Bank Plus Cuts Estimates for 1998 Earnings

Bank Plus Corp., the Los Angeles-based parent of Fidelity Federal Bank, said Tuesday that it will no longer offer credit cards to risky customers and will boost its reserves against losses, causing it to cut its earnings estimates for 1998.

The company also said its chief executive, Richard Greenwood, had resigned.

Bank Plus will stop offering cards to high-risk borrowers because of “increases in delinquencies and charge-offs in excess of prior expectations,” spokesman Neil Osborne said. “We increased the business very quickly and now we want to digest what we currently have.”

Bank Plus’ decision comes as banks, thrifts, retail chains and other lenders have been less aggressive in extending credit to consumers after a surge in credit card delinquencies and bankruptcies. Indeed, consumer borrowing is rising at a 5% annual rate, with total outstanding debt now at $1.27 trillion, according to Federal Reserve System figures released earlier this month. At the same time, consumer and business bankruptcies are at record levels. Since June 30, 1997, about 1.4 million consumers have filed for bankruptcy protection, up from 1.26 million for the comparable year-earlier period, federal statistics show.

Credit card debt usually isn’t secured by any collateral, and in the bankruptcy process creditors of unsecured loans have their claims paid after creditors of secured loans.

Of Bank Plus’ $290 million in outstanding credit card balances, 11.9% were delinquent at the end of August, compared with 11.2% at the end of June.

Bank Plus said its earnings will take a hit because it will have fewer card accounts than it previously projected, Osborne said.

The bank will eliminate new secured and high-fee credit card accounts to the minimum allowable under contracts for existing affinity programs. It said the moves will reduce earnings in the third quarter and future quarters but did not provide details. Osborne declined to elaborate.

Greenwood resigned a month after a hedge fund that invested in Bank Plus shares, Kalamazoo, Mich.-based LaSalle Financial Partners, criticized the bank for not seeking a buyer after the company said it was looking to make acquisitions.

Mark Mason, executive vice president and chief financial officer, was named interim chief executive.

The acquisition the bank had announced it was considering “is no longer being pursued,” the bank said in a statement Tuesday.

The bank said Greenwood resigned to pursue his interests in electronic commerce. Greenwood was also chairman and chief executive of Fidelity Federal.

Bank Plus shares fell $1.81 to close at $5.44 on Nasdaq.