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COLONIAL NATIONAL PROPOSED $50 MILLION SUBORDINATED NOTES DUE 2003 'BBB-' BY FITCH -- FITCH FINANCIAL WIRE --

 NEW YORK, July 22 /PRNewswire/ -- Colonial National Bank USA's proposed $50 million subordinated notes due 2003 are rated "BBB-" by Fitch, it was announced today. The credit trend is stable. The company plans to issue the notes in the third quarter. Proceeds of the offering are expected to qualify as Tier II capital. This marks the first time Fitch has rated this entity.
 The rating reflects the company's strong profitability, good asset quality, and recently improved balance sheet capitalization of parent Advanta Corp. Concerns focus on the single-product concentration in a highly competitive market, management's historical aggressiveness, and a limited funding base.
 Colonial, a wholly owned Advanta subsidiary that comprises approximately 80 percent of consolidated assets, is a highly focused direct marketer of selected consumer financial services, primarily credit cards and home equity loans. Credit cards represent 81 percent of Advanta's $966 million owned receivables. The company, specializing in marketing a no-fee gold card, has shown increasingly strong profits and good asset quality in this area, despite a national recession that resulted in high consumer bankruptcies and heightened market competition. Home equity loans, which account for 13 percent of owned receivables, targets a higher-risk customer and therefore is experiencing asset quality problems caused by the sluggish economy and depressed real estate prices. The rest of the portfolio is small ticket equipment leases.
 Advanta historically has been managed aggressively, employing high degrees of leverage and double leverage. In the late 1980s, management changed strategy, deleveraging to a more conservative level. Equity grew to $282 million at March 31, 1993 (pro forma for the exercise of the green shoe option) from $50 million at year-end 1988 through retained earnings and two stock offerings; $20 million in 1991 and $90 million in 1993. Equity to assets increased to 15.4 percent from 4.3 percent at Dec. 31, 1988. Colonial's risk-adjusted capital is a strong 11.6 percent. Double leverage was 104% at March 31 versus 360 percent at year-end 1988. Excess servicing from securitizations is $124 million, or 44 percent of equity.
 Advanta is highly profitable, with return on average assets increasing steadily to 3.68 percent for the annualized quarter ended March 31, 1993 from a loss position in 1988. Asset quality is strong and reserve coverage is good. Lacking an extensive retail deposit base, Advanta's funding sources are limited, relying primarily on the securitization market. To date, the company has completed 30 transactions totaling $4.2 billion. Other funding sources include Colonial's deposit base and, to a lesser extent, a retail subordinated note program at the holding company. With its newly bolstered equity base and more conservative leverage position, the company will now access the capital markets as an alternative and efficient source of funds.
 -0- 7/22/93
 /CONTACT: Helene L. Moehlman, CFA, 212-908-0606 or Nancy E. Stroker, CFA, 212-908-0533, both of Fitch/


CO: Colonial National Bank USA ST: IN: FIN SU: RTG

TS -- NY063 -- 4590 07/22/93 13:21 EDT
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Publication:PR Newswire
Date:Jul 22, 1993
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