Advanta Reports Second Quarter Results.SPRING HOUSE, Pa.--(BUSINESS WIRE)--July 22, 1998--Advanta Corp. (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 : ADVNB; ADVNA ADVNA Advanta Corporation (stock symbol) ; ADVNZ) Wednesday Wednesday: see week. announced that its net income for the second quarter of 1998 was $9.5 million, or $0.35 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 represents an increase of $3.2 million, or 51% from the net income of $6.3 million from 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. Mortgage and Advanta Business Services that was reported in the first quarter of this year. Advanta also announced that it closed the quarter in a strong capital position with equity, including capital securities, of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $658.6 million and in a strong cash position with approximately $475 million of unrestricted cash and equivalents at the parent and $580 million in unrestricted cash and equivalents at its two banks. The company continues to be comfortable with its earlier estimates of net income of approximately $70 million in 1998. "I am pleased with our performance this quarter. 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. were strong and continue to reflect significant growth," 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, chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Advanta. "Advanta's direct marketing expertise, strong analytic an·a·lyt·ic or an·a·lyt·i·cal adj. 1. Of or relating to analysis or analytics. 2. Expert in or using analysis, especially one who thinks in a logical manner. 3. Psychoanalytic. capabilities and sourcing customers through television and radio advertising is fueling our robust growth and market penetration Noun 1. market penetration - the extent to which a product is recognized and bought by customers in a particular market penetration - the act of entering into or through something; "the penetration of upper management by women" ." Loan Originations The company reported that loan production at its mortgage and business services units continues to be strong. Loans originated by these businesses totaled $1.67 billion this quarter, an increase of 32.0% over the second quarter of last year and 12.2% over the first quarter of 1998. Advanta's 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 expanded by 9.4% this quarter to $8.04 billion from $7.35 billion at March 31, 1998, an annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. growth rate of 37.6%. Advanta Mortgage originated $1.25 billion in new loans during the second quarter, an increase of 36.3% over the year-ago quarter and 9.8% over the first quarter of 1998. As a result, the mortgage unit's managed receivables increased this quarter by 9.9% to $6.65 billion, an annualized growth rate of 39.6%. Highlights relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc loan originations follow: -- Loans originated directly from consumers totaled $382 million, an increase of 35.0% over the $283 million originated in the first quarter of this year and 75.0% over the $218 million that was originated in the second quarter of last year. The company's newly launched direct response television business generated $49 million in originations directly from consumers, 84.9% higher this quarter than in the first quarter. -- Originations through brokers grew by 35.4% in the second quarter to $106 million from $78 million last quarter and $66 million in the second quarter of last year. -- Loan originations of the conduit conduit /con·du·it/ (kon´doo-it) channel. ileal conduit the surgical anastomosis of the ureters to one end of a detached segment of ileum, the other end being used to form a stoma on the business were $376 million this quarter compared to $404 million last quarter and $299 million in the second quarter of 1997. -- Loan originations of the corporate finance business of $324 million this quarter were slightly lower than the $349 million originated last quarter and were higher than the $299 million originated through this channel in the comparable period last year. -- Auto (AUTOmatic) Refers to a wide variety of devices that perform unattended operations. loan originations were $58 million compared to $21 million in the first quarter and $33 million in the second quarter of last year. Advanta Business Services originated $348 million in business credit card receivables and $74 million in lease receivables this quarter. The managed portfolio of business loans and leases of $1.38 billion at June June: see month. 30, 1998 grew by 6.4% from the preceding quarter and 26.4% from the year ago quarter. Business credit card originations were 20.3% higher than in the first quarter of this year and lease originations were 18.7% higher than in the first quarter of this year. Gain on Sale Advanta Mortgage completed three securitizations with an aggregate principal balance of $1.06 billion this quarter. In addition, the company sold $89 million in whole loans and increased its portfolio of loans held in off-balance sheet Commercial Paper conduit facilities by approximately $64 million. The company recognized $53.9 million in gains resulting from the 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. and sale of these receivables. In this quarter, in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Advanta's practice of regularly reviewing and, where appropriate, adjusting the gain receivable ("IO Strip") assumptions for the company's experience, the company recognized a pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern charge against second quarter earnings of $23.9 million. Prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. rate assumptions used in valuing the company's IO Strip were revised to 27% for fixed rate loans, 33% for intermediate rate loans and 39% for ARMs. At the end of the first quarter the prepayment assumptions were 24% for fixed rate loans, 29% for intermediate rate loans and 34% for ARMs. Advanta Business Services recognized $7.5 million in securitization income. This includes approximately $3.9 million in gains from the securitization of $72.6 million of leases. The remainder represents excess servicing income received from business card loans. Contract Servicing The company's contract servicing portfolio was $8.2 billion versus $8.8 billion at the end of the first quarter and $7.5 billion at the comparable period last year. The decrease in contract servicing volume since the first quarter resulted from the previously announced withdrawal of business by certain customers who have begun servicing their own portfolios, and from higher prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. in our sub-serviced portfolios. The company has revised its guidance and expects that this portfolio will range from $7.0 billion to $8.0 billion by the end of 1998. Credit Quality Net managed charge-offs for home equity loans were 0.61% this quarter compared to 0.49% last quarter. The combined 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. rate for home equity and auto loans of 6.86% was slightly below the 7.05% for the last quarter. Net managed charge-offs on business credit card loans increased from 5.71% last quarter to 6.57% this quarter as the portfolio continued to season. For the lease portfolio, net managed charge- offs decreased significantly from 3.17% last quarter to 2.26% this quarter due to improvements in collection efforts. The combined over 30 day delinquency rate for business loans and leases was 5.22% this quarter compared to 6.15% last quarter. This was the result of improvements in both business card and leasing delinquencies which are attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to improvements in collection efforts. Liquidity At June 30, 1998, Advanta had approximately $475 million in unrestricted cash and equivalents at the parent and $580 million of unrestricted cash and equivalents at its two banks. The decrease in cash and equivalents at the company's banks during this quarter is primarily attributable to the following previously announced transactions: (1) Advanta National Bank repurchased approximately $93 million of its debt, and (2) Advanta National Bank retained $445 million of notes issued in connection with the company's second quarter securitization of mortgage receivables. These transactions are part of the company's ongoing plan to efficiently manage its liquidity while maintaining funding flexibility. 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. The company's operating expenses this quarter totaled $74.5 million, or 3.86% of average managed receivables. As the company's managed portfolio continues to grow during the year, it is expected that the ratio of operating expenses to managed receivables will be within the range of 3.60% to 3.90%. 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 2,400 employees, over $10.0 billion in managed assets and $8.2 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 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; (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, 1998
------------------------------------------------
Advanta
Advanta Business
Mortgage Services Other(A) Total
----------- ---------- --------- ---------
Revenues:
Gain on sale of
receivables $ 53,859 $ 7,451 $ - $ 61,310
Interest Income 26,523 7,786 13,114 47,423
Servicing revenues 22,162 - - 22,162
Imputed interest (13,995) - - (13,995)
Other 1,150 14,882 (1,918) 14,114
----------- ---------- --------- ---------
Total revenues 89,699 30,119 11,196 131,014
----------- ---------- --------- ---------
Expenses:
Operating expenses 53,613 17,913 2,939 74,465
Interest expense 23,105 5,252 7,869 36,226
Provision for credit
losses 2,334 4,512 - 6,846
----------- ---------- --------- ---------
Total expenses 79,052 27,677 10,808 117,537
----------- ---------- --------- ---------
Income before income
taxes 10,647 2,442 388 13,477
Provision for income
taxes 3,194 733 79 4,006
----------- ---------- --------- ---------
Net income $ 7,453 $ 1,709 $ 309 $ 9,471
=========== ========== ========= =========
(A) Other includes the insurance and venture capital divisions.
Advanta Corp.
Highlights
($ in thousands, except per share data)
Three Months Ended
----------------------------------------------
Percent
Change
June March June from
30, 31, 30, Prior
ORIGINATIONS (A) 1998 1998 1997 Quarter
---------------- ----------- ----------- ----------- ---------
Direct $ 382,242 $ 283,048 $ 218,392 35.0%
Broker 106,188 78,423 66,156 35.4
Conduit 376,145 403,811 298,735 -6.9
Corp. Finance 324,484 349,415 298,968 -7.1
Auto 58,356 21,103 32,651 176.5
----------- ----------- ----------- --------
Total Advanta
Mortgage loans $ 1,247,415 $ 1,135,800 $ 914,902 9.8%
Leases $ 74,352 $ 62,651 $ 87,876 18.7%
Corporate cards 348,222 289,400 262,644 20.3
----------- ----------- ----------- --------
Total leases and
corporate cards $ 422,574 352,051 350,520 20.0%
SECURITIZATION/
SALES VOLUME (A)
------------------
Mortgage $ 1,215,097 $ 1,014,860 $ 765,856 19.7%
Leases and corporate
cards 135,426 110,218 214,317 22.9
----------- ----------- ----------- --------
Total
securitization/
sales volume $ 1,350,523 $ 1,125,078 $ 980,173 20.0%
AVERAGE MANAGED RECEIVABLES (A)
-------------------------------
Mortgage loans $ 6,208,526 $ 5,620,710 $ 3,557,932 10.5
Leases and corporate
cards 1,340,936 1,262,704 1,013,504 6.2
Other loans 14,785 12,458 25,390 18.7
---------- ----------- ----------- --------
Total average managed
receivables 7,564,247 6,895,872 4,596,826 9.7
Total average
serviced
receivables $15,898,544 $16,000,830 $11,149,844 -0.6%
ENDING MANAGED RECEIVABLES (A)
------------------------------
Mortgage loans $ 6,646,001 $ 6,046,393 $ 3,934,002 9.9%
Total serviced
mortgage loans 14,818,228 14,817,825 11,447,944 0.0
Leases and
corporate cards 1,377,316 1,294,447 1,089,592 6.4
Other loans 17,649 11,770 37,480 49.9
Total managed
receivables 8,040,966 7,352,610 5,061,074 9.4
Total serviced
receivables $16,213,193 $16,124,042 $12,575,016 0.6%
KEY IO ASSUMPTIONS
------------------
Assumed Prepayment Rates
Fixed 27% 24%
ARMs 39% 34%
Intermediate 33% 29%
Assumed loss rate 95 bps 80 bps
Assumed discount rate 14% 14%
(A) Excludes consumer credit card business and gain on transfer
of the business.
Advanta Corp.
Highlights
($ in thousands, except per share data)
Three Months Ended
----------------------------------------------
Percent
Change
June March June from
30, 31, 30, Prior
EARNINGS 1998 1998 1997 Quarter
-------- ----------- ----------- ----------- ---------
As a % of average
managed
receivables (A):
Operating expenses 3.86% 3.36% 3.53% 14.9%
Charge-offs 1.49 4.35 5.54 -65.7
Earnings per
common share 0.35 11.84 0.09 -97.0
Diluted earnings
per share 0.35 11.04 0.09 -96.8
Return on average
common equity 6.37% 260.14% 2.10% -97.6
COMMON STOCK DATA
-----------------
Weighted average
common shares
used to compute:
Earnings per common
share 24,523 35,278 42,772 -30.5%
Diluted earnings
per share 24,702 37,915 43,208 -34.8
Ending shares
outstanding 25,368 25,234 44,068 0.5
Stock price:
Class A
High $ 26.250 $ 32.750 $ 37.250 -19.8
Low 19.250 21.000 20.000 -8.3
Closing 21.938 22.500 36.750 1.7
Class B
High 24.250 31.250 36.250 -22.4
Low 17.500 19.688 18.875 -12.4
Closing 19.875 21.000 35.688 3.3
Cash dividends
declared
Class A 0.063 0.063 0.110 0.0
Class B 0.076 0.076 0.132 0.0
Book value per
common share 20.44 20.20 17.32 1.2
share
(A) Includes consumer credit card business and gain on transfer of the
business.
ADVANTA CORP.
Guidance Information
($ in millions)
Note: All data relates to the managed portfolio unless otherwise
noted
Updated as of
July 22, 1998
-----------------
Ending Receivables
------------------
Advanta Mortgage $8,000 to $9,000
Mortgage Loans Serviced for Fee $7,000 to $8,000(A)
Advanta Business Services $1,500 to $1,800
Revenue Assumptions
-------------------
Advanta Mortgage:
Gain on sale (as a % of
receivables securitized or sold) 4.20% to 4.60%(A)
Servicing fee income (as a % of
average serviced receivables) 55 bps to 65 bps
Advanta Business Services:
Securitization income (as a %
of leases securitized and
business credit card loans
originated) 2.25% to 2.75%(B)
Fee income 3.00% to 3.50%(B)
IO Strip Valuation Assumptions
as of June 30, 1998:
------------------------------
Assumed Prepayment Rates
Fixed 27.0%(A)
ARMs 39.0%(A)
Intermediate 33.0%(A)
Assumed loss rate 95 bps(A)
Assumed discount rate 14%
Net Charge-Off Ratios
---------------------
Advanta Mortgage 70 bps to 80 bps
Advanta Business Services 400 bps to 450 bps
Operating Expenses 3.60% to 3.90%(A)
------------------
Equity/Managed Assets(C) 6% to 7%
------------------------
Segment Net Income
------------------
Advanta Mortgage Approx. $60
Advanta Business Services Approx. $10
Net Income Approx. $70
----------
3rd Quarter $15 to $20
4th Quarter $35 to $40
Note: The above information reflects the Company's good-faith
estimates of certain preliminary projected results for 1998.
This information is subject to various risks and
uncertainties, as described in the accompanying press
release.
(A) Indicates modification to previous guidance
(B) Indicates new guidance category
(C) Equity includes Capital Securities
-- Statistical Supplement Available Upon Request -- CONTACT: Advanta Corp. Kamal A kamal is a celestial navigation device that determines latitude. The kamal was used primarily used by the Arabs during the Islamic Golden Age and later the Chinese in the 18th and 19th centuries. Advani, VP, Investor Relations Investor relations The process by which the corporation communicates with its investors. , 215/444-5335 or D'Arcy D'arcy may refer to: In places:
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