An Atlanta-area community bank expects to take a third-quarter loss, because of mounting problem credit card loans.
Fidelity National Corp., which owns $651 million-asset Fidelity National Bank of Decatur, Ga., said it has experienced unusually high losses on credit card loans and does not expect to report a profit for the quarter ended Sept. 30.
"Although losses track industry trends, the credit card business is more significant to the corporation ... than to most banks," the bank said in a press statement.
Though many large banks are reporting increasing delinquencies on credit card portfolios, Fidelity is the first bank in the country to announce that it expects to report a quarterly loss because of rising problems with consumer credit.
Officials at Fidelity could not be reached for comment.
The company did not say when it would release its third-quarter numbers, what types of credit cards were having problems, or whether the loss would come from chargeoffs or increasing reserves. In recent years, Fidelity has issued cobranded cards tied to the Olympics and several hotel chains.
Fidelity bet heavily on the credit card business in recent years, increasing its credit card portfolio from $98 million in 1994 to $160 million at midyear. Outstandings on noncard consumer loans also surged, from $43 million to $194 million, Sheshunoff Information Services said.
At midyear, Fidelity's 90-day delinquency rate on card loans was well above the national average, at 2.11% versus 1.68%, according to Veribanc Inc. The bank's rate had improved by 50 basis points in the second quarter, while the national rose 2 basis points. At yearend 1994, 1.9% of Fidelity card loans were 90 days past due.
The Atlanta company has the fifth-largest credit card portfolio of any bank with less than $700 million in assets, and the 11th-highest ratio of credit card loans to total loans of any bank in that group - 30.56%.
Thirty-seven percent of Fidelity's loan portfolio is in consumer installment loans, but the bank has almost no delinquencies in that line of business.