Credit Performance Continues to Show Improvement
Company Announces Pending Sale of $859 Million in Credit Card Loans
SAN FRANCISCO, July 28 /PRNewswire-FirstCall/ -- Providian Financial
Corporation (NYSE: PVN) today announced net income for the second quarter of
2003 of $39.0 million, or $0.13 per diluted share. Financial results for the
second quarter include the effect of the anticipated sale of credit card loans
resulting in a net after-tax charge of approximately $8 million or $0.03 per
diluted share.
"Our second quarter results demonstrate a continuation of the solid
progress we are making at Providian," said Joseph Saunders, Providian's
chairman and chief executive officer. "We remain focused in our efforts to
improve the risk profile of our loan portfolio, and our pending sale of credit
card loans is consistent with that strategy. We are pleased with our results
this quarter, our financial foundation remains strong, our credit performance
continues to improve, and we are making progress in the execution of our new
marketing strategy."
Credit Card Loan Sale
The Company's banking subsidiary, Providian Bank, expects shortly to sell
approximately $859 million in credit card loans. The Company expects the sale
to close in the next few weeks and the loan servicing to be transferred
shortly thereafter. These assets primarily consist of loans originated in the
Company's discontinued "standard" market segment. At June 30, 2003, in view
of the anticipated sale, these loans were classified as held for sale and
recorded at their realizable value reflecting the expected sales price. As a
result of the reclassification, the Company recognized an after-tax charge in
the second quarter of 2003 of approximately $8 million. Taking into account
the loss on the sale and negative carry on the proceeds, the Company now
expects full-year 2003 net income to be approximately $175 to $180 million.
Second Quarter Financial Highlights
Total net revenues on a reported basis, comprised of reported net interest
income and reported non-interest income, totaled $521.1 million in the second
quarter of 2003, compared to $597.9 million in the first quarter of 2003.
Total net revenues on a managed basis, comprised of net interest income and
non-interest income from both reported and securitized loans, totaled $1,043.8
million in the second quarter of 2003, compared to $1,136.4 million in the
first quarter of 2003. The reported and managed net interest margins on loans
in the second quarter of 2003 were 10.16% and 15.09%, compared to 11.50% and
15.41% in the first quarter of 2003, respectively.
Net credit losses in the second quarter of 2003 were modestly better than
the Company's expectations at $237.1 million on a reported basis and $759.8
million on a managed basis, resulting in reported and managed net credit loss
rates of 14.19% and 16.84%, respectively. This improvement was partially
attributable to an increase in the sale of charged-off assets in June and
continued improvements in collections efforts. The second quarter net credit
loss rates compare to reported and managed net credit loss rates in the first
quarter of 2003 of 15.79% and 17.61%, respectively. The Company's reported
and managed 30+ day delinquency rates at the end of the second quarter of 2003
were 7.64% and 9.72%, respectively, compared to 8.76% and 10.31%,
respectively, at the end of the first quarter of 2003.
Non-interest expense for the second quarter of 2003 was $324.6 million,
compared to $328.3 million in the first quarter of 2003. The Company has
implemented a number of initiatives throughout the organization that are
expected to result in meaningful savings in non-interest expense in the second
half of 2003.
Loans receivable, as of June 30, 2003, were $6.42 billion on a reported
basis and $17.80 billion on a managed basis. This compares to reported loans
receivable and managed loans receivable at March 31, 2003 of $7.15 billion and
$18.47 billion, respectively. The Company added approximately 484,000 gross
new accounts in the second quarter of 2003 and ended the quarter with
approximately 10.2 million customer accounts.
The Company ended the second quarter of 2003 with total equity, including
capital securities, of $2.29 billion and an allowance for credit losses of
$701.5 million, which together represent 47% of reported loans and 17% of
managed loans. Cash and investments ended the quarter at approximately $6.6
billion, representing approximately 103% of total reported loans and
approximately 37% of total managed loans.
Managed Financial Information
The Company presents financial information on both a reported and managed
basis. "Reported" financial information refers to GAAP financial information
while "managed" financial information is derived by adjusting the reported
financial information to add back securitized loan balances and the related
finance charge and fee income, credit losses, and net interest costs. The
interests the Company retains in the securitized loan balances creates
financial exposure to the current and expected cash flows of the securitized
loans. Although the loans sold are not on the Company's balance sheet, their
performance affects the Company's retained interests in the securitizations as
well as its results of operations and its financial position. In addition,
the Company continues to service the securitized loans.
About Providian
San Francisco-based Providian Financial is a leading provider of credit
cards and deposit products to customers throughout the U.S. By combining
experience, analysis, technology and outstanding customer service, Providian
seeks to build long-lasting relationships with its customers by providing
products and services that meet their evolving financial needs. One of
America's largest bankcard issuers, Providian has over $6.0 billion in
reported receivables and over $17.5 billion in managed receivables and more
than 10 million customer relationships.
Certain statements contained in this press release are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
which are subject to the "safe harbor" created by those sections.
Forward-looking statements include, without limitation: expressions of
"belief," "anticipation," or "expectations" of management; statements as to
industry trends or future results of operations of the Company and its
subsidiaries; and other statements that are not historical fact.
Forward-looking statements are based on certain assumptions by management and
are subject to risks and uncertainties that could cause actual results to
differ materially from those in the forward-looking statements. These risks
and uncertainties include, but are not limited to, competitive pressures;
factors that affect delinquency rates, credit loss rates and charge-off rates;
general economic conditions; consumer loan portfolio growth; changes in the
cost and/or availability of funding due to changes in the deposit, credit or
securitization markets; changes in the way the Company is perceived in such
markets and/or conditions relating to existing or future financing
commitments; the effect of government policy and regulation, whether of
general applicability or specific to the Company, including restrictions
and/or limitations relating to the Company's minimum capital requirements,
deposit taking abilities, reserving methodologies, dividend policies and
payments, growth, and/or underwriting criteria; year-end audit adjustments;
changes in accounting rules, policies, practices and/or procedures; the
success of product development efforts; legal and regulatory proceedings,
including the impact of ongoing litigation; interest rates; one-time charges;
extraordinary items; the ability to recruit and replace key personnel; and the
impact of existing, modified, or new strategic initiatives. These and other
risks and uncertainties are described in detail in the Company's Annual Report
on Form 10-K and Annual Report to Stockholders for the fiscal year ended
December 31, 2002 under the headings "Cautionary Statement Regard
Forward-Looking Information "and "Risk Factors." Readers are cautioned not to
place undue reliance on any forward-looking statement, which speaks only as of
the date thereof. The Company undertakes no obligation to update any
forward-looking statements.
NOTE: Investor information is available on Providian Financial's website
at http://www.providian.com.
Providian Financial Corporation
Financial & Statistical Summary
Reported Financial Measures
(unaudited)
2003 2003 2002 2002 2002
(in millions, except per Q2 Q1 Q4 Q3 Q2
share and employee data)
Reported Earnings:
Net Interest Income $127.8 $180.4 $186.2 $199.5 $208.4
Non-Interest Income 393.3 417.5 293.1 465.1 509.9
Total Net Revenue 521.1 597.9 479.3 664.6 718.3
Provision for Loan Losses 132.0 261.8 139.0 192.4 80.4
Non-Interest Expense 324.6 328.3 320.3 452.2 489.3
Income From
Operations Before
Taxes 64.5 7.8 20.0 20.0 148.6
Tax Expense (Benefit) 25.5 3.1 7.9 (22.1) 58.7
Income From
Operations $39.0 $4.7 $12.1 $42.1 $89.9
Income from Discontinued
Operations (1) -- -- -- -- 64.0
Net Income $39.0 $4.7 $12.1 $42.1 $153.9
Reported Financial Data:
Quarter:
Net Credit Losses (2) $237 $296 $299 $244 $269
Provision for Credit
Losses $132 $262 $139 $192 $80
Quarter End:
Total Loans $6,417 $7,147 $6,908 $8,198 $7,513
Total Assets $16,206 $16,607 $16,710 $17,218 $17,799
Total Capital (Includes
Capital Securities) $2,285 $2,239 $2,243 $2,235 $2,185
Total Equity $2,181 $2,134 $2,139 $2,131 $2,081
Quarter Average:
Total Loans $6,684 $7,500 $8,046 $7,305 $7,578
Earning Assets $14,048 $13,604 $14,236 $15,011 $14,243
Total Assets $16,460 $16,518 $16,757 $17,384 $18,319
Total Equity $2,161 $2,088 $2,100 $2,107 $2,008
Key Reported Statistics:
Net Interest Margin
(Earning Assets) 3.64% 5.30% 5.23% 5.32% 5.85%
Net Interest Margin
(Loans) 10.16% 11.50% 11.02% 12.93% 13.00%
Risk-Adjusted Margin
(Loans) (3) 19.51% 17.98% 10.71% 25.02% 25.70%
Non-interest income
margin (4) 23.54% 22.27% 14.57% 25.47% 26.92%
Return on Assets 0.95% 0.11% 0.29% 0.97% 3.36%
Return on Equity 7.23% 0.90% 2.31% 8.00% 30.64%
Allowance as a Percent of
Loans 12.20% 13.69% 14.67% 15.26% 16.34%
Net Credit Loss Rate (2) 14.19% 15.79% 14.88% 13.38% 14.21%
Delinquency Rate (30+
Days) 7.64% 8.76% 10.00% 8.14% 7.29%
Equity to Assets 13.46% 12.85% 12.80% 12.38% 11.69%
Common Share Statistics:
EPS Basic:
EPS - Continuing
Operations $0.14 $0.02 $0.04 $0.15 $0.32
EPS - Discontinued
Operations (1) -- -- -- -- 0.22
EPS - Basic $0.14 $0.02 $0.04 $0.15 $0.54
EPS - Diluted: (5)
EPS - Continuing
Operations $0.13 $0.02 $0.04 $0.15 $0.31
EPS - Discontinued
Operations (1) -- -- -- -- 0.22
EPS - Assuming Dilution $0.13 $0.02 $0.04 $0.15 $0.53
Book Value Per Share
(Period End) $7.51 $7.36 $7.39 $7.37 $7.20
Total Market
Capitalization (Period
End) $2,689 $1,901 $1,878 $1,417 $1,700
Shares Outstanding
(Period End) 290.4 289.8 289.4 289.2 289.1
Weighted Average Shares
O/S - Basic 286.3 286.2 285.4 285.3 284.2
Weighted Average Shares
O/S - Diluted 289.8 290.4 289.2 294.1 294.2
Accounts 10.2 11.7 12.0 12.7 12.9
Employees (FTE) 5,692 6,083 6,261 7,331 8,393
(1) The Company decided to discontinue its operations in Argentina and the
United Kingdom in 2001 and completed the disposition of those
operations in the second quarter of 2002. Accordingly, the operations
of its subsidiaries and branches in those locations are reflected as
discontinued operations in its statements of income.
(2) The net credit losses for the second quarter of 2003 exclude the fair
value adjustments on loans held for securitization or sale.
(3) Represents reported interest income on loans plus non-interest income,
less interest expense allocated to loans, and less net credit losses,
expressed as a percentage of average reported loans.
(4) Represents reported non-interest income expressed as a percentage of
average reported loans.
(5) During the first and second quarters of 2003, and the fourth quarter
of 2002, there was no interest expense add-back because the effect
would be antidilutive. During the second and third quarters of 2002,
$2 million of interest expense related to the Company's 3.25%
convertible notes was added back to income.
Providian Financial Corporation
Financial & Statistical Summary
Managed Financial Measures
(unaudited)
2003 2003 2002 2002 2002
(in millions) Q2 Q1 Q4 Q3 Q2
Managed Net Revenue:
Net Interest Income $649.5 $705.5 $734.6 $779.8 $783.2
Non-Interest Income 394.3 430.9 283.8 444.1 532.6
Total Net Revenue
(1) 1,043.8 1,136.4 1,018.4 1,223.9 1,315.8
Managed Financial Data:
Quarter:
Net Credit Losses (2) $760 $835 $838 $804 $867
Net change in Reported
Allowance for Credit
Losses (3) $(105) $(34) $(160) $(53) $(189)
Adjusted Credit Losses $655 $801 $678 $751 $678
Quarter End:
Total Loans (4) $17,798 $18,470 $19,628 $19,453 $19,639
Securitized Loans (5) $11,381 $11,323 $12,720 $11,255 $12,126
Total Assets (6) $25,131 $25,532 $26,543 $26,893 $28,014
Total Equity $2,181 $2,134 $2,139 $2,131 $2,081
Quarter Average:
Total Loans $18,045 $18,952 $19,344 $19,237 $19,773
Securitized Loans (5) $11,361 $11,452 $11,294 $11,932 $12,195
Earning Assets $25,409 $25,056 $25,534 $26,942 $26,438
Total Assets $25,385 $25,494 $26,222 $27,511 $28,576
Total Equity $2,161 $2,088 $2,100 $2,107 $2,008
Key Managed Statistics:
Net Interest Margin
(Earning Assets) (7) 10.22% 11.26% 11.51% 11.58% 11.85%
Net Interest Margin
(Loans) (8) 15.09% 15.41% 15.67% 16.73% 16.38%
Risk-Adjusted Margin
(Loans) (9) 6.99% 6.89% 4.20% 9.25% 9.62%
Non-interest Income
Margin (10) 8.74% 9.09% 5.87% 9.23% 10.77%
Return on Assets 0.62% 0.07% 0.18% 0.61% 2.15%
Net Credit Loss Rate (2) 16.84% 17.61% 17.34% 16.71% 17.53%
Delinquency Rate (30+
Days) 9.72% 10.31% 11.11% 11.23% 10.16%
Equity to Managed Assets 8.68% 8.36% 8.06% 7.92% 7.43%
(1) Represents the interest income and non-interest income earned from
managed loans receivable and investments less interest expense,
including the interest costs payable to securitization investors.
(2) The net credit losses for the second quarter 2003 exclude the fair
value adjustments on loans held for securitization or sale.
(3) The net change in the reported allowance for credit losses exclude the
allowance transferred to loans held for securitization or sale.
(4) Represents all loans receivable from customer accounts that are
managed by the Company, including the loans receivable
reported on the Company's statements of financial condition and the
loans receivable removed or reclassified from the Company's statements
of financial condition through securitizations. Loans receivable
amounts exclude estimated uncollectible finance charges and fees.
(5) Effective December 2002, the Company adopted the federal banking
agencies accrued interest receivable, or AIR, guidance,
resulting in a reclassification of a portion of accrued interest
receivable from reported loans receivable to due from securitizations
for 2003 and for the fourth quarter 2002. Securitized loans for 2003
and the fourth quarter 2002 include the AIR reclassification.
(6) Managed assets represent total assets reported on the Company's
statements of financial condition, plus the loans
receivable removed or reclassified from loans receivable on its
statements of financial condition through securitizations,
less the retained interests from securitization's reported on its
statements of financial condition.
(7) Represents the net interest income recognized on managed earning
assets, expressed as a percentage of managed average earning assets.
(8) Represents the interest income recognized on managed average loans
receivable, expressed as a percentage of managed average loans
receivable, less interest expense on deposits and borrowings,
including the interest costs payable to securitization investors,
expressed as a percentage of managed average earning assets.
(9) Represents managed interest income on loans plus non-interest income,
less interest expense allocated to loans, and less net credit losses,
expressed as a percentage of average managed loans.
(10) Represents managed non-interest income expressed as a percentage of
average managed loans. Managed non-interest income excludes the
interest income reclassification related to certain retained
beneficial interests.
Providian Financial Corporation
Delinquency Summary
(unaudited)
Quarterly
2003 2003
(dollars in thousands) Q2 Q1
% of % of
Total Total
Loans Loans Loans Loans
Reported
Loans outstanding (1) (2) $6,418,050 100.00% $7,145,817 100.00%
Loans delinquent
30 - 59 days $156,615 2.44% $173,449 2.43%
60 - 89 days 115,372 1.80% 136,652 1.91%
90 or more days 218,116 3.40% 315,630 4.42%
Total $490,103 7.64% $625,731 8.76%
Securitized
Loans outstanding (3) $11,381,475 $11,323,170
Loans delinquent
30 - 59 days $377,089 $353,358
60 - 89 days $291,690 $283,102
90 or more days $571,358 $642,045
Total $1,240,137 $1,278,505
Managed
Loans outstanding (1) $17,799,525 100.00% $18,468,987 100.00%
Loans delinquent
30 - 59 days $533,704 3.00% $526,807 2.85%
60 - 89 days $407,062 2.29% 419,754 2.27%
90 or more days $789,474 4.43% 957,675 5.19%
Total $1,730,240 9.72% $1,904,236 10.31%
(1) Excludes adjustments related to the fair value of designated
financial instruments.
(2) Effective December 2002, the Company adopted the federal banking
agencies' accrued interest receivable, or AIR, guidance,
resulting in a reclassification of a portion of accrued interest
receivable from reported loans receivable to due from
securitizations during the first and second quarters of 2003 and
the fourth quarter of 2002.
(3) Excludes the seller's interest in the loans receivable transferred
in securitizations. The senior seller's interest is an undivided
interest in the loans transferred to the securitization trust and is
included in reported loans receivable. Effective December 2002, the
Company adopted the accrued interest receivable, or AIR, guidance,
resulting in a reclassification of a portion of accrued interest
receivable from reported loans receivable to due from
securitizations for 2003 and for the fourth quarter 2002.
Securitized loans for 2003 and the fourth quarter 2002 include the
AIR reclassification.
Providian Financial Corporation
Delinquency Summary
(unaudited)
Quarterly
2002 2002
(dollars in thousands) Q4 Q3
% of % of
Total Total
Loans Loans Loans Loans
Reported
Loans outstanding (1) (2) $6,899,849 100.00% $8,185,724 100.00%
Loans delinquent
30 - 59 days $205,605 2.98% $243,298 2.97%
60 - 89 days 147,057 2.13% 166,733 2.04%
90 or more days 336,979 4.89% 256,676 3.13%
Total $689,641 10.00% $666,707 8.14%
Securitized
Loans outstanding (3) $12,719,752 $11,255,146
Loans delinquent
30 - 59 days $460,295 $432,957
60 - 89 days $335,700 $335,712
90 or more days $694,129 $747,759
Total $1,490,124 $1,516,428
Managed
Loans outstanding (1) $19,619,601 100.00% $19,440,870 100.00%
Loans delinquent
30 - 59 days $665,900 3.39% $676,255 3.48%
60 - 89 days 482,757 2.46% 502,445 2.58%
90 or more days 1,031,108 5.26% 1,004,435 5.17%
Total $2,179,765 11.11% $2,183,135 11.23%
(1) Excludes adjustments related to the fair value of designated
financial instruments.
(2) Effective December 2002, the Company adopted the federal banking
agencies' accrued interest receivable, or AIR, guidance,
resulting in a reclassification of a portion of accrued interest
receivable from reported loans receivable to due from
securitizations during the first and second quarters of 2003 and the
fourth quarter of 2002.
(3) Excludes the seller's interest in the loans receivable transferred
in securitizations. The senior seller's interest is an undivided
interest in the loans transferred to the securitization trust and is
included in reported loans receivable. Effective December 2002, the
Company adopted the accrued interest receivable, or AIR, guidance,
resulting in a reclassification of a portion of accrued interest
receivable from reported loans receivable to due from
securitizations for 2003 and for the fourth quarter 2002.
Securitized loans for 2003 and the fourth quarter 2002 include the
AIR reclassification.
Providian Financial Corporation
Delinquency Summary
(unaudited)
Quarterly
2002
(dollars in thousands) Q2
Loans % of Total Loans
Reported
Loans outstanding (1) (2) $7,495,030 100.00%
Loans delinquent
30 - 59 days $209,450 2.79%
60 - 89 days 139,787 1.87%
90 or more days 197,206 2.63%
Total $546,443 7.29%
Securitized
Loans outstanding (3) $12,125,831
Loans delinquent
30 - 59 days $435,944
60 - 89 days $311,924
90 or more days $699,078
Total $1,446,946
Managed
Loans outstanding (1) $19,620,861 100.00%
Loans delinquent
30 - 59 days $645,394 3.29%
60 - 89 days 451,711 2.30%
90 or more days 896,284 4.57%
Total $1,993,389 10.16%
(1) Excludes adjustments related to the fair value of designated
financial instruments.
(2) Effective December 2002, the Company adopted the federal banking
agencies' accrued interest receivable, or AIR, guidance,
resulting in a reclassification of a portion of accrued interest
receivable from reported loans receivable to due from
securitizations during the first and second quarters of 2003 and the
fourth quarter of 2002.
(3) Excludes the seller's interest in the loans receivable transferred
in securitizations. The senior seller's interest is an undivided
interest in the loans transferred to the securitization trust and is
included in reported loans receivable. Effective December 2002, the
Company adopted the accrued interest receivable, or AIR, guidance,
resulting in a reclassification of a portion of accrued interest
receivable from reported loans receivable to due from
securitizations for 2003 and for the fourth quarter 2002.
Securitized loans for 2003 and the fourth quarter 2002 include the
AIR reclassification.
Providian Financial Corporation
Allowance for Credit Losses
Three months ended Six months ended
June 30, June 30,
(dollars in thousands) 2003 2002 2003 2002
Balance at beginning of
period $978,202 $1,413,734 $1,012,461 $1,932,833
Provision for credit losses 120,129 80,385 381,944 572,234
Fair value adjustment -
loans available for sale 11,875 -- 11,875 388,230
Credit losses (299,637) (306,296) (640,975) (757,326)
Recoveries 62,525 37,078 107,789 74,873
Credit losses on loans
available for sale (171,606) -- (171,606) (985,943)
Balance at end of period $701,488 $1,224,901 $701,488 $1,224,901
Providian Financial Corporation and Subsidiaries
Consolidated Statements of Financial Condition
June 30, December 31,
(dollars in thousands) 2003 2002
(unaudited)
Assets
Cash and cash equivalents $719,131 $344,277
Federal funds sold and securities
purchased under resale
agreements 4,496,000 3,601,000
Investment securities:
Available-for-sale 1,420,007 1,856,607
Loans held for securitization or
sale 667,088 --
Loans receivable, less allowance
for credit losses of $701,488
at June 30, 2003 and $1,012,461
at December 31, 2002 5,048,135 5,895,296
Premises and equipment, net 104,706 119,260
Interest receivable 46,066 60,841
Due from securitizations 3,155,046 3,723,382
Deferred tax 335,857 487,529
Other assets 214,202 622,197
Total assets $16,206,238 $16,710,389
Liabilities
Deposits $12,138,676 $12,708,315
Short-term borrowings 108,757 91,560
Long-term borrowings 1,044,760 877,238
Deferred fee revenue 142,485 211,978
Accrued expenses and other
liabilities 486,493 577,894
Total liabilities 13,921,171 14,466,985
Capital securities 104,332 104,332
Shareholders' equity 2,180,735 2,139,072
Total liabilities and
shareholders' equity $16,206,238 $16,710,389
Providian Financial Corporation and Subsidiaries
Consolidated Statements of Income (unaudited)
Three months ended Six months ended
June 30, June 30,
(dollars in thousands, except per 2003 2002 2003 2002
share data)
Interest Income
Loans $247,740 $350,482 $558,080 $838,567
Federal funds sold and
securities purchased
under resale agreements 13,610 7,098 23,436 12,707
Other 30,322 46,813 62,355 85,454
Total interest income 291,672 404,393 643,871 936,728
Interest Expense
Deposits 153,153 185,738 314,375 381,041
Borrowings 10,714 10,280 21,337 22,032
Total interest expense 163,867 196,018 335,712 403,073
Net interest income 127,805 208,375 308,159 533,655
Provision for credit losses 132,004 80,385 393,819 960,464
Net interest income
after provision for
credit losses (4,199) 127,990 (85,660) (426,809)
Non-Interest Income
Servicing and
securitizations 162,728 124,830 353,316 445,190
Credit product fee income 219,614 286,200 419,807 631,127
Other 10,973 98,959 37,730 546,852
393,315 509,989 810,853 1,623,169
Non-Interest Expense
Salaries and employee
benefits 95,856 138,860 192,831 303,878
Solicitation and advertising 53,527 104,189 118,905 212,871
Occupancy, furniture, and
equipment 31,793 82,523 60,476 135,755
Data processing and
communication 32,411 44,708 63,081 93,994
Other 110,987 119,054 217,589 289,920
324,574 489,334 652,882 1,036,418
Income from continuing
operations before
income taxes 64,542 148,645 72,311 159,942
Income tax (benefit) expense 25,494 58,715 28,563 63,177
Income from continuing
operations after tax 39,048 89,930 43,748 96,765
Income from discontinued
operations - net of related
taxes -- 63,972 -- 67,156
Net Income $39,048 $153,902 $43,748 $163,921
Earnings per common share -
basic
Income from continuing operations $0.14 $0.32 $0.15 $0.34
Income (loss) from discontinued
operations - net of related
taxes -- 0.22 -- 0.24
Net Income $0.14 $0.54 $0.15 $0.58
Earnings per common share -
diluted
Income from continuing operations $0.13 $0.31 $0.15 $0.34
Income (loss) from discontinued
operations - net of related
taxes -- 0.22 -- 0.23
Net Income $0.13 $0.53 $0.15 $0.57
Weighted average common shares
outstanding - basic (000) 286,310 284,250 286,303 284,163
Weighted average common shares
outstanding - assuming dilution
(000) 289,769 294,172 288,775 293,847
Providian Financial Corporation
Bank Subsidiaries' Capital Ratios
Total Risk-Based Capital Ratios as of June 30, 2003 (1)
Providian Providian
National Bank Bank
Call Report Basis (2) 15.08% 20.79%
Applying Subprime Guidance (excluding
AIR) (3) 13.76% 13.15%
Applying Subprime Guidance (including
AIR) (4) 11.87% --
(1) Total risk-based capital (Tier 1 + Tier 2) divided by total
risk-based assets.
(2) Total risk-based capital ratios as shown on the June 30, 2003
Call Report and includes accrued interest receivable.
(3) Total risk-based capital ratios after applying the increased risk
weightings under the Expanded Guidance for Subprime Lending Programs
("Subprime Guidance"). Excludes the effect of adopting the regulatory
guidance on the accrued interest receivable asset.
(4) Total risk-based capital ratios after applying the increased risk
weightings under the Subprime Guidance. Includes the effect of
adopting the regulatory guidance on the accrued interest
receivable asset. Providian Bank is not affected by the accrued
interest receivable guidance.
Providian Financial Corporation
Financial & Statistical Summary
Reconciliation of Reported and Managed Financial Measures
Securiti-
Reported zation Managed Reported
2003 2003 2003
Adjustment
(in millions) QTR 02 QTR 02 QTR 01
Earnings:
Interest Income Loans $247.7 $581.9 $829.6 $310.3
Interest Income
Investments (1) 43.9 (14.7) 29.2 41.9
Interest Expense 163.8 45.5 209.3 171.8
Net Interest Income $127.8 $521.7 $649.5 $180.4
Non-Interest Income (1) 393.3 1.0 394.3 417.5
Total Net Revenue $521.1 $522.7 1,043.8 $597.9
Financial Data:
Quarter:
Net Credit Losses (2) $237 $523 $760 $296
--
Quarter End:
Total Loans (3) $6,417 $11,381 $17,798 $7,147
Total Assets $16,206 $8,925 $25,131 $16,607
Quarter Average:
Total Loans $6,684 $11,361 $18,045 $7,500
Earning Assets $14,048 $11,361 $25,409 $13,604
Total Assets $16,460 $8,925 $25,385 $16,518
(1) In November 1999, the Emerging Issues Task Force (EITF) of the FASB
issued EITF 99-20, "Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securitized Financial
Assets." This Pronouncement requires that the holders or retained
beneficial interests in securitized financial assets, such as the
Company, recognize a portion of securitization (non-interest) income
as interest income. EITF 99-20 became effective for fiscal quarters
beginning after March 15, 2001.
(2) The net credit losses for the second quarter of 2003 exclude the fair
value adjustments on loans held for securitization or sale.
(3) During the second quarter of 2003 loans outstanding include loans
held for securitization or sale recorded at fair market value.
Non-GAAP Managed Financial Information
Loans that have been securitized and sold to third party investors are
not considered to be our assets under GAAP and therefore are not shown
on our balance sheet. However, the interests we retain in the securitized
loan pools create financial exposure to the current and expected cash
flows of the securitized loans. Although the loans sold are not on our
balance sheet, their performance can affect some or all of our retained
interests as well as our results of operations and our financial
position. In addition, we continue to service these loans.
Because of this continued exposure and involvement, we use managed
financial information to evaluate our historical performance, assess our
current condition, and plan our future operations. We believe that
managed financial information supplements our GAAP information and is
helpful to the reader's understanding of our consolidated financial
condition and results of operations. "Reported" financial information
refers to GAAP financial information. "Managed" financial information is
derived by adjusting the reported financial information to add back
securitized loan balances and the related finance charge and fee income,
credit losses, and net interest costs.
The Company in its July 28, 2003 earnings call will be disclosing certain
projected financial measures relating to expected performance on a
managed basis, such as net credit losses, net interest income margin and
non-interest income margin. The Company develops such projections on a
managed basis using managed financial information and does not in the
normal course derive comparable GAAP projections. Developing such
comparable GAAP projections would be unreasonably burdensome and in the
opinion of management such comparable GAAP projections would not provide
to the users of the financial information a significant benefit in
understanding the Company's expected future performance.
Providian Financial Corporation
Financial & Statistical Summary
Reconciliation of Reported and Managed Financial Measures
Securiti- Securiti-
zation Managed Reported zation
2003 2002
Adjustment Adjustment
(in millions) QTR 01 QTR 04
Earnings:
Interest Income Loans $586.0 $896.3 $323.5 $613.2
Interest Income
Investments (1) (13.0) 28.9 42.6 (8.6)
Interest Expense 47.9 219.7 179.9 56.2
Net Interest Income $525.1 $705.5 $186.2 $548.4
Non-Interest Income (1) 13.4 430.9 293.1 (9.3)
Total Net Revenue $538.5 $1,136.4 $479.3 $539.1
Financial Data:
Quarter:
Net Credit Losses (2) $539 $835 $299 $539
--
Quarter End:
Total Loans (3) $11,323 $18,470 $6,908 $12,720
Total Assets $8,925 $25,532 $16,710 $9,833
Quarter Average:
Total Loans $11,452 $18,952 $8,046 $11,294
Earning Assets $11,452 $25,056 $14,236 $11,298
Total Assets $8,976 $25,494 $16,757 $9,465
(1) In November 1999, the Emerging Issues Task Force (EITF) of the FASB
issued EITF 99-20, "Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securitized Financial
Assets." This Pronouncement requires that the holders or retained
beneficial interests in securitized financial assets, such as the
Company, recognize a portion of securitization (non-interest) income
as interest income. EITF 99-20 became effective for fiscal quarters
beginning after March 15, 2001.
(2) The net credit losses for the second quarter of 2003 exclude the fair
value adjustments on loans held for securitization or sale.
(3) During the second quarter of 2003 loans outstanding include loans
held for securitization or sale recorded at fair market value.
Non-GAAP Managed Financial Information
Loans that have been securitized and sold to third party investors are
not considered to be our assets under GAAP and therefore are not shown
on our balance sheet. However, the interests we retain in the securitized
loan pools create financial exposure to the current and expected cash
flows of the securitized loans. Although the loans sold are not on our
balance sheet, their performance can affect some or all of our retained
interests as well as our results of operations and our financial
position. In addition, we continue to service these loans.
Because of this continued exposure and involvement, we use managed
financial information to evaluate our historical performance, assess our
current condition, and plan our future operations. We believe that
managed financial information supplements our GAAP information and is
helpful to the reader's understanding of our consolidated financial
condition and results of operations. "Reported" financial information
refers to GAAP financial information. "Managed" financial information is
derived by adjusting the reported financial information to add back
securitized loan balances and the related finance charge and fee income,
credit losses, and net interest costs.
The Company in its July 28, 2003 earnings call will be disclosing certain
projected financial measures relating to expected performance on a
managed basis, such as net credit losses, net interest income margin and
non-interest income margin. The Company develops such projections on a
managed basis using managed financial information and does not in the
normal course derive comparable GAAP projections. Developing such
comparable GAAP projections would be unreasonably burdensome and in the
opinion of management such comparable GAAP projections would not provide
to the users of the financial information a significant benefit in
understanding the Company's expected future performance.
Providian Financial Corporation
Financial & Statistical Summary
Reconciliation of Reported and Managed Financial Measures
Securiti-
Managed Reported zation Managed
2002 2002 2002
Adjustment
(in millions) QTR 04 QTR 03 QTR 03
Earnings:
Interest Income Loans $936.6 $328.2 $656.2 $984.4
Interest Income
Investments (1) 34.1 60.3 (13.2) 47.1
Interest Expense 236.1 189.0 62.7 251.7
Net Interest Income $734.6 $199.5 $580.3 $779.8
Non-Interest Income (1) 283.8 465.1 (21.0) 444.1
Total Net Revenue $1,018.4 $664.6 $559.3 $1,223.9
Financial Data:
Quarter:
Net Credit Losses (2) $838 $244 $559 $804
Quarter End:
Total Loans (3) $19,628 $8,198 $11,255 $19,453
Total Assets $26,543 $17,218 $9,675 $26,893
Quarter Average:
Total Loans $19,344 $7,305 $11,932 $19,237
Earning Assets $25,534 $15,011 $11,932 $26,942
Total Assets $26,222 $17,384 $10,127 $27,511
(1) In November 1999, the Emerging Issues Task Force (EITF) of the FASB
issued EITF 99-20, "Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securitized Financial
Assets." This Pronouncement requires that the holders or retained
beneficial interests in securitized financial assets, such as the
Company, recognize a portion of securitization (non-interest) income
as interest income. EITF 99-20 became effective for fiscal quarters
beginning after March 15, 2001.
(2) The net credit losses for the second quarter of 2003 exclude the fair
value adjustments on loans held for securitization or sale.
(3) During the second quarter of 2003 loans outstanding include loans
held for securitization or sale recorded at fair market value.
Non-GAAP Managed Financial Information
Loans that have been securitized and sold to third party investors are
not considered to be our assets under GAAP and therefore are not shown
on our balance sheet. However, the interests we retain in the securitized
loan pools create financial exposure to the current and expected cash
flows of the securitized loans. Although the loans sold are not on our
balance sheet, their performance can affect some or all of our retained
interests as well as our results of operations and our financial
position. In addition, we continue to service these loans.
Because of this continued exposure and involvement, we use managed
financial information to evaluate our historical performance, assess our
current condition, and plan our future operations. We believe that
managed financial information supplements our GAAP information and is
helpful to the reader's understanding of our consolidated financial
condition and results of operations. "Reported" financial information
refers to GAAP financial information. "Managed" financial information is
derived by adjusting the reported financial information to add back
securitized loan balances and the related finance charge and fee income,
credit losses, and net interest costs.
The Company in its July 28, 2003 earnings call will be disclosing certain
projected financial measures relating to expected performance on a
managed basis, such as net credit losses, net interest income margin and
non-interest income margin. The Company develops such projections on a
managed basis using managed financial information and does not in the
normal course derive comparable GAAP projections. Developing such
comparable GAAP projections would be unreasonably burdensome and in the
opinion of management such comparable GAAP projections would not provide
to the users of the financial information a significant benefit in
understanding the Company's expected future performance.
Providian Financial Corporation
Financial & Statistical Summary
Reconciliation of Reported and Managed Financial Measures
Securitiza-
Reported tion Managed
2002 2002
(in millions) QTR 02 Adjustment QTR 02
Earnings:
Interest Income Loans $350.5 $654.5 $1,005.0
Interest Income
Investments (1) 53.9 (14.7) 39.2
Interest Expense 196.0 65.0 261.0
Net Interest Income $208.4 $574.8 $783.2
Non-Interest Income (1) 509.9 22.7 532.6
Total Net Revenue $718.3 $597.5 $1,315.8
Financial Data:
Quarter:
Net Credit Losses (2) $269 $598 $867
Quarter End:
Total Loans (3) $7,513 $12,126 $19,639
Total Assets $17,799 $10,215 $28,014
Quarter Average:
Total Loans $7,578 $12,195 $19,773
Earning Assets $14,243 $12,195 $26,438
Total Assets $18,319 $10,257 $28,576
(1) In November 1999, the Emerging Issues Task Force (EITF) of the FASB
issued EITF 99-20, "Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securitized Financial
Assets." This Pronouncement requires that the holders or retained
beneficial interests in securitized financial assets, such as the
Company, recognize a portion of securitization (non-interest) income
as interest income. EITF 99-20 became effective for fiscal quarters
beginning after March 15, 2001.
(2) The net credit losses for the second quarter of 2003 exclude the fair
value adjustments on loans held for securitization or sale.
(3) During the second quarter of 2003 loans outstanding include loans
held for securitization or sale recorded at fair market value.
Non-GAAP Managed Financial Information
Loans that have been securitized and sold to third party investors are
not considered to be our assets under GAAP and therefore are not shown
on our balance sheet. However, the interests we retain in the securitized
loan pools create financial exposure to the current and expected cash
flows of the securitized loans. Although the loans sold are not on our
balance sheet, their performance can affect some or all of our retained
interests as well as our results of operations and our financial
position. In addition, we continue to service these loans.
Because of this continued exposure and involvement, we use managed
financial information to evaluate our historical performance, assess our
current condition, and plan our future operations. We believe that
managed financial information supplements our GAAP information and is
helpful to the reader's understanding of our consolidated financial
condition and results of operations. "Reported" financial information
refers to GAAP financial information. "Managed" financial information is
derived by adjusting the reported financial information to add back
securitized loan balances and the related finance charge and fee income,
credit losses, and net interest costs.
The Company in its July 28, 2003 earnings call will be disclosing certain
projected financial measures relating to expected performance on a
managed basis, such as net credit losses, net interest income margin and
non-interest income margin. The Company develops such projections on a
managed basis using managed financial information and does not in the
normal course derive comparable GAAP projections. Developing such
comparable GAAP projections would be unreasonably burdensome and in the
opinion of management such comparable GAAP projections would not provide
to the users of the financial information a significant benefit in
understanding the Company's expected future performance.
SOURCE Providian Financial Corporation
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Related links:
http://www.providian.com
CONTACT:
investors, Jack Carsky, +1-415-278-4977, or
Bill Horning, +1-415-278-4602, or media, Alan Elias,
+1-415-278-4189, all of Providian Financial Corporation
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