Fidelity Southern in Atlanta will significantly dial back its dealings in indirect auto finance.

The $4.9 billion-asset company said it will limit future dealings to Georgia and Florida, citing increased competition and a decline in investor demand for loan sales.

“It … became very apparent during the [second] quarter that the market pressures in indirect auto required us to exit all remaining states outside of our existing branch footprint,” Jim Miller, Fidelity's chairman, said in a press release.

Fidelity, which entered the business in 1990, had been operating in 10 states, including Virginia, North Carolina, South Carolina, Texas and Oklahoma.

Fidelity's indirect portfolio stood at $1.7 billion on June 30, or a 10% increase from a year earlier. However, income from the business declined by 84%, to $1.3 million. Quarterly originations fell 26% from a year earlier, to $184 million.

Fidelity said it expects the indirect portfolio to decline by about 5% each quarter. To offset the decline, the company plans to ramp up Small Business Administration, commercial and mortgage lending.

The company also disclosed that it had agreed to sell residential mortgage servicing rights on a portfolio with a principal balance of about $1.2 billion to an unnamed buyer. The sale, which represents about 12.5% of Fidelity's residential servicing portfolio, is expected to close by Sept. 30.

Fidelity said the MSR sale will optimize and increase regulatory capital while reducing future amortization expense and impairment risk.

Finally, the company said it paid the Federal Deposit Insurance Corp. about $632,000 in late June to exit loss-share agreements tied to its acquisition of two failed banks.

Overall, the company's second-quarter profit rose 6% from a year earlier, to $9.4 million.

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