Olympus Capital Corp., parent company of Prudential Federal Savings & Loan Association, has announced a major restructuring of its assets which the company said may result in an initial loss of $12.5 million when completed.
The restructuring consists of the sale of fixed-rate U.S. government treasury and agency obligations and mortgage-backed securities totaling some $260 million, and the purchase of an equivalent amount of adjustable rate mortgage backed securities.Olympus said the loss in market value of the assets has already occurred and its accounting recognition caused by the restructuring has several benefits for the corporation.
"These benefits include a significant reduction in the corporation's exposure to future changes in interest rates, stabilized or increased future earnings under most interest rate scenarios and a net operating tax loss carryforward which the corporation expects will reduce future tax liabilities," a company representative said.
An Olympus spokesman said there have been increasing pressures for federally insured banks and savings and loans to disclose their assets and liabilities on a market-to-market basis which would force many institutions to seek more outside capital.
"This restructuring is a major step in more closely aligning the corporation's balance sheet with its actual currently valued capital and the corporation is proud to be one of the few institutions financially capable of taking the leadership in this direction."
Olympus said the loss from the restructuring will be reflected on its financial reports on Dec. 31 and on reports for 1988. The company also said that in connection with the 1988 audit, which should be completed by March 1989, it may incur and announce additional losses relating primarily to increased reserves for losses on real estate, equipment and mortgage loans.
Prudential Federal Savings & Loan Association had assets of $829 million on Sept. 30. The tangible net worth of Prudential Federal is said to be significantly greater than that required under the regulations of the Federal Savings & Loan Insurance Corp. (FSLIC) which insures its savings accounts.