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Advanta Corp., a Spring House, Pa.-based small-business credit card lender, this week reported that loan defaults fell in August, following a decline the previous month.
The percentage of loans written off because the credit card issuer deemed them uncollectible was 22.19%, down 183 basis points from 24.02% in July, according to a federal filing. A basis point is one-hundredth of a percentage point.
Loans at least 30 days delinquent rose 159 basis points, to 11.57% from 9.98%. Advanta is writing off loans when they are 120 days overdue instead of the industry standard of 180 days. The average credit card default rate was 10.52% in July, as measured by Moody's Investors Service Inc.
Earlier this month, the company was notified by the NASDAQ Stock Market that it no longer complies with listing requirements because both classes of Advanta stock have been below the $1 minimum for 30 consecutive business days. The company can regain compliance on either or both stock classes if, within 180 days, the closing-bid price is at least $1 for 10 or more consecutive business days.
In August, the 15th-largest card issuer last year based on purchase volume posted a second-quarter loss of $330.1 million – the company's fourth consecutive quarterly loss. Advanta generated a $4 million profit for the same period last year.
"Deterioration of the U.S. economy beginning in the latter half of 2007 and the negative trends in economic conditions and disruption in the capital markets that have continued into 2009 have adversely affected our business," said company officials at the time Q2 results were released. "We, like many small business credit card issuers and other small business lenders, have experienced increased delinquencies and charge-offs due to the impact of the general economic downturn on small businesses."
Advanta cut off almost 1 million customers and said it will dismiss about half the staff, as write-offs of bad loans more than doubled in June to 56.95%. Advanta said in May that it would unwind its securitization funding vehicle and stop lending to its cardholders. In June it announced an agreement to refer some of those customers to American Express Co. and that it would receive a fee for doing so.
