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29.01.2009 12:30:00
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Advanta Reports 2008 Results
Advanta Corp. (NASDAQ: ADVNB; ADVNA) today reported a full year 2008 net loss of $43.8 million or $1.08 per diluted share for Class A and Class B shares combined. Reflecting the impact of an eroding economy, the Company’s 2008 results included $86.2 million pretax, or $1.37 per share after tax, of balance sheet charges and reserve build associated with worsening credit trends and wider market credit spreads. Through this year of challenging economic events, the Company has increased its cash and liquid investments to $2.6 billion dollars at year end and has strong capital levels.
Specific to the fourth quarter of 2008, the Company incurred a net loss of $46.9 million or $1.16 per combined diluted share. These results include $47.8 million pretax, or $0.77 per share after tax, of balance sheet charges and reserve build.
Other noteworthy activity and detail for the fourth quarter include:
- Cash and liquid investments increased by $0.8 billion while deposits grew by $0.5 billion. At year end, cash and liquid investments were 53% of aggregate owned and securitized receivables.
- Advanta Bank Corp. total risk-based and Tier 1 capital ratios increased to 38.4% and 35.4%, respectively.
- Advanta Corp. equity together with subordinated debt for trust preferred securities to managed receivables increased slightly to 12.2% and to owned receivables increased to 120.7%.
- The fair value estimates of the Company’s retained interests in securitizations decreased by $36.4 million with about two-thirds of the adjustment related to increased market credit spreads that resulted in higher discounts on these assets.
- The allowance for receivable losses increased to 20.3% of Business Cards owned receivables at quarter end, after building reserves for credit losses on principal receivables by $11.4 million.
- Business Cards ending managed receivables decreased to $5.0 billion with owned receivables decreasing to $0.5 billion.
- Business Cards managed net interest yield expanded to 12.45% and owned net interest yield declined to 7.04%.
- Customer transaction volume declined to $2.9 billion.
- Business Cards managed net credit loss rate rose to 12.0% and owned net credit loss rate rose to 14.1%.
- Business Card operating expenses include a $3.3 million asset impairment charge related to certain acquisition-related software and other assets based on the Company’s expectations for future account originations.
- The consolidated results include the impact of a $2.2 million reserve reduction for the Company’s proportionate share of the amounts funded by Visa in Visa’s litigation escrow.
The Company also announced that it is taking actions in response to the continued economic downturn.
The Board of Directors has approved a reduction in the Company’s regular quarterly cash dividends. The new rates will apply to its next dividend declaration. As a result of this action, future quarterly dividends declared for its Class A Common Stock will decrease from 17.71 cents to 2 cents per share and future quarterly dividends declared for its Class B Common Stock will decrease from 21.25 cents to 2.5 cents per share.
In addition, the Company is taking steps to significantly reduce operating expenses to a level that is more commensurate with its anticipated portfolio size and scale of business activities in 2009. Cost reductions will result from actions such as slowing marketing activities, structuring the organization to be more efficient and reducing staffing levels beyond those previously announced related to its offshoring initiative. Flowing from this, the Company will have approximately 300 fewer employees and operating expenses for 2009 are expected to be between 20% and 25% lower than those reported for 2008.
Conference Call Details
Advanta management will hold a conference call with analysts and institutional investors today, January 29, at 9:00 a.m. Eastern Time, to review the fourth quarter and full year results for 2008. The call can be accessed by dialing 877-857-6173 and referring to confirmation code 4034997. At the same time, the call will be webcast via a Vcall link on Advanta’s website or at www.investorcalendar.com. Those interested in listening to the webcast should go to the website at least ten minutes before the call to register and download any necessary software. Beginning at about 11:00 this morning, a replay of the call will be available on the Internet at the same sites as the original webcast. The conference call may include a discussion of non-GAAP financial measures, which are reconciled to the most directly comparable GAAP financial measures in the Company’s press releases or the statistical supplements also available on the Company’s website.
About Advanta
Advanta is one of the nation’s largest credit card issuers (through Advanta Bank Corp.) in the small business market today. Advanta’s exclusive focus on this market as well as its size, experience, and commitment to developing meaningful product offerings and a high level of service tailored to the needs of small businesses differentiates the company from other issuers. Founded in 1951, Advanta has long been an innovator in developing and introducing many of the marketing techniques that are common in the financial services industry today. Learn more about Advanta at www.advanta.com.
This Press Release contains forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ from those projected. The most significant of these risks and uncertainties are: (1) political conditions, social conditions, monetary and fiscal policies and general economic and other environmental conditions, including the impact of the ongoing disruption in the capital markets and deterioration of the U.S. economy, as well as the potential for further deterioration and disruption, and the impact of these factors on the level of new account originations, customer spending, delinquencies, charge-offs, the value of and ability to realize expected returns on its investments, and other results of operations; (2) factors affecting fluctuations in the number of accounts or receivable balances, including the retention of customers after promotional pricing periods have expired, changes in terms on their accounts, or changes in programs or product offerings; (3) interest rate and credit spread fluctuations; (4) factors affecting its level of costs and expenses; including difficulties achieving expected operating cost reductions due to, among other things, operational delays associated with new systems and processes, changes in personnel, changes in timing for our plans for implementation of our outsourcing initiatives and changes in the estimated timing for completion of a reduction in workforce; (5) factors affecting its level of liquidity, including funding decisions, the potential timing of the securitizations of its receivables and its ability to monetize its investments; (6) government regulation of banking and finance businesses, including the effects of and changes in the level of scrutiny, regulatory requirements and regulatory initiatives, certain mandatory and possibly discretionary action by state and federal regulators, restrictions and limitations imposed by banking laws, regulators, examinations and reviews, and the effects of, and changes in, regulatory policies, guidance, interpretations and initiatives and agreements between the Company and its regulators; (7) effect of legal and regulatory developments relating to the legality of certain business methods, practices and policies of credit card issuers and the ultimate resolution of industry-related judicial proceedings relating to the legality of certain interchange rates; (8) the amount and cost of financing available to it; (9) the ratings on the debt of Advanta Corp. and its subsidiaries; and (10) the impact of litigation and legal, regulatory, administrative or other claims, investigations or proceedings including judgments, settlements and actual or anticipated insurance recoveries for costs or judgments. Additional risks that may affect the Company’s future performance are detailed in the Company’s filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q.
In addition to the GAAP results provided throughout this document, the Company has provided managed receivable data and other non-GAAP financial measurements. Management believes that the non-GAAP financial measures used to manage the business may provide users additional useful information. The tables attached to this press release include a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures and a description of why the non-GAAP financial measures are useful to investors.
| ADVANTA | |||||||||||||
| SEGMENT INCOME STATEMENT - QUARTER | |||||||||||||
| (in thousands) | |||||||||||||
| Three Months Ended | |||||||||||||
| December 31, 2008 | |||||||||||||
| Advanta | |||||||||||||
| Business | |||||||||||||
| Cards | Other (A) | Total | |||||||||||
| Interest income | $ | 36,870 | $ | 9,315 | $ | 46,185 | |||||||
| Interest expense | 21,920 | 10,631 | 32,551 | ||||||||||
| Net interest income | 14,950 | (1,316 | ) | 13,634 | |||||||||
| Provision for credit losses | 35,476 | 9 | 35,485 | ||||||||||
| Net interest loss after provision for credit losses | (20,526 | ) | (1,325 | ) | (21,851 | ) | |||||||
| Noninterest revenues: | |||||||||||||
| Interchange income | 60,304 | 0 | 60,304 | ||||||||||
| Securitization income (loss) | (31,862 | ) | 0 | (31,862 | ) | ||||||||
| Servicing revenues | 22,458 | 0 | 22,458 | ||||||||||
| Business credit card rewards | (21,195 | ) | 0 | (21,195 | ) | ||||||||
| Other revenues, net | 2,059 | 1,459 | 3,518 | ||||||||||
| Total noninterest revenues | 31,764 | 1,459 | 33,223 | ||||||||||
| Operating expenses | 81,157 | (2,115 | ) | 79,042 | |||||||||
| Income (loss) before income taxes | $ | (69,919 | ) | $ | 2,249 | (67,670 | ) | ||||||
| Income tax benefit | (20,728 | ) | |||||||||||
| Net loss | $ | (46,942 | ) | ||||||||||
| Three Months Ended | |||||||||||||
| December 31, 2007 | |||||||||||||
| Advanta | |||||||||||||
| Business | |||||||||||||
| Cards | Other (A) | Total | |||||||||||
| Interest income | $ | 38,945 | $ | 10,829 | $ | 49,774 | |||||||
| Interest expense | 14,983 | 12,547 | 27,530 | ||||||||||
| Net interest income | 23,962 | (1,718 | ) | 22,244 | |||||||||
| Provision for credit losses | 21,587 | (35 | ) | 21,552 | |||||||||
| Net interest income (loss) after provision for credit losses | 2,375 | (1,683 | ) | 692 | |||||||||
| Noninterest revenues: | |||||||||||||
| Interchange income | 69,346 | 0 | 69,346 | ||||||||||
| Securitization income | 10,375 | 0 | 10,375 | ||||||||||
| Servicing revenues | 25,258 | 0 | 25,258 | ||||||||||
| Business credit card rewards | (22,495 | ) | 0 | (22,495 | ) | ||||||||
| Other revenues, net | 8,149 | 1,768 | 9,917 | ||||||||||
| Total noninterest revenues | 90,633 | 1,768 | 92,401 | ||||||||||
| Operating expenses | 73,140 | 7,924 | 81,064 | ||||||||||
| Income (loss) before income taxes | $ | 19,868 | $ | (7,839 | ) | 12,029 | |||||||
| Income tax expense | 4,643 | ||||||||||||
| Net income | $ | 7,386 | |||||||||||
| ____________________ | ||
| (A) | Other includes investment and other activities not attributable to the Advanta Business Cards segment. In addition, operating expenses in the three months ended December 31, 2008 include the benefit of a $2.2 million decrease in Visa indemnification reserves. Operating expenses in the three months ended December 31, 2007 include $7.8 million of charges associated with a contingent obligation to indemnify Visa Inc. for certain litigation matters. | |
| ADVANTA | |||||||||||||
| SEGMENT INCOME STATEMENT - YEAR-TO-DATE | |||||||||||||
| (in thousands) | |||||||||||||
| Twelve Months Ended | |||||||||||||
| December 31, 2008 | |||||||||||||
| Advanta | |||||||||||||
| Business | |||||||||||||
| Cards | Other (A) | Total | |||||||||||
| Interest income | $ | 160,475 | $ | 38,035 | $ | 198,510 | |||||||
| Interest expense | 80,247 | 39,226 | 119,473 | ||||||||||
| Net interest income | 80,228 | (1,191 | ) | 79,037 | |||||||||
| Provision for credit losses | 123,154 | 34 | 123,188 | ||||||||||
| Net interest loss after provision for credit losses | (42,926 | ) | (1,225 | ) | (44,151 | ) | |||||||
| Noninterest revenues: | |||||||||||||
| Interchange income | 264,401 | 0 | 264,401 | ||||||||||
| Securitization income (loss) | (18,930 | ) | 0 | (18,930 | ) | ||||||||
| Servicing revenues | 97,398 | 0 | 97,398 | ||||||||||
| Business credit card rewards | (103,683 | ) | 0 | (103,683 | ) | ||||||||
| Other revenues, net | 35,834 | 15,219 | 51,053 | ||||||||||
| Total noninterest revenues | 275,020 | 15,219 | 290,239 | ||||||||||
| Operating expenses | 317,784 | (5,565 | ) | 312,219 | |||||||||
| Income (loss) before income taxes | $ | (85,690 | ) | $ | 19,559 | (66,131 | ) | ||||||
| Income tax benefit | (22,308 | ) | |||||||||||
| Net loss | $ | (43,823 | ) | ||||||||||
| Twelve Months Ended | |||||||||||||
| December 31, 2007 | |||||||||||||
| Advanta | |||||||||||||
| Business | |||||||||||||
| Cards | Other (A) | Total | |||||||||||
| Interest income | $ | 157,255 | $ | 38,392 | $ | 195,647 | |||||||
| Interest expense | 54,922 | 44,409 | 99,331 | ||||||||||
| Net interest income | 102,333 | (6,017 | ) | 96,316 | |||||||||
| Provision for credit losses | 58,200 | (35 | ) | 58,165 | |||||||||
| Net interest income (loss) after provision for credit losses | 44,133 | (5,982 | ) | 38,151 | |||||||||
| Noninterest revenues: | |||||||||||||
| Interchange income | 249,481 | 0 | 249,481 | ||||||||||
| Securitization income | 79,040 | 0 | 79,040 | ||||||||||
| Servicing revenues | 92,393 | 0 | 92,393 | ||||||||||
| Business credit card rewards | (86,705 | ) | 0 | (86,705 | ) | ||||||||
| Other revenues, net | 24,582 | 7,706 | 32,288 | ||||||||||
| Total noninterest revenues | 358,791 | 7,706 | 366,497 | ||||||||||
| Operating expenses | 276,439 | 12,529 | 288,968 | ||||||||||
| Income (loss) before income taxes | $ | 126,485 | $ | (10,805 | ) | 115,680 | |||||||
| Income tax expense | 44,652 | ||||||||||||
| Income from continuing operations | 71,028 | ||||||||||||
|
Gain on discontinuance of mortgage and leasing businesses, net of tax |
1,022 | ||||||||||||
| Net income | $ | 72,050 | |||||||||||
| ____________________ | ||
| (A) | Other includes investment and other activities not attributable to the Advanta Business Cards segment. In addition, in the twelve months ended December 31, 2008, noninterest revenues include a $13.4 million gain on the redemption of Visa Inc. shares and operating expenses include the benefit of a $6.1 million net decrease in Visa indemnification reserves. Operating expenses in the twelve months ended December 31, 2007 include $12.0 million of charges associated with a contingent obligation to indemnify Visa Inc. for certain litigation matters. | |
| ADVANTA | ||||||||||||||||||||||||||||||||||||
| EARNINGS AND COMMON STOCK DATA | ||||||||||||||||||||||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||||||||||||||||||
| Three Months Ended | Percent Change From | Twelve Months Ended | ||||||||||||||||||||||||||||||||||
| Dec. 31, | Sept. 30, |
Dec. 31, |
Prior |
Prior |
Dec. 31, |
Dec. 31, |
Percent | |||||||||||||||||||||||||||||
| 2008 | 2008 | 2007 | Quarter | Year | 2008 | 2007 | Change | |||||||||||||||||||||||||||||
| Basic income (loss) from continuing operations per common share: | ||||||||||||||||||||||||||||||||||||
| Class A | $ | (1.19 | ) | $ | (0.51 | ) | $ | 0.15 | 133.3 | % | N/M | $ | (1.23 | ) | $ | 1.61 | N/M | |||||||||||||||||||
| Class B | (1.14 | ) | (0.45 | ) | 0.20 | 153.3 | N/M | (1.01 | ) | 1.78 | N/M | |||||||||||||||||||||||||
| Combined (A) | (1.16 | ) | (0.47 | ) | 0.18 | 146.8 | N/M | (1.08 | ) | 1.73 | N/M | |||||||||||||||||||||||||
| Diluted income (loss) from continuing operations per common share: | ||||||||||||||||||||||||||||||||||||
| Class A | $ | (1.19 | ) | $ | (0.51 | ) | $ | 0.15 | 133.3 | % | N/M | $ | (1.23 | ) | $ | 1.55 | N/M | |||||||||||||||||||
| Class B | (1.14 | ) | (0.45 | ) | 0.18 | 153.3 | N/M | (1.01 | ) | 1.64 | N/M | |||||||||||||||||||||||||
| Combined (A) | (1.16 | ) | (0.47 | ) | 0.17 | 146.8 | N/M | (1.08 | ) | 1.61 | N/M | |||||||||||||||||||||||||
| Basic net income (loss) per common share: | ||||||||||||||||||||||||||||||||||||
| Class A | $ | (1.19 | ) | $ | (0.51 | ) | $ | 0.15 | 133.3 |
% |
N/M | $ | (1.23 | ) | $ | 1.64 | N/M | |||||||||||||||||||
| Class B | (1.14 | ) | (0.45 | ) | 0.20 | 153.3 | N/M | (1.01 | ) | 1.81 | N/M | |||||||||||||||||||||||||
| Combined (A) | (1.16 | ) | (0.47 | ) | 0.18 | 146.8 | N/M | (1.08 | ) | 1.75 | N/M | |||||||||||||||||||||||||
| Diluted net income (loss) per common share: | ||||||||||||||||||||||||||||||||||||
| Class A | $ | (1.19 | ) | $ | (0.51 | ) | $ | 0.15 | 133.3 |
% |
N/M | $ | (1.23 | ) | $ | 1.57 | N/M | |||||||||||||||||||
| Class B | (1.14 | ) | (0.45 | ) | 0.18 | 153.3 | N/M | (1.01 | ) | 1.66 | N/M | |||||||||||||||||||||||||
| Combined (A) | (1.16 | ) | (0.47 | ) | 0.17 | 146.8 | N/M | (1.08 | ) | 1.63 | N/M | |||||||||||||||||||||||||
| Return on average common equity (annualized) | (34.70 | ) | % | (13.15 | ) | % | 4.98 | % | 163.9 | % | N/M | (7.61 | ) | % | 12.24 | % | N/M | |||||||||||||||||||
| Weighted average common shares used to compute: | ||||||||||||||||||||||||||||||||||||
| Basic earnings (loss) per common share | ||||||||||||||||||||||||||||||||||||
| Class A | 13,405 | 13,393 | 13,356 | 0.1 | % | 0.4 | % | 13,387 | 13,337 | 0.4 | % | |||||||||||||||||||||||||
| Class B | 27,225 | 27,217 | 27,149 | 0.0 | 0.3 | 27,151 | 27,679 | (1.9 | ) | |||||||||||||||||||||||||||
| Total | 40,630 | 40,610 | 40,505 | 0.0 | 0.3 | 40,538 | 41,016 | (1.2 | ) | |||||||||||||||||||||||||||
| Diluted earnings (loss) per common share | ||||||||||||||||||||||||||||||||||||
| Class A | 13,405 | 13,393 | 13,356 | 0.1 | % | 0.4 | % | 13,387 | 13,337 | 0.4 | % | |||||||||||||||||||||||||
| Class B | 27,225 | 27,217 | 29,396 | 0.0 | (7.4 | ) | 27,151 | 30,664 | (11.5 | ) | ||||||||||||||||||||||||||
| Total | 40,630 | 40,610 | 42,752 | 0.0 | (5.0 | ) | 40,538 | 44,001 | (7.9 | ) | ||||||||||||||||||||||||||
| Ending shares outstanding: | ||||||||||||||||||||||||||||||||||||
| Class A | 14,410 | 14,410 | 14,410 | 0.0 | % | 0.0 | % | |||||||||||||||||||||||||||||
| Class B | 31,213 | 31,144 | 28,055 | 0.2 | 11.3 | |||||||||||||||||||||||||||||||
| Total | 45,623 | 45,554 | 42,465 | 0.2 | 7.4 | |||||||||||||||||||||||||||||||
| Stock price: | ||||||||||||||||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||||||||||||||
| High | $ | 5.09 | $ | 7.80 | $ | 26.45 | (34.7 | ) | % | (80.8 | ) | % | $ | 9.36 | $ | 31.47 | (70.3 | ) | % | |||||||||||||||||
| Low | 1.10 | 4.00 | 6.93 | (72.5 | ) | (84.1 | ) | 1.10 | 6.93 | (84.1 | ) | |||||||||||||||||||||||||
| Closing | 1.16 | 4.93 | 7.30 | (76.5 | ) | (84.1 | ) | 1.16 | 7.30 | (84.1 | ) | |||||||||||||||||||||||||
| Class B | ||||||||||||||||||||||||||||||||||||
| High | $ | 8.65 | $ | 10.24 | $ | 29.95 | (15.5 | ) | % | (71.1 | ) | % | $ | 10.63 | $ | 34.51 | (69.2 | ) | % | |||||||||||||||||
| Low | 1.58 | 6.01 | 7.84 | (73.7 | ) | (79.8 | ) | 1.58 | 7.84 | (79.8 | ) | |||||||||||||||||||||||||
| Closing | 2.09 | 8.23 | 8.07 | (74.6 | ) | (74.1 | ) | 2.09 | 8.07 | (74.1 | ) | |||||||||||||||||||||||||
| Cash dividends declared: | ||||||||||||||||||||||||||||||||||||
| Class A | $ | 0.1771 | $ | 0.1771 | $ | 0.1771 | 0.0 | % | 0.0 | % | $ | 0.7084 | $ | 0.6730 | 5.3 | % | ||||||||||||||||||||
| Class B | 0.2125 | 0.2125 | 0.2125 | 0.0 | 0.0 | 0.8500 | 0.8075 | 5.3 | ||||||||||||||||||||||||||||
| Book value per common share | $ | 12.26 | $ | 13.75 | $ | 14.40 | (10.8 | ) | % | (14.9 | ) | % | ||||||||||||||||||||||||
| ____________________ | ||
| (A) | Combined represents income (loss) allocable to common stockholders divided by the combined total of Class A and Class B weighted average common shares outstanding. | |
| N/M - Not Meaningful | ||
| ADVANTA | |||||||||
| BALANCE SHEET | |||||||||
| (in thousands) | |||||||||
| As of | |||||||||
| Dec. 31, | Dec. 31, | ||||||||
| 2008 | 2007 | ||||||||
|
ASSETS |
|||||||||
| Cash | $ | 31,716 | $ | 90,228 | |||||
| Federal funds sold | 32,277 | 872,587 | |||||||
| Interest-bearing deposits | 1,595,138 | 0 | |||||||
| Investments available for sale | 977,245 | 223,500 | |||||||
| Receivables, net | 414,844 | 990,668 | |||||||
| Accounts receivable from securitizations | 301,118 | 349,581 | |||||||
| Premises and equipment, net | 16,762 | 16,893 | |||||||
| Other assets | 215,945 | 220,915 | |||||||
| Total assets | $ | 3,585,045 | $ | 2,764,372 | |||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||||
| Deposits | $ | 2,541,406 | $ | 1,651,737 | |||||
| Debt | 206,598 | 220,848 | |||||||
| Other borrowings | 50,000 | 25,000 | |||||||
| Subordinated debt payable to preferred securities trust | 103,093 | 103,093 | |||||||
| Other liabilities | 176,587 | 177,913 | |||||||
| Total liabilities | 3,077,684 | 2,178,591 | |||||||
| Stockholders' equity | 507,361 | 585,781 | |||||||
| Total liabilities and stockholders' equity | $ | 3,585,045 | $ | 2,764,372 | |||||
| Ratio of equity to owned assets | 14.15 | % | 21.19 | % | |||||
|
Ratio of equity and subordinated debt payable to preferred securities trust to owned assets |
17.03 | % | 24.92 | % | |||||
| Ratio of equity to managed assets (A) | 6.57 | % | 7.38 | % | |||||
|
Ratio of equity and subordinated debt payable to preferred securities trust to managed assets (A) |
7.90 | % | 8.68 | % | |||||
| Ratio of equity to owned business credit card receivables | 100.35 | % | 56.78 | % | |||||
|
Ratio of equity and subordinated debt payable to preferred securities trust to owned business credit card receivables |
120.74 | % | 66.78 | % | |||||
| Ratio of equity to managed business credit card receivables (A) | 10.11 | % | 9.23 | % | |||||
|
Ratio of equity and subordinated debt payable to preferred securities trust to managed business credit card receivables (A) |
12.17 | % | 10.85 | % | |||||
|
MANAGED ASSETS (A) |
|||||||||
| Total on-balance sheet assets (GAAP) | $ | 3,585,045 | $ | 2,764,372 | |||||
| Off-balance sheet securitized receivables (B) | 4,140,595 | 5,173,404 | |||||||
| Managed assets | $ | 7,725,640 | $ | 7,937,776 | |||||
| ____________________ | ||
| (A) | Managed asset and managed receivable statistics are non-GAAP financial measures. Management believes that managed assets and managed receivables and the related ratios provide useful supplemental information because our on-balance sheet assets include retained interests in securitizations that serve as credit enhancement to the noteholders' interests in the securitized receivables. | |
| (B) | Includes off-balance sheet business credit card receivables. Excludes our ownership interest in the noteholder principal balance of securitizations that are held on-balance sheet. | |
| ADVANTA | |||||||||||||||||||
| ADVANTA BUSINESS CARDS STATISTICS | |||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||
| Three Months Ended | Percent Change From | ||||||||||||||||||
| Dec. 31, | Sept. 30, | Dec. 31, | Prior | Prior | |||||||||||||||
| 2008 | 2008 | 2007 | Quarter | Year | |||||||||||||||
| New account originations | 15,312 | 18,581 | 61,234 | (17.6) | % | (75.0) | % | ||||||||||||
| Average number of active accounts (A) | 839,105 | 897,138 | 952,557 | (6.5) | (11.9) | ||||||||||||||
| Ending number of accounts | 1,048,363 | 1,206,580 | 1,316,523 | (13.1) | (20.4) | ||||||||||||||
| Customer transaction volume: | |||||||||||||||||||
| Merchandise sales | $ | 2,599,639 | $ | 2,940,685 | $ | 3,019,122 | (11.6) | (13.9) | |||||||||||
| Balance transfers | 90,347 | 97,304 | 346,484 | (7.1) | (73.9) | ||||||||||||||
| Cash usage | 194,986 | 249,489 | 389,714 | (21.8) | (50.0) | ||||||||||||||
| Total customer transaction volume | 2,884,972 | 3,287,478 | 3,755,320 | (12.2) | (23.2) | ||||||||||||||
| Securitization volume increase (decrease) | |||||||||||||||||||
| excluding replenishment sales | $ | (364,390) | $ | (369,902) | $ | 330,000 | (1.5) | N/M | |||||||||||
| Average receivables: | |||||||||||||||||||
| Owned | $ | 684,034 | $ | 858,331 | $ | 1,164,704 | (20.3) | (41.3) | |||||||||||
| Securitized | 4,630,859 | 5,030,299 | 5,148,195 | (7.9) | (10.0) | ||||||||||||||
| Managed (B) | 5,314,893 | 5,888,630 | 6,312,899 | (9.7) | (15.8) | ||||||||||||||
| Ending receivables: | |||||||||||||||||||
| Owned | $ | 505,578 | $ | 726,652 | $ | 1,031,607 | (30.4) | (51.0) | |||||||||||
| Securitized | 4,511,650 | 4,863,634 | 5,315,421 | (7.2) | (15.1) | ||||||||||||||
| Managed (B) | 5,017,228 | 5,590,286 | 6,347,028 | (10.3) | (21.0) | ||||||||||||||
| Operating expense ratio (C) | 6.11 | % | 5.45 | % | 4.63 | % | 12.1 | 32.0 | |||||||||||
|
CREDIT QUALITY - OWNED |
|||||||||||||||||||
| Receivables 30 days or more delinquent | $ | 52,997 | $ | 51,661 | $ | 42,424 | |||||||||||||
| Receivables 90 days or more delinquent | 24,132 | 24,531 | 19,204 | ||||||||||||||||
| As a percentage of receivables: | |||||||||||||||||||
| Receivables 30 days or more delinquent | 10.48 | % | 7.11 | % | 4.11 | % | 47.4 | % | 155.0 | % | |||||||||
| Receivables 90 days or more delinquent | 4.77 | 3.38 | 1.86 | 41.1 | 156.5 | ||||||||||||||
| Net principal charge-offs: | |||||||||||||||||||
| Amount | $ | 24,092 | $ | 22,839 | $ | 11,542 | |||||||||||||
| As a percentage of average | |||||||||||||||||||
| receivables (annualized) | 14.09 | % | 10.64 | % | 3.96 | % | 32.4 | 255.8 | |||||||||||
|
CREDIT QUALITY - SECURITIZED |
|||||||||||||||||||
| Receivables 30 days or more delinquent | $ | 425,271 | $ | 314,740 | $ | 229,808 | |||||||||||||
| Receivables 90 days or more delinquent | 188,424 | 148,182 | 105,577 | ||||||||||||||||
| As a percentage of receivables: | |||||||||||||||||||
| Receivables 30 days or more delinquent | 9.43 | % | 6.47 | % | 4.32 | % | 45.7 | % | 118.3 | % | |||||||||
| Receivables 90 days or more delinquent | 4.18 | 3.05 | 1.99 | 37.0 | 110.1 | ||||||||||||||
| Net principal charge-offs: | |||||||||||||||||||
| Amount | $ | 135,270 | $ | 124,303 | $ | 53,572 | |||||||||||||
| As a percentage of average | |||||||||||||||||||
| receivables (annualized) | 11.68 | % | 9.88 | % | 4.16 | % | 18.2 | 180.8 | |||||||||||
|
CREDIT QUALITY - MANAGED (B) |
|||||||||||||||||||
| Receivables 30 days or more delinquent | $ | 478,268 | $ | 366,401 | $ | 272,232 | |||||||||||||
| Receivables 90 days or more delinquent | 212,556 | 172,713 | 124,781 | ||||||||||||||||
| As a percentage of receivables: | |||||||||||||||||||
| Receivables 30 days or more delinquent | 9.53 | % | 6.55 | % | 4.29 | % | 45.5 | % | 122.1 | % | |||||||||
| Receivables 90 days or more delinquent | 4.24 | 3.09 | 1.97 | 37.2 | 115.2 | ||||||||||||||
| Net principal charge-offs: | |||||||||||||||||||
| Amount | $ | 159,362 | $ | 147,142 | $ | 65,114 | |||||||||||||
|
As a percentage of average receivables (annualized) |
11.99 | % | 10.00 | % | 4.13 | % | 19.9 | 190.3 | |||||||||||
| ____________________ | ||
| (A) | Active accounts are defined as accounts with a balance at month-end. Active account statistics do not include charged-off accounts. The statistics reported above are the average number of active accounts for the periods presented. | |
| (B) | Managed statistics are non-GAAP financial measures and represent the sum of owned (GAAP) business credit card statistics and securitized business credit card statistics. We believe that performance on a managed basis provides useful supplemental information to investors because we retain interests in the securitized receivables and, therefore, we have a financial interest in and exposure to the performance of the securitized receivables. | |
| (C) | Operating expense ratio is annualized and calculated as a percentage of average owned and securitized receivables. | |
| N/M - Not Meaningful | ||
| ADVANTA | ||
| RECONCILIATION OF MANAGED FINANCIAL MEASURES AND RATIOS | ||
| (in thousands) | ||
| In addition to evaluating the financial performance of the Advanta Business Cards segment under U.S. generally accepted accounting principles (GAAP), we evaluate Advanta Business Cards' performance on a managed basis. Our managed business credit card receivable portfolio is comprised of both owned and securitized business credit card receivables. We believe that performance on a managed basis provides useful supplemental information to investors because we retain interests in the securitized receivables and, therefore, we have a financial interest in and exposure to the performance of the securitized receivables. Revenue and credit data on the managed portfolio provides additional information useful in understanding the performance of the retained interests in securitizations. Risk-adjusted revenues represent net interest income and noninterest revenues, less provision for credit losses. Management uses risk-adjusted revenues as a basis for monitoring the risk-based return on the portfolio and components of our portfolio. Generally, based on risk-based pricing strategies, customers with higher credit losses should have higher revenues. We believe the measure is useful to investors as a measure of our ability to appropriately price for the risk of the portfolio by demonstrating the relationship between revenues and credit losses in one concise measure. | ||
| Three Months Ended | ||||||||||||||||
| December 31, 2008 | ||||||||||||||||
| Advanta | Advanta | |||||||||||||||
| Business Cards | Securitization | Business Cards | ||||||||||||||
| GAAP | Adjustments | Managed | ||||||||||||||
| Net interest income | $ | 14,950 | $ | 150,454 | $ | 165,404 | ||||||||||
| Average business credit card interest-earning assets | 849,454 | 4,465,439 | 5,314,893 | |||||||||||||
| Ratio (A) | 7.04 | % | 12.45 | % | ||||||||||||
| Provision for credit losses | $ | 35,476 | $ | 171,707 | (B) | $ | 207,183 | |||||||||
| Average business credit card interest-earning assets | 849,454 | 4,465,439 | 5,314,893 | |||||||||||||
| Ratio (A) | 16.71 | % | 15.59 | % | ||||||||||||
| Noninterest revenues | $ | 31,764 | $ | 21,253 | $ | 53,017 | ||||||||||
| Average business credit card interest-earning assets | 849,454 | 4,465,439 | 5,314,893 | |||||||||||||
| Ratio (A) | 14.96 | % | 3.99 | % | ||||||||||||
| Risk-adjusted revenues (C) | $ | 11,238 | $ | 0 | $ | 11,238 | ||||||||||
| Average business credit card interest-earning assets | 849,454 | 4,465,439 | 5,314,893 | |||||||||||||
| Ratio (A) | 5.29 | % | 0.85 | % | ||||||||||||
| Pretax loss | $ | (69,919 | ) | $ | 0 | $ | (69,919 | ) | ||||||||
| Average business credit card interest-earning assets | 849,454 | 4,465,439 | 5,314,893 | |||||||||||||
| Ratio (A) | (32.92 | ) | % | (5.26 | ) | % | ||||||||||
| Three Months Ended | ||||||||||||||||
| December 31, 2007 | ||||||||||||||||
| Advanta | Advanta | |||||||||||||||
| Business Cards | Securitization | Business Cards | ||||||||||||||
| GAAP | Adjustments | Managed | ||||||||||||||
| Net interest income | $ | 23,962 | $ | 90,823 | $ | 114,785 | ||||||||||
| Average business credit card interest-earning assets | 1,392,748 | 4,920,151 | 6,312,899 | |||||||||||||
| Ratio (A) | 6.88 | % | 7.27 | % | ||||||||||||
| Provision for credit losses | $ | 21,587 | $ | 70,764 | (B) | $ | 92,351 | |||||||||
| Average business credit card interest-earning assets | 1,392,748 | 4,920,151 | 6,312,899 | |||||||||||||
| Ratio (A) | 6.20 | % | 5.85 | % | ||||||||||||
| Noninterest revenues | $ | 90,633 | $ | (20,059 | ) | $ | 70,574 | |||||||||
| Average business credit card interest-earning assets | 1,392,748 | 4,920,151 | 6,312,899 | |||||||||||||
| Ratio (A) | 26.03 | % | 4.47 | % | ||||||||||||
| Risk-adjusted revenues (C) | $ | 93,008 | $ | 0 | $ | 93,008 | ||||||||||
| Average business credit card interest-earning assets | 1,392,748 | 4,920,151 | 6,312,899 | |||||||||||||
| Ratio (A) | 26.71 | % | 5.89 | % | ||||||||||||
| Pretax income | $ | 19,868 | $ | 0 | $ | 19,868 | ||||||||||
| Average business credit card interest-earning assets | 1,392,748 | 4,920,151 | 6,312,899 | |||||||||||||
| Ratio (A) | 5.71 | % | 1.26 | % | ||||||||||||
| ____________________ | ||
| (A) | Ratios are annualized and calculated as a percentage of average business credit card interest-earning assets. | |
| (B) | Includes the amount by which credit losses would have been higher had the securitized receivables remained as owned and the provision for credit losses on securitized receivables been equal to actual reported charge-offs. In addition, provision for credit losses includes unfavorable valuation adjustments to retained interests in securitizations of $36.4 million for the three months ended December 31, 2008 and $17.2 million for the three months ended December 31, 2007. | |
| (C) | Risk-adjusted revenues represent net interest income and noninterest revenues, less provision for credit losses. | |
- Statistical Supplement available at www.advanta.com -
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