New Strategic Partnership Programs Announced Net Credit Losses Continue
To Decline
SAN FRANCISCO, Oct. 29 /PRNewswire-FirstCall/ -- Providian Financial
Corporation (NYSE: PVN) today announced net income for the third quarter of
2003 of $85.3 million, or $0.29 per diluted share.
"We delivered a solid quarter that was consistent with our expectations,"
said Joseph Saunders, Providian's chairman and chief executive officer. "This
quarter we also made significant strides in the extension of our marketing
strategy with the announcement of several new strategic partnerships that we
expect will contribute to our account and receivables growth going forward."
Third Quarter Financial Highlights
Total net revenues on a reported basis, comprised of reported net interest
income and reported non-interest income, totaled $526.3 million in the
third quarter of 2003, compared to $521.1 million in the second 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
$977.1 million in the third quarter of 2003, compared to $1,043.8 million in
the second quarter of 2003. The reported and managed net interest margins on
loans in the third quarter of 2003 were 8.87% and 14.79%, compared to 10.16%
and 15.09% in the second quarter of 2003, respectively.
Net credit losses in the third quarter of 2003 were better than the
Company's expectations at $156.2 million on a reported basis and
$607.0 million on a managed basis, resulting in reported and managed net
credit loss rates of 10.65% and 14.37%, respectively. The third quarter net
credit loss rates compare to a reported net credit loss rate of 14.19% and a
managed net credit loss rate of 16.84% in the second quarter of 2003. The
Company's reported and managed 30+ day delinquency rates at the end of the
third quarter of 2003 were 7.18% and 9.68%, respectively, compared to 7.64%
and 9.72%, respectively, at the end of the second quarter of 2003.
Non-interest expense for the third quarter of 2003 was $286.6 million,
compared to $324.6 million in the second quarter of 2003. The majority of the
reduction in non-interest expense was driven by non-marketing expenditures,
including lower collections costs and lower expenditures for salaries and
employee benefits.
Loans receivable, as of September 30, 2003, were $5.99 billion on a
reported basis and $16.95 billion on a managed basis. This compares to
reported loans receivable and managed loans receivable at June 30, 2003 of
$6.42 billion and $17.80 billion, respectively. The reported and managed
loans receivable at June 30, 2003 included approximately $667 million in loans
held for sale that were sold on August 1, 2003. The Company added
approximately 400,000 gross new accounts in the third quarter of 2003 and
ended the quarter with approximately 10.8 million customer accounts.
The Company ended the third quarter of 2003 with total equity of
$2.26 billion and an allowance for credit losses of $644.0 million, which
together represent 48% of reported loans and 17% of managed loans. Cash and
investments ended the quarter at approximately $5.8 billion, representing
approximately 97% of total reported loans and approximately 34% of total
managed loans.
Strategic Partnership Programs
The Company recently announced several new strategic partnerships
including an agreement with MBNA to cooperatively issue the eBay "Anything
Points" MasterCard, an agreement with the Democratic National Committee to
market DNC Visa cards and an agreement with the North American Membership
Group to issue affinity credit cards for its membership clubs.
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 to Middle America 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.
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)
(dollars in millions, except
per share and employee data)
2003 2003 2003 2002 2002
Q3 Q2 Q1 Q4 Q3
Reported
Earnings:
Net Interest
Income $80.9 $127.8 $180.4 $186.2 $199.5
Non-Interest
Income 445.4 393.3 417.5 293.1 465.1
Total Net
Revenue 526.3 521.1 597.9 479.3 664.6
Provision
for
Loan Losses 98.7 132.0 261.8 139.0 192.4
Non-Interest
Expense 286.6 324.6 328.3 320.3 452.2
Income From
Operations
Before
Income Taxes 141.0 64.5 7.8 20.0 20.0
Income Tax
Expense
(Benefit) 55.7 25.5 3.1 7.9 (22.1)
Net Income $85.3 $39.0 $4.7 $12.1 $42.1
Reported
Financial Data:
Quarter:
Net Credit
Losses (1) $156 $237 $296 $299 $244
Provision
for Credit
Losses $99 $132 $262 $139 $192
Quarter End:
Total Loans $5,994 $6,417 $7,147 $6,908 $8,198
Total
Assets $15,329 $16,206 $16,607 $16,651 $17,218
Total
Equity $2,257 $2,181 $2,134 $2,139 $2,131
Quarter
Average:
Total Loans $5,866 $6,684 $7,500 $8,046 $7,305
Earning
Assets $12,869 $14,048 $13,604 $14,236 $15,011
Total
Assets $15,740 $16,460 $16,518 $16,757 $17,384
Total
Equity $2,198 $2,161 $2,088 $2,100 $2,107
Key Reported
Statistics:
Net Interest
Margin
(Earning
Assets) 2.51% 3.64% 5.30% 5.23% 5.32%
Net Interest
Margin
(Loans) 8.87% 10.16% 11.50% 11.02% 12.93%
Risk-
Adjusted
Margin
(Loans) (2) 28.61% 19.51% 17.98% 10.71% 25.02%
Non-interest
Income
Margin (3) 30.38% 23.54% 22.27% 14.57% 25.47%
Return on
Assets 2.17% 0.95% 0.11% 0.29% 0.97%
Return on
Equity 15.52% 7.23% 0.90% 2.31% 8.00%
Allowance
as a
Percent of
Loans 10.74% 12.20% 13.69% 14.67% 15.26%
Net Credit
Loss Rate (1)10.65% 14.19% 15.79% 14.88% 13.38%
Delinquency
Rate
(30+ Days) 7.18% 7.64% 8.76% 10.00% 8.14%
Equity to
Loans 37.65% 33.99% 29.86% 30.96% 25.99%
Equity to
Assets 14.72% 13.46% 12.85% 12.85% 12.38%
Common Share
Statistics:
Earnings Per
Common Share
- Basic $0.30 $0.14 $0.02 $0.04 $0.15
Earnings
Per Common
Share -
Assuming
Dilution (4) $0.29 $0.13 $0.02 $0.04 $0.15
Book Value
Per Share
(Period End) $7.78 $7.51 $7.36 $7.39 $7.37
Total Market
Capitalization
(Period End) $3,421 $2,689 $1,901 $1,878 $1,417
Shares
Outstanding
(Period End) 290.2 290.4 289.8 289.4 289.2
Weighted
Average
Shares O/S
- Basic 287.6 286.3 286.2 285.4 285.3
Weighted
Average
Shares O/S
- Diluted 291.9 289.8 290.4 289.2 294.1
Accounts 10.8 11.4 11.7 12.0 12.7
Employees
(FTE) 5,012 5,692 6,083 6,261 7,331
(1) The net credit losses for the second quarter of 2003 exclude the fair
value adjustments on loans held for securitization or sale.
(2) 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.
(3) Represents reported non-interest income expressed as a percentage of
average reported loans.
Providian Financial Corporation
Financial & Statistical Summary
Managed Financial Measures
(unaudited)
(dollars in millions) 2003 2003 2003 2002 2002
Q3 Q2 Q1 Q4 Q3
Managed Net Revenue:
Net Interest Income $590.7 $649.5 $705.5 $734.6 $779.8
Non-Interest Income 386.4 394.3 430.9 283.8 444.1
Total Net Revenue(1) 977.1 1,043.8 1,136.4 1,018.4 1,223.9
Managed Financial Data:
Quarter:
Net Credit Losses(2) $607 $760 $835 $838 $804
Net Change in Reported
Allowance for Credit
Losses(3) (57) (105) (34) (160) (53)
Adjusted Credit Losses $550 $655 $801 $678 $751
Quarter End:
Total Loans(4) $16,945 $17,798 $18,470 $19,628 $19,453
Securitized Loans(5) $10,951 $11,381 $11,323 $12,720 $11,255
Total Assets(6) $23,779 $25,131 $25,532 $26,484 $26,893
Total Equity $2,257 $2,181 $2,134 $2,139 $2,131
Quarter Average:
Total Loans $16,891 $18,045 $18,952 $19,344 $19,237
Securitized Loans(5) $11,026 $11,361 $11,452 $11,294 $11,932
Earning Assets $23,894 $25,409 $25,056 $25,534 $26,942
Total Assets $24,462 $25,385 $25,494 $26,222 $27,511
Total Equity $2,198 $2,161 $2,088 $2,100 $2,107
Key Managed Statistics:
Net Interest Margin
(Earning Assets)(7) 9.89% 10.22% 11.26% 11.51% 11.58%
Net Interest Margin
(Loans)(8) 14.79% 15.09% 15.41% 15.67% 16.73%
Risk-Adjusted Margin
(Loans)(9) 9.57% 6.99% 6.89% 4.20% 9.25%
Non-interest Income
Margin(10) 9.15% 8.74% 9.09% 5.87% 9.23%
Return on Assets 1.40% 0.62% 0.07% 0.18% 0.61%
Net Credit Loss Rate(2) 14.37% 16.84% 17.61% 17.34% 16.71%
Delinquency Rate
(30+ Days) 9.68% 9.72% 10.31% 11.11% 11.23%
Equity to Managed Loans 13.32% 12.25% 11.55% 10.90% 10.95%
Equity to Managed Assets 9.49% 8.68% 8.36% 8.08% 7.92%
(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 excludes
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 reflect 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
securitizations reported on its statement 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) Q3 Q2 (4)
% of % of
Total Total
Loans Loans Loans Loans
Reported
Loans
outstanding(1)(2) $5,994,446 100.00% $6,418,050 100.00%
Loans delinquent
30 - 59 days $138,168 2.31% $156,615 2.44%
60 - 89 days 97,361 1.62% 115,372 1.80%
90 or more days 194,822 3.25% 218,116 3.40%
Total $430,351 7.18% $490,103 7.64%
Securitized
Loans
outstanding (3) $10,951,709 $11,381,475
Loans delinquent
30 - 59 days $382,647 $377,089
60 - 89 days 275,898 291,690
90 or more days 552,222 571,358
Total $1,210,767 $1,240,137
Managed
Loans
outstanding (1) $16,946,155 100.00% $17,799,525 100.00%
Loans delinquent
30 - 59 days $520,815 3.07% $533,704 3.00%
60 - 89 days 373,259 2.20% 407,062 2.29%
90 or more days 747,044 4.41% 789,474 4.43%
Total $1,641,118 9.68% $1,730,240 9.72%
Providian Financial Corporation
Delinquency Summary
(unaudited)
Quarterly
2003
(dollars in thousands) Q1
% of Total
Loans Loans
Reported
Loans outstanding (1) (2) $7,145,817 100.00%
Loans delinquent
30 - 59 days $173,449 2.43%
60 - 89 days 136,652 1.91%
90 or more days 315,630 4.42%
Total $625,731 8.76%
Securitized
Loans outstanding (3) $11,323,170
Loans delinquent
30 - 59 days $353,358
60 - 89 days 283,102
90 or more days 642,045
Total $1,278,505
Managed
Loans outstanding (1) $18,468,987 100.00%
Loans delinquent
30 - 59 days $526,807 2.85%
60 - 89 days 419,754 2.27%
90 or more days 957,675 5.19%
Total $1,904,236 10.31%
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) Balances exclude market value adjustment related to the fair value of
designated financial instruments during 2003 of $(0.8) million for the third
quarter, $(1.3) million for the second quarter and $0.8 million for the first
quarter. For 2002, $7.9 million and $12.1 million were excluded for the fourth
and third quarters, respectively.
(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 for the first, second, and third
quarters of 2003 and the fourth quarter of 2002.
(3) Excludes the senior 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 of 2002. Securitized loans for 2003 and the fourth quarter of 2002
reflect the AIR reclassification.
(4) Includes Providian Bank loans held for securitization or sale at fair
value. Excluding the Providian Bank loans held for securitization or sale
from the second quarter 30+ days delinquency rates would have increased the
managed rate from 9.72% to 9.90% and the reported rate from 7.64% to 7.93%.
Providian Financial Corporation
Allowance for Credit Losses
Three months ended Nine months ended
September 30, September 30,
(dollars in thousands) 2003 2002 2003 2002
Balance at beginning of
period $701,488 $1,224,901 $1,012,461 $1,932,833
Provision for credit losses 98,732 192,366 480,676 764,600
Fair value adjustment -
loans available for sale -- -- 11,875 388,230
Credit losses (206,654) (278,437) (847,629) (1,035,763)
Recoveries 50,416 34,008 158,205 108,881
Credit losses on loans
available for sale -- -- (171,606) (985,943)
Balance at end of period $643,982 $1,172,838 $643,982 $1,172,838
Providian Financial Corporation
September 2003 Reported Monthly Net Credit Loss and Delinquency Rates
Providian Financial Corporation's reported net credit loss rate for the
month ended September 30, 2003 and its 30+ day reported delinquency rate as of
September 30, 2003 are presented in the table below. Reported monthly net
credit loss and delinquency rates exclude the impact of loans receivable
removed or reclassified from loans receivable on the Company's balance sheet
through its securitizations.
Monthly Net Credit Loss Rate(1)(3)(4) 30+ Day Delinquency Rate(2)(3)(4)
(Annualized) (Unaudited) (Unaudited)
9.55% 7.18%
(1) Represents the principal amounts of reported loans receivable that
have been charged off, less the total amount of recoveries on
previously charged-off loans, expressed as a percentage of the average
reported loans receivable during the period, multiplied by 12.
Recoveries include proceeds from the sale of charged-off assets to
third parties. Total average reported loans exclude a decrease of
$0.9 million for market value adjustments related to the fair value
of designated financial instruments.
(2) Represents reported loans that are 30+ days past due as of the last
day of the monthly period, divided by the total reported loans as of
the last day of the monthly period. Total reported loans exclude a
decrease of $0.8 million for market value adjustments related to the
fair value of designated financial instruments.
(3) In August 2003, in connection with the migration to the Total Systems
2 servicing platform, which increased the functionality of its data
system, the Company modified its practice for recognizing the
charge-off of bankruptcy accounts. Previously, the Company batch
processed bankruptcy accounts and charged-off the related amounts once
a month. With the change, the Company now charges off bankrupt
accounts on a daily basis, generally 30 days after notification of the
bankruptcy. This change continues to be within the guidelines provided
by the Federal Financial Institutions Examination Council. The Company
estimates the change had the effect of reducing the monthly net credit
loss rate by approximately 96 basis points and increasing the 30+ day
delinquency rate by approximately 6 basis points in September 2003.
(4) In September, the Company modified its loan re-aging practices.
Previously, an account could qualify for re-aging if the customer paid
the minimum amount due in each of three consecutive monthly payment
cycles. With the change instituted in September, an account may also
qualify for re-aging when the customer pays the cumulative equivalent
amount within a three-payment cycle period. This change is also
consistent with the guidelines provided by the Federal Financial
Institutions Examination Council. This change had the effect of
reducing the monthly net credit loss rate by approximately 4 basis
points and reducing the 30+ day delinquency rate by approximately
18 basis points in September 2003.
Providian Financial Corporation and Subsidiaries
Consolidated Statements of Financial Condition
September 30, December 31,
(dollars in thousands) 2003 2002
(unaudited)
Assets
Cash and cash equivalents $516,479 $344,277
Federal funds sold and securities
purchased under resale agreements 3,845,824 3,601,000
Investment securities:
Available-for-sale 1,463,451 1,856,607
Loans receivable, less allowance
for credit losses of $643,982
at September 30, 2003 and
$1,012,461 at December 31, 2002 5,349,684 5,895,296
Premises and equipment, net 95,602 119,260
Interest receivable 43,430 60,841
Due from securitizations 3,178,223 3,723,382
Deferred tax 225,012 487,529
Other assets 611,055 562,738
Total assets $15,328,760 $16,650,930
Liabilities
Deposits $11,180,345 $12,662,077
Short-term borrowings 108,793 91,529
Long-term borrowings 1,153,219 864,048
Deferred fee revenue 116,574 211,978
Accrued expenses and
other liabilities 513,207 577,894
Total liabilities 13,072,138 14,407,526
Capital securities -- 104,332
Shareholders' equity 2,256,622 2,139,072
Total liabilities and
shareholders' equity $15,328,760 $16,650,930
Providian Financial Corporation and Subsidiaries
Consolidated Statements of Income (unaudited)
Three months ended Nine months ended
(dollars in thousands, September 30, September 30,
except per share data) 2003 2002 2003 2002
Interest Income
Loans $200,777 $328,240 $758,857 $1,166,807
Federal funds sold and
securities purchased
under resale agreements 10,562 13,334 33,998 26,041
Other 24,445 46,902 86,800 132,356
Total interest income 235,784 388,476 879,655 1,325,204
Interest Expense
Deposits 139,470 178,705 453,845 559,746
Borrowings 15,437 10,306 36,774 32,338
Total interest expense 154,907 189,011 490,619 592,084
Net interest income 80,877 199,465 389,036 733,120
Provision for credit losses 98,732 192,366 492,551 1,152,830
Net interest (loss)
income after
provision
for credit losses (17,855) 7,099 (103,515) (419,710)
Non-Interest Income
Servicing and
securitizations 261,086 125,057 614,402 570,247
Credit product fee income 173,427 273,548 593,234 904,675
Other 10,953 66,503 48,683 613,355
445,466 465,108 1,256,319 2,088,277
Non-Interest Expense
Salaries and employee
benefits 90,050 129,341 282,881 433,219
Solicitation and
advertising 38,523 126,404 157,428 339,275
Occupancy, furniture, and
equipment 31,571 43,765 91,661 179,520
Data processing and
communication 31,064 39,621 94,531 133,615
Other 95,380 113,035 312,969 402,955
286,588 452,166 939,470 1,488,584
Income from continuing
operations before
income taxes 141,023 20,041 213,334 179,983
Income tax expense (benefit) 55,704 (22,084) 84,267 41,093
Income from continuing
operations after tax 85,319 42,125 129,067 138,890
Income from discontinued
operations - net of related
taxes -- -- -- 67,156
Net Income $85,319 $42,125 $129,067 $206,046
Earnings per common share -
basic
Income from continuing
operations $0.30 $0.15 $0.45 $0.49
Income from discontinued
operations - net of related
taxes -- -- -- 0.23
Earnings per common share -
basic $0.30 $0.15 $0.45 $0.72
Earnings per common share -
assuming dilution
Income from continuing
operations $0.29 $0.15 $0.45 $0.49
Income from discontinued
operations - net of related
taxes -- -- -- 0.23
Earnings per common share -
assuming dilution $0.29 $0.15 $0.45 $0.72
Weighted average common shares
outstanding - basic (000) 287,620 285,323 286,783 284,649
Weighted average common shares
outstanding - assuming
dilution (000) 291,871 294,094 289,969 293,935
Providian Financial Corporation
Bank Subsidiaries' Capital Ratios
Total Risk-Based Capital Ratios as of September 30, 2003(1)
Providian Providian
National Bank Bank
Call Report Basis(2) 17.07% 84.87%
Applying Subprime Guidance (excluding
AIR)(3) 15.40% 81.41%
Applying Subprime Guidance (including
AIR)(4) 13.68% --
(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 September 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. Providian Bank is
not affected by the accrued interest receivable guidance.
(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
Reported Securitiza- Managed
2003 tion 2003
(dollars in millions) QTR 03 Adjustment QTR 03
Earnings:
Interest Income Loans $200.8 $562.3 $763.1
Interest Income Investments (1) 35.0 (11.4) 23.6
Interest Expense 154.9 41.1 196.0
Net Interest Income $80.9 $509.8 $590.7
Non-Interest Income (1) 445.4 (59.0) 386.4
Total Net Revenue $526.3 $450.8 $977.1
Financial Data:
Quarter:
Net Credit Losses (2) $156 $451 $607
--
Quarter End:
Total Loans (3) $5,994 $10,951 $16,945
Total Assets $15,329 $8,450 $23,779
Quarter Average:
Total Loans $5,866 $11,025 $16,891
Earning Assets $12,869 $11,025 $23,894
Total Assets $15,740 $8,722 $24,462
Providian Financial Corporation
Financial & Statistical Summary
Reconciliation of Reported and Managed Financial Measures
Reported Securitiza- Managed
2003 tion 2003
(dollars in millions) QTR 02 Adjustment QTR 02
Earnings:
Interest Income Loans $247.7 $581.9 $829.6
Interest Income Investments (1) 43.9 (14.7) 29.2
Interest Expense 163.8 45.5 209.3
Net Interest Income $127.8 $521.7 $649.5
Non-Interest Income (1) 393.3 1.0 394.3
Total Net Revenue $521.1 $522.7 $1,043.8
Financial Data:
Quarter:
Net Credit Losses (2) $237 $523 $760
--
Quarter End:
Total Loans (3) $6,417 $11,381 $17,798
Total Assets $16,206 $8,925 $25,131
Quarter Average:
Total Loans $6,684 $11,361 $18,045
Earning Assets $14,048 $11,361 $25,409
Total Assets $16,460 $8,925 $25,385
Providian Financial Corporation
Financial & Statistical Summary
Reconciliation of Reported and Managed Financial Measures
Reported Securitiza- Managed
2003 tion 2003
(dollars in millions) QTR 01 Adjustment QTR 01
Earnings:
Interest Income Loans $310.3 $586.0 $896.3
Interest Income Investments (1) 41.9 (13.0) 28.9
Interest Expense 171.8 47.9 219.7
Net Interest Income $180.4 $525.1 $705.5
Non-Interest Income (1) 417.5 13.4 430.9
Total Net Revenue $597.9 $538.5 $1,136.4
Financial Data:
Quarter:
Net Credit Losses (2) $296 $539 $835
--
Quarter End:
Total Loans (3) $7,147 $11,323 $18,470
Total Assets $16,607 $8,925 $25,532
Quarter Average:
Total Loans $7,500 $11,452 $18,952
Earning Assets $13,604 $11,452 $25,056
Total Assets $16,518 $8,976 $25,494
Providian Financial Corporation
Financial & Statistical Summary
Reconciliation of Reported and Managed Financial Measures
Reported Securitiza- Managed
2002 tion 2002
(dollars in millions) QTR 04 Adjustment QTR 04
Earnings:
Interest Income Loans $323.5 $613.2 $936.6
Interest Income Investments (1) 42.6 (8.6) 34.1
Interest Expense 179.9 56.2 236.1
Net Interest Income $186.2 $548.4 $734.6
Non-Interest Income (1) 293.1 (9.3) 283.8
Total Net Revenue $479.3 $539.1 $1,018.4
Financial Data:
Quarter:
Net Credit Losses (2) $299 $539 $838
Quarter End:
Total Loans (3) $6,908 $12,720 $19,628
Total Assets $16,651 $9,833 $26,484
Quarter Average:
Total Loans $8,046 $11,294 $19,344
Earning Assets $14,236 $11,298 $25,534
Total Assets $16,757 $9,465 $26,222
Providian Financial Corporation
Financial & Statistical Summary
Reconciliation of Reported and Managed Financial Measures
Reported Securitiza- Managed
2002 tion 2002
(dollars in millions) QTR 03 Adjustment QTR 03
Earnings:
Interest Income Loans $328.2 $656.2 $984.4
Interest Income Investments (1) 60.3 (13.2) 47.1
Interest Expense 189.0 62.7 251.7
Net Interest Income $199.5 $580.3 $779.8
Non-Interest Income (1) 465.1 (21.0) 444.1
Total Net Revenue $664.6 $559.3 $1,223.9
Financial Data:
Quarter:
Net Credit Losses (2) $244 $559 $804
Quarter End:
Total Loans (3) $8,198 $11,255 $19,453
Total Assets $17,218 $9,675 $26,893
Quarter Average:
Total Loans $7,305 $11,932 $19,237
Earning Assets $15,011 $11,932 $26,942
Total Assets $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 of 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.
Our new book of business comprises 18% of our total managed loans and 50%
of our reported loans.
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 October 29, 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, or Beth Haiken, +1-415-278-4889, all of
Providian Financial Corporation
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