SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number: 1-6701
Full title of the Plan: Providian Corporation Thrift Savings Plan
Name of issuer of the securities held pursuant to the Plan and the address
of its principal executive office:
Providian Corporation
Providian Center
400 W Market Street
Louisville, Kentucky 40202
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Plan Administrator has duly caused this annual report to be signed by the
undersigned thereunto duly authorized.
PROVIDIAN CORPORATION
[S] ROGER L. SMITH
ROGER L. SMITH
PLAN ADMINISTRATOR
May 9, 1995
REPORT OF INDEPENDENT AUDITORS
Plan Administrator
Providian Corporation Thrift Savings Plan
We have audited the accompanying statements of net assets available for plan
benefits of Providian Corporation Thrift Savings Plan as of December 31,
1994 and 1993, and the related statements of changes in net assets available
for plan benefits for the years then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets available for plan benefits of the
Plan at December 31, 1994 and 1993, and the changes in its net assets
available for plan benefits for the years then ended, in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of
assets held for investment purposes as of December 31, 1994, and reportable
transactions for the year ended December 31, 1994, are presented for
purposes of complying with the Department of Labor's Rules and Regulations
for Reporting and Disclosure under the Employee Retirement Income Security
Act of 1974, and are not a required part of the financial statements. The
supplemental schedules have been subjected to the auditing procedures
applied in our audit of the 1994 financial statements and, in our opinion,
are fairly stated in all material respects in relation to the 1994 financial
statements taken as a whole.
[S] ERNST & YOUNG LLP
May 9, 1995
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
December 31, 1994
Total Funds
ASSETS
Investments:
Providian Corporation
common stock $ 76,908,742
Guaranteed interest
contracts 64,062,836
Investments in registered
mutual funds 15,412,398
Temporary investments 13,860,201
Loans receivable from
participants 4,953,424
------------
175,197,601
Cash 183,071
Accrued income on
investments 21,312
Contributions receivable
from participating
employers 1,776,416
Contributions receivable
from participating
employees 330,835
Miscellaneous receivable 40,747
------------
$177,549,982
============
LIABILITIES AND NET ASSETS
AVAILABLE FOR PLAN BENEFITS
Miscellaneous payable $ 41,659
Net assets available
for plan benefits 177,508,323
------------
$177,549,982
============
See notes to financial statements.
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
December 31, 1994
Merrill
Lynch
Providian Providian Providian Global
Common Equity Stable Allocation
Stock Fund Index Fund Value Fund Fund
ASSETS
Investments:
Providian Corporation
common stock $76,908,742
Guaranteed interest
contracts $64,062,836
Investments in registered
mutual funds
Temporary investments $13,860,201 6,026,159 $994,759
Loans receivable from
participants
----------- ----------- ----------- -----------
76,908,742 13,860,201 70,088,995 994,759
Cash 54,820 15,145 75,762 1,088
Accrued income on
investments 9,628 1,735 8,774 125
Contributions receivable
from participating
employers 242,074 86,252 1,312,416 11,593
Contributions receivable
from participating
employees 130,535 23,524 118,960 1,688
Miscellaneous receivable 1,269 229 19,323 16
----------- ----------- ----------- -----------
$77,347,068 $13,987,086 $71,624,230 $1,009,269
=========== =========== =========== ===========
LIABILITIES AND NET ASSETS
AVAILABLE FOR PLAN BENEFITS
Miscellaneous payable $ 8,200 $ 946 $ 4,784 $ 68
Net assets available
for plan benefits 77,338,868 13,986,140 71,619,446 1,009,201
----------- ----------- ----------- -----------
$77,347,068 $13,987,086 $71,624,230 $1,009,269
=========== =========== =========== ===========
See notes to financial statements.
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
December 31, 1994
Merrill Merrill Merrill Merrill
Lynch Lynch Lynch Lynch
Corporate Basic Asset Asset
Bond Fund Value Fund Income Fund Growth Fund
ASSETS
Investments:
Providian Corporation
common stock
Guaranteed interest
contracts
Investments in registered
mutual funds $1,183,555 $838,397 $487,763 $405,876
Temporary investments
Loans receivable from
participants
----------- ----------- ----------- -----------
1,183,555 838,397 487,763 405,876
Cash 1,292 916 533 443
Accrued income on
investments 148 105 61 51
Contributions receivable
from participating
employers 8,667 20,958 11,672 4,838
Contributions receivable
from participating
employees 2,009 1,423 828 689
Miscellaneous receivable 99 14 8 7
----------- ----------- ----------- -----------
$1,195,770 $861,813 $500,865 $411,904
=========== =========== =========== ===========
LIABILITIES AND NET ASSETS
AVAILABLE FOR PLAN BENEFITS
Miscellaneous payable $ 80 $ 57 $ 33 $ 28
Net assets available
for plan benefits 1,195 690 861,756 500,832 411,876
----------- ----------- ----------- -----------
$1,195,770 $861,813 $500,865 $411,904
=========== =========== =========== ===========
See notes to financial statements.
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
December 31, 1994
Fidelity Delaware Templeton
Advisor Group Foreign
Growth Fund Trend Fund Fund Loan Fund
ASSETS
Investments:
Providian Corporation
common stock
Guaranteed interest
contracts
Investments in registered
mutual funds $2,482,596 $577,859 $2,415,434
Temporary investments
Loans receivable from
participants $4,953,424
----------- ----------- ----------- -----------
2,482,596 577,859 2,415,434 4,953,424
Cash 2,712 631 2,639 27,090
Accrued income on
investments 311 72 302
Contributions receivable
from participating
employers 37,555 9,232 31,159
Contributions receivable
from participating
employees 4,214 980 4,100 41,885
Miscellaneous receivable 19,494 169 119
----------- ----------- ----------- -----------
$2,546,882 $588,943 $2,453,753 $5,022,399
=========== =========== =========== ===========
LIABILITIES AND NET ASSETS
AVAILABLE FOR PLAN BENEFITS
Miscellaneous payable $ 169 $ 39 $ 165 $ 27,090
Net assets available
for plan benefits 2,546,713 588,904 2,453,588 4,995,309
----------- ----------- ----------- -----------
$2,546,882 $588,943 $2,453,753 $5,022,399
=========== =========== =========== ===========
See notes to financial statements.
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
December 31, 1993
Total Funds
ASSETS
Investments:
Providian Corporation
common stock $ 85,665,752
Guaranteed interest
contract 39,673,979
Temporary investments 14,103,590
Loans receivable from
participants 3,737,649
------------
143,180,970
Cash 142,448
Accrued income on
investments 35,763
Contributions receivable
from participating
employers 533,015
Contributions receivable
from participating
employees 102,652
------------
$143,994,848
============
LIABILITIES AND NET ASSETS
AVAILABLE FOR PLAN BENEFITS
Cash overdraft $ 282,435
Miscellaneous payable 32,356
Net assets available
for plan benefits 143,680,057
------------
$143,994,848
============
See notes to financial statements.
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
December 31, 1993
Providian Providian Providian
Common Equity Stable
Stock Fund Index Fund Value Fund Loan Fund
ASSETS
Investments:
Providian Corporation
common stock $85,665,752
Guaranteed interest
contract $39,673,979
Temporary investments 319,249 $13,269,577 188,433 $ 326,331
Loans receivable from
participants 3,737,649
----------- ----------- ----------- -----------
85,985,001 13,269,577 39,862,412 4,063,980
Cash 126,781 15,667
Accrued income on
investments 1,226 33,572 245 720
Contributions receivable
from participating
employers 533,015
Contributions receivable
from participating
employees 41,226 14,002 36,502 10,922
----------- ----------- ----------- -----------
$86,687,249 $13,317,151 $39,899,159 $4,091,289
=========== =========== =========== ===========
LIABILITIES AND NET ASSETS
AVAILABLE FOR PLAN BENEFITS
Cash overdraft $ 259,231 $ 23,204
Miscellaneous payable $ 32,356
Net assets available
for plan benefits 86,654,893 13,057,920 39,875,955 $4,091,289
----------- ----------- ----------- -----------
$86,687,249 $13,317,151 $39,899,159 $4,091,289
=========== =========== =========== ===========
See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
For the Year Ended December 31, 1994
Total Funds
Investment income:
Dividends $ 1,989,769
Interest and other 4,913,877
Net appreciation
(depreciation) in fair
value of investments (15,031,336)
Contributions from
participating employers 6,116,013
Contributions from
participating employees 12,485,468
Transfers for mergers of
National Home and
Academy Plans 39,017,244
-------------
49,491,035
Distributions from the
Plan, net (15,472,204)
Administrative expenses (190,565)
Net participant transfers
between funds -
-------------
(15,662,769)
NET INCREASE (DECREASE) 33,828,266
Net assets available
for plan benefits at
beginning of year 143,680,057
-------------
NET ASSETS AVAILABLE FOR
PLAN BENEFITS AT
END OF YEAR $177,508,323
=============
See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
For the Year Ended December 31, 1994
Merrill
Lynch
Providian Providian Providian Global
Common Equity Stable Allocation
Stock Fund Index Fund Value Fund Fund
Investment income:
Dividends $ 1,916,294 $ 35,110
Interest and other 102,584 $ 356,696 $ 4,180,532 463
Net appreciation
(depreciation) in fair
value of investments (14,579,305) 37,832 8,047 (57,521)
Contributions from
participating employers 4,485,227 87,049 1,408,063 11,593
Contributions from
participating employees 5,736,523 1,813,994 4,512,601 46,533
Transfers from mergers
of National Home and
Academy Plans 2,006,718 2,730,423 34,280,103
------------ ------------ ------------ -----------
(331,959) 5,025,994 44,389,346 36,178
Distributions from the
plan, net (7,646,397) (1,101,625) (6,527,889) (4,801)
Administrative expenses (107,044) (40,071) (42,348) (115)
Net participant
transfers between funds (1,230,625) (2,956,078) (6,075,618) 977,939
------------ ------------ ------------ -----------
(8,984,066) (4,097,774) (12,645,855) 973,023
NET INCREASE (DECREASE) (9,316,025) 928,220 31,743,491 1,009,201
Net assets available
for plan benefits at
beginning of year 86,654,893 13,057,920 39,875,955 -
------------ ------------ ------------ -----------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS AT
END OF YEAR $77,338,868 $13,986,140 $71,619,446 $1,009,201
============ ============ ============ ===========
See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
For the Year Ended December 31, 1994
Merrill Merrill Merrill Merrill
Lynch Lynch Lynch Lynch
Corporate Basic Asset Asset
Bond Fund Value Fund Income Fund Growth Fund
Investment income:
Dividends $ 14,001 $ 16,565 $ 6,267 $ 1,532
Interest and other 567 420 276 237
Net appreciation
(depreciation) in fair
value of investments (9,222) (22,762) (9,851) (18,163)
Contributions from
participating employers 8,667 20,958 11,672 4,838
Contributions from
participating employees 49,528 25,547 20,450 21,858
Transfers from mergers
of National Home and
Academy Plans
------------ ------------ ------------ -----------
63,541 40,728 28,814 10,302
Distributions from the
plan, net (2,287) (4,168) (5,898) (6,505)
Administrative expenses (70) (77) (80) (52)
Net participant
transfers between funds 1,134,506 825,273 477,996 408,131
------------ ------------ ------------ -----------
1,132,149 821,028 472,018 401,574
NET INCREASE (DECREASE) 1,195,690 861,756 500,832 411,876
Net assets available
for plan benefits at
beginning of year - - - -
------------ ------------ ------------ -----------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS AT
END OF YEAR $1,195,690 $861,756 $500,832 $411,876
============ ============ ============ ===========
See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
For the Year Ended December 31, 1994
Fidelity Delaware Templeton
Advisor Group Foreign
Growth Fund Trend Fund Fund Loan Fund
Investment income:
Dividends
Interest and other $ 126,533 $ 372 $ 137,815 $ 7,382
Net appreciation
(depreciation) in fair
value of investments (138,006) (15,696) (226,689)
Contributions from
participating employers 37,555 9,232 31,159
Contributions from
participating employees 89,253 27,502 99,794 41,885
Transfers from mergers
of National Home and
Academy Plans
------------ ------------ ------------ -----------
115,335 21,410 42,079 49,267
Distributions from the
plan, net (5,256) (344) (167,034)
Administrative expenses (313) (69) (326)
Net participant
transfers between funds 2,436,947 567,563 2,412,179 1,021,787
------------ ------------ ------------ -----------
2,431,378 567,494 2,411,509 854,753
NET INCREASE (DECREASE) 2,546,713 588,904 2,453,588 904,020
Net assets available
for plan benefits at
beginning of year - - - 4,091,289
------------ ------------ ------------ -----------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS AT
END OF YEAR $2,546,713 $588,904 $2,453,588 $4,995,309
============ ============ ============ ===========
See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
For the Year Ended December 31, 1993
Total Funds
Investment income:
Dividends $ 1,647,982
Interest and other 2,966,093
Net appreciation
in fair value of
investments 2,445,961
Contributions from
participating employers 4,532,824
Contributions from
participating employees 13,090,204
Transfers for mergers of
Durham Life and
Southlife Plans 9,954,888
-------------
34,637,952
Distributions from the
Plan, net (12,704,562)
Net participant transfers
between funds -
-------------
(12,704,562)
NET INCREASE 21,933,390
Net assets available
for plan benefits at
beginning of year 121,746,667
-------------
NET ASSETS AVAILABLE FOR
PLAN BENEFITS AT
END OF YEAR $143,680,057
=============
See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
For the Year Ended December 31, 1993
Providian Providian Providian
Common Equity Stable
Stock Fund Index Fund Value Fund Loan Fund
Investment income:
Dividends $ 1,647,982
Interest and other 17,978 $ 349,666 $ 2,588,084 $ 10,365
Net appreciation
in fair value of
investments 1,800,564 645,397
Contributions from
participating employers 4,412,027 120,797
Contributions from
participating employees 6,026,681 1,941,036 5,119,119 3,368
Transfers from mergers
of Durham Life and
Southlife Plans 873,784 9,081 104
------------ ------------ ------------ -----------
14,779,016 2,936,099 16,909,104 13,733
Distributions from the
plan, net (6,973,579) (549,593) (5,121,785) (59,605)
Net participant
transfers between funds (587,486) (727,794) (813,813) 2,129,093
------------ ------------ ------------ -----------
(7,561,065) (1,277,387) (5,935,598) 2,069,488
NET INCREASE 7,217,951 1,658,712 10,973,506 2,083,221
Net assets available
for plan benefits at
beginning of year 79,436,942 11,399,208 28,902,449 2,008,068
------------ ------------ ------------ -----------
NET ASSETS AVAILABLE
FOR PLAN BENEFITS AT
END OF YEAR $86,654,893 $13,057,920 $39,875,955 $4,091,289
============ ============ ============ ===========
See notes to financial statements.
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Providian Corporation Thrift Savings Plan
(Plan) are prepared on the accrual basis. On May 11, 1994, the Plan's name
was changed from Capital Holding Corporation Thrift Savings Plan to
Providian Corporation Thrift Savings Plan. Effective January 1, 1993, as a
result of guidance provided by the AICPA Employee Benefit Plans Committee,
the Plan no longer reports requested distributions from the Plan, that have
not yet been paid, as a liability in the Statements of Net Assets Available
for Plan Benefits or as a distribution from the Plan in the Statements of
Changes in Net Assets Available for Plan Benefits. Such amounts are not
deducted from the Plan's net assets available for plan benefits until paid.
The 1993 financial statements have been restated to reflect this change.
However, for presentation in Form 5500, the Department of Labor (DOL)
continues to require such amounts to be included in liabilities and
distributions from the Plan. Using the DOL prescribed method, accounts and
other payables in Form 5500 were $218,877 and $4,196,696 at December 31,
1994 and 1993 respectively, while distributions from the Plan were
$11,485,082 and $15,203,624 in 1994 and 1993, respectively.
Securities which are traded on a national securities exchange are valued at
the last reported sales price on the last business day of the year. Shares
of registered mutual funds are valued at quoted market prices which
represent the net asset value of shares held by the Plan at year-end. The
guaranteed interest contracts with Commonwealth Insurance Company
(Commonwealth), a subsidiary of Providian Corporation (Providian), are
stated at cost plus accrued interest (contract value). Temporary
investments are stated at current market value which approximates cost.
Loans receivable from participants are carried at unpaid principal balances.
The Plan presents in the statement of changes in net assets the net
appreciation (depreciation) in the fair value of its investments which
consists of the realized gains or losses and the unrealized appreciation
(depreciation) on those investments. The daily change in market value of
futures contracts is included in net appreciation (depreciation) in fair
value of investments. Margin requirements on futures contracts, equal to
the change in market value, usually are settled on a daily basis.
Effective July 1, 1994, Merrill Lynch Trust Company was appointed as
Trustee of the Plan (Trustee). The Trustee, in accordance with the Trust
Agreement, has exclusive authority and discretion to manage and control the
trust funds, except that Providian Capital Management, Inc., a subsidiary
of Providian, serves as the investment manager for the Providian Equity
Index Fund (formerly Fund B). A description of these funds, and the
additional investment funds now provided under the Plan, is included in
Note B.
Prior to July 1, 1994, Liberty National Bank and Trust Company served as
Trustee to administer the Plan's assets and make investment decisions
relating to the Providian Common Stock Fund (formerly Fund A). Providian,
through a Review Committee, had the investment responsibility relating to
the Providian Equity Index Fund. The Providian Stable Value Fund held a
guaranteed interest contract issued by Commonwealth.
The Trustee accounts for loans receivable as a separate fund. Accordingly,
such loans and related activity are shown as a separate fund (Loan Fund) in
the accompanying financial statements. Distributions from the Loan Fund
represent withdrawals from the Plan which are used to repay a participant's
note. All other normal borrowings and payments, including interest charged
on outstanding loans, are reflected in fund transfers.
The Plan provides that all costs and expenses incurred in administering
the Plan, including the fees and expenses of the Trustee, are to be paid
by the Plan, unless they are paid by the employer. During 1994, the Plan
incurred administrative costs totaling $190,565. No such costs were
incurred by the Plan in 1993.
NOTE B - DESCRIPTION OF THE PLAN
The following description of the Plan provides only general information.
Participants should refer to the Plan document for a complete description
of the Plan's provisions.
The Plan was established on January 1, 1965. Prior to 1981, participation
in the Plan was limited to qualified employees of Providian and certain of
its subsidiaries. Effective January 1, 1981, the Plan was amended to allow
participation by qualified employees of all Providian subsidiaries who
elect to participate, and was renamed and restated in its entirety. The
Plan was amended effective various dates to incorporate certain additional
changes which are reflected below.
The Plan is a defined contribution plan and is funded on a current basis
with contributions from participants and their employers.
Each person who is an employee of Providian or a participating subsidiary
is eligible to become a participant as soon as administratively feasible
following completion of one year of service.
Effective September 26, 1994, participants may elect to contribute an
amount not less than 1% nor more than 15% of their earnings. Prior to
September 26, 1994, the maximum contribution to the Plan could not exceed
11% of participants' earnings. Participants' contributions can be made on
a pre-tax or after-tax basis. Rollovers from other qualified plans are
permitted. The employer match, up to the first 6% of participants'
contributions, was at the following rates for 1994 and 1993:
55% of eligible contributions invested in the Providian Stock Fund
50% of eligible contributions invested in any other investment fund
provided for in the Plan
In addition to the employer matching contributions noted above,
participants in the National Home Life Assurance Company Employees' Profit
Sharing Plan, which was merged into the Plan effective July 1, 1994, are
entitled to receive a contribution based upon a percentage of eligible
compensation (4.5% in 1994). During 1994, an employer contribution of
$1,624,455 was recorded as a result of this provision.
Plan assets are administered in eleven separate funds. Prior to
September 26, 1994, Plan assets were administered in three separate funds
(Funds A, B and C). All employers' contributions, except for participants
who are at least 55 years of age who have elected to make one-time
irrevocable transfers to the Providian Stable Value Fund, are made to an
employer contribution account in the Providian Stock Fund, which consists
almost entirely of Providian common stock. For individuals making this
irrevocable transfer to the Providian Stable Value Fund, all future
employer contributions are also invested in that fund. Contributions from
participants can be made to any of the following funds:
Providian Common Stock Fund: Invests primarily in shares of common stock
of Providian.
Providian Equity Index Fund: Invests primarily in futures, short-term
investments, and other securities with the objective of closely matching
the performance of the Standard & Poor's 500 Common Stock Index.
Providian Stable Value Fund: Invests primarily in a guaranteed interest
contract (GIC), the underlying assets of which consist of a portfolio of
intermediate term bonds with an average credit quality of AA. The fund
also invests in intermediate floating rate GICs and a short-term money
market fund.
Merrill Lynch Global Allocation Fund: Invests primarily in globally
oriented equity, debt and money market securities.
Merrill Lynch Corporate Bond Fund - Investment Grade Portfolio: Invests
in long-term corporate bonds rated A or better by a nationally recognized
rating agency.
Merrill Lynch Basic Value Fund: Invests primarily in stocks that are
selling at a discount from per-share book value or from historic price-
to-earnings ratios.
Merrill Lynch Asset Income Fund: Invests primarily in United States and
foreign debt, equity and money market securities. Under normal conditions,
at least 65% of the funds assets will be invested in debt securities.
Merrill Lynch Asset Growth Fund: Invests primarily in United States and
foreign equity, debt and money market securities.
Fidelity Advisor Growth Opportunities Fund: Invests primarily in common
stocks and securities convertible into common stocks.
Delaware Trend Fund: Invests primarily in common stocks and securities
convertible into common stocks of emerging and other growth-oriented
companies.
Templeton Foreign Fund: Invests primarily in stocks and debt instruments
of companies and governments outside the United States. Although primarily
invested in common stock, the fund may purchase preferred stocks and
certain debt securities such as convertible bonds and bonds selling at a
discount.
Generally, all participants in the Plan maintain Providian Stock Fund
accounts. Upon reaching the age of 55, participants may make a one-time
irrevocable election to transfer their account balance from the Providian
Stock Fund to the Providian Stable Value Fund and invest their own
contributions in the other funds described above rather than in the
Providian Stock Fund. A proportionate share of the net increase or
decrease resulting from investment income and net appreciation or
depreciation in investments in each fund is allocated to each participant
on the valuation date.
A participant may withdraw all or part of his or her after tax and/or
employer contribution account in cash once during any calendar year. A
participant may not withdraw any amounts contributed by an employer within
the two year period immediately preceding the date of withdrawal, unless
the participant has at least sixty months of participation in the Plan.
Within certain pre-defined criteria, Plan participants may borrow from
$1,000 to the lesser of $50,000 or one-half of the vested portion of the
participant's individual account from their respective pre-tax accounts.
Loan repayment terms cannot exceed five years. The fixed interest rate
on a loan is the prime rate as published in the Wall Street Journal on
the last business day of the preceding month plus 1%.
A participant or his or her beneficiary is entitled to receive the
participant's full interest in the Plan upon attainment of the earlier
of the participant's age sixty-five, death or medical disability. For
any other type of termination, the participant is entitled to receive
the value of his or her contribution account as of the valuation date
coincident with or next following termination of employment. In addition,
the participant has a vested interest in his or her employer contribution
account determined on the basis of years of service with the employer as
follows:
Vested Percentage of
Employer
Years of Service Contribution Account
Less than 2 0%
2 but less than 3 15%
3 but less than 4 35%
4 but less than 5 65%
5 years or more 100%
At a minimum, the participant is entitled to receive his or her
contributions to the Plan, without interest. The value of the nonvested
portion of the employer contribution account, forfeited by a participant
who terminates from the Plan, is held until five consecutive one-year
breaks in service has expired or the participant receives or is deemed to
receive a lump sum distribution from the participant's individual account.
Any forfeitures attributable to the employer contribution account shall be
used first, to pay for any forfeitures which are to be restored pursuant
to a participant being reinstated into the Plan, and then to pay Plan
administrative expenses. Any remaining forfeitures will be used to reduce
future employer contributions.
Under the Tax Reform Act of 1986, the Plan is subject to a
nondiscrimination test which limits the contribution rate of certain
highly compensated employees. The Plan was in compliance with the
nondiscrimination limitations during 1994 and 1993.
Although the employers intend to continue the Plan, they have the right to
terminate the Plan or to temporarily suspend or permanently discontinue
contributions at any time. In the event of termination or discontinuance
of contributions, all rights and interests of the participants shall become
fully vested and nonforfeitable. In no event will the assets of the Plan
revert to the employer or be used or applied for any purpose other than the
exclusive benefit of participants and their beneficiaries or costs of
administration.
Effective January 1, 1994, employees of Academy Insurance were eligible to
participate in the Plan. Employer and employee contributions subsequent
to January 1, 1994 are included in the accompanying Statement of Changes
in Net Assets Available for Plan Benefits. On July 1, 1994, the existing
assets and participant accounts totaling $1,843,972 from the Academy
Insurance Group Retirement and Savings Plan (Academy Plan) were merged
into the Plan.
Effective July 1, 1994, the National Home Life Assurance Company Employees'
Profit Sharing Plan (National Home Plan) was merged into the Plan. Assets
and participant accounts of the merged plan were transferred to the Plan as
of that date. The total amount transferred from the National Home Plan was
$37,173,272 on that date. Certain provisions from the National Home Plan
were retained subsequent to the merger into the Plan. Reference should be
made to the Plan document for a summary of these provisions.
Effective January 1, 1993, the Durham Corporation Retirement Savings Plan
(Durham Plan) and the Southlife Holding Company Restated 401(k) Retirement
Plan (Southlife Plan) were merged into the Plan. Assets and participant
accounts of the merged plans were transferred to the Plan as of that date.
The total amounts transferred from the Durham Plan and the Southlife Plan
were $7,589,110 and $2,365,778, respectively.
NOTE C - FEDERAL INCOME TAXES
Providian has obtained a determination letter dated February 10, 1987, from
the Internal Revenue Service finding that the Plan and its related trust
are qualified under Section 401(a) and 501(a), respectively, of the
Internal Revenue Code of 1954. During the period the Plan is so qualified,
a participant will not be subject to federal income taxes on the
contributions of the participant's employer, or on dividends, interest or
profit from the sale of securities received by the Trustee and credited
to the participant's account, until such account is distributed to the
participant (or a designated beneficiary or legal representative).
Effective January 1, 1990, the Plan was amended to include pre-tax 401(k)
and loan features. A determination letter has been requested by the Plan
for these amendments. The Plan Administrator does not believe that these
amendments will adversely affect the qualifications of the Plan under
section 401(a) and 501(a) of the Internal Revenue Code.
NOTE D - TRANSACTIONS WITH PARTIES-IN-INTEREST
Transactions with Providian and Commonwealth, both participating employers
in the Plan, and Merrill Lynch Trust Company and Liberty National Bank,
Trustee and former Trustee of the Plan, respectively, are summarized as
follows:
1994 1993
Providian common stock:
Shares purchased (1) 494,964 330,322
Cost of purchases $15,885,264 $12,948,085
Shares sold (1) 311,488 202,587
Proceeds from sales $ 9,782,696 $ 7,826,727
Shares held at December 31 2,490,971 2,307,495
Balance at December 31 $76,908,742 $85,665,752
Dividends $ 1,916,294 $ 1,647,982
Guaranteed interest contracts with Commonwealth:
Deposits $66,024,935 $16,735,889
Withdrawals $45,652,926 $ 8,357,123
Balance at December 31 $64,062,836 $39,673,979
Interest $ 4,016,848 $ 2,585,188
Registered mutual funds with Merrill Lynch:
Cost of purchases $38,137,599 -
Proceeds from sales $15,014,725 -
Balance at December 31 $23,005,382 -
Investment income $ 444,275 -
Liberty Treasury Bill Index Account
with Liberty National Bank:
Cost of purchases $18,123,101 $33,325,745
Proceeds from sales $32,226,691 $31,331,461
Balance at December 31 - $14,103,590
Interest $ 246,711 $ 380,905
(1) These shares were traded on a national securities exchange.
NOTE E - INVESTMENTS
The current value of individual Plan investments that represent 5% or
more of net assets available for plan benefits at December 31, 1994 and
1993 is as follows:
1994 1993
Providian common stock $76,908,742 $85,665,752
Commonwealth guaranteed
interest contract $33,479,193 $39,673,979
Commonwealth synthetic
guaranteed interest contract $30,583,643 -
Temporary investments
- Merrill Lynch Treasury Fund $13,068,873 -
- Liberty Treasury Bill Index Account - $14,103,590
NOTE F - GUARANTEED INTEREST CONTRACTS
The Plan owns a guaranteed interest contract that was issued by
Commonwealth. The contract provides for the guarantee of principal plus
an indexed rate of return on the principal amount which is adjusted
quarterly based on long-term market interest rates. At December 31, 1994
and 1993 the contract value was $33,479,193 and $39,673,979, respectively,
which approximates fair value, as reported to the Plan by Commonwealth.
Contract value represents contributions made under the contract, plus
earnings, less Plan withdrawals and administrative expenses. During 1994
and 1993, the average yield on the contract was 7.75% and 7.56%,
respectively. At December 31, 1994 and 1993, the credited interest rate
on the contract was 8.17% and 6.60%, respectively.
During 1994, the Plan received a guaranteed interest contract with a
contract value of $34,743,393 through the merger into the Plan of the
National Home Plan. This contract was subsequently liquidated and
replaced by a synthetic interest contract issued by Commonwealth. In
connection with this contract, the Plan retains ownership of assets placed
in a trust while Commonwealth provides an insurance wrapper that
guarantees benefit responsiveness to plan participants at contract value.
The underlying assets of the contract primarily consist of U.S. Treasury
Notes and mortgage-backed securities guaranteed by the U.S. government.
At December 31, 1994, the contract value was $30,583,643, which equals
the fair value of the underlying assets ($27,453,865) and of the insurance
wrapper ($3,129,778). During the period that this contract was
outstanding during 1994, the average yield was 7.04% while the credited
interest rate was 7.286% at December 31, 1994.
NOTE G - FINANCIAL INSTRUMENTS
The Plan utilizes futures contracts with off-balance-sheet market risk in
its investing activities for the Providian Equity Index Fund. Futures are
contracts which call for the delayed delivery of securities in which the
seller agrees to deliver on a specified future date, a specified instrument,
at a specified price. Generally, futures contracts' margin requirements,
equal to the change in market value, are settled daily. These instruments
are subject to market risk, which is the possibility that future changes
in market prices may make the instruments less valuable. The Plan's
investment of $800,000 in an United States Treasury Bill has been pledged
to meet the margin requirements for these open futures contracts at
December 31, 1994. The Plan had committed to purchase equity indexes
having contract values of $14,071,175 and $12,607,650 at December 31, 1994
and 1993, respectively. The contract amounts of these instruments reflect
the extent of involvement in futures contracts. The Plan had no off-
balance-sheet exposure to credit risk associated with futures contracts at
December 31, 1994 and 1993.
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
December 31, 1994
Description of
Investment
Including Maturity
Date, Rate of
Identity of Issue, Borrower, Interest, Par, or Current
Lessor or Similar Party Maturity Value Cost Value
Common stock -
Providian Corporation 2,490,971 shares
common stock* of common stock $ 59,197,894 $ 76,908,742
Guaranteed interest contracts -
Commonwealth Life Insurance Indexed rate of
Company (Contract return, adjusted
#ADA00000LT)* quarterly 33,479,193 33,479,193
Commonwealth Life Insurance Indexed rate of
Company (Contract return, adjusted
#ADA00110SA)* quarterly 30,583,643 30,583,643
Registered mutual funds -
Merrill Lynch Global
Allocation Fund* 81,338 shares 1,052,016 994,759
Merrill Lynch Corporate
Bond Fund* 111,656 shares 1,192,645 1,183,555
Merrill Lynch Basic
Value Fund* 37,512 shares 861,179 838,397
Merrill Lynch Asset
Income Fund* 50,389 shares 497,544 487,763
Merrill Lynch Asset
Growth Fund* 43,502 shares 424,072 405,876
Merrill Lynch Government
Fund* 6,026,159 shares 6,026,159 6,026,159
Merrill Lynch Treasury
Fund* 13,068,873 shares 13,068,873 13,068,873
Fidelity Advisor Growth
Fund 101,746 shares 2,619,617 2,482,596
Delaware Trend Fund 48,930 shares 593,397 577,859
Templeton Foreign Fund 273,859 shares 2,641,280 2,415,434
United States Treasury Bill $800,000 par
value, 5.764%
effective rate,
matures 3/16/95 788,574 791,328
Loans receivable from Principal
participants balances from
$1,000 to
$50,000, bearing
interest at the
prime rate plus
1%, due within 5
years from date
of loan 4,953,424 4,953,424
------------ ------------
$157,979,510 $175,197,601
============ ============
* Indicates party-in-interest to the Plan.
<TABLE>
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
Year Ended December 31, 1994
<CAPTION>
Current Value
of Asset on
Identity of Description of Cost of Proceeds Transaction
Party Involved Assets Purchases from Sales Cost Date Net Gain
<S> <C> <C> <C> <C> <C> <C>
Category (i) - A single securities transaction in excess of 5% of plan assets
Liberty National Liberty Treasury Bill $12,103,821 $12,103,821 $12,103,821 -
Bank Index Account
($12,103,821 Par
Value)
Category (iii) - A series of securities transactions in excess of 5% of plan assets
Providian 494,964 shares of $15,885,264 15,885,264 15,885,264
Corporation common stock
Providian 311,488 shares of 9,782,696 7,116,655 9,782,696 $2,666,041
Corporation common stock
Commonwealth Life Guaranteed interest 66,024,935 66,024,935 66,024,935
Insurance contract
Commonwealth Life Guaranteed interest 45,652,926 45,652,926 45,652,926 -
Insurance contract
Merrill Lynch Merrill Lynch Government 14,345,705 14,345,705 14,345,705
Fund (14,345,705 shares)
Merrill Lynch Merrill Lynch Government 8,319,544 8,319,544 8,319,544 -
Fund (8,319,544 shares)
Merrill Lynch Merrill Lynch Treasury 19,685,678 19,685,678 19,685,678
Fund (19,685,678 shares)
Merrill Lynch Merrill Lynch Treasury 6,616,805 6,616,805 6,616,805 -
Fund (6,616,805 shares)
Liberty National Liberty Treasury Bill 18,123,101 18,123,101 18,123,101
Bank Index Account
($18,123,101 Par
Value)
Liberty National Liberty Treasury Bill 32,226,691 32,226,691 32,226,691 -
Bank Index Account
($32,226,691 Par
Value)
There were no expenses incurred with these transactions.
There were no category (ii) or (iv) reportable transactions during 1994.
</TABLE>
PAGE 0
DOCUMENT HEADER
DOCUMENT DESCRIPTION EXHIBIT - 23.1
DOCUMENT TYPE 2
COUNT 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement
No. 33-34655 on Form S-8 dated April 24, 1990, as amended by Post
Effective Amendment No.1 dated April 16, 1991, and in Registration
Statement No. 33-47336 on Form S-8 dated April 21, 1992 (which also
serves as Post Effective Amendment No.2 to Registration Statement
No. 33-34655), as amended by Post Effective Amendment No. 2 dated
July 18, 1994 pertaining to the Providian Corporation Thrift Savings
Plan of Providian Corporation and in the related Prospectus, of our
report dated May 9, 1995, with respect to the financial statements and
schedules of the Providian Corporation Thrift Savings Plan included in
this Annual Report (Form 11-K) for the year ended December 31, 1994.
[S] ERNST & YOUNG LLP
Louisville, Kentucky
June 5, 1995
