Advanta Reports Second Quarter Profits; Results On Track.SPRING HOUSE, Pa.--(BUSINESS WIRE)--July 27, 1999-- Advanta Advanta is an American banking company. Currently, it controls two banks, Advanta Bank Corp and Advanta National Bank. The banking corporation is not associated with Advanta Energy Corp., an energy consulting practice based in California. Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :ADVNA ADVNA Advanta Corporation (stock symbol) ;ADVNB;ADVNZ) today announced net income for the second quarter of 1999 of $12.3 million, or $0.49 per share on a diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis for its Class A and Class B shares combined. This net income reflects the Company's previously announced plan to report income for its mortgage business that is essentially equal to that of a portfolio lender LENDER, contracts. He from whom a thing is borrowed. 2. The contract of loan confers rights, and imposes duties on the lender. 1. The lender has the right to revoke the loan at his mere pleasure; 9 Cowen, R. 687; 8 Johns. Rep. 432; 1 T. R. 480; 2 Campb. Rep. . The improvement in net income from the net operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $10.2 million, or $0.40 per share, reported last quarter resulted primarily from continued decreases in operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. at the Company's mortgage and leasing businesses and improved yields in the business credit card portfolio. "Advanta's earnings this quarter continue to reflect our focus and aggressive steps to increase profits and optimize optimize - optimisation cash flow," said Dennis Dennis is a male first name derived from the Greco-Roman name Dionysius meaning "servant of Dionysus", the Thracian god of wine, which is ultimately derived from the Greek Dios (Διος, "of Zeus") combined with Nysos or Nysa (Νυσα), where the Alter, Advanta's Chairman and Chief Executive Officer. "We are committed to the strategy we outlined for 1999, to improve lending margins, manage operating expenses and emphasize the direct channel of our mortgage business while we profitably expand our business card and leasing activities." Reported results this quarter included additional pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern gains of $9.3 million predominantly pre·dom·i·nant adj. 1. Having greatest ascendancy, importance, influence, authority, or force. See Synonyms at dominant. 2. associated with the previously announced sale by Advanta Partners of its interest in JDR JDR Journal of Dental Research JDR Jeu de Rôle (French: Roleplaying Game) JDR Jydske Dragonregiment (Jutland Dragoon Regiment, Danish Army) Holdings. Also impacting results was a reduction in the Company's Interest Only Strip ("IO Strip") of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $10 million which strengthened the balance sheet. This quarter, Advanta continued its previously discussed initiatives to increase profits, and optimize cash flow and returns on invested capital. In addition, the Company began implementing a new automated au·to·mate v. au·to·mat·ed, au·to·mat·ing, au·to·mates v.tr. 1. To convert to automatic operation: automate a factory. 2. sales and underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. system at its mortgage business, began pilot testing a new origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real and automated decisioning system to take business credit card applications over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the , and took significant steps to refine processes at Advanta Leasing resulting in cost efficiencies. Highlights on the Company's operations this quarter follow. Company Achieves Lower Expense Ratio The Company's vigorous implementation of cost reduction measures continues to yield benefits. Advanta's operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. ratio for the quarter of 3.25% was lower than the 3.47% reported in the first quarter of this year and significantly lower than the 3.90% in the fourth quarter of 1998. Total pretax operating expenses for the quarter were $82.2 million, approximately 4.9% below operating expenses of $86.4 million reported last quarter and 11.0% below operating expenses of $92.4 million reported in the fourth quarter of 1998. Total managed receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed for the Company's businesses at the end of this quarter were $10.06 billion, an increase of 1.2% from $9.95 billion at March 31, 1999 and an increase of 25.2% from $8.04 billion at June June: see month. 30, 1998. Advanta Mortgage - Lower Expenses Fuel Profit Growth Advanta Mortgage reported pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net income from operations of $7.6 million for this quarter on a basis that is essentially the same as a portfolio lender. This compares to net income of $5.8 million reported by this business in the first quarter of 1999 and net income of $2.5 million reported by this business in the fourth quarter of 1998. The increase in net income this quarter was primarily due to lower operating expenses and higher servicing revenues. Advanta Mortgage's net income of $1.5 million reported this quarter is approximately $6.1 million less than a portfolio lender would have reported because it includes a $10.0 million decrease, before taxes, in the Company's IO Strip which reduced earnings and strengthened the Company's balance sheet. In addition, the Company's IO Strip decreased by $21 million as a result of hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. activities which had no impact on current earnings. The IO Strip and CMSR CMSR Centro Mondialità Sviluppo Reciproco (Italian) CMSR Compiled Military Service Record CMSR Configuration Management Status Report at June 30,1999 were $247.1 million compared to $271.9 million reported at the end of last quarter and $283.5 million reported at December December: see month. 31, 1998. Advanta Mortgage maintained the lending margin improvements that were accomplished last quarter and continued its focus on originating loans from its direct to consumer and broker channels. The weighted average yield of mortgage loans originated by the Company's direct to consumer channels this quarter was 12.41% compared to 12.13% last quarter. In addition to benefiting from higher yields on newly originated loans, the Company's overall portfolio yields are increasing as loans originated from direct channels, which typically have better yields, make up a larger portion of the total portfolio. Originations from the direct to consumer channels represented 56.1% of total originations this quarter compared to 56.3% in the prior quarter and 30.6% in the second quarter of 1998. Loans originated through direct to consumer channels represented approximately 37.1% of the total portfolio at June 30, 1999 compared to 28.9% at the same time last year and 34.6% at the end of the first quarter of this year. Mortgage loan originations The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. of $727.7 million were slightly higher than originations of $716.5 million last quarter. Originations from direct to consumer channels of $407.9 million were relatively flat compared to originations of $403.2 million in the first quarter, while originations from brokers increased by 39.3% from the prior quarter. Wholesale originations by the Company's Conduit and Corporate Finance channels decreased reflecting the Company's willingness to reduce volume levels in order to purchase loans with appropriate profitability characteristics. Advanta Mortgage's sub-serviced portfolio increased to $9.4 billion at the end of this quarter from $8.9 billion at the end of last quarter. Credit quality trends remain consistent with the Company's experience. However, due to the increase in the average age of the portfolio from 14 months at the end of the prior quarter to 17 months at June 30, 1999, the Company experienced increases in charge-off Eliminate or write off. The term charge-off is used to describe the process of removing from the records of a company something that was once regarded as an asset but has subsequently become worthless. and delinquency delinquency Criminal behaviour carried out by a juvenile. Young males make up the bulk of the delinquent population (about 80% in the U.S.) in all countries in which the behaviour is reported. rates. This seasoning of the Company's portfolio is associated with slower portfolio growth. The net managed charge-off rate for home equity loans was 0.66% this quarter compared to 0.51% reported last quarter and the over 30 day delinquency rate was 8.54% compared to 8.00% reported last quarter. Advanta Business Cards Reports Higher Yields Advanta Business Cards reported net income of $5.6 million this quarter compared to $4.0 million last quarter. The increase resulted from significant improvements in portfolio yields. The average yield on the Company's business credit card portfolio, including fee income, increased this quarter to 21.72% from 20.36% last quarter due to increases in rates and higher fee income. A decrease in the net managed charge-off rate on business credit card loans from 5.61% last quarter to 5.22% this quarter also contributed to the increase in net income. Managed receivables for Advanta Business Cards at the end of the quarter were $886 million, up 6.5% from last quarter and 16.4% from the same quarter last year. Advanta Leasing Services - Expense Reduction Leads to Higher Profits Advanta Leasing Services reported net income of $1.5 million this quarter, a significant increase from net income of $0.8 million that was reported last quarter. The increase in net income was caused primarily by a decrease in operating expenses resulting from the Company's ongoing program to improve processes at the leasing business and from expense reduction measures that were implemented toward the end of the first quarter. Operating expenses decreased from $8.81 million last quarter to $7.47 million this quarter. The Company originated $113.4 million in lease receivables this quarter and closed the quarter with a managed portfolio of leases of $744 million. This represents an increase of 6.1% from managed lease receivables of $701 million last quarter. Over 30-day delinquencies improved considerably this quarter to 7.33% from 8.38% last quarter. The net managed charge-off rate for Advanta Leasing Services of 3.23% this quarter was slightly higher than the 2.94% reported last quarter. Advanta Reports Continued Positive Operating Cash Flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. Advanta had positive operating cash flow of approximately $26.8 million this quarter after considering key non-cash income and expense items and the cash impact of loan originations. This positive cash flow is largely attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to increases in operating income and the proportion of mortgage loans originated from direct channels. This quarter, origination fees A charge imposed by a lending institution or a bank for the service of processing a loan. For example, a bank might charge an individual who has applied for a student loan an origination fee of one percent for processing the application and granting the loan. collected by the Company exceeded premiums and broker fees paid by approximately $13.5 million. This positive cash flow was offset by a net investment in subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. trust assets of $37.9 million. This investment is consistent with the structure of the Company's securitizations and results primarily from the growth in the Company's managed receivables during 1998. The Company's use of deposit funding at its two FDIC-insured banks for its lending activities continues to bolster This article is about the pillow called a bolster. For other meanings of the word "bolster", see bolster (disambiguation). A bolster (etymology: Middle English, derived from Old English, and before that the Germanic word bulgstraz liquidity at the parent and at the Company's banks. After paying down approximately $47 million of Medium Term Notes and other parent debt this quarter, the Company had approximately $437 million in unrestricted cash and equivalents at the parent compared to $429 million at March 31, 1999. At the end of the quarter, the Company had approximately $934 million of unrestricted cash and equivalents at its two banks. In addition, the Company had financed, with parent and bank funds, loan receivables on its books totaling $1.1 billion and had available approximately $1.4 billion in unused warehouse lines and Commercial Paper conduit facilities. Advanta is a highly focused financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. company with over 2,400 employees, approximately $12.4 billion in managed assets and approximately $9.4 billion in assets serviced for third parties. Advanta provides consumers and small businesses with innovative products and services including mortgages, equipment leases, business credit cards, insurance and deposit products. The Company also provides a full range of loan purchasing, contract servicing and securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. services to the mortgage industry. This Press Release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The most significant among these risks and uncertainties are: (1) factors that affect consumer debt; (2) competitive pressures; (3) the level of delinquencies and charge-offs; (4) the rate of prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. ; (5) the level of expenses; (6) the timing of the securitizations of the Company's receivables; and (7) the ratings on the debt of the Company and its subsidiaries. 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and its Quarterly Reports on Form 10-Q Form 10-Q See 10-Q. . -0-
Advanta Corp.
Highlights
Supplemental Consolidating Income Statement
(in thousands)
Three Months Ended June 30, 1999
---------------------------------------------
Advanta Advanta
Advanta Leasing Business
Mortgage Services Cards Other (a) Total
--------- --------- -------- --------- -----
Revenues:
Gain on sale
of receivables $28,416 $4,942 $7,758 $ $41,116
Interest income 30,534 2,725 7,785 18,157 59,201
Servicing
revenues 25,001 1,526 3,522 30,049
Other 861 4,489 8,528 11,306 25,184
------- ------- ------- ------- -------
Total revenues 84,812 13,682 27,593 29,463 155,550
------- ------- ------- ------- --------
Expenses:
Operating expenses 56,133 7,465 11,148 7,433 82,179
Interest expense 21,820 2,689 2,851 15,957 43,317
Provision for credit
losses 2,364 908 4,135 7,407
Minority int. in
inc. of consolidated
sub 1,865 155 200 2,220
------- ------- ------- ------- --------
Total expenses 82,182 11,217 18,334 23,390 135,123
------- ------- ------- ------- --------
Income before income
taxes 2,630 2,465 9,259 6,073 20,427
Income tax expense 1,122 979 3,694 2,320 8,115
------ -------- ------ ------ ------
Net income,
as reported $1,508 $1,486 $5,565 $3,753 $12,312
========= ======== ======== ======== ========
Pro forma net
operating income,
with results of
Advanta Mortgage
reported as a
portfolio lender $7,558(b) $1,486 $5,565 $(1,887)(c)$12,722
======== ======== ======== ========== ========
(a) Other includes the insurance and venture capital divisions.
(b) Adjusted to reflect the after-tax effect on earnings of the
decrease in the Interest Only Strip.
(c) Adjusted to reflect the after-tax gain associated with the sale
of an Advanta Partners investment.
Advanta Corp.
Highlights
Reconciliation to Portfolio Lender Earnings Format
(in thousands)
Three Months Ended June 30, 1999
--------------------------------
Advanta
Mortgage as Pro Forma
Reported Adjustments
----------- -------------
Revenues:
Gain on sale of receivables $ 28,416 $(28,416) (a)
Interest income 30,534 175,799 (b)
Servicing revenues 25,001 (8,846) (c)
Other 861
------------------------------
Total revenues 84,812 138,537
------------------------------
Expenses:
Operating expenses 56,133 1,883 (d)
Interest expense 21,820 114,970 (b)
Provision for credit losses 2,364 11,684 (e)
Minority interest in income of
consolidated subsidiary 1,865
Unusual charges
------------------------------
Total expenses 82,182 128,537
------------------------------
Income before income taxes 2,630 10,000
Pro forma income taxes 1,122 3,950
------------------------------
Pro forma net income $ 1,508 $ 6,050
------------------------------
Advanta Proforma
Mortgage as Remaining
Portfolio Businesses Pro Forma
Lender (f) Consolidated
---------- ---------- -------------
Revenues:
Gain on sale of receivables $ $ 12,700 $ 12,700
Interest income 206,333 28,667 235,000
Servicing revenues 16,155 5,048 21,203
Other 861 15,001 (f) 15,862
-------------------------------------
Total revenues 223,349 61,416 284,765
-------------------------------------
Expenses:
Operating expenses 58,016 26,046 84,062
Interest expense 136,790 21,497 158,287
Provision for credit losses 14,048 5,043 19,091
Minority interest in income of
consolidated subsidiary 1,865 355 2,220
Unusual charges
-------------------------------------
Total expenses 210,719 52,941 263,660
-------------------------------------
Income before income taxes 12,630 8,475 21,105
Pro forma income taxes 5,072 3,311 8,383
----------------- -------------------
Pro forma net income $ 7,558 $ 5,164 $ 12,722
-------------------------------------
Footnotes for pro forma adjustments:
(a) Represents the reclassification of net gains recognized on
the sale of mortgage loans for the period.
(b) Represents the adjustment to interest income and interest
expense as if the securitized mortgage loans were still owned
by the Company and remained on the balance sheet for the period
presented.
(c) Represents the reclassification of servicing revenues on
securitized mortgage loans for the period presented.
(d) Represents the reclassification of securitization costs
incurred by the Company.
(e) Represents the amount by which the provision for credit losses
would have increased had the securitized mortgage loans
remained on the balance sheet and the provision for credit
losses on securitized receivables been equal to actual reported
charge-offs.
(f) Adjusted to exclude the gain associated with the sale of an
Advanta Partners investment.
Advanta Corp.
Highlights
($ in thousands, except per share data)
Three Months Ended
-------------------------------------------------------
Percent
Change
June 30, March 31, June 30, from
ORIGINATIONS 1999 1999 1998 Prior
Quarter
------------ -------- -------- -------- ----------
Direct $407,880 $403,204 $382,242 1.2%
Broker 152,533 109,538 106,188 39.3
Conduit 153,575 181,835 376,145 -15.5
Corp. Finance 13,701 16,773 324,484 -18.3
Auto 0 5,103 58,356 -100.0
-------- -------- --------
Total Advanta
Mortgage
loans $727,689 $716,453 $1,247,415 1.6
Leases $113,384 $109,836 $74,352 3.2%
Business
cards 471,239 400,428 348,222 17.7
SECURITIZATION/
SALES VOLUME
--------------
Advanta
Mortgage $635,896 $634,147 $1,215,097 0.3%
Leases 105,909 95,574 72,636 10.8
Business
cards 0 24,248 62,790 -100.0
-------- -------- --------
Total
securitization/
sales volume $741,805 $753,969 $1,350,523 -1.6
AVERAGE
MANAGED
RECEIVABLES
------------
Mortgage
loans $8,263,300 $8,114,144 $6,021,777 1.8%
Auto loans 140,560 198,321 220,477 -29.1
Leases 693,921 671,118 601,283 3.4
Business
cards 866,732 822,852 739,654 5.3
Other loans 17,019 17,820 14,784 -4.5
-------- -------- --------
Total average
managed
receivables 9,981,532 9,824,255 $7,597,975 1.6
Total average
serviced
receiv-
ables $19,182,200 $18,404,342 $15,898,544 4.2
ENDING
MANAGED
RECEIVABLES
Mortgage
loans $8,293,166 $8,212,797 $6,394,835 1.0%
Auto loans 122,836 185,621 251,166 -33.8
Leases 744,121 701,178 615,740 6.1
Business
cards 886,237 832,086 761,576 6.5
Other loans 17,187 17,093 17,649 0.5
-------- -------- --------
Total
managed
receiv-
ables $10,063,547 $9,948,775 $8,040,966 1.2
Total
serviced
receiv-
ables $19,503,442 $18,859,606 $16,213,193 3.4
IO AND CMSR
ROLLFORWARD
------------
Beginning
Balance(A) $ 271,876 $ 283,521
Retained
IO on sales,
net 38,529 31,297
Hedge impact (20,819) (3,614)
Write-down
related to
auto loans 0 (7,828)
Transaction
expenses 2,507 1,472
Interest
income 7,970 11,118
Additional
reserves (10,000)
Cash received (42,966) (43,217)
Other, net (26) (873)
-------- --------
Ending
balance 247,071 271,876
(A) Includes reclassification of amounts due from Trustee
Advanta Corp.
Highlights
($ in thousands, except per share data)
Three Months Ended
-----------------------------------------------
Percent
Change
From
June 30, Mar. 31, June 30, Prior
1999 1999 1998 Quarter
--------- --------- -------- --------
EARNINGS
--------
As a % of average
managed receivables:
Operating expenses 3.25% 3.47% 3.73% -6.3%
Charge-offs 1.46 1.36 1.49 7.4
Earnings per
common share $ 0.49 $ 0.25 $ 0.35 96.0
Diluted earnings
per share 0.49 0.25 0.35 96.0
Return on average
common equity 8.94% 4.54% 6.37% 96.9
COMMON STOCK DATA
-----------------
Weighted average
common shares
Used to compute:
Earnings per
common share 23,163 23,087 24,523 0.3%
Diluted earnings
per share 23,373 23,178 24,702 0.8
Ending shares
outstanding 25,445 25,310 25,368 0.5%
Stock price:
Class A
High $ 18.250 $ 15.188 $ 26.250 20.2%
Low 9.625 10.313 19.250 -6.7
Closing 18.063 11.063 21.938 63.3
Class B
High $ 14.750 $ 12.313 $ 24.250 19.8%
Low 7.594 7.750 17.500 -2.0
Closing 13.563 8.938 19.875 51.7
Cash dividends
declared
Class A $ 0.063 $ 0.063 $ 0.063 0.0%
Class B 0.076 0.076 0.076 0.0
Book value per
common share (A) $ 22.51 $ 22.41 $ 21.26 0.4%
(A) Assumes conversion of the Class B Preferred Stock.
-Statistical Supplement Available Upon Request- |
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