-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SJXSshw1ESsrf9pv3XllXz6RdezSlIvqEIIcorPMS6PrE0jMrrXA7OzemS/ZTjDb ICocOSmdiGzwOLwvKnvD2g== 0000893220-99-000048.txt : 19990127 0000893220-99-000048.hdr.sgml : 19990127 ACCESSION NUMBER: 0000893220-99-000048 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990126 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990126 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANTA CORP CENTRAL INDEX KEY: 0000096638 STANDARD INDUSTRIAL CLASSIFICATION: PERSONAL CREDIT INSTITUTIONS [6141] IRS NUMBER: 231462070 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-14120 FILM NUMBER: 99513302 BUSINESS ADDRESS: STREET 1: P.O. BOX 844 STREET 2: WELSH & MCKEAN ROADS CITY: SPRING HOUSE STATE: PA ZIP: 19044 BUSINESS PHONE: 2156574000 MAIL ADDRESS: STREET 1: BRANDYWINE CORPORATE CENTER STREET 2: 650 NAAMANS ROAD CITY: CLAYMONT STATE: DE ZIP: 19703 FORMER COMPANY: FORMER CONFORMED NAME: TSO FINANCIAL CORP DATE OF NAME CHANGE: 19880306 FORMER COMPANY: FORMER CONFORMED NAME: TEACHERS SERVICE ORGANIZATION INC DATE OF NAME CHANGE: 19850812 8-K 1 FORM 8-K ADVANTA CORP. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): January 26, 1999 ---------------- Advanta Corp. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 0-14120 23-1462070 -------- ------- ---------- (State or other jurisdiction (Commission File (IRS Employer of incorporation) Number) Identification No.)
Welsh and McKean Roads, P.O. Box 844, Spring House, PA 19477 - ----------------------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (215) 657-4000 -------------- 2 Item 5. Other Events On January 26, 1999 Advanta Corp. (the "Company" or "Advanta") reported net income for the fourth quarter of 1998 of $4.6 million, or $0.16 per share on a diluted basis for its Class A and Class B shares combined. This reflects the Company's previously announced plan to report income for its mortgage business that is essentially equal to that of a portfolio lender. The Company also reported net income of $35.4 million for the full year excluding the gain from the consumer credit card transaction, the results of the consumer credit card business through February 20, 1998 and the restructuring and other similar charges reported in the first quarter. Additionally, Advanta closed the year in a strong cash position with approximately $441 million of unrestricted cash and equivalents at the parent and approximately $761 million in unrestricted cash and equivalents at its two banks, after paying down approximately $263 million in long term debt at the parent this year. The Company had a strong capital position with equity, including capital securities, of approximately $660 million. Reported results for the fourth quarter included nonrecurring revenues of approximately $11 million from the sale of the Company's investment in affordable housing partnerships and approximately $6 million from a tax settlement. These revenues were more than offset by increases in the allowance for loan losses and other reserves to strengthen the balance sheet. Consolidated results for the year, after including the gain from the first quarter consumer credit card business transaction, the results of operations of that business for the period leading up to the transaction and the restructuring and other similar charges taken in the first quarter, were $447.9 million or $15.71 per share on a diluted basis for the Company's Class A and Class B shares combined. OPERATIONS - ---------- Total managed receivables for the Company's businesses at year end were $9.8 billion, an increase of 10.1% from $8.9 billion at September 30, 1998 and an increase of 48.0% from $6.6 billion at the end of last year. For the full year, loan originations at Advanta Mortgage totaled $5.3 billion compared to $3.7 billion in 1997. Consistent with its strategy, in 1998 Advanta Mortgage significantly grew loan production from its direct to consumer channels. Total loan production from the direct to consumer channels this year of $1.7 billion was 91.4% higher than in 1997. In the fourth quarter, loan originations for the direct to consumer channels of $507 million were 4.9% higher than originations of $483 million from these channels last quarter and 102.2% higher than the fourth quarter of last year. Loan originations from the indirect businesses were $854 million this quarter compared to $1.09 billion in the third quarter. The Company closed the year servicing an $8.3 billion portfolio for third parties compared to $7.6 billion at the end of the last quarter and $9.2 billion at the end of last year. 3 The Company's business credit card operations originated $399 million in receivables this quarter, up 14.1% from the last quarter, and closed the year with a managed portfolio of business credit card loans of $815 million, up 22.9% from $663 million at the end of 1997. Advanta Leasing originated $103 million in lease receivables this quarter and closed the year with a managed portfolio of loans and leases of $670 million, an increase of 11.6% over the portfolio of $601 million a year ago. For the year, operating expenses were 3.68% of average managed receivables. This quarter operating expenses totaled $94.6 million, or 3.96% of average managed receivables, an increase from 3.73% last quarter. LIQUIDITY - --------- Advanta was highly liquid at December 31, 1998. After paying down approximately $263 million of Medium Term Notes and other parent debt which matured this year, the Company had approximately $441 million in unrestricted cash and equivalents at the parent and $761 million of unrestricted cash and equivalents at its two banks. The Company had financed, with parent and bank funds, loan receivables totaling $972 million that were on the books. At December 31, 1998, the Company had available over $770 million in unused warehouse lines and Commercial Paper conduit facilities. Additionally, the Company has the ability to fund its businesses through its two FDIC insured banks. SECURITIZATION INCOME - --------------------- Consistent with the Company's guidance in its third quarter earnings announcement, the Company reported income for Advanta Mortgage that is essentially equal to that of a portfolio lender. To accomplish this, Advanta Mortgage substantially offset the amortization of its Retained Interest Only Strip ("IO Strip") and Contractual Mortgage Servicing Rights ("CMSR") by recognizing gains of $32.9 million from the securitization and sale of approximately $1.1 billion of loans this quarter. In addition, the Company recognized gains of $1.1 million from the sale of $42 million in whole loans to third parties this quarter. The increase in the IO Strip and CMSR to $296.5 million this quarter from $267.0 million last quarter resulted from the deferral of losses on hedging activities associated with loan production and transaction expenses. These are items which would also be deferred by a portfolio lender. Advanta regularly reviews and, where appropriate, adjusts the gain receivable ("IO Strip") assumptions for its experience. This quarter, due to prepayment experience that was consistent with expectations, the Company did not change the prepayment rate assumptions used in valuing its IO Strip and is still using prepayment rates of 29% for fixed rate loans, 37% for intermediate rate loans and 43% for ARMs. This quarter, the assumed loss rate was increased from 95 basis points to 100 basis points. The Company also recognized securitization income of $3.8 million this quarter from the securitization of $89.1 million of leases and $12.5 million of excess servicing income received from business card loans. For the full year, the Company recognized $11.7 million in securitization income from the securitization of $299.2 million of leases and $35.3 million of excess servicing income received from business card loans. 4 CREDIT QUALITY - -------------- The net managed charge-off rate for home equity loans of 0.55% this quarter was approximately the same as last quarter. The combined over 30 day delinquency rate for home equity and auto loans of 7.93% was higher than the 7.16% for the last quarter. The net managed charge-off rate on business credit card loans of 5.46% this quarter was better than the 5.79% last quarter. For the lease portfolio, the net managed charge-off rate was 2.94%, up from 2.29% last quarter. The combined over 30 day delinquency rate for business loans and leases was 6.47% this quarter compared to 5.83% last quarter. Advanta is a highly focused financial services company with 2,700 employees, over $12 billion in managed assets and approximately $8.3 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 Current Report on Form 8-K contains forward-looking statements 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 and its Quarterly Reports on Form 10-Q. 5 Form 8-K Advanta Corp. January 26, 1999 Item 7. Financial Statements and Exhibits. --------------------------------- (c) Exhibits: The following exhibits are filed as part of this Report on Form 8-K. 27 Financial Data Schedule. 99 Selected Summary Financial Data. 6 Form 8-K Advanta Corp. January 26, 1998 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of l934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Advanta Corp. By:/s/ Elizabeth H. Mai --------------------------------------- Elizabeth H. Mai, Senior Vice President, Secretary and General Counsel January 26, 1999 7 Form 8-K Advanta Corp. January 26, 1999 Index to Exhibits ----------------- Exhibit Number Per Item 60l of Regulation S-K Description of Document - -------------- ----------------------- 27 Financial Data Schedule. 99 Selected Summary Financial Data
EX-27 2 FINANCIAL DATA SCHEDULE
9 12-MOS DEC-31-1998 DEC-31-1998 90,597 80,028 267,400 501,563 591,955 0 0 1,172,370 33,437 3,763,086 1,749,790 490,812 209,422 652,758 267 0 1,010 559,027 3,763,086 127,362 92,054 0 219,416 85,953 98,322 35,141 67,193 6,937 513,716 432,329 447,880 0 0 447,880 16.65 15.71 1.36 49,568 30 0 0 137,773 61,429 8,321 33,437 29,703 0 3,734
EX-99 3 SELECTED SUMMARY FINANCIAL DATA 1 Exhibit 99 ADVANTA CORP. HIGHLIGHTS SUPPLEMENTAL CONSOLIDATING INCOME STATEMENT (IN THOUSANDS)
THREE MONTHS ENDED DECEMBER 31, 1998 -------------------------------------------------------- ADVANTA ADVANTA BUSINESS MORTGAGE SERVICES OTHER (A) TOTAL --------------- ---------- -------------- ---------- REVENUES: Gain on sale of receivables $ 33,967 $ 16,314 $ $ 50,281 Interest income 28,668 5,738 13,972 48,378 Servicing revenues 25,279 4,715 29,994 Imputed interest 5,792 5,792 Other 22,611 4,321 1,141 28,073 --------------- ---------- -------------- ---------- Total revenues 116,317 31,088 15,113 162,518 --------------- ---------- -------------- ---------- EXPENSES: Operating expenses 73,321 20,209 1,109 94,639 Interest expense 22,514 4,853 13,972 41,339 Provision for credit losses 16,887 3,085 19,972 --------------- ---------- -------------- ---------- Total expenses 112,722 28,147 15,081 155,950 --------------- ---------- -------------- ---------- INCOME BEFORE INCOME TAXES 3,595 2,941 32 6,568 Provision for income taxes 1,078 882 10 1,970 --------------- ---------- -------------- ---------- NET INCOME $ 2,517 $ 2,059 $ 22 $ 4,598 =============== ========== ============== ==========
(A) Other includes the insurance and venture capital divisions. 2 ADVANTA CORP. HIGHLIGHTS SUPPLEMENTAL CONSOLIDATING INCOME STATEMENT (IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1998 -------------------------------------------------------------------------- ADVANTA ADVANTA BUSINESS MORTGAGE SERVICES OTHER (A) TOTAL -------------- -------------- -------------- ------------ REVENUES: Gain on sale of receivables $118,652 $47,079 $ $ 165,731 Interest income 101,877 33,185 84,354 219,416 Servicing revenues 100,183 17,606 26,040 143,829 Imputed interest 21,674 21,674 Credit card securitization income 84,144 84,144 Gain on transfer of consumer credit card business 541,288 541,288 Other 26,447 28,496 15,495 70,438 -------------- -------------- -------------- ------------ Total revenues 368,833 126,366 751,321 1,246,520 -------------- -------------- -------------- ------------ EXPENSES: Operating expenses 231,046 77,099 80,499 388,644 Interest expense 76,453 21,162 86,660 184,275 Provision for credit losses 25,577 13,337 28,279 67,193 Restructure/other similar charges 167,572 167,572 -------------- -------------- -------------- ------------ Total expenses 333,076 111,598 363,010 807,684 -------------- -------------- -------------- ------------ INCOME BEFORE INCOME TAXES 35,757 14,768 388,311 438,836 Provision for income taxes 10,667 4,430 (24,141) (9,044) -------------- -------------- -------------- ------------ NET INCOME $25,090 $10,338 $ 412,452 $ 447,880 ============== ============== ============== ============
(A) Other includes the operating results of the consumer credit card division up to February 20, 1998, the gain relating to the transaction, restructuring and other similar charges taken in the first quarter, and the insurance and venture capital divisions. 3 ADVANTA CORP. HIGHLIGHTS RECONCILIATION TO PORTFOLIO LENDER EARNINGS FORMAT (IN THOUSANDS)
THREE MONTHS ENDED DECEMBER 31, 1998 -------------------------------------------------------------- PRO FORMA PORTFOLIO AS REPORTED ADJUSTMENTS LENDER -------------------------------------------------------------- REVENUES: Gain on sale of receivables $ 50,281 $ (33,967) [a] $ 16,314 Interest income 48,378 175,357 [b] 223,735 Servicing revenues 29,994 (4,250) [c] 25,744 Imputed interest 5,792 (5,792) [d] Other 28,073 28,073 -------------------------------------------------------------- Total revenues 162,518 131,348 293,866 -------------------------------------------------------------- EXPENSES: Operating expenses 94,639 1,760 [e] 96,399 Interest expense 41,339 114,191 [b] 155,530 Provision for credit losses 19,972 15,397 [f] 35,369 -------------------------------------------------------------- Total expenses 155,950 131,348 287,298 -------------------------------------------------------------- INCOME BEFORE INCOME TAXES $ 6,568 $ 0 $ 6,568 ===============================================================
FOOTNOTES FOR PRO FORMA ADJUSTMENTS: [a] Represents the reclassification of net gains recognized on the sale of Advanta Mortgage loans for the period. [b] Represents the adjustment to interest income and interest expense as if the securitized Advanta 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 Advanta Mortgage loans for the period presented. [d] Represents the reclassification of imputed interest on the IO Strip. [e] Represents the reclassification of securitization costs incurred by the Company. [f] Represents the amount by which the provision for credit losses would have increased had the securitized Advanta Mortgage loans remained on the balance sheet and the provision for credit losses on securitized receivables been equal to actual reported charge-offs. 4 ADVANTA CORP. HIGHLIGHTS ($ IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED ------------------------------------------------------------------ PERCENT CHANGE DECEMBER 31, SEPTEMBER 30, DECEMBER 31, FROM ORIGINATIONS (A) 1998 1998 1997 PRIOR QUARTER ---------------- ------------------------------------------------------------------ Direct $506,819 $ 483,290 $250,597 4.9% Broker 128,285 162,531 73,717 -21.1 Conduit 388,594 584,418 393,385 -33.5 Corp. Finance 330,677 320,871 270,102 3.1 Auto 6,298 18,593 98,924 -66.1 --------- -------- -------- Total Advanta Mortgage loans $1,360,673 $ 1,569,703 $1,086,725 -13.3 Leases $102,683 $ 95,344 $74,935 7.7% Business cards 399,080 349,645 296,250 14.1 --------- -------- -------- Total leases and business cards $501,763 $ 444,989 $371,185 12.8 SECURITIZATION/SALES VOLUME (A) ------------------------------- Advanta Mortgage $1,124,060 $ 1,508,537 $1,133,591 -25.5% Leases and business cards 113,129 105,613 205,332 7.1 --------- -------- -------- Total securitization/sales volume $1,237,189 $ 1,614,150 $1,338,923 -23.4% AVERAGE MANAGED RECEIVABLES (A) ------------------------------- Advanta Mortgage loans $7,994,056 $ 7,085,359 $4,893,372 12.8% Leases and business cards 1,427,619 1,380,195 1,224,945 3.4 Other loans 17,866 17,704 41,040 0.9 --------- ----------- ---------- Total average managed receivables $9,439,541 $ 8,483,258 $6,159,357 11.3 Total average serviced receivables $17,187,094 $ 16,490,158 $15,428,156 4.2 ENDING MANAGED RECEIVABLES (A) ------------------------------ Mortgage loans $8,285,246 $ 7,454,791 $5,308,836 11.1% Total serviced mortgage loans 16,563,574 15,050,208 14,490,301 10.1 Leases and business cards 1,484,974 1,415,806 1,263,789 4.9 Other loans 17,862 17,763 40,978 0.6 --------- ---------- ---------- Total managed receivables $9,788,082 $ 8,888,360 $6,613,603 10.1 Total serviced receivables $18,066,410 $ 16,483,777 $15,795,068 9.6
(A) Excludes consumer credit card business. 5 ADVANTA CORP. HIGHLIGHTS ($ IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED ------------------------------------------------------ PERCENT CHANGE FROM DEC. 31, SEPT. 30, DEC. 31, PRIOR 1998 1998 1997 QUARTER -------- --------- -------- -------- EARNINGS -------- As a % of average managed receivables (A): Operating expenses 3.96% 3.73% 3.65% 6.2% Charge-offs 1.44 1.35 4.84 6.7 Earnings per common share $0.16 $0.58 $0.98 -72.4 Diluted earnings per share 0.16 0.58 0.95 -72.4 Return on average common equity 2.98% 10.59% 20.49% -71.9 COMMON STOCK DATA ----------------- Weighted average common shares used to compute: Earnings per common share 23,185 24,482 43,003 -5.3 Diluted earnings per share 23,194 24,514 46,025 -5.4 Ending shares outstanding 25,643 26,021 44,340 -1.5 Stock price: Class A High $ 14.875 $ 22.750 $ 38.750 -34.6 Low 7.125 9.375 24.250 -24.0 Closing 13.250 12.875 26.250 2.9 Class B High $ 12.000 $ 20.563 $ 37.625 -41.6 Low 5.250 8.250 23.375 -36.4 Closing 11.063 10.500 25.375 5.4 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 (B) $ 22.19 $ 21.62 $ 19.90 2.6
(A) Includes consumer credit card business (where applicable). (B) Assumes conversion of the Class B Preferred Stock. -----END PRIVACY-ENHANCED MESSAGE-----