Magazine article American Banker

Pa. Community Bank to Sell a $50M Portfolio to MBNA

Magazine article American Banker

Pa. Community Bank to Sell a $50M Portfolio to MBNA

Article excerpt

First Western Bancorp of New Castle, Pa., has agreed to sell its credit card portfolio to MBNA Corp., the second-largest MasterCard and Visa issuer.

Terms of the deal were not disclosed. It is expected to close this quarter or next.

First Western said it expects a net after-tax gain of $6.5 million to $8 million from the deal that covers 72,000 cardholders with an estimated $50 million of outstandings.

The $1.8 billion-asset community bank said it had decided to sell the portfolio because of growing competition in the card business and flat profitability.

Experts said the sale epitomizes a trend among regional and community banks unable to achieve the scale needed to stay competitive with larger issuers that offer more comprehensive customer services and value-added products.

Credit card investment banker Robert Hammer said community and regional banks are selling portfolios because "loan losses are creeping up and cutting into yields, and now is the time to sell. Banks are looking for marketing money to do other things in the company internally."

An MBNA spokesman confirmed it had bought the First Western portfolio but would not comment about specifics. He said First Western would continue to market cards in an agent bank capacity under a five-year agreement. MBNA has 850 such arrangements.

Mr. Hammer, president of R.K. Hammer Investment Bankers, Thousand Oaks, Calif., said there have been 21 deals this year for portfolios greater than $15 million; the total amount sold is $7 billion. …

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