Providian National Bank, Tilton, NH
October 1, 2005
Providian National Bank merged out of the National Bank System
OCC Quarterly Journal vol 25 no. 1
NYT: Bank to Buy Credit Card Business for $6.45 Billion
By ERIC DASH
Published: June 7, 2005
Washington Mutual, which grew rapidly from a Seattle savings institution to a home loan giant, said yesterday that it would buy Providian Financial for $6.45 billion in cash and stock, its first major foray into the credit card business. . . .
Response to February 3, 2005 Request for Burden Reduction Recommendations; Money Laundering, Safety and Soundness, and Securities Rules; Economic Growth and Regulatory Paperwork Reduction Act of 1996 Review – May 4, 2005 letter of Mark R. Hillis
Chief Credit Officer, Washington Mutual Bank
Washington Mutual is a financial services company serving consumers and small to midsized businesses. Although we operate principally in California, Washington, Oregon, Florida, Texas and Utah, our operations serve consumers in all 50 states. Through our subsidiaries, we engage in mortgage banking, consumer banking, commercial banking, financial services and consumer finance. Two of our banking subsidiaries, Washington Mutual Bank, FA and Washington Mutual Bank fsb, would be subject to the revisions of the Thrift Financial Report (“TFR”) as stated in the proposal.
WaMu October 3, 2000 response to OTC Proposed Agency Information Collection Activities
Providian National Bank
295 Main Street
Tilton, NH 03276-5147
National Bank Charter Number: 1333
Description of Institution
Providian National Bank is a Competitive Equality Banking Act (CEBA) limited purpose bank specializing in credit card lending and deposit products. The main office of PNB is located in Tilton, New Hampshire, with a single branch office located in Belmont, New Hampshire. PNB offers proprietary credit card products nationwide under the Visa and MasterCard brands and in collaboration with third-party affinity partners. PNB’s credit card loans are sourced primarily through direct mail solicitations. As of September 30, 2004, bank assets totaled $13.1 billion.
PNB employs approximately 3,460 individuals with major employment centers for PNB’s credit card activities in San Francisco and Pleasanton, California, and Arlington, Austin, El Paso and San Antonio, Texas.
Providian Bancorp Services
201 Mission Street
San Francisco, CA 94105
Providian Financial Corporation
4460 Rosewood Dr
PNB is the result of the 1997 merger of PNB, Concord, New Hampshire, into First Deposit National Bank, Tilton, New Hampshire, with the combined bank retaining the PNB name. As an accommodation to customers who used the products and services of the predecessor institutions, PNB offers commercial and consumer loans and deposit products to local residents at PNB’s New Hampshire main office and branch. Generally, CEBA banks cannot make commercial loans nor accept any savings or time deposits less than $100 thousand. PNB, however, is allowed to provide commercial loans and to accept savings or time deposits at its New Hampshire main office and branch, as a result of the CEBA-grandfather provision. This provision allows “non-bank banks” chartered prior to March 5, 1987, to conduct these activities if they could lawfully conduct them prior to the CEBA being enacted. PNB was originally chartered in 1853 and designated as a limited purpose bank for CRA purposes on April 19, 1996. Lending activities at the main office and branch amount to less than 1% of managed assets.
PNB is a wholly owned subsidiary of Providian Financial Corporation (PFC), a Delaware corporation based in San Francisco, California. As of September 30, 2004, PFC reported total assets of $13.9 billion. Effective December 31, 2003, PNB acquired substantially all of the assets and assumed the liabilities of PFC’s other wholly owned bank subsidiary, Providian Bank (PB), a Utah industrial loan corporation organized under the laws of Utah and a member of the FDIC. Immediately following the transaction, PB was merged with and into PNB.
During the course of the evaluation period, PNB underwent significant changes in its financial condition, management, and business strategy. In late 2001, as a result of deterioration in its asset quality, PNB entered into a written agreement with the OCC to address various safety and soundness concerns. From year-end 2000 to year-end 2001 PNB’s earnings dropped from $665 to $189 million. PNB’s on-balance sheet Report of Condition and Income (Call Report) assets dropped from over $17 billion to just over $13 billion from year-end 2001 to the most recent quarter-end of September 30, 2004. While the financial condition of PNB has recently improved, during the majority of the evaluation period PNB experienced significant financial challenges. These challenges had the potential to impact PNB’s capacity in helping to meet the credit and CD needs of its AA.
OCC Public Disclosure
November 29, 2004
COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION
Providian National Bank
Charter Number: 1333
“Re: Application from Providian National Bank, Tilton, New Hampshire to purchase substantially all the assets and assume all of the deposits of Providian Bank, Salt Lake City, Utah; and, application to merge, subsequent to the purchase and assumption transaction, Providian Bank, Salt Lake City, Utah, an affiliated Utah non-bank business corporation with and into Providian National Bank, Tilton, New Hampshire under the authority of 12 U.S.C. § 215a-3.
Application Control Numbers: 2002-WE-02-0007 and 2003-WE-12-0260”
Comptroller of the Currency Administrator of National Banks
Corporate Decision #2003-12 December 2003
New York Times: Providian 57% drop in earnings
Published: July 29, 2003
The Providian Financial Corporation, a credit card issuer, said yesterday that second-quarter net income dropped 57 percent and net revenue decreased 27 percent. Net income fell to $39 million, or 13 cents, from $89.9 million, or 53 cents, in the period a year earlier. The company, based in San Francisco, was expected to earn 10 cents, according to analysts surveyed by Thomson Financial. Net revenue fell to $521.1 million from $718.3 million. Results include $8 million, or 3 cents a share, in costs for anticipated sales, as the company plans to sell $859 million in credit card loans in the next few weeks, Providian said. Its shares fell 14 cents, or 1.4 percent, to $9.80.
“In November 2001, the OCC entered into a Formal Agreement with Providian National Bank, Tilton, New Hampshire, a monoline credit card bank that was experiencing substantial asset deterioration. In addition to the Formal Agreement, the bank also executed a Capital and Liquidity Maintenance Agreement to be executed by the bank. The terms of the formal agreement require, among other things, that the bank submit a Capital Plan and to immediately restrict the Bank’s growth in certain credit card products. In the Matter of Providian National Bank, Tilton, New Hampshire.”
Office of the Comptroller of the Currency (OCC)
– Special Supervision/Fraud and Enforcement Activities
Quarterly Journal, Vol. 21, No. 1, March 2002 pp. 79 – 83
Providian sells $8.2 Billion is credit card loans
New York Times
Published: January 17, 2002
The Providian Financial Corporation, a leading issuer of Visa and MasterCard credit cards, has agreed to sell its proceeds from $8.2 billion in credit card loans to J. P. Morgan Chase & Company to raise cash and satisfy regulators. The loans, about one-quarter of its business, are with Providian’s most creditworthy customers. Providian, based in San Francisco, is trying to find a buyer for $3 billion in loans to customers with poor or short credit histories. In November, federal regulators told Providian to improve its capital ratios, measures of the company’s cushion against unexpected loan losses, after profit plunged because of an increase in the number of customers with blemished credit who could not pay their credit card bills.
Providian National Bank (PNB) is a limited purpose institution specializing in consumer lending and deposit products, including credit cards and certificates of deposit. The main office of PNB is located in Tilton, New Hampshire, with a single branch in Belmont, New Hampshire. PNB is the result of the 1997 merger of Providian National Bank (headquartered in Concord, New Hampshire) into First Deposit National Bank (headquartered in Tilton, New Hampshire). The combined company retained the name Providian. As an accommodation to customers who used the products and services of the predecessor institution, the bank offers commercial and consumer loans and deposit products to local residents. Lending activities at the main office and branch amount to less than 1% of managed assets.
PNB was designated as a limited purpose bank for purposes of the Community Reinvestment Act on April 19, 1996. While there are no financial impediments that would prevent PNB from helping to meet the credit needs of the assessment area, it is subject to the limitations of the Competitive Equality Banking Act of 1987 (CEBA). In general, banks subject to CEBA can not make commercial loans nor accept any savings or time deposits less than $100,000. PNB is allowed to provide commercial loans and to accept savings or time deposits at its main office in Tilton and branch in Belmont as a result of the grandfather provision in CEBA. This provision allows “non-bank banks” chartered prior to March 5, 1987, to conduct these activities if they could lawfully conduct them prior to CEBA being enacted. The bank was chartered in 1853.
PNB is a wholly owned subsidiary of Providian Financial Corporation (PFC), a publicly traded company with total assets of $15 billion and net income of $665 million as of December 2000, based in San Francisco, California. PFC was incorporated in Delaware in 1984 under the name First Deposit Corporation. The name of the company was changed from First Deposit Corporation to Providian Bancorp., Inc. in 1994 and to PFC in 1997. PFC has evolved from a one-market, one-product company into a multi-market, multi-product provider of consumer financial services. Loans are sourced primarily through nationwide mail solicitations and telemarketing. As part of its funding strategy, PFC securitizes varying percentages of its receivables. In 2000, the bank securitized 43% of the its receivables and retained the remainder. Table 1 highlights basic financial information regarding PNB.
February 20, 2001
Community Reinvestment Act
Providian National Bank
“The court recognized that whether an activity falls within the ‘‘business of insurance’’ for purposes of the McCarran-Ferguson Act is a federal question and not determined by State law defining insurance. Id. at 780, n.8 (citing SEC v. Variable Annuity Life Ins. Co., 359 U.S. 65, 69(1959)). See also Steele v. First Deposit Nat’l Bank, 732 So.2d 301 (Ala. Civ. App. 1999) (finding a credit protection debt deferral product was not within the meaning of the ‘‘business of insurance’’).”
New York Times – Providian acquires First Union Credit Card Portfolio
Published: April 2, 1998
The Providian Financial Corporation of San Francisco said it would acquire the $1.1 billion credit card portfolio of the First Union Corporation. Both are bank holding companies.
Andrew Seth Kahr was the founder and CEO of First Deposit Corp, which later became known as Providian, and was acquired by Washington Mutual in 2005.
Class action lawsuit
In a 1999 cardholder class-action lawsuit against Providian, 12 internal company documents were obtained by The San Francisco Chronicle.
In a July 1998 memorandum to David Alvarez and Dawn Greiner, Kahr urged the company not to tell customers that some credit cards don’t have “grace periods,” a limited time for paying off balances before finance charges kick in. And in a September 1998 memo to marketing executive Greg Pacheco, Kahr suggested how to promote a for-fee cardholder buyers club program that in most cases offered tiny 1% rebates at selected stores: “A 1% rebate is a ‘discount on everything you buy.’ We could easily make that discount ‘up to 30%’ just by randomly or systematically giving a few customers a big rebate.”
In a September 1998 memo to Mehta, Kahr advised calculating the credit protection charge as a percentage of the customer’s credit line:”The (credit protection) fee can be denominated at 9.8 cents per hundred dollars of line, or whatever, and this has the additional merit of making the $96 go away from the disclosure box.” The recommendation was underlined and the notation “excellent suggestion,” followed by the CEO’s initials, was penned in the margin.
For his role in forming the credit card business, he was interviewed by the PBS Frontline documentary “Secret History of the Credit Card”. He claims to have introduced the two percent minimum monthly payment in the credit card business (as opposed to the usual five percent), as well as the idea of a zero percent financing introductory rate in mass mailings and solicitations.
Although Providian was prominently mentioned in “Secret History of the Credit Card”, Kahr’s specific connection to Providian as its founder was not mentioned at all, possibly as a provision of his agreement to be interviewed, previously mentioned therein.