This startup aims to solve funding crunch for kids already in college

And they’ve got two well-known, deep-pocketed firms backing the venture—Bank of New York Mellon and Chicago venture-capital firm Lightbank.

“People don’t understand the scale of this problem,” Wright says.

The loans won’t be available for students who haven’t yet begun college. Instead, they are for those who are at least juniors and have excellent grades at four-year colleges and universities. “That’s the kid we want to make the bet on,” he says.

Targeted local schools, apart from UIC, include the University of Chicago, Northwestern University, DePaul University, Loyola University Chicago and others. There are more than 65,000 undergrads in those institutions, with the average unmet financial need per student of more than $20,000, according to data compiled by Lightbank.

Lightbank believes the national market for students in need of these bridge loans to finish school is between $11 billion and $15 billion, says Eric Ong, vice president at Lightbank and the firm’s point person on the transaction. “It’s a big market, and no one’s going after it,” he says.

Neither Lightbank nor A.M. Money would disclose the amount of Lightbank’s equity investment. Likewise, a Bank of New York spokeswoman says no one there can discuss the bonds financing the loans due to securities law restrictions.

Several large banks have expressed interest in underwriting future bonds to finance these loans, Ong says. He expects numerous banks to get involved, assuming A.M. Money establishes the business model.

“We’re really, really bullish about it,” Ong says.

The key to the product is that no co-signer is required. The private lending industry typically demands that parents or others shoulder the risk if a borrower doesn’t repay the loan over a period ranging from five to 20 years. And rates are generally higher than the 7 percent or so A.M. Money is charging.

For example, interest rates on student loans at one of the nation’s largest private student lenders, Riverwoods-based Discover Financial, averaged 8.59 percent in the second quarter, according to investor disclosures.

Underwriting is relatively straightforward. The questions the firm asks and attempts to answer are, “Who is going to graduate? Are they employable?” Rogers says.

The federal government keeps statistics on the performance of loans at specific colleges. Students at schools that perform well are eligible for A.M. Money loans. Those at online schools or for-profit colleges don’t qualify.

Students provide their transcripts. Those with good grades at qualifying schools get loans. “Most of the process is automated,” Rogers says.

Private lending without a co-signer sounds risky. Nationally, for students who began paying off their debt in 2013, the most recent default rate on federal loans was 11.3 percent. For four-year, public institutions, the average default rate for students who attended four or more years was 7.3 percent, according to the U.S. Department of Education.

But, essentially, A.M. Money is betting on the quality of the schools whose students it’s willing to bankroll.

UIC, for example, has a student default rate of 2.8 percent for the group that began repaying their loans in 2013, according to the Department of Education. The University of Chicago’s student default rate from the same year is just 0.9 percent. And Northwestern’s is 1.3 percent.

Related Posts:

  • No Related Posts

Fintech start-up working to fill Myanmar’s loan gap

Unlike banks, Mother Finance is a fintech – or financial technology – start-up. Its customers apply for loans through a mobile app without ever stepping …

“So far, we have made loans to 10,000 people, most of them civil servants, of over K1.5 billion in total. This year, we’re targeting small to medium-sized enterprises (SMEs),” she said.

Unlike banks, Mother Finance is a fintech – or financial technology – start-up. Its customers apply for loans through a mobile app without ever stepping into an office.

“We are a paperless organisation where loan applications are concerned. We use fintech to reach out to and communicate with potential borrowers,” Ma Theta Aye said. The aim is to make lending more convenient and accessible for qualified individuals who need short-term funds but who may not be eligible for funds via traditional banking channels.

At Mother Finance, obtaining a loan starts with downloading the company’s app. Once the loan is approved, the successful applicant can withdraw the money from their bank accounts or mobile wallet. “It’s safe, convenient and you can apply at any time of the day,” she said.

Mother Finance, founded in July 2018, is one of 28 non-bank financial institutions licensed by the Central Bank of Myanmar that offer financial services, including loans. It is part of Yangon-based Mother Group Co Ltd, a local business conglomerate involved mainly in construction, manufacturing and trade.

Ma Theta Aye talked to us about the role of technology in helping to plug the financing gap in Myanmar:

How did you get the idea to start Mother Finance?

I had returned to Myanmar in 2016 after 20 years abroad and worked at a local firm for two years where I saw opportunities in financial services, especially where loans were concerned.

In Myanmar, I found that microcredit firms were mainly granting loans to people in rural areas, while many people in urban areas who had 9-to-5 jobs and sideline incomes from selling goods and services were finding it hard to get a loan to finance their businesses. So I decided to set up Mother Finance.

What challenges did you encounter when starting?

When we first started, there were many who doubted that we could sustain a fintech firm, as this type of business was still very much in its infancy in Myanmar. Many also believed that without going the traditional way of having face-to-face meetings with applicants as part of the vetting process, the company would have a hard time getting people to repay loans.

However, when we first started, we focused on civil servants, which I think was the right strategy, as technology allows us to get the financial background data that we needed in the application process. The government and the rest of the private sector are struggling to set up a credit rating service agency, as they lack the data.

There are risks, of course, but they are minimised because data collection is made easier by technology. We also educate applicants about financial literacy.

How does the company check an applicant’s background?

Technology is used for everything, from facial recognition to identify applicants through their most recent photos to their eligibility for a loan. Also, applicants have to give us permission to take data from their mobile phones, or the process cannot go forward.

Once the identity of the applicant has been established, we look through their phones to check data use, calls made and messages sent. We can also check the phone’s location tracker to see if applicants have actually been to the office address they give us. We also check their Facebook account to see if they have any friends who are on our blacklist.

All this data is taken into account before an algorithm is used to calculate the applicant’s ability to repay a loan. The interest rate is not fixed but based on the risk. We may refuse to loan them money, lend them less than the amount applied for, or charge a higher interest rate.

Our non-performing loan rate is 0.5 percent. Borrowers with a good track record can subsequently borrow larger amounts and at lower rates while defaulters go on our blacklist.

What types of loans do you offer?

As a non-bank financial institution, we target retail customers. We have three types of loans – small, employee, and SMEs. They range from K50,000 for small loans to K50 million for SME loans. We started out offering employee loans, and introduced small loans earlier this year, and SME loans three months ago.

There are no fixed interest rates. It depends on the risks and personal financial background of the borrowers, which vary from individual to individual. We sometimes give out a lower amount for first-time borrowers. Based on their track record, the loan amounts may increase and interest rates decrease for subsequent loans. Their credit history is important and helps us to build up the borrower’s financial identity.

How long does it usually take to process a loan?

We issue loans within 48 hours if the borrower has proper documentation and there are no glitches in the application process. It may take a bit longer if not enough data is available, or if the loan amount is higher, such as the ones offered to SMEs, which start at K1 million.

There is no face-to-face interaction or physical documentation involved. In general, for smaller loans, we take far less time, as we are now familiar with the process, while SME loans take a bit longer. The advantages of being a fintech is that we are flexible and can easily amend the process as it’s paperless. – Translated

Related Posts:

  • No Related Posts

QNB Corp. Reports Earnings For Second Quarter 2019

Unrealized loss on equity securities decreased $446,000 when comparing the second quarter 2019 to the same period in 2018, due to the decrease …

QUAKERTOWN, Pa., July 23, 2019 /PRNewswire/ — QNB Corp. (the “Company” or “QNB”) (OTC Bulletin Board: QNBC), the parent company of QNB Bank, reported net income for the second quarter of 2019 of $3,143,000, or $0.90 per share on a diluted basis, compared to net income of $2,862,000, or $0.82 per share on a diluted basis, for the same period in 2018. For the six months ended June 30, 2019, QNB reported net income of $6,522,000, or $1.86 per share on a diluted basis. This compares to net income of $5,797,000, or $1.67 per share on a diluted basis, reported for the same period in 2018.

Total assets as of June 30, 2019 were $1,212,005,000 compared with $1,175,452,000 at December 31, 2018. Loans receivable at June 30, 2019 were $817,593,000 compared with $785,448,000 at December 31, 2018, an increase of $32,145,000, or 4.1%. Total deposits at June 30, 2019 were $1,030,661,000, increasing $15,063,000, compared with $1,015,598,000 at December 31, 2018.

“QNB is pleased to report increased earnings and earnings per share for the second quarter and first half of 2019,” said David W. Freeman, President and Chief Executive Officer. “During the second quarter, we continued to see strong loan, deposit, and household growth throughout the communities the Bank serves. Asset quality and net interest margin improved as well.”

Net Interest Income and Net Interest Margin

Net interest income for the quarter and six months ended June 30, 2019 totaled $9,111,000 and $17,947,000, respectively, an increase of $411,000 and $456,000, respectively, from the same periods in 2018. The net interest margin for the second quarter 2019 was 3.20% compared to 3.15% for the second quarter 2018. Net interest margin for the six months ended June 30, 2019 was 3.19%, an increase of five basis points for the quarter and one basis point for the six months ended June 30, 2019, respectively, compared to the same periods in 2018.

The yield on average earning assets improved 29 basis points to 4.10% for the second quarter 2019, compared with the second quarter 2018. For the six months ended June 30, 2019, the yield on average earning assets was 4.07%, compared with 3.82% for the same period in 2018, primarily due the proportionate increase in loans as a percent of earning assets, along with increased rates. The cost of interest-bearing liabilities increased 30 basis points to 1.11% for the quarter, and 31 basis points to 1.09% for the six months ended June 30, 2019, respectively, compared with the same periods in 2018.

Asset Quality, Provision for Loan Loss and Allowance for Loan Loss

QNB recorded a $150,000 provision for loan losses in the second quarter of 2019 compared with $187,000 in the second quarter 2018. QNB’s allowance for loan losses of $9,164,000 represents 1.12% of loans receivable at June 30, 2019 compared to $8,834,000, or 1.12% of loans receivable at December 31, 2018, and $8,192,000, or 1.05% of loans receivable at June 30, 2018. Net loan charge offs were $1,000 and $45,000 for the quarter and six months ended June 30, 2019, respectively, compared with $32,000 and $24,000 for the same periods in 2018, respectively. Annualized net loan charge-offs for the quarter and six months ended June 30, 2019 were 0.00% and 0.01% of average loans receivable, respectively.

Total non-performing loans, which represent loans on non-accrual status, loans past due 90 days or more and still accruing interest and restructured loans, were $9,677,000, or 1.18% of loans receivable at June 30, 2019, compared with $9,638,000, or 1.23% of loans receivable at December 31, 2018, and $7,987,000, or 1.02% of loans receivable at June 30, 2018. In cases where there is a collateral shortfall on impaired loans, specific impairment reserves have been established based on updated collateral values even if the borrower continues to pay in accordance with the terms of the agreement. At June 30, 2019, $2,172,000, or approximately 28% of the loans classified as non-accrual are current or past due less than 30 days. Commercial loans classified as substandard or doubtful loans totaled $12,572,000 at June 30, 2019, a decrease of $5,767,000, or 31.4%, from the $18,339,000 reported at December 31, 2018, and a decrease of $5,627,000, or 30.9%, from the $18,199,000 reported at June 30, 2018. The decrease is largely due to improved financial performance of two large commercial relationships resulting in upgrades to pass ratings, as well a payoff of a classified loan due to the sale of the collateral by the borrower.

Non-Interest Income

Total non-interest income was $1,654,000 for the second quarter of 2019, an increase of $200,000, or 13.8%, compared with the same period in 2018. Increases in non-interest income comprise; net gain on the sale of investment securities, other income, ATM and debit card, brokerage and advisory, and fees for services to customers, which increased $536,000, $45,000, $32,000, $28,000, and $14,000 respectively, in second quarter 2019 compared with the same period in 2018. Other income increased $45,000 to $373,000, due to increased merchant fee income and the recording of a $58,000 deferred gain on sale of a bank-financed OREO property. These increases were offset in part due to a reduction in miscellaneous income from $60,000 to $28,000. The Company recorded a $53,000 sales tax refund during second quarter 2018.

Unrealized loss on equity securities decreased $446,000 when comparing the second quarter 2019 to the same period in 2018, due to the decrease in fair value of the equities portfolio. Net gains on sale of loans decreased $9,000, due to reduced mortgage loan activity during the second quarter 2019, compared to the same period in 2018.

For the six months ended June 30, 2019, non-interest income was $3,963,000, an increase of $1,442,000, or 57.2%, compared to the same period in 2018, primarily due to net realized gains on the sale of investment securities of $457,000 and improved fair value of equity securities of $776,000, when comparing the two periods.

Non-Interest Expense

Total non-interest expense was $6,793,000 for the second quarter of 2019, increasing $260,000, or 4.0% from $6,533,000 for the same period in 2018. Salaries and benefits expense increased $163,000, or 4.5%, to $3,790,000 when comparing the two quarters. Salary expense and related payroll taxes increased $288,000, or 9.6%, to $3,277,000 during the second quarter 2019 compared to the same period in 2018 due to increased employees and salaries. Retirement plan expenses increased $27,000, or 14.1%, for the same reasons. Medical premiums decreased $152,000, or 29.5%, due to reduced medical claims when comparing the two periods. Net occupancy and furniture and equipment expense increased $86,000, or 8.5%, to $1,097,000 for the second quarter 2019, due primarily to increased rent, building repairs and maintenance, depreciation of furniture and equipment and software maintenance expense of $19,000, $42,000, $36,000, and $25,000, respectively, offset in part by decreased software amortization, and equipment maintenance expense of $7,000 and $23,000, respectively, when comparing the two periods. Other non-interest expense increased $11,000, or 0.6%, when comparing second quarter 2019 with second quarter 2018.

For the six months ended June 30, 2019, non-interest expense was $13,517,000, an increase of $806,000, or 6.3%, compared to the same period in 2018.

Provision for income taxes increased 18.7%, to $679,000 in the second quarter 2019 due to increased pre-tax income and a higher effective tax rate, compared with the same period in 2018. The effective tax rates for the quarter and six months ended June 30, 2019 were 17.8% and 18.7%, respectively, compared with 16.7% and 16.3%, respectively, for the same periods in 2018. The increase in effective tax rates is due to the increased proportional share of taxable versus non-taxable income during the quarter and six months ended June 30, 2019, compared with the same period in 2018.

About the Company

QNB Corp. is the holding company for QNB Bank, which is headquartered in Quakertown, Pennsylvania. QNB Bank currently operates eleven branches in Bucks, Montgomery and Lehigh Counties and offers commercial and retail banking services in the communities it serves. More information about QNB Corp. and QNB Bank is available at www.qnbbank.com.

Forward Looking Statement

This press release may contain forward-looking statements as defined in the Private Securities Litigation Act of 1995. Actual results and trends could differ materially from those set forth in such statements due to various factors. Such factors include the possibility that increased demand or prices for the Company’s financial services and products may not occur, changing economic and competitive conditions, technological developments, and other risks and uncertainties, including those detailed in the Company’s filings with the Securities and Exchange Commission, including “Item lA. Risk Factors,” set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018. You should not place undue reliance on any forward-looking statements. These statements speak only as of the date of this press release, even if subsequently made available by the Company on its website or otherwise. The Company undertakes no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this press release.

QNB Corp.

Consolidated Selected Financial Data (unaudited)

(Dollars in thousands)

Balance Sheet (Period End)

6/30/19

3/31/19

12/31/18

9/30/18

6/30/18

Assets

$

1,212,005

$

1,203,126

$

1,175,452

$

1,184,389

$

1,172,874

Cash and cash equivalents

14,068

13,708

13,458

13,982

11,726

Investment securities

Debt securities, AFS

347,728

344,367

344,221

347,392

344,194

Equity securities

6,898

10,482

9,421

10,436

9,600

Loans held-for-sale

154

404

Loans receivable

817,593

804,528

785,448

785,962

779,886

Allowance for loan losses

(9,164)

(9,015)

(8,834)

(8,645)

(8,192)

Net loans

808,429

795,513

776,614

777,317

771,694

Deposits

1,030,661

1,034,614

1,015,598

1,024,565

985,726

Demand, non-interest bearing

149,591

139,970

128,615

128,089

135,482

Interest-bearing demand, money market and savings

646,759

671,925

663,195

672,467

627,525

Time

234,311

222,719

223,788

224,009

222,719

Short-term borrowings

59,048

49,897

50,872

55,923

85,646

Shareholders’ equity

115,878

110,360

104,348

98,834

97,818

Asset Quality Data (Period End)

Non-accrual loans

$

7,668

$

7,706

$

7,478

$

9,631

$

6,731

Loans past due 90 days or more and still accruing

23

Restructured loans

2,009

2,047

2,160

1,259

1,233

Non-performing loans

9,677

9,753

9,638

10,890

7,987

Other real estate owned and repossessed assets

Non-performing assets

$

9,677

$

9,753

$

9,638

$

10,890

$

7,987

Allowance for loan losses

$

9,164

$

9,015

$

8,834

$

8,645

$

8,192

Non-performing loans / Loans excluding held-for-sale

1.18

%

1.21

%

1.23

%

1.39

%

1.02

%

Non-performing assets / Assets

0.80

%

0.81

%

0.82

%

0.92

%

0.68

%

Allowance for loan losses / Loans excluding held-for-sale

1.12

%

1.12

%

1.12

%

1.10

%

1.05

%

QNB Corp.

Consolidated Selected Financial Data (unaudited)

(Dollars in thousands, except per share data)

Three months ended,

Six months ended,

For the period:

6/30/19

3/31/19

12/31/18

9/30/18

6/30/18

6/30/19

6/30/18

Interest income

$

11,712

$

11,289

$

11,203

$

10,926

$

10,562

$

23,001

$

21,071

Interest expense

2,601

2,453

2,383

2,222

1,862

5,054

3,580

Net interest income

9,111

8,836

8,820

8,704

8,700

17,947

17,491

Provision for loan losses

150

225

187

568

187

375

375

Net interest income after provision

for loan losses

8,961

8,611

8,633

8,136

8,513

17,572

17,116

Non-interest income:

Fees for services to customers

422

393

451

419

408

815

829

ATM and debit card

519

470

502

476

487

989

917

Retail brokerage and advisory income

133

141

66

96

105

274

208

Net realized gain (loss) on investment securities

584

6

(390)

181

48

590

133

Unrealized gain (loss) on equity securities

(405)

976

(862)

731

41

571

(205)

Net gain on sale of loans

28

21

23

38

37

49

44

Other

373

302

354

286

328

675

595

Total non-interest income

1,654

2,309

144

2,227

1,454

3,963

2,521

Non-interest expense:

Salaries and employee benefits

3,790

3,781

3,827

3,612

3,627

7,571

6,972

Net occupancy and furniture and

equipment

1,097

1,062

1,068

1,000

1,011

2,159

1,969

Other

1,906

1,881

1,894

1,773

1,895

3,787

3,770

Total non-interest expense

6,793

6,724

6,789

6,385

6,533

13,517

12,711

Income before income taxes

3,822

4,196

1,988

3,978

3,434

8,018

6,926

Provision for income taxes

679

817

(339)

767

572

1,496

1,129

Net income

$

3,143

$

3,379

$

2,327

$

3,211

$

2,862

$

6,522

$

5,797

Share and Per Share Data:

Net income – basic

$

0.90

$

0.97

$

0.67

$

0.93

$

0.83

$

1.87

$

1.68

Net income – diluted

$

0.90

$

0.97

$

0.67

$

0.92

$

0.82

$

1.86

$

1.67

Book value

$

33.09

$

31.59

$

29.95

$

28.47

$

28.23

$

33.09

$

28.23

Cash dividends

$

0.33

$

0.33

$

0.32

$

0.32

$

0.32

$

0.66

$

0.64

Average common shares outstanding

– basic

3,494,620

3,486,786

3,473,965

3,466,672

3,460,360

3,490,724

3,456,467

Average common shares outstanding

– diluted

3,502,111

3,494,429

3,492,060

3,489,061

3,481,312

3,498,057

3,476,874

(Dollars in thousands, except per share data)

Three months ended,

Six months ended,

For the period:

6/30/19

3/31/19

12/31/18

9/30/18

6/30/18

6/30/19

6/30/18

Selected Ratios:

Return on average assets

1.05

%

1.15

%

0.78

%

1.07

%

0.98

%

1.10

%

1.00

%

Return on average shareholders’ equity

10.91

%

12.09

%

8.29

%

11.64

%

10.70

%

11.49

%

11.02

%

Net interest margin (tax equivalent)

3.20

%

3.18

%

3.11

%

3.06

%

3.15

%

3.19

%

3.18

%

Efficiency ratio (tax equivalent)

61.97

%

59.28

%

74.03

%

57.31

%

63.08

%

60.61

%

62.27

%

Average shareholders’ equity to total

average assets

9.61

%

9.54

%

9.38

%

9.20

%

9.20

%

9.58

%

9.10

%

Net loan charge-offs (recoveries)

$

1

$

44

$

(2)

$

115

$

32

$

45

$

24

Net loan charge-offs (recoveries) –

annualized / Average loans excluding

held-for-sale

0.00

%

0.02

%

0.00

%

0.06

%

0.02

%

0.01

%

0.01

%

Balance Sheet (Average)

Assets

$

1,202,406

$

1,187,374

$

1,186,456

$

1,190,132

$

1,166,383

$

1,194,932

$

1,165,356

Investment securities (Trading, AFS & HTM, Equities)

357,836

360,640

366,469

368,807

372,850

359,231

378,055

Loans receivable

805,538

789,737

784,372

780,221

757,451

797,681

750,828

Deposits

1,021,925

1,008,060

1,018,141

1,023,227

987,000

1,015,031

985,333

Shareholders’ equity

115,551

113,304

111,312

109,433

107,301

114,434

106,073

SOURCE QNB Corp.

Related Posts:

  • No Related Posts

Discover Financial Services Reports Second Quarter Net Income of $753 Million or $2.32 Per …

The company’s return on equity for the second quarter of 2019 was 26%. … Shares of common stock outstanding declined by 1.8% from the prior …

2019 Capital Plan

On June 27, 2019, the Company announced that its capital plan for the four quarters ending June 30, 2020 contemplates share repurchases of up to $1.63 billion and an increase in the company’s quarterly dividend from $0.40 to $0.44 per share of common stock.

The capital plan contemplates actions that maintain capital ratios to meet regulatory and legal requirements and support the company’s funding and other capital markets activities. The timing and exact amount of repurchases under the new repurchase program will be based on market conditions and other factors, including Accounting Standards Update 2016-13, Financial Instruments – Credit Losses, commonly known as CECL, which becomes effective on January 1, 2020, and will change how financial institutions, including the company, account for expected credit losses.

Conference Call and Webcast Information

The company will host a conference call to discuss its first quarter results on Tuesday, July 23, 2019, at 4:00 p.m. Central time. Interested parties can listen to the conference call via a live audio webcast at https://investorrelations.discover.com.

About Discover

Discover Financial Services (DFS) is a direct banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company issues the Discover card, America’s cash rewards pioneer, and offers private student loans, personal loans, home equity loans, checking and savings accounts and certificates of deposit through its direct banking business. It operates the Discover Global Network, comprised of Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation’s leading ATM/debit networks; and Diners Club International, a global payments network with acceptance around the world. For more information, visit www.discover.com/company.

A financial summary follows. Financial, statistical, and business related information, as well as information regarding business and segment trends, is included in the financial supplement filed as Exhibit 99.2 to the company’s Current Report on Form 8-K filed today with the Securities and Exchange Commission (“SEC”). Both the earnings release and the financial supplement are available online at the SEC’s website (http://www.sec.gov) and the company’s website (https://investorrelations.discover.com).

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which speak to our expected business and financial performance, among other matters, contain words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” and similar expressions. Such statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements. These forward-looking statements speak only as of the date of this press release, and there is no undertaking to update or revise them as more information becomes available.

The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: changes in economic variables, such as the availability of consumer credit, the housing market, energy costs, the number and size of personal bankruptcy filings, the rate of unemployment, the levels of consumer confidence and consumer debt, and investor sentiment; the impact of current, pending and future legislation, regulation, supervisory guidance, and regulatory and legal actions, including, but not limited to, those related to tax reform, financial regulatory reform, consumer financial services practices, anti-corruption, and funding, capital and liquidity; the actions and initiatives of current and potential competitors; the company’s ability to manage its expenses; the company’s ability to successfully achieve card acceptance across its networks and maintain relationships with network participants; the company’s ability to sustain and grow its non-card products; difficulty obtaining regulatory approval for, financing, closing, transitioning, integrating or managing the expenses of acquisitions of or investments in new businesses, products or technologies; the company’s ability to manage its credit risk, market risk, liquidity risk, operational risk, compliance and legal risk, and strategic risk; the availability and cost of funding and capital; access to deposit, securitization, equity, debt and credit markets; the impact of rating agency actions; the level and volatility of equity prices, commodity prices and interest rates, currency values, investments, other market fluctuations and other market indices; losses in the company’s investment portfolio; limits on the company’s ability to pay dividends and repurchase its common stock; limits on the company’s ability to receive payments from its subsidiaries; fraudulent activities or material security breaches of key systems; the company’s ability to remain organizationally effective; the company’s ability to increase or sustain Discover card usage or attract new customers; the company’s ability to maintain relationships with merchants; the effect of political, economic and market conditions, geopolitical events and unforeseen or catastrophic events; the company’s ability to introduce new products or services; the company’s ability to manage its relationships with third-party vendors; the company’s ability to maintain current technology and integrate new and acquired systems; the company’s ability to collect amounts for disputed transactions from merchants and merchant acquirers; the company’s ability to attract and retain employees; the company’s ability to protect its reputation and its intellectual property; and new lawsuits, investigations or similar matters or unanticipated developments related to current matters. The company routinely evaluates and may pursue acquisitions of or investments in businesses, products, technologies, loan portfolios or deposits, which may involve payment in cash or the company’s debt or equity securities.

Additional factors that could cause the company’s results to differ materially from those described in the forward-looking statements can be found under “Risk Factors,” “Business – Competition,” “Business – Supervision and Regulation” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company’s Annual Report on Form 10-K for the year ended December 31, 2018, and “Management’s Discussion & Analysis of Financial Condition and Results of Operations” in the company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, which are filed with the SEC and available at the SEC’s internet site (http://www.sec.gov).

DISCOVER FINANCIAL SERVICES
(unaudited, in millions, except per share statistics)
Quarter Ended
June 30, 2019 March 31, 2019 June 30, 2018
EARNINGS SUMMARY
Interest Income

$2,977

$2,937

$2,636

Interest Expense

645

632

507

Net Interest Income

2,332

2,305

2,129

Discount/Interchange Revenue

759

677

724

Rewards Cost

460

446

461

Discount and Interchange Revenue, net

299

231

263

Protection Products Revenue

49

49

50

Loan Fee Income

102

104

95

Transaction Processing Revenue

48

46

42

Other Income

22

28

24

Total Other Income

520

458

474

Revenue Net of Interest Expense

2,852

2,763

2,603

Provision for Loan Losses

787

809

742

Employee Compensation and Benefits

427

425

400

Marketing and Business Development

224

195

224

Information Processing & Communications

101

99

86

Professional Fees

183

167

161

Premises and Equipment

26

28

24

Other Expense

117

110

89

Total Other Expense

1,078

1,024

984

Income Before Income Taxes

987

930

877

Tax Expense

234

204

208

Net Income

$753

$726

$669

Net Income Allocated to Common Stockholders

$747

$705

$663

PER SHARE STATISTICS
Basic EPS

$2.32

$2.15

$1.91

Diluted EPS

$2.32

$2.15

$1.91

Common Stock Price (period end)

$77.59

$71.16

$70.41

Book Value per share

$35.97

$34.60

$31.66

SEGMENT- INCOME BEFORE INCOME TAXES
Direct Banking

$941

$879

$837

Payment Services

46

51

40

Total

$987

$930

$877

BALANCE SHEET SUMMARY
Total Assets

$110,707

$110,720

$102,751

Total Liabilities

99,214

99,461

91,862

Total Equity

11,493

11,259

10,889

Total Liabilities and Stockholders’ Equity

$110,707

$110,720

$102,751

TOTAL LOAN RECEIVABLES
Ending Loans 1, 2

$90,229

$88,743

$84,789

Average Loans 1, 2

$89,358

$89,353

$83,648

Interest Yield

12.82%

12.79%

12.28%

Gross Principal Charge-off Rate

4.03%

4.02%

3.78%

Gross Principal Charge-off Rate excluding PCI Loans 3

4.10%

4.10%

3.87%

Net Principal Charge-off Rate

3.22%

3.25%

3.11%

Net Principal Charge-off Rate excluding PCI Loans 3

3.27%

3.31%

3.18%

Delinquency Rate (30 or more days) excluding PCI Loans 3

2.18%

2.28%

2.08%

Delinquency Rate (90 or more days) excluding PCI Loans 3

1.04%

1.10%

0.99%

Gross Principal Charge-off Dollars

$898

$887

$789

Net Principal Charge-off Dollars

$718

$715

$649

Net Interest and Fee Charge-off Dollars

$158

$158

$138

Loans Delinquent 30 or more days 3

$1,939

$1,988

$1,725

Loans Delinquent 90 or more days 3

$922

$959

$821

Allowance for Loan Loss (period end)

$3,202

$3,134

$2,828

Reserve Change Build/(Release) 4

$69

$94

$93

Reserve Rate

3.55%

3.53%

3.34%

Reserve Rate excluding PCI Loans 3

3.58%

3.57%

3.38%

CREDIT CARD LOANS
Ending Loans

$72,393

$70,789

$67,812

Average Loans

$71,492

$71,363

$66,594

Interest Yield

13.44%

13.42%

12.88%

Gross Principal Charge-off Rate

4.43%

4.40%

4.12%

Net Principal Charge-off Rate

3.49%

3.50%

3.34%

Delinquency Rate (30 or more days)

2.34%

2.45%

2.16%

Delinquency Rate (90 or more days)

1.18%

1.26%

1.09%

Gross Principal Charge-off Dollars

$789

$774

$684

Net Principal Charge-off Dollars

$623

$616

$555

Loans Delinquent 30 or more days

$1,692

$1,731

$1,466

Loans Delinquent 90 or more days

$857

$891

$743

Allowance for Loan Loss (period end)

$2,691

$2,622

$2,334

Reserve Change Build/(Release)

$69

$94

$82

Reserve Rate

3.72%

3.70%

3.44%

Total Discover Card Volume

$39,935

$36,386

$38,430

Discover Card Sales Volume

$36,664

$32,899

$35,077

Rewards Rate

1.25%

1.35%

1.31%

NETWORK VOLUME
PULSE Network

$47,389

$47,106

$44,308

Network Partners

5,950

5,663

4,602

Diners Club International 5

8,472

8,278

8,417

Total Payment Services

61,811

61,047

57,327

Discover Network – Proprietary

37,891

34,051

36,339

Total

$99,702

$95,098

$93,666

1 Total Loans includes Home Equity and other loans.
2 Purchased Credit Impaired (“PCI”) loans are loans that were acquired in which a deterioration in credit quality occurred between the origination date and the acquisition date. These loans were initially recorded at fair value and accrete interest income over the estimated lives of the loans as long as cash flows are reasonably estimable, even if the loans are contractually past due. PCI loans are private student loans and are included in total loan receivables.
3 Excludes PCI loans (described above) which are accounted for on a pooled basis. Since a pool is accounted for as a single asset with a single composite interest rate and aggregate expectation of cash flows, the past-due status of a pool, or that of the individual loans within a pool, is not meaningful. Because the Company is recognizing interest income on a pool of loans, it is all considered to be performing.
4 Allowance for loan loss includes the net change in reserves on PCI pools having no remaining non-accretable difference which does not impact the reserve change build/(release) in provision for loan losses.
5 Volume is derived from data provided by licensees for Diners Club branded cards issued outside of North America and is subject to subsequent revision or amendment.
Note: See Glossary for definitions of financial terms in the financial supplement which is available online at the SEC’s website (http://www.sec.gov) and the Company’s website (http://investorrelations.discoverfinancial.com).

View source version on businesswire.com: https://www.businesswire.com/news/home/20190723005945/en/

Related Posts:

  • No Related Posts