THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Saturday, August 6, 1994 TAG: 9408060180
SECTION: BUSINESS PAGE: C1 EDITION: FINAL
SOURCE: By TOM SHEAN, STAFF WRITER
LENGTH: Short : 46 lines
Blaming a glitch in an interest-rate-sensitive transaction, the parent of Virginia Beach Federal Savings Bank said Friday that it lost $575,000 for the second quarter and $1.26 million for the six months through June 30.
Virginia Beach Federal Financial Corp. said it took a charge of $601,000 against its second-quarter earnings and a $706,000 charge against earnings for the first quarter. Both charges were necessary to cover the reduced value of a complicated interest-rate swap, it said.
The thrift holding company entered into the swap a year ago to maintain an interest-rate spread between some of its assets and liabilities, said Dennis R. Stewart, Virginia Beach Federal's chief financial officer.
The swap's market value was reduced earlier this year by rising interest rates, and accounting guidelines indicated that the lower value should be recognized right away, Stewart said. ``If interest rates fall, we could recover some of that value,'' he said.
The company's second-quarter loss compared with net income of $240,000, or 5 cents a share, for the April-through-June period of 1993.
In the process of restating its results for the first quarter, Virginia Beach Federal reported a net loss of $680,000, or 14 cents a share, for the three months ended March 31.
The company previously reported net income of $26,000, or 1 cent a share, for the first quarter. Its net loss of $1.26 million, or 25 cents a share, for the first half of 1994 compared with net income of $1.08 million, or 22 cents a share, for the '93 period.
Had the company not marked down the value of its rate swap, it would have been ``barely profitable'' in the recent quarter, Stewart said. Virginia Beach Federal, he said, continued to suffer from the high cost of certain certificates of deposit that it put on the books in the 1980s. Many of these deposits, which have been yielding 12 and 13 percent, will mature later this year, Stewart said.
Net interest income for the second quarter fell 1 percent from the '93; fees and other non-interest income fell 19 percent. by CNB