American Savings had a third-quarter deposit increase of $252.8 million but only because of the addition of $435.9 million in deposits gained when it bought 13 branches of Pacific Savings Bank. Without those funds, the thrift unit would have shown a net deposit outflow of $183.1 million.

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