THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Wednesday, December 20, 1995 TAG: 9512200384
SECTION: BUSINESS PAGE: D2 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: Medium: 52 lines
Life Bancorp Inc. said Tuesday that it suffered an after-tax loss of $585,000 from the recent sale of underperforming investment securities.
The transaction means that Life will likely report fourth-quarter net income that is down from the $2.74 million, or 27 cents a share, earned in the year-earlier quarter.
Life's shares, which are traded in the Nasdaq National Market System, declined 1/4 on Tuesday to 14 3/8.
The Norfolk-based parent of Life Savings Bank also disclosed that it may take a pre-tax charge of $5 million before year end to cover a special assessment by the Federal Deposit Insurance Corp. That action would likely generate a net loss for Life's October-through-December quarter.
Legislation pending in Congress would require the FDIC to raise additional capital for the fund that insures thrift deposits by assessing each thrift a one-time fee based on the volume of its deposits.
Life said it will take the planned charge against its fourth-quarter earnings if the legislation is signed into law by Dec. 31. Otherwise, the company will take the charge for the assessment when the law becomes effective, a Life spokesman said.
Life's loss on the sale of investment securities involved $52 million of mortgage-backed securities issued by the Federal National Mortgage Association. The association, dubbed Fannie Mae, buys blocks of home loans and packages them into investment securities for sale to financial institutions and other investors.
Life said it sold the securities because of their low yields and expected to earn higher returns next year by reinvesting the funds.
``Under prevailing market conditions, Life anticipates the transaction will enhance the company's annual pre-tax core income by approximately $625,000'' in 1996, Tollie W. Rich Jr., Life's executive vice president and chief operating officer, said in a statement.
The Financial Accounting Standards Board, the rule-making body for corporate accounting, requires financial institutions to classify their investment securities depending on whether they are held for investment or are available to be sold. The board has allowed financial institutions a brief period in November and December to readjust the classifications of their securities.
For the nine months through Sept. 30, Life reported net income of $7.01 million, or 69 cents a share. That was up from $3.74 million in the comparable three quarters of 1994. by CNB