Household Int. 1H04 8-K
HSBC Holdings PLC
02 August 2004
:
"The following is a Current Report on Form 8-K containing selected financial
information for the quarter and six months ended 30 June 2004 filed with the
United States Securities and Exchange Commission by Household International,
Inc., a subsidiary of HSBC Holdings plc. Copies of the Form 8-K are available
on Household International, Inc.'s website at www.Household.com and on the SEC
website at www.sec.gov."
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FORM 8-K
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM 8-K
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Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: August 2, 2004
-----------------
HOUSEHOLD INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
-----------------
Delaware 1-8198 86-1052062
(State of incorporation) (Commission File Number) (IRS Employer
Identification Number)
2700 Sanders Road, Prospect Heights, Illinois 60070
(Address of principal executive offices) (Zip Code)
(847) 564-5000
Registrant's telephone number, including area code
================================================================================
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
No. Exhibit
--- -------
99 Quarterly Financial Supplement for the quarter ended June 30, 2004.
Item 12. Results of Operations and Financial Condition
Financial supplement pertaining to the financial results of Household
International, Inc., for the quarter and six months ended June 30, 2004. The
information shall not be deemed "filed" for the purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise
incorporated by reference into any filing pursuant to the Securities Act of
1933, as amended, or the Exchange Act except as otherwise expressly stated in
such a filing.
1
SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HOUSEHOLD INTERNATIONAL, INC.
(Registrant)
By: /S/ PATRICK D. SCHWARTZ
------------------------------
Patrick D. Schwartz
Vice President-General Counsel
Treasury and Corporate Law
Dated: August 2, 2004
2
Exhibit 99
(LOGO) HOUSEHOLD
Quarterly Financial Supplement--June 30, 2004
Index Page No.
----- --------
Basis of Reporting.................................................... 2
Consolidated Statements of Income--Owned Basis:
Three Months....................................................... 3
Six Months......................................................... 5
Receivables Analysis.................................................. 7
Financial Highlights--Managed Basis:
Three Months....................................................... 8
Six Months......................................................... 9
Credit Quality/Credit Loss Reserves--Managed Basis.................... 10
Reconciliations to GAAP Financial Measures:
Revenues, Average Interest-Earning Assets and Net Interest Income:
Three Months................................................... 11
Six Months..................................................... 12
Selected Financial Ratios.......................................... 13
Credit Quality/Credit Loss Reserves:
Two-Months-and-Over Contractual Delinquency.................... 14
Quarter-to-Date Charge-offs, Net of Recoveries................. 14
Real Estate Charge-offs and REO Expense........................ 16
Credit Loss Reserves........................................... 16
Nonperforming Assets........................................... 17
Basis of Reporting
Non-GAAP Financial Measures
This Quarterly Financial Supplement includes financial information which is
presented on a non-GAAP basis as discussed below. Information included in this
Quarterly Financial Supplement is intended to supplement and should not be
considered a substitute for owned basis reporting. This Quarterly Financial
Supplement should be read in conjunction with the owned basis information
reported in our Quarterly Reports on Form 10-Q.
See "Reconciliations to GAAP Financial Measures" for quantitative
reconciliations of non-GAAP financial information to the equivalent owned basis
GAAP financial information.
Managed basis reporting We monitor our operations and evaluate trends on a
managed basis (a non-GAAP financial measure), which assumes that securitized
receivables have not been sold and are still on our balance sheet. We manage
and evaluate our operations on a managed basis because the receivables that we
securitize are subjected to underwriting standards comparable to our owned
portfolio, are serviced by operating personnel without regard to ownership and
result in a similar credit loss exposure for us. In addition, we fund our
operations, review our operating results, and make decisions about allocating
resources such as employees and capital on a managed basis.
When reporting on a managed basis, net interest income, provision for credit
losses and fee income related to receivables securitized are reclassified from
securitization revenue in our owned statements of income into the appropriate
caption. Additionally, charge-off and delinquency associated with these
receivables are included in our managed basis credit quality statistics.
Debt analysts, rating agencies and others also evaluate our operations on a
managed basis for the reasons discussed above and have historically requested
managed basis information from us. We believe that managed basis information
enables investors and other interested parties to better understand the
performance and quality of our entire managed loan portfolio and is important
to understanding the quality of originations and the related credit risk
inherent in our owned and securitized portfolios. As our securitized levels
fall over time, managed basis and owned basis results will eventually converge
and we will only report owned basis results.
Operating results, percentages and ratios Certain percentages and ratios
have been presented on an operating basis and have been calculated using
"operating net income", a non-GAAP financial measure. "Operating net income" is
net income excluding $167.3 million, after-tax, of HSBC acquisition related
costs and other merger related items incurred by Household in the first quarter
of 2003. This nonrecurring item is also excluded in calculating our operating
basis efficiency ratios. We believe that excluding this nonrecurring item helps
readers of our financial statements to better understand the results and trends
of our underlying business.
A reconciliation of net income to operating net income follows:
Three Months Ended Six Months Ended
------------------ -----------------------
($ millions) 6/30/04 3/31/04 6/30/03 6/30/04 6/30/03
------------ ------- ------- ------- ------- -------
Net income.............................. $394.7 $481.1 $364.0 $875.8 $619.4
HSBC acquisition related costs and other
merger related items incurred by
Household, after-tax.................. -- -- -- -- 167.3
------ ------ ------ ------ ------
Operating net income.................... $394.7 $481.1 $364.0 $875.8 $786.7
====== ====== ====== ====== ======
Predecessor and Successor Periods
Household's acquisition by HSBC on March 28, 2003 has resulted in a new
basis of accounting reflecting the fair value of our assets and liabilities for
the "successor" period beginning March 29, 2003. Information for all
"predecessor" periods prior to the merger are presented using our historical
basis of accounting, which impacts comparability with the "successor" period
beginning March 29, 2003. To assist in the comparability of our financial
results and to make it easier to discuss and understand our results of
operations, this Quarterly Financial Supplement combines the "predecessor"
period (January 1 to March 28, 2003) with the "successor" period (March 29 to
June 30, 2003) to present "combined" results for the six months ended June 30,
2003.
2
Consolidated Statements of Income--Owned Basis
Three Months
% Change
Three Months Ended from Prior
-------------------------- ------------
6/30/04 3/31/04 6/30/03 Qtr. Year
-------- -------- -------- ----- -----
(dollars are in millions)
Finance and other interest income.................... $2,650.3 $2,542.8 $2,504.1 4.2% 5.8%
Interest expense..................................... 640.2 637.3 558.8 .5 14.6
-------- -------- -------- ----- -----
Net interest income.................................. 2,010.1 1,905.5 1,945.3 5.5 3.3
Provision for credit losses.......................... 997.4 927.8 1,039.3 7.5 (4.0)
-------- -------- -------- ----- -----
Net interest income after provision for credit losses 1,012.7 977.7 906.0 3.6 11.8
-------- -------- -------- ----- -----
Other revenues:
Securitization revenue............................ 253.0 333.7 282.6 (24.2) (10.5)
Insurance revenue................................. 204.2 210.9 183.3 (3.2) 11.4
Investment income................................. 30.2 40.8 33.2 (26.0) (9.0)
Fee income........................................ 247.2 267.6 259.7 (7.6) (4.8)
Other income...................................... 178.9 301.9 131.5 (40.7) 36.0
-------- -------- -------- ----- -----
Total other revenues................................. 913.5 1,154.9 890.3 (20.9) 2.6
-------- -------- -------- ----- -----
Costs and expenses:
Salaries and employee benefits.................... 457.4 485.8 488.6 (5.8) (6.4)
Sales incentives.................................. 89.8 78.6 83.2 14.2 7.9
Occupancy and equipment expenses.................. 76.3 82.7 100.0 (7.7) (23.7)
Other marketing expenses.......................... 131.2 131.7 135.2 (.4) (3.0)
Other servicing and administrative expenses....... 198.1 226.1 263.7 (12.4) (24.9)
Support services from HSBC affiliates............. 196.4 177.4 -- 10.7 100.0
Amortization of intangibles....................... 79.4 115.6 78.3 (31.3) 1.4
Policyholders' benefits........................... 93.2 112.8 98.4 (17.4) (5.3)
HSBC acquisition related costs incurred by
Household....................................... -- -- -- -- --
-------- -------- -------- ----- -----
Total costs and expenses............................. 1,321.8 1,410.7 1,247.4 (6.3) 6.0
-------- -------- -------- ----- -----
Income before income tax expense..................... 604.4 721.9 548.9 (16.3) 10.1
Income tax expense................................... 209.7 240.8 184.9 (12.9) 13.4
-------- -------- -------- ----- -----
Net income........................................... $ 394.7 $ 481.1 $ 364.0 (18.0) 8.4%
======== ======== ======== ===== =====
3
Consolidated Statements of Income--Owned Basis
Securitization Revenue
Three Months Ended
-----------------------
6/30/04 3/31/04 6/30/03
------- ------- -------
(in millions)
Net initial gains.................. $ 22.3 $ 2.9 $ 32.3
Net replenishment gains............ 112.9 119.8 134.5
Servicing revenue and excess spread 117.8 211.0 115.8
------ ------ ------
Total.............................. $253.0 $333.7 $282.6
====== ====== ======
Receivables Securitized
Three Months Ended
------------------------
6/30/04 3/31/04 6/30/03
------- ------- --------
(in millions)
Auto finance............ $300.0 -- $ 596.3
MasterCard/Visa (1)..... 500.0 $50.0 --
Private label........... 190.0 -- 250.0
Personal non-credit card -- -- 305.0
------ ----- --------
Total................... $990.0 $50.0 $1,151.3
====== ===== ========
--------
(1) MasterCard and Visa are registered trademarks of MasterCard International,
Incorporated and VISA USA Inc., respectively.
4
Consolidated Statements of Income--Owned Basis
Six Months
Six Months Ended
--------------------
6/30/04 6/30/03 (1) % Change
-------- ----------- --------
(dollars are in millions)
Finance and other interest income....................... $5,193.1 $5,049.1 2.9 %
Interest expense........................................ 1,277.5 1,470.8 (13.1)
-------- -------- ------
Net interest income..................................... 3,915.6 3,578.3 9.4
Provision for credit losses............................. 1,925.2 2,048.9 (6.0)
-------- -------- ------
Net interest income after provision for credit losses... 1,990.4 1,529.4 30.1
-------- -------- ------
Other revenues:
Securitization revenue............................... 586.7 723.7 (18.9)
Insurance revenue.................................... 415.1 360.6 15.1
Investment income.................................... 71.0 114.5 (38.0)
Fee income........................................... 514.8 556.8 (7.5)
Other income......................................... 480.8 375.3 28.1
-------- -------- ------
Total other revenues.................................... 2,068.4 2,130.9 (2.9)
-------- -------- ------
Costs and expenses:
Salaries and employee benefits....................... 943.2 997.2 (5.4)
Sales incentives..................................... 168.4 122.3 37.7
Occupancy and equipment expenses..................... 159.0 201.2 (21.0)
Other marketing expenses............................. 262.9 278.7 (5.7)
Other servicing and administrative expenses.......... 424.2 586.6 (27.7)
Support services from HSBC affiliates................ 373.8 -- 100.0
Amortization of intangibles.......................... 195.0 92.6 100+
Policyholders' benefits.............................. 206.0 192.4 7.1
HSBC acquisition related costs incurred by Household. -- 198.2 (100.0)
-------- -------- ------
Total costs and expenses................................ 2,732.5 2,669.2 2.4
-------- -------- ------
Income before income tax expense........................ 1,326.3 991.1 33.8
Income tax expense...................................... 450.5 371.7 21.2
-------- -------- ------
Net income.............................................. $ 875.8 $ 619.4 41.4%
======== ======== ======
HSBC acquisition related costs incurred by Household.... -- 167.3 (100.0)
-------- -------- ------
Operating net income (2)................................ $ 875.8 $ 786.7 11.3%
======== ======== ======
--------
(1) To assist in the comparability of our financial results, the "predecessor"
period (January 1 to March 28, 2003) has been combined with the "successor"
period (March 29 to June 30, 2003) to present "combined" results for the
six months ended June 30, 2003. See "Basis of Reporting" for additional
information regarding the "successor" period and "predecessor" period.
(2) Operating net income is a non-GAAP financial measure which is provided for
comparison of our operating trends and should be read in conjunction with
our owned basis GAAP financial information. See "Basis of Reporting" for a
discussion on the use of non-GAAP financial information and
"Reconciliations to GAAP Financial Measures" for quantitative
reconciliations to the equivalent GAAP basis financial measure.
5
Consolidated Statements of Income--Owned Basis
Securitization Revenue
Six Months Ended
---------------
6/30/04 6/30/03
------- -------
(in millions)
Net initial gains.................. $ 25.2 $ 67.6
Net replenishment gains............ 232.7 271.4
Servicing revenue and excess spread 328.8 384.7
------ ------
Total.............................. $586.7 $723.7
====== ======
Receivables Securitized
Six Months Ended
-----------------
6/30/04 6/30/03
-------- --------
(in millions)
Auto finance............ $ 300.0 $1,007.1
MasterCard/Visa......... 550.0 320.0
Private label........... 190.0 250.0
Personal non-credit card -- 815.0
-------- --------
Total................... $1,040.0 $2,392.1
======== ========
6
Receivables Analysis
End-of-Period Receivables
% Change
from Prior
------------
6/30/04 3/31/04 6/30/03 Qtr. Year
---------- ---------- ---------- ----- -----
(dollars are in millions)
Owned receivables:
Real estate secured..................... $ 56,033.0 $ 52,440.2 $ 49,756.2 6.9 % 12.6 %
Auto finance............................ 5,459.1 4,936.3 2,576.3 10.6 100+
MasterCard/Visa......................... 10,815.9 10,787.9 9,368.6 .3 15.4
Private label........................... 12,759.3 11,759.1 12,060.1 8.5 5.8
Personal non-credit card................ 14,019.2 13,343.4 14,115.2 5.1 (.7)
Commercial and other.................... 345.9 383.1 430.6 (9.7) (19.7)
---------- ---------- ---------- ----- -----
Total owned receivables.................... 99,432.4 93,650.0 88,307.0 6.2 12.6
---------- ---------- ---------- ----- -----
Receivables serviced with limited recourse:
Real estate secured..................... 175.3 182.1 237.0 (3.7) (26.0)
Auto finance............................ 3,877.1 4,092.5 5,285.3 (5.3) (26.6)
MasterCard/Visa......................... 9,345.2 9,535.7 9,604.8 (2.0) (2.7)
Private label........................... 4,722.7 5,261.3 4,261.3 (10.2) 10.8
Personal non-credit card................ 4,715.1 5,285.3 4,879.8 (10.8) (3.4)
---------- ---------- ---------- ----- -----
Total receivables serviced with limited
recourse................................. 22,835.4 24,356.9 24,268.2 (6.2) (5.9)
---------- ---------- ---------- ----- -----
Managed receivables: (1)
Real estate secured..................... 56,208.3 52,622.3 49,993.2 6.8 12.4
Auto finance............................ 9,336.2 9,028.8 7,861.6 3.4 18.8
MasterCard/Visa......................... 20,161.1 20,323.6 18,973.4 (.8) 6.3
Private label........................... 17,482.0 17,020.4 16,321.4 2.7 7.1
Personal non-credit card (2)............ 18,734.3 18,628.7 18,995.0 .6 (1.4)
Commercial and other.................... 345.9 383.1 430.6 (9.7) (19.7)
---------- ---------- ---------- ----- -----
Total managed receivables.................. $122,267.8 $118,006.9 $112,575.2 3.6 % 8.6 %
========== ========== ========== ===== =====
--------
(1) Managed basis reporting is a non-GAAP financial measure. See "Basis of
Reporting" for a discussion on the use of non-GAAP financial information.
(2) Personal non-credit card receivables are comprised of the following:
6/30/04 3/31/04 6/30/03
--------- --------- ---------
(in millions)
Domestic personal unsecured.. $ 9,787.0 $ 9,658.6 $10,076.3
Union Plus personal unsecured 576.6 640.4 862.0
Personal homeowner loans..... 4,555.6 4,580.3 4,742.0
Foreign unsecured............ 3,815.1 3,749.4 3,314.7
--------- --------- ---------
Total........................ $18,734.3 $18,628.7 $18,995.0
========= ========= =========
7
Financial Highlights--Managed Basis (1)
Revenues, Average Interest-Earning Assets and Net Interest Income
Three Months
% Change
Three Months Ended from Prior
------------------------------------------------------- -------------
6/30/04 (2) 3/31/04 (2) 6/30/03 (2) Qtr. Year
---------- ----- ---------- ----- ---------- ----- ----- -----
(dollars are in millions)
Finance and other interest income.... $ 3,416.6 10.95% $ 3,416.6 10.94% $ 3,368.1 11.67% -- % 1.4%
Interest expense..................... 767.9 2.46 772.0 2.47 704.5 2.44 (.5) 9.0
---------- ----- ---------- ----- ---------- ----- ----- -----
Net interest income.................. 2,648.7 8.49% 2,644.6 8.47% 2,663.6 9.23% .2 (.6)
Provision for credit losses.......... 1,145.4 1,180.9 1,656.3 (3.0) (30.8)
---------- ---------- ---------- ----- -----
Net interest income after provision
for credit losses................... $ 1,503.3 $ 1,463.7 $ 1,007.3 2.7% 49.2%
========== ========== ========== ===== =====
Other revenues:
Insurance revenue................ $ 204.2 $ 210.9 $ 183.3 (3.2)% 11.4%
Investment income................ 30.2 40.8 33.2 (26.0) (9.0)
Fee income....................... 445.1 464.9 427.0 (4.3) 4.2
Securitization revenue........... (435.5) (349.6) 14.0 24.6 (100+)
Other income..................... 178.9 301.9 131.5 (40.7) 36.0
---------- ---------- ---------- ----- -----
Total other revenues................. $ 422.9 $ 668.9 $ 789.0 (36.8)% (46.4)%
========== ========== ========== ===== =====
Average managed receivables
Real estate secured.............. $ 54,398.0 $ 52,164.8 $ 48,619.4 4.3 % 11.9%
Auto finance..................... 9,177.5 8,902.0 7,601.4 3.1 20.7
MasterCard/Visa.................. 20,211.7 20,823.0 18,788.8 (2.9) 7.6
Private label.................... 17,362.5 17,470.5 15,816.7 (.6) 9.8
Personal non-credit card......... 18,567.6 18,857.3 19,049.7 (1.5) (2.5)
Commercial and other............. 366.9 391.0 442.8 (6.2) (17.1)
Purchase accounting fair value
adjustments..................... 346.4 390.5 580.8 (11.3) (40.4)
---------- ---------- ---------- ----- -----
Average managed receivables.......... $120,430.6 $118,999.1 $110,899.6 1.2 % 8.6%
Average noninsurance
investments......................... 3,727.9 5,313.2 3,949.5 (29.8) (5.6)
Other interest-earning assets........ 647.1 641.2 626.2 .9 3.3
---------- ---------- ---------- ----- -----
Average managed interest-earning
assets.............................. $124,805.6 $124,953.5 $115,475.3 (.1)% 8.1%
========== ========== ========== ===== =====
Selected Financial Ratios:
Return on average managed
assets.............................. 1.12% 1.33% 1.08% (15.8)% 3.7%
Efficiency ratio..................... 41.3 40.6 34.3 1.7 20.4
Net interest margin.................. 8.49 8.47 9.23 .2 (8.0)
Risk adjusted revenue................ 6.86 7.11 7.26 (3.5) (5.5)
---------- ---------- ---------- ----- -----
--------
(1) Managed basis reporting is a non-GAAP financial measure. See "Basis of
Reporting" for a discussion on the use of non-GAAP financial information
and "Reconciliations to GAAP Financial Measures" for quantitative
reconciliations to the equivalent GAAP basis financial measure.
(2) % Columns: comparison to average managed interest-earning assets,
annualized.
8
Financial Highlights--Managed Basis (1)
Revenues, Average Interest-Earning Assets and Net Interest Income
Six Months
Six Months Ended
------------------------------------
6/30/04 (2) 6/30/03 (3) (2) % Change
---------- ----- ----------- ----- --------
(dollars are in millions)
Finance and other interest income.................... $ 6,833.2 10.94% $ 6,791.1 11.85% .6 %
Interest expense..................................... 1,539.9 2.46 1,768.9 3.09 (12.9)
---------- ----- ---------- ----- -----
Net interest income.................................. 5,293.3 8.48% 5,022.2 8.76% 5.4
Provision for credit losses.......................... 2,326.3 3,073.2 (24.3)
---------- ---------- -----
Net interest income after provision for credit losses $ 2,967.0 $ 1,949.0 52.2%
========== ========== =====
Other revenues:
Insurance revenue................................ $ 415.1 $ 360.6 15.1%
Investment income................................ 71.0 114.5 (38.0)
Fee income....................................... 910.0 878.8 3.6
Securitization revenue........................... (785.1) (17.9) 100+
Other income..................................... 480.8 375.3 28.1
---------- ---------- -----
Total other revenues................................. $ 1,091.8 $ 1,711.3 (36.2)%
========== ========== =====
Average managed receivables
Real estate secured.............................. $ 53,281.4 $ 47,688.0 11.7%
Auto finance..................................... 9,039.7 7,482.1 20.8
MasterCard/Visa.................................. 20,517.4 18,732.6 9.5
Private label.................................... 17,416.5 15,327.9 13.6
Personal non-credit card......................... 18,712.5 19,223.9 (2.7)
Commercial and other............................. 379.0 450.6 (15.9)
Purchase accounting fair value adjustments....... 368.4 318.9 15.5
---------- ---------- -----
Average managed receivables.......................... $119,714.9 $109,224.0 9.6%
Average noninsurance investments..................... 4,520.5 4,750.7 (4.8)
Other interest-earning assets........................ 644.1 623.0 3.4
---------- ---------- -----
Average managed interest-earning assets.............. $124,879.5 $114,597.7 9.0%
========== ========== =====
Selected Financial Ratios:
Return on average managed assets..................... 1.23% .96% 28.1%
Efficiency ratio..................................... 40.9 37.9 7.9
Net interest margin.................................. 8.48 8.76 (3.2)
Risk adjusted revenue................................ 6.98 7.22 (3.3)
Excluding Nonrecurring Items/Operating Basis:
Return on average managed assets..................... 1.23 1.21 1.7
Efficiency ratio..................................... 40.9 34.8 17.5
---------- ---------- -----
--------
(1) Managed basis reporting is a non-GAAP financial measure. See "Basis of
Reporting" for a discussion on the use of non-GAAP financial information
and "Reconciliations to GAAP Financial Measures" for quantitative
reconciliations to the equivalent GAAP basis financial measure.
(2) % Columns: comparison to average managed interest-earning assets,
annualized.
(3) To assist in the comparability of our financial results, the "predecessor"
period (January 1 to March 28, 2003) has been combined with the "successor"
period (March 29 to June 30, 2003) to present "combined" results for the
six months ended June 30, 2003. See "Basis of Reporting" for additional
information regarding the "successor" period and "predecessor" period.
9
Credit Quality/Credit Loss Reserves--Managed Basis (1)
Two-Months-and-Over Contractual Delinquency
As a percent of managed consumer 6/30/04 3/31/04 6/30/03
receivables, excludes commercial. --------- --------- ---------
Real estate secured.................................................... 3.41 % 3.89 % 4.31 %
Auto finance........................................................... 3.03 2.63 3.08
MasterCard/Visa........................................................ 4.21 4.35 4.19
Private label.......................................................... 4.81 4.98 5.16
Personal non-credit card............................................... 9.81 10.36 10.04
--------- --------- ---------
Total.................................................................. 4.70 % 5.06 % 5.30 %
========= ========= =========
Quarter-to-Date Charge-offs, Net of Recoveries
As a percent of average managed consumer 6/30/04 3/31/04 6/30/03
receivables, annualized, excludes commercial. --------- --------- ---------
Real estate secured.................................................... 1.04 % 1.15 % 1.03 %
Auto finance........................................................... 5.04 7.81 6.69
MasterCard/Visa........................................................ 7.62 7.08 7.90
Private label.......................................................... 4.92 5.06 6.26
Personal non-credit card............................................... 11.00 11.21 9.92
--------- --------- ---------
Total.................................................................. 4.57 % 4.88 % 4.89 %
========= ========= =========
Real estate charge-offs and REO expense as a percent of average managed
real estate secured receivables...................................... 1.47 % 1.63 % 1.46 %
========= ========= =========
Credit Loss Reserves
6/30/04 3/31/04 6/30/03
--------- --------- ---------
(dollars are in millions)
Reserves for managed receivables at beginning of quarter............... $ 5,911.5 $ 6,166.6 $ 5,259.3
Provision for credit losses............................................ 1,145.4 1,180.9 1,656.3
Charge-offs, net of recoveries......................................... (1,367.1) (1,441.9) (1,343.5)
Other, net............................................................. 8.9 5.9 66.8
--------- --------- ---------
Reserves for managed receivables at end of quarter..................... $ 5,698.7 $ 5,911.5 $ 5,638.9
========= ========= =========
Reserves as a percent of managed receivables........................... 4.66 % 5.01 % 5.01 %
--------- --------- ---------
Nonperforming Assets
6/30/04 3/31/04 6/30/03
--------- --------- ---------
(dollars are in millions)
Nonaccrual managed receivables......................................... $ 3,506.4 $ 3,726.7 $ 3,703.2
Accruing managed receivables 90 or more days delinquent................ 1,133.9 1,208.0 1,140.1
Renegotiated commercial loans.......................................... 1.5 1.5 1.5
--------- --------- ---------
Total nonperforming managed receivables................................ 4,641.8 4,936.2 4,844.8
Real estate owned...................................................... 624.2 656.4 486.3
--------- --------- ---------
Total nonperforming assets............................................. $ 5,266.0 $ 5,592.6 $ 5,331.1
========= ========= =========
Managed credit loss reserves as a percent of nonperforming managed
receivables.......................................................... 122.8 % 119.8 % 116.4 %
--------- --------- ---------
--------
(1) Managed basis reporting is a non-GAAP financial measure. See "Basis of
Reporting" for a discussion on the use of non-GAAP financial information
and "Reconciliations to GAAP Financial Measures" for quantitative
reconciliations to the equivalent GAAP basis financial measure.
10
Reconciliation to GAAP Financial Measures
Revenues, Average Interest-Earning Assets and Net Interest Income
Three Months
Three Months Ended 6/30/04 Three Months Ended 3/31/04
------------------------------------ -----------------------------------
Serviced with Serviced with
Limited Limited
Owned Recourse (1) Managed Owned Recourse (1) Managed
---------- ------------- ---------- --------- ------------- ----------
(dollars are in millions)
Finance and other
interest income...... $ 2,650.3 $ 766.3 $ 3,416.6 $ 2,542.8 $ 873.8 $ 3,416.6
Interest expense...... 640.2 127.7 767.9 637.3 134.7 772.0
---------- --------- ---------- --------- --------- ----------
Net interest
income............... 2,010.1 638.6 2,648.7 1,905.5 739.1 2,644.6
Provision for credit
losses............... 997.4 148.0 1,145.4 927.8 253.1 1,180.9
---------- --------- ---------- --------- --------- ----------
Net interest income
after provision for
credit losses........ $ 1,012.7 $ 490.6 $ 1,503.3 $ 977.7 $ 486.0 $ 1,463.7
========== ========= ========== ========= ========= ==========
Other revenues:
Securitization
revenue........... $ 253.0 $ (688.5) $ (435.5) $ 333.7 $ (683.3) $ (349.6)
Insurance
revenue........... 204.2 -- 204.2 210.9 -- 210.9
Investment
income............ 30.2 -- 30.2 40.8 -- 40.8
Fee income......... 247.2 197.9 445.1 267.6 197.3 464.9
Other income....... 178.9 -- 178.9 301.9 -- 301.9
---------- --------- ---------- --------- --------- ----------
Total other
revenues............. $ 913.5 $ (490.6) $ 422.9 $ 1,154.9 $ (486.0) $ 668.9
========== ========= ========== ========= ========= ==========
Average receivables:
Real estate
secured............ $ 54,220.1 $ 177.9 $ 54,398.0 $51,976.2 $ 188.6 $ 52,164.8
Auto finance........ 5,197.2 3,980.3 $ 9,177.5 4,511.2 4,390.8 8,902.0
MasterCard/Visa..... 10,912.7 9,299.0 $ 20,211.7 11,129.0 9,694.0 20,823.0
Private label....... 12,249.0 5,113.5 $ 17,362.5 12,209.2 5,261.3 17,470.5
Personal non-credit
card............... 13,570.5 4,997.1 $ 18,567.6 13,114.6 5,742.7 18,857.3
Commercial and
other.............. 366.9 -- $ 366.9 391.0 -- 391.0
Purchase
accounting fair
value
adjustments........ 346.4 -- $ 346.4 390.5 -- 390.5
---------- --------- ---------- --------- --------- ----------
Average
receivables.......... $ 96,862.8 $23,567.8 $120,430.6 $93,721.7 $25,277.4 $118,999.1
Average noninsurance
investments.......... 3,727.9 -- 3,727.9 5,313.2 -- 5,313.2
Other interest-earning
assets............... 647.1 -- 647.1 641.2 -- 641.2
---------- --------- ---------- --------- --------- ----------
Average interest-
earning assets....... $101,237.8 $23,567.8 $124,805.6 $99,676.1 $25,277.4 $124,953.5
========== ========= ========== ========= ========= ==========
Net interest income as
a percentage of
average interest-
earning assets....... 7.94% 10.84% 8.49% 7.65% 11.70% 8.47%
========== ========= ========== ========= ========= ==========
Three Months Ended 6/30/03
-----------------------------------
Serviced with
Limited
Owned Recourse (1) Managed
--------- ------------- ----------
Finance and other
interest income...... $ 2,504.1 $ 864.0 $ 3,368.1
Interest expense...... 558.8 145.7 704.5
--------- --------- ----------
Net interest
income............... 1,945.3 718.3 2,663.6
Provision for credit
losses............... 1,039.3 617.0 1,656.3
--------- --------- ----------
Net interest income
after provision for
credit losses........ $ 906.0 $ 101.3 $ 1,007.3
========= ========= ==========
Other revenues:
Securitization
revenue........... $ 282.6 $ (268.6) $ 14.0
Insurance
revenue........... 183.3 -- 183.3
Investment
income............ 33.2 -- 33.2
Fee income......... 259.7 167.3 427.0
Other income....... 131.5 -- 131.5
--------- --------- ----------
Total other
revenues............. $ 890.3 $ (101.3) $ 789.0
========= ========= ==========
Average receivables:
Real estate
secured............ $48,333.2 $ 286.2 $ 48,619.4
Auto finance........ 2,436.5 5,164.9 7,601.4
MasterCard/Visa..... 9,109.6 9,679.2 18,788.8
Private label....... 11,836.0 3,980.7 15,816.7
Personal non-credit
card............... 14,080.9 4,968.8 19,049.7
Commercial and
other.............. 442.8 -- 442.8
Purchase
accounting fair
value
adjustments........ 580.8 -- 580.8
--------- --------- ----------
Average
receivables.......... $86,819.8 $24,079.8 $110,899.6
Average noninsurance
investments.......... 3,949.5 -- 3,949.5
Other interest-earning
assets............... 626.2 -- 626.2
--------- --------- ----------
Average interest-
earning assets....... $91,395.5 $24,079.8 $115,475.3
========= ========= ==========
Net interest income as
a percentage of
average interest-
earning assets....... 8.51% 11.93% 9.23%
========= ========= ==========
--------
(1) When reporting on a managed basis, finance and other interest income,
interest expense, provision for credit losses and fee income related to
securitized receivables are reclassified from securitization revenue in our
owned statements of income into the appropriate caption.
11
Reconciliation to GAAP Financial Measures
Revenues, Average Interest-Earning Assets and Net Interest Income
Six Months
Six Months Ended 6/30/04 Six Months Ended 6/30/03
------------------------------------ -----------------------------------
Serviced with Serviced with
Limited Limited
Owned Recourse (1) Managed Owned Recourse (1) Managed
---------- ------------- ---------- --------- ------------- ----------
(dollars are in millions)
Finance and other interest
income.................... $ 5,193.1 $ 1,640.1 $ 6,833.2 $ 5,049.1 $ 1,742.0 $ 6,791.1
Interest expense............ 1,277.5 262.4 1,539.9 1,470.8 298.1 1,768.9
---------- --------- ---------- --------- --------- ----------
Net interest income......... 3,915.6 1,377.7 5,293.3 3,578.3 1,443.9 5,022.2
Provision for credit losses. 1,925.2 401.1 2,326.3 2,048.9 1,024.3 3,073.2
---------- --------- ---------- --------- --------- ----------
Net interest income after
provision for credit
losses.................... $ 1,990.4 $ 976.6 $ 2,967.0 $ 1,529.4 $ 419.6 $ 1,949.0
========== ========= ========== ========= ========= ==========
Other revenues:
Securitization revenue... $ 586.7 $(1,371.8) $ (785.1) $ 723.7 $ (741.6) $ (17.9)
Insurance revenue........ 415.1 -- 415.1 360.6 -- 360.6
Investment income........ 71.0 -- 71.0 114.5 -- 114.5
Fee income............... 514.8 395.2 910.0 556.8 322.0 878.8
Other income............. 480.8 -- 480.8 375.3 -- 375.3
---------- --------- ---------- --------- --------- ----------
Total other revenues........ $ 2,068.4 $ (976.6) $ 1,091.8 $ 2,130.9 $ (419.6) $ 1,711.3
========== ========= ========== ========= ========= ==========
Average receivables:
Real estate secured...... $ 53,098.1 $ 183.3 $ 53,281.4 $47,359.2 $ 328.8 $ 47,688.0
Auto finance............. 4,854.4 4,185.3 9,039.7 2,302.4 5,179.7 7,482.1
MasterCard/Visa.......... 11,020.8 9,496.6 20,517.4 8,995.6 9,737.0 18,732.6
Private label............ 12,229.1 5,187.4 17,416.5 11,549.0 3,778.9 15,327.9
Personal non-credit
card................... 13,342.5 5,370.0 18,712.5 14,130.8 5,093.1 19,223.9
Commercial and other..... 379.0 -- 379.0 450.6 -- 450.6
Purchase accounting fair
value adjustments...... 368.4 -- 368.4 318.9 -- 318.9
---------- --------- ---------- --------- --------- ----------
Average receivables......... $ 95,292.3 $24,422.6 $119,714.9 $85,106.5 $24,117.5 $109,224.0
Average noninsurance
investments............... 4,520.5 -- 4,520.5 4,750.7 -- 4,750.7
Other interest-earning
assets.................... 644.1 -- 644.1 623.0 -- 623.0
---------- --------- ---------- --------- --------- ----------
Average interest-earning
assets.................... $100,456.9 $24,422.6 $124,879.5 $90,480.2 $24,117.5 $114,597.7
========== ========= ========== ========= ========= ==========
Net interest income as a
percentage of average
interest-earning assets... 7.80% 11.28% 8.48% 7.91% 11.97% 8.76%
========== ========= ========== ========= ========= ==========
--------
(1) When reporting on a managed basis, finance and other interest income,
interest expense, provision for credit losses and fee income related to
securitized receivables are reclassified from securitization revenue in our
owned statements of income into the appropriate caption.
12
Reconciliation to GAAP Financial Measures
Selected Financial Ratios
Three Months Ended Six Months Ended
---------------------------------- ----------------------
6/30/04 3/31/04 6/30/03 6/30/04 6/30/03
---------- ---------- ---------- ---------- ----------
(dollars are in millions)
Return on Average Common Shareholder's(s')
Equity:
Net income......................................... $ 394.7 $ 481.1 $ 364.0 $ 875.8 $ 619.4
Dividends on preferred stock................... (17.9) (17.9) (18.5) (35.7) (40.8)
---------- ---------- ---------- ---------- ----------
Net income available to common shareholders........ $ 376.8 $ 463.2 $ 345.5 $ 840.1 $ 578.6
HSBC acquisition related costs incurred by
Household......................................... -- -- -- -- 167.3
---------- ---------- ---------- ---------- ----------
Operating net income available to common
shareholders...................................... $ 376.8 $ 463.2 $ 345.5 $ 840.1 $ 745.9
---------- ---------- ---------- ---------- ----------
Average common shareholder's(s') equity............ $ 17,345.2 $ 16,800.4 $ 14,830.9 $ 17,072.8 $ 12,181.7
---------- ---------- ---------- ---------- ----------
Return on average common shareholder's(s')
equity............................................ 8.7 % 11.0 % 9.3 % 9.8 % 9.5 %
Return on average common shareholder's(s') equity,
operating basis................................... 8.7 11.0 9.3 9.8 12.2
========== ========== ========== ========== ==========
Return on Average Assets:
Net income......................................... $ 394.7 $ 481.1 $ 364.0 $ 875.8 $ 619.4
Operating net income............................... 394.7 481.1 364.0 875.8 786.7
---------- ---------- ---------- ---------- ----------
Average assets:
Owned basis.................................... $117,523.2 $119,461.5 $110,363.7 $118,492.4 $105,400.8
Serviced with limited recourse................. 23,567.8 25,277.4 24,079.8 24,422.6 24,117.5
---------- ---------- ---------- ---------- ----------
Managed basis.................................. $141,091.0 $144,738.9 $134,443.5 $142,915.0 $129,518.3
---------- ---------- ---------- ---------- ----------
Return on average owned assets..................... 1.34 % 1.61 % 1.32 % 1.48 % 1.18 %
Return on average owned assets, operating basis.... 1.34 1.61 1.32 1.48 1.49
Return on average managed assets................... 1.12 1.33 1.08 1.23 .96
Return on average managed assets, operating
basis............................................. 1.12 1.33 1.08 1.23 1.21
========== ========== ========== ========== ==========
Efficiency Ratio:
Total costs and expenses less policyholders'
benefits.......................................... $ 1,228.6 $ 1,297.9 $ 1,149.0 $ 2,526.5 $ 2,476.8
HSBC acquisition related costs incurred by
Household..................................... -- -- -- -- (198.2)
---------- ---------- ---------- ---------- ----------
Total costs and expenses less policyholders'
benefits, excluding nonrecurring items........ $ 1,228.6 $ 1,297.9 $ 1,149.0 $ 2,526.5 $ 2,278.6
---------- ---------- ---------- ---------- ----------
Net interest income and other revenues less
policyholders' benefits:
Owned basis.................................... $ 2,830.4 $ 2,947.6 $ 2,737.2 $ 5,778.0 $ 5,516.8
Serviced with limited recourse................. 148.0 253.1 617.0 401.1 1,024.3
---------- ---------- ---------- ---------- ----------
Managed basis.................................. $ 2,978.4 $ 3,200.7 $ 3,354.2 $ 6,179.1 $ 6,541.1
---------- ---------- ---------- ---------- ----------
Owned basis efficiency ratio....................... 43.4 % 44.0 % 42.0 % 43.7 % 44.9 %
Owned basis efficiency ratio, operating basis...... 43.4 44.0 42.0 43.7 41.3
Managed basis efficiency ratio..................... 41.3 40.6 34.3 40.9 37.9
Managed basis efficiency ratio, operating basis.... 41.3 40.6 34.3 40.9 34.8
========== ========== ========== ========== ==========
Managed Basis Risk Adjusted Revenue:
Net interest income................................ $ 2,648.7 $ 2,644.6 $ 2,663.6 $ 5,293.3 $ 5,022.2
Other revenues, excluding securitization revenue... 858.4 1,018.5 775.0 1,876.9 1,729.2
Less: Net charge-offs.............................. (1,367.1) (1,441.9) (1,343.5) (2,809.0) (2,615.9)
---------- ---------- ---------- ---------- ----------
Risk adjusted revenue.............................. $ 2,140.0 $ 2,221.2 $ 2,095.1 $ 4,361.2 $ 4,135.5
Average interest-earning assets.................... 124,805.6 124,953.5 115,475.3 124,879.5 114,597.7
---------- ---------- ---------- ---------- ----------
Managed basis risk adjusted revenue................ 6.86 % 7.11 % 7.26 % 6.98 % 7.22 %
========== ========== ========== ========== ==========
13
Reconciliation to GAAP Financial Measures
Credit Quality/Credit Loss Reserves
Two-Months-and-Over Quarter-to-Date Charge-offs,
Contractual Delinquency Net of Recoveries
-------------------------------------------------- ----------------------------------
Two-Months-and-Over Consumer Two-Months-and-Over Average
Contractual Receivables Contractual Net Consumer Net
Delinquency Outstanding Delinquency Charge-offs Receivables Charge-offs
------------------- ----------- ------------------- ----------- ----------- -----------
(dollars are in millions)
June 30, 2004
Owned:
First mortgage............ $ 1.6 $ 28.7 5.57% $ .3 $ 39.4 3.05%
Real estate secured....... 1,897.1 56,033.0 3.39 141.5 54,220.1 1.04
Auto finance.............. 116.0 5,459.1 2.12 39.6 5,197.3 3.05
MasterCard/Visa........... 631.1 10,815.9 5.83 270.3 10,912.7 9.91
Private label............. 638.1 12,759.3 5.00 155.0 12,249.0 5.06
Personal non-credit card.. 1,250.5 14,019.2 8.92 359.2 13,570.5 10.59
-------- ---------- ----- -------- ---------- -----
Total..................... $4,534.4 $ 99,115.2 4.57% $ 965.9 $ 96,189.0 4.02%
======== ========== ===== ======== ========== =====
Serviced with Limited
Recourse:
Real estate secured....... $ 20.8 $ 175.3 11.87% $ .3 $ 177.9 .67%
Auto finance.............. 167.2 3,877.1 4.31 76.0 3,980.2 7.64
MasterCard/Visa........... 216.8 9,345.2 2.32 114.9 9,299.0 4.94
Private label............. 202.1 4,722.7 4.28 58.6 5,113.5 4.58
Personal non-credit card.. 587.1 4,715.1 12.45 151.3 4,997.1 12.11
-------- ---------- ----- -------- ---------- -----
Total..................... $1,194.0 $ 22,835.4 5.23% $ 401.1 $ 23,567.7 6.81%
======== ========== ===== ======== ========== =====
Managed:
First mortgage............ $ 1.6 $ 28.7 5.57% $ .3 $ 39.4 3.05%
Real estate secured....... 1,917.9 56,208.3 3.41 141.8 54,398.0 1.04
Auto finance.............. 283.2 9,336.2 3.03 115.6 9,177.5 5.04
MasterCard/Visa........... 847.9 20,161.1 4.21 385.2 20,211.7 7.62
Private label............. 840.2 17,482.0 4.81 213.6 17,362.5 4.92
Personal non-credit card.. 1,837.6 18,734.3 9.81 510.5 18,567.6 11.00
-------- ---------- ----- -------- ---------- -----
Total..................... $5,728.4 $121,950.6 4.70% $1,367.0 $119,756.7 4.57%
======== ========== ===== ======== ========== =====
March 31, 2004
Owned:
First mortgage............ $ 2.2 $ 31.8 6.92% $ .4 $ 33.5 4.78%
Real estate secured....... 2,030.7 52,440.2 3.87 149.1 51,976.2 1.15
Auto finance.............. 82.8 4,936.3 1.68 52.4 4,511.2 4.65
MasterCard/Visa........... 636.9 10,787.9 5.90 240.9 11,129.0 8.66
Private label............. 632.5 11,759.1 5.38 161.4 12,209.2 5.29
Personal non-credit card.. 1,285.8 13,343.4 9.64 366.2 13,114.6 11.17
-------- ---------- ----- -------- ---------- -----
Total..................... $4,670.9 $ 93,298.7 5.01% $ 970.4 $ 92,973.7 4.17%
======== ========== ===== ======== ========== =====
Serviced with Limited
Recourse:
Real estate secured....... $ 18.3 $ 182.1 10.05% $ .5 $ 188.6 1.06%
Auto finance.............. 155.0 4,092.5 3.79 121.5 4,390.8 11.07
MasterCard/Visa........... 246.6 9,535.7 2.59 127.7 9,694.0 5.27
Private label............. 215.4 5,261.3 4.09 59.6 5,261.3 4.53
Personal non-credit card.. 645.0 5,285.3 12.20 162.2 5,742.7 11.30
-------- ---------- ----- -------- ---------- -----
Total..................... $1,280.3 $ 24,356.9 5.26% $ 471.5 $ 25,277.4 7.46%
======== ========== ===== ======== ========== =====
Managed:
First mortgage............ $ 2.2 $ 31.8 6.92% $ .4 $ 33.5 4.78%
Real estate secured....... 2,049.0 52,622.3 3.89 149.6 52,164.8 1.15
Auto finance.............. 237.8 9,028.8 2.63 173.9 8,902.0 7.81
MasterCard/Visa........... 883.5 20,323.6 4.35 368.6 20,823.0 7.08
Private label............. 847.9 17,020.4 4.98 221.0 17,470.5 5.06
Personal non-credit card.. 1,930.8 18,628.7 10.36 528.4 18,857.3 11.21
-------- ---------- ----- -------- ---------- -----
Total..................... $5,951.2 $117,655.6 5.06% $1,441.9 $118,251.1 4.88%
======== ========== ===== ======== ========== =====
14
Reconciliation to GAAP Financial Measures
Credit Quality/Credit Loss Reserves (Continued)
Two-Months-and-Over Quarter-to-Date Charge-offs,
Contractual Delinquency Net of Recoveries
-------------------------------------------------- ----------------------------------
Two-Months-and-Over Consumer Two-Months-and-Over Average
Contractual Receivables Contractual Net Consumer Net
Delinquency Outstanding Delinquency Charge-offs Receivables Charge-offs
------------------- ----------- ------------------- ----------- ----------- -----------
(dollars are in millions)
June 30, 2003
Owned:
First mortgage......... $ 3.7 $ 38.9 9.51% $ -- $ 40.2 -- %
Real estate secured.... 2,125.0 49,756.2 4.27 124.1 48,333.2 1.03
Auto finance........... 64.1 2,576.3 2.49 32.3 2,436.5 5.30
MasterCard/Visa........ 559.5 9,368.6 5.97 237.5 9,109.6 10.43
Private label.......... 656.9 12,060.1 5.45 189.8 11,836.0 6.41
Personal non-credit
card.................. 1,324.8 14,115.2 9.39 347.5 14,081.0 9.87
-------- ---------- ----- -------- ---------- -----
Total.................. $4,734.0 $ 87,915.3 5.38% $ 931.2 $ 85,836.5 4.34%
======== ========== ===== ======== ========== =====
Serviced with Limited
Recourse:
Real estate secured.... $ 28.9 $ 237.0 12.19% $ 1.0 $ 286.2 1.40%
Auto finance........... 178.4 5,285.3 3.38 94.9 5,165.0 7.35
MasterCard/Visa........ 235.2 9,604.8 2.45 133.5 9,679.2 5.52
Private label.......... 185.4 4,261.3 4.35 57.9 3,980.7 5.82
Personal non-credit
card.................. 583.0 4,879.8 11.95 125.0 4,968.7 10.06
-------- ---------- ----- -------- ---------- -----
Total.................. $1,210.9 $ 24,268.2 4.99% $ 412.3 $ 24,079.8 6.85%
======== ========== ===== ======== ========== =====
Managed:
First mortgage......... $ 3.7 $ 38.9 9.51% $ -- $ 40.2 -- %
Real estate secured.... 2,153.9 49,993.2 4.31 125.1 48,619.4 1.03
Auto finance........... 242.5 7,861.6 3.08 127.2 7,601.5 6.69
MasterCard/Visa........ 794.7 18,973.4 4.19 371.0 18,788.8 7.90
Private label.......... 842.3 16,321.4 5.16 247.7 15,816.7 6.26
Personal non-credit
card.................. 1,907.8 18,995.0 10.04 472.5 19,049.7 9.92
-------- ---------- ----- -------- ---------- -----
Total.................. $5,944.9 $112,183.5 5.30% $1,343.5 $109,916.3 4.89%
======== ========== ===== ======== ========== =====
15
Reconciliation to GAAP Financial Measures
Credit Quality/Credit Loss Reserves (Continued)
Serviced with
Owned Limited Recourse Managed
--------- ---------------- ----------
(dollars are in millions)
Real Estate Charge-offs and REO Expense:
Three months ended June 30, 2004
Real estate charge-offs and REO expense............ $ 199.4 $ .3 $ 199.7
Average real estate secured receivables............ 54,220.1 177.9 54,398.0
--------- --------- ----------
Real estate charge-offs and REO expense as a
percentage of average real estate secured
receivables....................................... 1.47% 0.67% 1.47%
========= ========= ==========
Three months ended March 31, 2004
Real estate charge-offs and REO expense............ $ 212.1 $ .5 $ 212.6
Average real estate secured receivables............ 51,976.2 188.6 52,164.8
--------- --------- ----------
Real estate charge-offs and REO expense as a
percentage of average real estate secured
receivables....................................... 1.63% 1.06% 1.63%
========= ========= ==========
Three months ended June 30, 2003
Real estate charge-offs and REO expense............ $ 176.3 $ 1.0 $ 177.3
Average real estate secured receivables............ 48,333.2 286.2 48,619.4
--------- --------- ----------
Real estate charge-offs and REO expense as a
percentage of average real estate secured
receivables....................................... 1.46% 1.40% 1.46%
========= ========= ==========
Credit Loss Reserves:
Three months ended June 30, 2004
Reserves for receivables at beginning of quarter... $ 3,753.0 $ 2,158.5 $ 5,911.5
Provision for credit losses........................ 997.4 148.0 1,145.4
Charge-offs, net of recoveries..................... (965.9) (401.2) (1,367.1)
Other, net......................................... 10.2 (1.3) 8.9
--------- --------- ----------
Reserves for receivables at end of quarter......... $ 3,794.7 $ 1,904.0 $ 5,698.7
========= ========= ==========
Receivables........................................ $99,432.4 $22,835.4 $122,267.8
Credit loss reserves as a percent of receivables... 3.82% 8.34% 4.66%
--------- --------- ----------
Three months ended March 31, 2004
Reserves for receivables at beginning of quarter... $ 3,793.1 $ 2,373.5 $ 6,166.6
Provision for credit losses........................ 927.8 253.1 1,180.9
Charge-offs, net of recoveries..................... (970.4) (471.5) (1,441.9)
Other, net......................................... 2.5 3.4 5.9
--------- --------- ----------
Reserves for receivables at end of quarter......... $ 3,753.0 $ 2,158.5 $ 5,911.5
========= ========= ==========
Receivables........................................ $93,650.0 $24,356.9 $118,006.9
Credit loss reserves as a percent of receivables... 4.01% 8.86% 5.01%
--------- --------- ----------
Three months ended June 30, 2003
Reserves for receivables at beginning of quarter... $ 3,483.1 $ 1,776.2 $ 5,259.3
Provision for credit losses........................ 1,039.3 617.0 1,656.3
Charge-offs, net of recoveries..................... (931.2) (412.3) (1,343.5)
Other, net......................................... 67.4 (.6) 66.8
--------- --------- ----------
Reserves for receivables at end of quarter......... $ 3,658.6 $ 1,980.3 $ 5,638.9
========= ========= ==========
Receivables........................................ $88,307.0 $24,268.2 $112,575.2
Credit loss reserves as a percent of receivables... 4.14% 8.16% 5.01%
--------- --------- ----------
16
Reconciliation to GAAP Financial Measures
Credit Quality/Credit Loss Reserves (Continued)
Serviced with
Owned Limited Recourse Managed
-------- ---------------- --------
(dollars are in millions)
Nonperforming Assets:
June 30, 2004
Nonaccrual receivables............................... $2,832.5 $ 673.9 $3,506.4
Accruing receivables 90 or more days delinquent...... 849.6 284.3 1,133.9
Renegotiated commercial loans........................ 1.5 -- 1.5
-------- -------- --------
Total nonperforming receivables...................... 3,683.6 958.2 4,641.8
Real estate owned.................................... 624.2 -- 624.2
-------- -------- --------
Total nonperforming assets........................... $4,307.8 $ 958.2 $5,266.0
======== ======== ========
Credit loss reserves as a percent of nonperforming
receivables......................................... 103.0% -- 122.8%
-------- -------- --------
March 31, 2004
Nonaccrual receivables............................... $3,003.2 $ 723.5 $3,726.7
Accruing receivables 90 or more days delinquent...... 876.1 331.9 1,208.0
Renegotiated commercial loans........................ 1.5 -- 1.5
-------- -------- --------
Total nonperforming receivables...................... 3,880.8 1,055.4 4,936.2
Real estate owned.................................... 656.4 -- 656.4
-------- -------- --------
Total nonperforming assets........................... $4,537.2 $1,055.4 $5,592.6
======== ======== ========
Credit loss reserves as a percent of nonperforming
receivables......................................... 96.7% -- 119.8%
-------- -------- --------
June 30, 2003
Nonaccrual receivables............................... $3,021.2 $ 682.0 $3,703.2
Accruing receivables 90 or more days delinquent...... 843.8 296.3 1,140.1
Renegotiated commercial loans........................ 1.5 -- 1.5
-------- -------- --------
Total nonperforming receivables...................... 3,866.5 978.3 4,844.8
Real estate owned.................................... 486.3 -- 486.3
-------- -------- --------
Total nonperforming assets........................... $4,352.8 $ 978.3 $5,331.1
======== ======== ========
Credit loss reserves as a percent of nonperforming
receivables......................................... 94.6% -- 116.4%
-------- -------- --------
17
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