Fidelity downgraded as it announces TARP funds

A banking analyst on Tuesday downgraded the parent company of Atlanta-based Fidelity Bank —- a day after the bank announced it will get a cash infusion of as much as $48 million from the federal government.

The analyst, Jennifer Demba of SunTrust Robinson Humphrey, wrote that the firm “cannot foresee the company making money for at least the next two years.”

Fidelity lost $4.9 million in the third quarter, a big change from the $1.7 million profit a year earlier.

Demba painted a gloomy outlook for Fidelity, noting the deteriorating local economy and the bank’s loan portfolio heavily concentrated in auto loans and construction and development. She projected the bank’s loan loss provision would grow from $15 million in the fourth quarter this year to $28 million in 2009 and $29.5 million in 2010.

Demba also said the dividend payments on the preferred stock to be sold to the government will weigh on the company’s bottom line.

Steve Brolly, Fidelity’s interim chief financial officer, said being selected to receive funds from the U.S. Treasury’s Troubled Asset Relief Program, or TARP, is a sign of the bank’s strength. Fidelity remains well capitalized, he said.

Brolly said the bank hasn’t decided whether to use the full $48 million it’s been allotted.

The funds will be used to help boost lending, shore up the bank’s capital base, and possibly fund acquisitions, he said.

Other Georgia banks that have received TARP funds include SunTrust Banks, Synovus and United Community Banks.