UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20549


                                    FORM 10-Q

(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the quarterly period ended September 30, 2000

                                       OR

[_]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(D)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from _________ to _________

                                     1-12897
                            (Commission File Number)

                         PROVIDIAN FINANCIAL CORPORATION
             (Exact Name of Registrant as Specified in Its Charter)

           Delaware                                              94-2933952
(State or other Jurisdiction of                              (I.R.S. Employer
Incorporation or Organization)                              Identification  No.)

               201 Mission Street, San Francisco, California 94105
               (Address of principal executive offices) (Zip Code)


                                 (415) 543-0404
              (Registrant's Telephone Number, Including Area Code)

                                 Not Applicable
             (Former name, former address and former fiscal year, if
                           changed since last report)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X]   No [_]

     As of October 31, 2000, there were  142,933,381  shares of the registrant's
Common Stock, par value $0.01 per share, outstanding.


                                       1

<PAGE>


                         PROVIDIAN FINANCIAL CORPORATION
                                    FORM 10-Q

                                      INDEX

                               September 30, 2000


PART I. FINANCIAL INFORMATION                                              Page

        Item 1. Financial  Statements (unaudited):
                 Condensed Consolidated Statements of Financial
                   Condition ...........................................    3
                 Condensed Consolidated Statements of Income ...........    4
                 Condensed Consolidated Statements of Changes in
                   Shareholders' Equity ................................    5
                 Condensed Consolidated Statements of Cash Flows .......    6
                 Notes to Condensed Consolidated Financial
                   Statements ..........................................    7

        Item 2. Management's Discussion and Analysis of Financial
                 Condition and Results of Operations ...................   12

PART II. OTHER INFORMATION

        Item 1. Legal Proceedings ......................................   30

        Item 6. Exhibits and Reports on Form 8-K .......................   32

Signatures .............................................................   33



                                       2
<PAGE>


PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
PROVIDIAN FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
                                                                                                   (unaudited)
                                                                                                   September 30         December 31
(dollars in thousands)                                                                                 2000                 1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                <C>                 <C>
ASSETS
   Cash and cash equivalents                                                                       $    310,070        $    182,915
   Federal funds sold and securities
     purchased under resale agreements                                                                  220,583           1,298,000
   Investment securities:
     Available-for-sale                                                                               1,932,581             455,238
     Held-to-maturity                                                                                 1,160,261             126,258
   Loans held for securitization or sale                                                              1,263,858                --
   Loans receivable, less allowance for credit losses of $1,316,185
     at September 30, 2000 and $1,028,377 at December 31, 1999                                       11,685,343          10,545,173
   Premises and equipment, net                                                                          185,132             149,194
   Interest receivable                                                                                  161,999             108,087
   Due from securitizations                                                                             624,580             614,217
   Deferred taxes                                                                                       701,168             571,040
   Other assets                                                                                         418,748             290,755
                                                                                                   --------------------------------
          Total assets                                                                             $ 18,664,323        $ 14,340,877
                                                                                                   ================================

LIABILITIES
  Deposits:
     Non-interest bearing                                                                          $     67,105        $     63,890
     Interest bearing                                                                                13,752,718          10,474,233
                                                                                                   --------------------------------
                                                                                                     13,819,823          10,538,123

   Short-term borrowings                                                                                    300             126,289
   Long-term borrowings                                                                               1,085,441             958,056
   Deferred fee revenue                                                                                 640,128             578,607
   Accrued expenses and other liabilities                                                             1,146,895             647,326
                                                                                                   --------------------------------
          Total liabilities                                                                          16,692,587          12,848,401

Company obligated mandatorily redeemable capital securities of subsidiary trust
  holding solely junior subordinated deferrable
  interest debentures of the Company (capital securities)                                               160,000             160,000

SHAREHOLDERS' EQUITY
Common stock, par value $0.01 per share (authorized: 800,000,000
  shares; issued and outstanding: September 30, 2000--142,910,916
  shares; December 31, 1999--142,066,407 shares)                                                          1,431                 954
Retained earnings                                                                                     1,810,184           1,394,293
Cumulative other comprehensive income                                                                     9,236              (2,161)
Common stock held in treasury--at cost: (September 30, 2000--
  197,064 shares; December 31, 1999--1,053,573 shares)                                                   (9,115)            (60,610)
                                                                                                   --------------------------------
          Total shareholders' equity                                                                  1,811,736           1,332,476
                                                                                                   --------------------------------
          Total liabilities and shareholders' equity                                               $ 18,664,323        $ 14,340,877
                                                                                                   ================================
</TABLE>

See Notes to Condensed Consolidated Financial Statements.


                                       3


<PAGE>


CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
PROVIDIAN FINANCIAL CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                         Three Months Ended                   Nine Months Ended
                                                                            September 30                       September 30
(dollars in thousands, except per share data)                           2000             1999               2000            1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>               <C>               <C>               <C>
INTEREST INCOME
     Loans                                                          $  633,589        $  424,597        $1,804,460        $1,062,171
     Federal funds sold and securities
       purchased under resale agreements                                16,782             7,107            68,130            19,730
     Other                                                              40,954             7,544           100,213            21,892
                                                                 -------------------------------------------------------------------
Total interest income                                                  691,325           439,248         1,972,803         1,103,793

INTEREST EXPENSE
     Deposits                                                          211,312            89,073           598,624           227,302
     Borrowings                                                         13,459            28,546            47,676            71,088
                                                                 -------------------------------------------------------------------
Total interest expense                                                 224,771           117,619           646,300           298,390

          Net interest income                                          466,554           321,629         1,326,503           805,403

Provision for credit losses                                            332,241           288,279         1,067,044           725,574
                                                                 -------------------------------------------------------------------

          Net interest income after provision
            for credit losses                                          134,313            33,350           259,459            79,829

NON-INTEREST INCOME
     Servicing and securitizations                                     242,893           157,802           550,099           437,776
     Credit product fee income                                         479,063           484,153         1,600,849         1,240,782
     Other                                                              27,938             9,163           150,290            21,274
                                                                 -------------------------------------------------------------------
                                                                       749,894           651,118         2,301,238         1,699,832

NON-INTEREST EXPENSE
     Salaries and employee benefits                                    179,056           132,579           527,371           350,350
     Solicitation and advertising                                      138,821           115,972           369,963           317,650
     Occupancy, furniture, and equipment                                37,139            23,745           100,536            57,926
     Data processing and communication                                  46,940            33,593           132,248            88,207
     Other                                                             147,792           127,299           700,992           314,001
                                                                 -------------------------------------------------------------------
                                                                       549,748           433,188         1,831,110         1,128,134
                                                                 -------------------------------------------------------------------

          Income before income taxes                                   334,459           251,280           729,587           651,527

Income tax expense                                                     133,793           100,408           291,831           260,623
                                                                 -------------------------------------------------------------------

          Net Income                                                $  200,666        $  150,872        $  437,756        $  390,904
                                                                 ===================================================================

Earnings per common share - basic                                   $     1.41        $     1.07        $     3.08        $     2.77
                                                                 ===================================================================
Earnings per common share - assuming dilution                       $     1.36        $     1.04        $     3.00        $     2.69
                                                                 ===================================================================

Cash dividends paid per common share                                $     0.05        $     0.05        $     0.15        $     0.15
                                                                 ===================================================================

Weighted average common shares
   outstanding - basic (000)                                           142,186           141,296           141,943           141,316
                                                                 ===================================================================
Weighted average common shares
   outstanding - assuming dilution (000)                               147,714           145,070           146,136           145,553
                                                                 ===================================================================
</TABLE>

See Notes to Condensed Consolidated Financial Statements.



                                       4
<PAGE>


CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
PROVIDIAN FINANCIAL CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                                             Cumulative     Common
                                                                  Additional                   Other        Stock
                                                        Common     Paid-In     Retained    Comprehensive    Held in
(dollars in thousands, except per share data)            Stock     Capital     Earnings        Income      Treasury         Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>         <C>         <C>            <C>          <C>          <C>
BALANCE AT DECEMBER 31, 1998                          $    954    $     --    $   866,005    $    (320)   $ (63,452)   $   803,187
Comprehensive income:
     Net Income                                                                   390,904                                  390,904
     Other comprehensive income, net of income tax:
           Unrealized loss on securities net of
                income taxes of $205                                                              (311)                       (311)
           Foreign currency translation adjustments
                net of income taxes of $33                                                         (49)                        (49)
                                                                                                                        ----------
     Other comprehensive income                                                                                               (360)
                                                                                                                        ----------
Comprehensive income                                                                                                       390,544
Cash dividend: Common - $0.15 per share                                           (21,272)                                 (21,272)
Purchase of 938,619 common shares for treasury                      25,723                                  (97,572)       (71,849)
Exercise of stock options and other awards                         (57,564)         4,917                    74,919         22,272
Issuance of restricted and unrestricted stock less
      forfeited shares                                                (440)                                   8,833          8,393
Deferred compensation related to grant of
      restricted and unrestricted stock less
      amortization of $5,711                                        (2,682)                                                 (2,682)
Net tax effect from employee stock plans                            34,963                                                  34,963
                                                      ----------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1999                         $    954    $     --    $ 1,240,554    $    (680)   $ (77,272)   $ 1,163,556
                                                      ============================================================================

BALANCE AT DECEMBER 31, 1999                          $    954    $     --    $ 1,394,293    $  (2,161)   $ (60,610)   $ 1,332,476
Comprehensive income:
     Net Income                                                                   437,756                                  437,756
     Other comprehensive income, net of income tax:
           Unrealized gain on securities net of
                income taxes of ($7,867)                                                        11,801                      11,801
           Foreign currency translation adjustments
                net of income taxes of $269                                                       (404)                       (404)
                                                                                                                        ----------
     Other comprehensive income                                                                                             11,397
                                                                                                                        ----------
Comprehensive income                                                                                                       449,153
Cash dividend: Common - $0.15 per share                                           (21,396)                                 (21,396)
Adjustment for stock dividend                              477        (473)            (4)                                      --
Purchase of 592,182 common shares for treasury                      25,786                                  (57,063)       (31,277)
Exercise of stock options and other awards                         (47,558)          (465)                   80,730         32,707
Issuance of restricted and unrestricted stock less
     forfeited shares                                               (8,636)                                  27,828         19,192
Deferred compensation related to grant of
     restricted and unrestricted stock less
     amortization of $10,219                                        (8,973)                                                 (8,973)
Net tax effect from employee stock plans                            39,854                                                  39,854
                                                      ----------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 2000                         $  1,431    $     --    $ 1,810,184    $   9,236    $  (9,115)   $ 1,811,736
                                                      ============================================================================
</TABLE>

See Notes to Condensed Consolidated Financial Statements.


                                       5
<PAGE>

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
PROVIDIAN FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
                                                                                                               Nine Months Ended
                                                                                                                  September 30
(dollars in thousands)                                                                                        2000           1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                      <C>            <C>
OPERATING ACTIVITIES
    Net Income                                                                                           $   437,756    $   390,904
    Adjustments to reconcile net income to net cash provided by operating activities:
       Provision for credit losses                                                                         1,067,044        725,574
       Depreciation and amortization of premises and equipment                                                36,583         23,308
       Amortization of net loan acquisition costs                                                             24,831         41,182
       Amortization of deferred compensation
         related to restricted and unrestricted stock                                                         10,219          5,711
       Increase in deferred income tax benefit                                                              (137,507)      (181,917)
       Increase in net deferred fee revenue                                                                   61,521        188,995
       Increase in interest receivable                                                                       (53,912)       (27,919)
       Gain from sale of home loans                                                                          (64,671)            --
       Net increase in other assets                                                                         (153,511)      (112,195)
       Net increase in accrued expenses and other liabilities                                                539,423        190,688
                                                                                                         --------------------------
                             Net cash provided by operating activities                                     1,767,776      1,244,331

INVESTING ACTIVITIES
       Net (increase) decrease in money market instrument investments                                     (1,034,003)        99,882
       Net cash used for loan originations and principal
         collections on loans receivable                                                                  (5,821,634)    (5,083,567)
       Net increase in securitized loans                                                                     867,563      1,109,720
       Net proceeds from sale of home loans                                                                1,548,173             --
       Portfolio acquisitions                                                                                     --       (127,119)
       Increase in due from securitizations                                                                  (10,363)      (139,365)
       Purchases of investment securities                                                                 (1,568,774)      (170,742)
       Proceeds from maturities of  investment securities                                                    111,099        125,950
       Decrease (increase) in federal funds sold and securities purchased under resale agreements          1,077,417       (640,295)
       Net purchases of premises and equipment                                                               (73,229)       (68,366)
                                                                                                         --------------------------
                             Net cash used by investing activities                                        (4,903,751)    (4,893,902)

FINANCING ACTIVITIES
       Net increase in deposits                                                                            3,281,700      2,681,263
       Proceeds from issuance of term federal funds                                                          995,000      1,718,000
       Repayment of term federal funds                                                                    (1,095,037)    (1,712,000)
       (Decrease) increase in other short-term borrowings                                                    (25,952)       480,938
       Proceeds from issuance of convertible senior notes                                                    402,500            -
       (Decrease) Increase in other long-term borrowings                                                    (275,115)       629,603
       Purchase of treasury stock                                                                            (31,277)       (71,849)
       Dividends paid                                                                                        (21,396)       (21,272)
       Proceeds from exercise of stock options                                                                32,707         22,272
                                                                                                         --------------------------
                             Net cash provided by financing activities                                     3,263,130      3,726,955
                                                                                                         --------------------------

Net increase in cash and cash equivalents                                                                    127,155         77,384
Cash and cash equivalents at beginning of period                                                             182,915        176,348
                                                                                                         --------------------------
Cash and cash equivalents at end of period                                                               $   310,070    $   253,732
                                                                                                         ==========================
</TABLE>

See Notes to Condensed Consolidated Financial Statements.



                                       6
<PAGE>

PROVIDIAN FINANCIAL CORPORATION
Notes to Condensed Consolidated Financial Statements
September 30, 2000  (unaudited)

Note 1 - Basis of Presentation

     The condensed  consolidated  financial  statements  include the accounts of
Providian   Financial   Corporation  and  its  wholly  owned  subsidiaries  (the
"Company").  The  Company's  subsidiaries  offer a  range  of  consumer  lending
products, deposit products and membership products marketed through direct mail,
Internet and other channels. The principal operating subsidiaries of the Company
are Providian National Bank and Providian Bank, which are financial institutions
principally  engaged  in  consumer  lending   activities.   Providian  Financial
Corporation also has a subsidiary,  Providian Bancorp  Services,  which provides
administrative and customer services to its consumer lending affiliates.

     The accompanying  unaudited condensed  consolidated financial statements of
the Company have been prepared in accordance with generally accepted  accounting
principles for interim  financial  information and with the instructions to Form
10-Q and Article 10 of Regulation S-X.  Accordingly,  they do not include all of
the  information  and  footnotes  required  by  generally  accepted   accounting
principles for complete  consolidated  financial  statements.  In the opinion of
management,  all  adjustments  considered  necessary to a fair  statement of the
results for the interim period presented have been included.  The preparation of
financial statements in conformity with generally accepted accounting principles
requires  management to make estimates and  assumptions  that affect the amounts
reported in the financial  statements  and  accompanying  notes.  Actual results
could  differ  from those  estimates.  Operating  results for the three and nine
month periods ended  September  30, 2000 are not  necessarily  indicative of the
results  for the year  ended  December  31,  2000.  The  notes to the  financial
statements  contained in the  Company's  Annual Report on Form 10-K for the year
ended  December  31, 1999  should be read in  conjunction  with these  condensed
consolidated  financial  statements.  All significant  intercompany balances and
transactions  have been  eliminated.  Certain  prior  period  amounts  have been
reclassified to conform to the 2000 presentation.


                                       7
<PAGE>


Note 2 - Earnings Per Share

     The  following  table  sets  forth  the  computation  of both the basic and
assumed conversion methods of earnings per share.

<TABLE>
<CAPTION>
                                                     Three Months Ended     Nine Months Ended
                                                        September 30          September 30
(dollars in thousands, except per share data)         2000       1999       2000       1999
---------------------------------------------------------------------------------------------
<S>                                                 <C>        <C>        <C>        <C>
Basic
Net Income available to common stockholders         $200,666   $150,872   $437,756   $390,904
                                                    =========================================
Weighted average common shares outstanding           142,186    141,296    141,943    141,316
                                                    =========================================
Earnings per common share--basic                    $   1.41   $   1.07   $   3.08   $   2.77
                                                    =========================================
Diluted
Net Income available to common stockholders         $200,666   $150,872   $437,756   $390,904
Plus: Income impact of assumed conversions
     Interest on 3.25% convertible senior notes
          (net of tax)                                   807        --         807        --
                                                    -----------------------------------------
Net Income available to common stockholders with
     assumed conversions                            $201,473   $150,872   $438,563   $390,904
                                                    =========================================

Weighted average common shares outstanding           142,186    141,296    141,943    141,316
Plus: Incremental shares from assumed conversions
   Restricted stock issued--non vested                   622        549        596        551
   Employee stock options(1)                           3,671      3,088      3,128      3,686
   3.25% convertible senior notes                      1,204        --         404        --
   Forward purchase contracts                             31        137         65        --
                                                    -----------------------------------------
Dilutive potential common shares                       5,528      3,774      4,193      4,237
                                                    -----------------------------------------
Adjusted weighted average common shares              147,714    145,070    146,136    145,553
                                                    =========================================
Earnings per common share--assuming dilution        $   1.36   $   1.04   $   3.00   $   2.69
                                                    =========================================
</TABLE>

(1)  During the three and nine  months  ended  September  30,  2000,  options to
purchase  1,699,001 and 2,690,650  shares of the Company's common stock were not
included in the  computation of diluted  earnings per common share,  because the
exercise  price of the options was greater than the average  market price of the
common  shares  and,   therefore,   the  inclusion  of  such  options  would  be
antidilutive.

Note 3 - Loans Receivable and Allowance for Credit Losses

     The following is a summary of the Company's  loans  receivable at September
30, 2000 and December 31, 1999:

(dollars in thousands)                  September 30, 2000    December 31,1999
------------------------------------------------------------------------------
Credit cards                               $ 12,961,222        $ 10,075,185
Home loans                                       18,966           1,520,795
Other                                            21,340              13,974
                                           --------------------------------
                                             13,001,528          11,609,954
Allowance for credit losses                  (1,316,185)         (1,028,377)
Net deferred origination fees                      --               (36,404)
                                           --------------------------------
                                           $ 11,685,343        $ 10,545,173
                                           ================================

     The activity in the  allowance  for credit losses for the nine months ended
September 30, 2000 and 1999 was as follows:

                                               Nine Months Ended September 30
(dollars in thousands)                             2000                1999
-----------------------------------------------------------------------------
Balance at beginning of period                $  1,028,377        $    451,245
Provision for credit losses                      1,067,044             725,574
Allowance acquired/Other                           (22,617)             14,310
Foreign currency translation                            37                --
Credit losses                                     (841,246)           (414,783)
Recoveries                                          84,590              56,437
                                              --------------------------------
Net credit losses                                 (756,656)           (358,346)
                                              --------------------------------
Balance at end of period                      $  1,316,185        $    832,783
                                              ================================


                                       8
<PAGE>


Note 4 - Loans Held for Securitization or Sale

     Loans  held  for  securitization  or sale  are  those  loans  eligible  for
securitization  which management has committed to securitize or sell,  generally
within six months.  These assets,  which were securitized or sold during October
2000, are reported at the lower of cost or fair market value.

Note 5 - Sale of Home Loans

     On February  29, 2000,  the Company  announced a  realignment  of resources
previously  dedicated to its home loan  business.  The Company has  transitioned
these resources,  including  employees and facilities,  into its credit card and
e-commerce  businesses,  which have  experienced  rapid  growth and have greater
potential  returns.  On June 16,  2000,  the Company  sold $1.5  billion of home
equity loans which  resulted in a one-time  pre-tax gain of $64.7  million which
was  included  in  non-interest  income  -other  on the  Company's  consolidated
statements of income.

Note 6 - Convertible Notes

     On August 23, 2000, the Company issued  $402,500,000  of 3.25%  Convertible
Senior  Notes  due  August  15,  2005  (the  "Notes")   with  interest   payable
semi-annually on February 15 and August 15 of each year,  commencing on February
15, 2001. The Notes are initially convertible,  at the option of the holders, at
the conversion rate of 7.2446 shares of the Company's common stock per $1,000 of
Note  principal.  The  Company  has the  option to redeem  the Notes on or after
August 20, 2003.

Note 7 - Credit Product Fee Income

     During the third  quarter of 2000,  the Company  recognized  the  estimated
uncollectible   portion  of  accrued  fees  on  certain   delinquent   accounts.
Previously,  these accrued fees were reversed  against  current fee revenue upon
charge-off,  which  generally  occurs no later  than 180 days  after an  account
becomes delinquent. This change resulted from continued growth in credit product
fee income.  The effect of adopting this change was to advance the timing of fee
income  reversals,  resulting in a decrease in loans receivable and non-interest
income of $95 million at the time of adoption.

Note 8 - Shareholders' Equity

     In October 2000,  the Company's  Board of Directors  approved a two-for-one
split of the Company's  common stock, in the form of a stock dividend.  For each
share of the Company's  common stock held at the close of business on the record
date, one additional share will be issued. Distribution of the additional shares
will be made on  November  30,  2000 to  shareholders  of record at the close of
business on November 15, 2000.

     During the third quarter of 2000, the Company extended  several  agreements
to purchase,  on a forward basis,  shares of its common stock.  At the Company's
election,  the  agreements  may be settled on a  physical  basis or,  subject to
certain conditions, on a net basis in shares of the Company's common stock or in
cash. As of September 30, 2000, the agreements  covered  1,865,899 shares of the
Company's  common stock at a weighted  forward price of $99.3526 per share.  The
agreements  have terms of one year but may be settled  earlier at the  Company's
option. If the agreements had been settled on a net share basis at the September
30, 2000 market price of the  Company's  common stock  ($127.00 per share),  the
Company would have  received  approximately  406,199  shares of its common stock
from the  counterparties.  During the nine months ended  September 30, 2000, the
Company  received  390,714 shares of common stock from the settlement of forward
purchase  agreements,  which resulted in a $26.0 million  increase in additional
paid in capital.

Note 9 - Cumulative Other Comprehensive Income

     The components of cumulative  other  comprehensive  income,  net of related
tax, for the nine months ended September 30, 2000 and 1999 were as follows:

<TABLE>
<CAPTION>
                                         Unrealized          Foreign        Cumulative Other
                                        Gain/(Loss)         Currency         Comprehensive
(dollars in thousands)                 on Securities       Translation           Income
-------------------------------------------------------------------------------------------
<S>                                      <C>                <C>                <C>
Balance, January 1, 1999                 $   (320)          $   --             $   (320)
  Other comprehensive income                 (516)               (82)              (598)
  Tax benefit (expense)                       205                 33                238
                                         ----------------------------------------------
Balance, September 30, 1999              $   (631)          $    (49)          $   (680)
                                         ==============================================

Balance, January 1, 2000                 $ (2,207)          $     46           $ (2,161)
  Other comprehensive income               19,668               (673)            18,995
  Tax benefit (expense)                    (7,867)               269             (7,598)
                                         ----------------------------------------------
Balance, September 30, 2000              $  9,594           $   (358)          $  9,236
                                         ==============================================
</TABLE>


                                       9
<PAGE>


Note 10 - Segment Information

     The operations of the Company are  principally  concentrated  in its Credit
Card operating  segment.  All other operations of the Company have been included
in the segment titled "Other".  Credit Card customer relationships are initiated
through  direct  marketing  and  other  distribution  channels  or  credit  card
portfolio  acquisitions  from other  financial  institutions.  The Other segment
includes First Select, which specializes in the purchase of delinquent loans for
collection,  and the Company's e-commerce operations and international  consumer
lending  operations.  Segment  reporting has been reorganized as a result of the
Company's home loan portfolio sale and because it is no longer  originating home
loans.  Previously,  home loan  operations  were  combined with its First Select
business to form the  reporting  segment  titled  "Emerging  Businesses".  Prior
periods have been restated to reflect the change in segment  reporting.  Revenue
from cross-marketed products, which is derived from both the Credit Card segment
and the Other segment,  is included in the respective  segment summary financial
information.

     It is the  Company's  practice to analyze its  financial  performance  on a
managed basis.  Segment  information  presented  below is based on the Company's
managed loan portfolios.  The Company securitizes certain loans and records such
securitizations  as sales,  which has the effect of removing such loans from the
Company's consolidated statements of financial condition.

     The following is a summary of the Company's  segment  activity on a managed
basis for the three and nine months ended September 30, 2000 and 1999:

                                          Credit
(dollars in thousands)                     Card           Other          Total
--------------------------------------------------------------------------------
Three Months Ended September 30, 2000
  Revenue                               $ 1,285,165        75,037    $ 1,360,202
  Profit or loss                        $   455,004       (32,399)   $   422,605
  Assets                                $23,595,742     1,092,405    $24,688,147
Three Months Ended September 30, 1999
  Revenue                               $ 1,055,841        52,805    $ 1,108,646
  Profit or loss                        $   270,900       (13,842)   $   257,058
  Assets                                $16,636,125     1,770,037    $18,406,162

Nine Months Ended September 30, 2000
  Revenue                               $ 3,747,777       227,398    $ 3,975,175
  Profit or loss                        $   953,228       (32,811)   $   920,417
  Assets                                $23,595,742     1,092,405    $24,688,147
Nine Months Ended September 30, 1999
  Revenue                               $ 2,796,685       126,059    $ 2,922,744
  Profit or loss                        $   735,727       (42,490)   $   693,237
  Assets                                $16,636,125     1,770,037    $18,406,162

     The impact of securitizations on the Company's  consolidated  statements of
income is to reduce net interest income and the provision for credit losses, and
to increase  non-interest  income.  The  following  is a  reconciliation  of the
Company's segment activity on a managed basis to the consolidated  statements of
income of the Company for the periods ended September 30, 2000 and 1999:



                                       10
<PAGE>


<TABLE>
<CAPTION>
                                Three Months Ended September 30         Nine Months Ended September 30
(dollars in thousands)             2000            1999                    2000               1999
-----------------------------------------------------------------------------------------------------
<S>                             <C>             <C>                      <C>                <C>
Total segment profits           $ 422,605       $ 257,058                $ 920,417          $ 693,237
Corporate and other               (88,146)         (5,778)                (190,830)           (41,710)
                                ---------------------------------------------------------------------
   Income before income taxes   $ 334,459       $ 251,280                $ 729,587          $ 651,527
                                =====================================================================
</TABLE>

Note 11 - Commitments and Contingencies

     On June  28,  2000,  the  Company  announced  that it had  reached  a final
settlement agreement with the Office of the Comptroller of the Currency, the San
Francisco District Attorney's office and the California Attorney General, ending
their  inquiries into the Company's  business  practices.  The Company agreed to
make certain  business  practice  changes and to pay a one-time  restitution  to
affected customers.  During the quarter ended June 30, 2000 the Company recorded
a  net  pre-tax  charge  of  $272.6  million  to  non-interest  expense  on  its
consolidated  statements  of  income as a result  of its  obligations  under the
settlement  agreement.  For  more  detailed  information  on  legal  proceedings
affecting  the  Company,  see "Legal  Proceedings"  in Item 1 of Part II of this
Quarterly Report on Form 10-Q.

Note 12 - New Accounting Pronouncements

     Statement  of  Financial  Accounting  Standards  No. 133,  "Accounting  for
Derivative  Instruments and Hedging  Activities"  ("SFAS No. 133"),  establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts,  and hedging activities.  In
June 1999,  Statement of Financial Accounting Standards No. 137, "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
FASB  Statement No. 133" ("SFAS No. 137"),  was issued and extends the effective
date for SFAS No. 133 to all fiscal quarters of all fiscal years beginning after
June 15, 2000. In June 2000,  the Financial  Accounting  Standards  Board issued
Statement of Financial  Accounting  Standards No. 138,  "Accounting  for Certain
Derivative  Instruments  and Certain  Hedging  Activities - an amendment of FASB
Statement No. 133" ("SFAS No. 138").  SFAS No. 138 addresses a limited number of
issues causing implementation difficulties for entities that apply SFAS No. 133,
and amends the  accounting  and reporting  standards of SFAS No. 133 for certain
derivative  instruments and certain hedging  activities.  Based on the Company's
current level of derivative and hedging  activities,  the implementation of SFAS
No. 133, as amended by SFAS No. 137 and SFAS No. 138, should not have a material
impact on the Company's consolidated financial statements.

     In  September  2000,  the  Financial   Accounting  Standards  Board  issued
Statement of Financial  Accounting  Standards No. 140, "Accounting for Transfers
and  Servicing  of  Financial  Assets and  Extinguishments  of  Liabilities  - a
replacement  of FASB  Statement No. 125" ("SFAS No. 140").  SFAS No. 140,  which
replaces FASB  Statement  No. 125,  revises the  standards  for  accounting  for
securitizations  and other  transfers of financial  assets and requires  certain
additional  disclosures.  SFAS  140  will be  effective  for all  transfers  and
servicing of financial assets and extinguishments of liabilities occurring after
March 31,  2001.  The SFAS 140  disclosure  requirements  will be  required  for
financial  statements  for fiscal  years ending  after  December  15, 2000.  The
Company   intends  to  adopt  SFAS  140  on  the   required   effective   dates.
Implementation  of SFAS 140 is not  expected  to have a  material  impact on the
Company's consolidated financial statements.


                                       11
<PAGE>


Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

Introduction

     Providian  Financial  Corporation  (the "Company") is a leading provider of
consumer finance products,  including credit cards, deposits, and cross-marketed
products.  The Company offers its lending and deposit products primarily through
its  banking  subsidiaries,  Providian  National  Bank,  a  national  bank,  and
Providian Bank, a Utah industrial loan corporation.  The Company's  products are
offered  to a broad  spectrum  of  consumers  in the United  States,  the United
Kingdom and in  Argentina.  Credit card  products  range from gold and  platinum
cards with high credit  lines to lower line classic and secured  cards  designed
for consumers  underserved by traditional  financial  institutions.  The primary
factors affecting the  profitability of the Company's  consumer lending business
are growth in the number of customer accounts and outstanding loan balances, net
interest   spread  on  loans,   fee  revenue,   credit  usage,   credit  quality
(delinquencies and credit losses), level of solicitation and marketing expenses,
and account  servicing  efficiency.  The  Company's  market focus is to seek out
profitable consumer segments and apply its risk adjusted, return driven approach
to customer  segmentation  and pricing.  The Company  believes this strategy has
been responsible for its continued overall strong performance.  During the first
nine months of 2000 the Company incurred the following one-time events:

     On June  28,  2000,  the  Company  announced  that it had  reached  a final
settlement agreement with the Office of the Comptroller of the Currency, the San
Francisco District Attorney's office and the California Attorney General, ending
their  inquiries into the Company's  business  practices.  The Company agreed to
make certain  business  practice  changes and to pay a one-time  restitution  to
affected customers.  During the quarter ended June 30, 2000 the Company recorded
a  net  pre-tax  charge  of  $272.6  million  to  non-interest  expense  on  its
consolidated  statements  of  income  as a result  of its  obligation  under the
settlement agreement.

     On February  29, 2000,  the Company  announced a  realignment  of resources
previously  dedicated to its home loan  business.  The Company has  transitioned
these resources,  including  employees and facilities,  into its credit card and
e-commerce  businesses,  which have  experienced  rapid  growth and have greater
potential returns. On June 16, 2000 the Company sold $1.5 billion of home equity
loans which resulted in a one-time pre-tax gain of $64.7 million.

Forward-Looking Information

     Certain  statements  contained  herein include  forward-looking  statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended,  and are subject
to the "safe  harbor"  created  by those  sections.  Forward-looking  statements
include   expressions  of  "belief,"   "anticipation,"   or   "expectations"  of
management,  statements as to industry trends or future results of operations of
the Company, and other statements which are not historical fact. Forward-looking
statements  are based on certain  assumptions  by management  and are subject to
risks and  uncertainties  that could cause actual  results to differ  materially
from those in the  forward-looking  statements.  These  risks and  uncertainties
include,  but are not limited to, competitive  pressures arising from aggressive
competition  from other consumer  lenders;  factors that affect the  delinquency
rate on the  Company's  consumer  loans  and the  rate at  which  the  Company's
consumer loans are charged off;  changes in the cost and availability of funding
due to changes in the deposit market, credit market or securitization market, or
the way in which the  Company  is  perceived  in such  markets;  the  effects of
government  policy and regulation,  including  restrictions  and /or limitations
arising from banking laws, regulations and examinations;  legal proceedings; and
the  ability to attract  and retain  key  personnel.  These and other  risks and


                                       12
<PAGE>


uncertainties  are  described in detail in the  Company's  1999 Annual Report on
Form 10-K under the heading  "Cautionary  Statements," and in other filings made
by the  Company  with  the  Securities  and  Exchange  Commission.  Readers  are
cautioned not to place undue reliance on forward-looking statements, which speak
only as of the date hereof.  The Company  undertakes no obligation to update any
forward-looking statements.

Earnings Summary

     Net  income  for the three  months  ended  September  30,  2000 was  $200.7
million,  an  increase  of 33% over net income of $150.9  million  for the three
months ended  September 30, 1999. Net income for the nine months ended September
30, 2000, before one-time  adjustments for the settlement charge and the gain on
the sale of home equity  loans in the second  quarter,  was $562.6  million,  an
increase  of 44% over net income of $390.9  million  for the nine  months  ended
September  30,  1999.  The key  drivers to the third  quarter  and  year-to-date
performance came from growth in outstanding loan balances and customer  accounts
combined with improved customer retention.  Net income for the nine months ended
September  30,  2000 was  $437.8  million  after  the  second  quarter  one-time
adjustments.

     As of  September  30,  2000,  managed  loans,  which  include  reported and
securitized  loans,  were $24.5  billion.  Managed  credit card loans were $24.1
billion, an increase of $5.1 billion, or 26.7%, over the balance at December 31,
1999. This growth in managed credit card loans was achieved through increases in
the  Company's  loan  originations,  improved  customer  retention and increased
purchase activity from existing  customers  facilitated by the Company's ability
to upgrade proven customers to higher line products.

     The Company's  managed net interest margin on loans increased to 12.90% for
the third  quarter of 2000  compared to 12.40% for the same period in 1999.  The
managed net credit loss rate for the third  quarter of 2000  increased  to 7.61%
from  6.40%  for the same  period in 1999 and is up from  7.42%  for the  second
quarter of 2000. The increase quarter over quarter  reflects  account  seasoning
within the managed  portfolio and was less than  expected.  Consistent  with the
Company's  expectations,  the 30+ day  managed  delinquency  rate for the  third
quarter of 2000 increased to 6.71% from 6.48% for the second quarter of 2000 and
5.20% for the third  quarter of 1999.  This  account  seasoning  is  expected to
result in a continued  increase in the  Company's  managed net credit loss rate,
which is  expected  to rise to the 8% range in the fourth  quarter of 2000.  The
dollar  contribution to managed revenue from  non-interest  income for the third
quarter of 2000  increased  more than 10% over the same period in 1999 to $620.2
million,  due primarily to increased  revenue from  cross-marketed  products and
loan activity fees. The Company reinvested a portion of the increased revenue to
strengthen  loan  loss  reserves,   increase  marketing   investment  and  build
infrastructure,  through the expansion of the employee base and product  support
systems.  Year over year,  non-interest  expense increased $116.6 million during
the third quarter of 2000 to $549.7 million, reflecting expenses associated with
servicing a greater  number of customers and  maintaining  an employee base that
has grown by 27% over that period.

     The Company's  return on reported assets was 4.53% for the third quarter of
2000, down from 5.62% for the same period in 1999. The decrease is primarily the
result of the Company's  decision to strengthen  its balance sheet  liquidity by
increasing  its investment  security  portfolio.  The return on average  managed
assets  for  the  third  quarter  of  2000  and  1999,   was  2.92%  and  3.20%,
respectively.  Return on equity was 47.49% for the third  quarter of 2000,  down
from 54.89% for the same period in 1999.


                                       13
<PAGE>

Managed Consumer Loan Portfolio and the Impact of Securitization

     The  Company   securitizes   consumer  loan  receivables.   For  additional
discussion  of the  Company's  securitization  activities,  see  "--Funding  and
Liquidity."  Securitized  assets sold to external  investors are not  considered
assets of the Company and therefore are not shown on the Company's  consolidated
statements of financial  condition.  It is, however,  the Company's  practice to
analyze its financial  performance on a managed basis. To perform this analysis,
the  Company  uses an adjusted  income  statement  and  statement  of  financial
condition,  which add back the effect of  securitizations.  The following  table
summarizes the Company's managed loan portfolio:

<TABLE>
<CAPTION>
                                                                        Three Months Ended                 Nine Months Ended
                                                                           September 30                        September 30
                                                                  ------------------------------      -----------------------------
(dollars in thousands)                                                2000             1999               2000              1999
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>               <C>               <C>               <C>
Period-End Balances:
Reported consumer loans                                                                               $14,265,386       $ 9,520,735
Securitized consumer loans                                                                             10,284,140         8,835,433
                                                                                                      -----------       -----------
    Total managed consumer loan portfolio                                                             $24,549,526       $18,356,168
                                                                                                      ===========       ===========

Average Balances:
Reported consumer loans                                           $13,402,828       $ 8,994,243       $12,753,895       $ 7,697,174
Securitized consumer loans                                          9,992,190         8,268,226         9,776,064         7,773,717
                                                                  -----------       -----------       -----------       -----------
    Total average managed consumer loan portfolio                 $23,395,018       $17,262,469       $22,529,959       $15,470,891
                                                                  ===========       ===========       ===========       ===========

Operating Data and Ratios:
Reported:
          Average earning assets                                  $16,807,971       $10,094,134       $16,208,824       $ 8,758,022
          Return on average assets                                       4.53%             5.62%             3.41%             5.57%
          Net interest margin (1)                                       11.10%            12.75%            10.91%            12.26%
Managed:
          Average earning assets                                  $26,800,161       $18,362,360       $25,984,888       $16,531,739
          Return on average assets                                       2.92%             3.20%             2.17%             3.06%
          Net interest margin (1)                                       11.36%            12.15%            10.82%            12.01%
</TABLE>

(1) Net  interest  margin is equal to net  interest  income  divided  by average
earning assets.

Financial Statement Impact

     The Company's securitizations are treated as sales under generally accepted
accounting  principles ("GAAP").  The Company receives the proceeds of the sale,
and the securitized loans are removed from the Company's consolidated statements
of  financial   condition.   In  certain  cases,  the  Company  has  retained  a
subordinated interest in the pool of assets included in a securitization, with a
right to receive  collections  allocated  to such  subordinated  interest  after
payment to investors. Such retained interests are recorded at fair value and are
included in "due from securitizations" on the Company's consolidated  statements
of financial condition. At the time it enters into a securitization, the Company
recognizes an "interest-only strip receivable" asset, which is the present value
of the projected excess servicing income during the period the securitized loans
are projected to be outstanding.  "Excess servicing income" refers to the excess
of the finance charge and fee revenue  generated by the  securitized  loans over
the sum of the interest  paid to investors,  related  credit  losses,  servicing
fees,  and  other  transaction  expenses.  During  the  revolving  period  of  a
securitization,  an additional interest-only strip receivable is recognized each
month,  as additional  receivables are generated in the accounts that are in the
securitized pool to replenish the investors'  share of principal  collections on
the  securitized  loans.  Revenue  resulting  from  excess  servicing  income is
recognized  each  month  first  as  a  reduction  of  the  interest-only  strips
receivable  and then,  to the extent the amount  received  exceeds  the  related
component  of  the   interest-only   strips   receivable,   as   servicing   and
securitization income.



                                       14
<PAGE>

     When loans are  securitized,  the  Company  retains a  "seller's  interest"
generally  equal to the  total  amount  of the pool of  assets  included  in the
securitization  less the  investors'  portion of those  assets  and  securitized
interests retained by the Company. As the amount of the loans in the securitized
pool fluctuates due to customer payments,  purchases,  cash advances, and credit
losses,  the amount of the seller's interest will vary. The seller's interest is
classified on the Company's  consolidated  statements of financial  condition as
loans  receivable  at par less  the  associated  allowance  for  credit  losses.
Periodically,  the Company may transfer new loans  receivable into a securitized
pool in order to maintain the seller's interest above an agreed-upon minimum.

     The Company  services the accounts  underlying  the  securitized  loans and
earns a monthly  servicing fee, which is generally offset by the servicing costs
incurred by the Company. Accordingly,  servicing assets have not been recognized
in connection with the Company's securitizations.

     The  effect of  securitization  accounting  on the  Company's  consolidated
statements  of income is to reduce net  interest  income and the  provision  for
credit losses, and to increase  non-interest  income. For the three months ended
September  30,  2000 and 1999,  securitization  accounting  had the  effect  of:
reducing net interest income by $294.7 million and $236.2 million;  reducing the
provision for credit losses by $165.1 million and $145.7 million; and increasing
non-interest  income by $129.6  million and $90.5  million.  For the nine months
ended September 30, 2000 and 1999,  securitization accounting had the effect of:
reducing net interest income by $782.8 million and $683.5 million;  reducing the
provision for credit losses by $495.3 million and $455.2 million; and increasing
non-interest income by $287.5 million and $228.3 million.  Because credit losses
on  the  securitized  loans  are  reflected  as a  reduction  in  servicing  and
securitization  income  rather  than a  reduction  of the  allowance  for credit
losses,  the  Company's  provision  for credit losses is lower than would be the
case had such loans not been securitized.

Risk Adjusted Revenue and Return

     One measure of product profitability that incorporates revenue and the most
significant  costs  inherent in  consumer  loan risk  analysis is risk  adjusted
revenue, which is net interest income on loans plus non-interest income less net
credit  losses.  The  Company  uses risk  adjusted  revenue as a measure of loan
portfolio  profitability,  consistent with its goal of matching the revenue base
of customer accounts with the risk undertaken. Risk adjusted revenue may also be
expressed  as a  percentage  of  average  consumer  loans,  in which  case it is
referred to as risk adjusted return.

     Managed  risk  adjusted  revenue  and  return  for the three  months  ended
September 30, 2000 were $929.5  million and 15.89%  compared to $819 million and
18.99% for the same period in 1999.  For the nine  months  ended  September  30,
2000,  managed risk adjusted revenue and return,  before one-time second quarter
adjustments, were $2.79 billion and 16.50%, compared to $2.09 billion and 18.02%
for the same  period in 1999.  The  decrease  in managed  risk  adjusted  return
reflects a decrease  in the  managed  net  interest  margin on loans,  which has
absorbed numerous rate increases by the Federal Reserve in the last year, and an
increase in the managed net credit loss rates,  which reflects account seasoning
in the managed loan portfolio.

     The  components  of risk  adjusted  revenue are discussed in more detail in
subsequent  sections of this  Management's  Discussion and Analysis of Financial
Condition and Results of Operations.

Net Interest Income and Margin

     Net interest income is interest earned from loan and investment  portfolios
less interest  expense on deposits and  borrowings.  Managed net interest income
includes net interest  income and interest  earned from  securitized  loans less
interest paid to securitization investors.



                                       15
<PAGE>


     Managed net interest  income for the three months ended  September 30, 2000
was $761.3  million,  compared  to $557.8  million  for the same period in 1999,
representing an increase of $203.5 million,  or 36%. Managed net interest margin
on average managed earning assets decreased to 11.36% for the three months ended
September 30, 2000, from 12.15% for the same period in 1999. For the nine months
ended  September  30, 2000,  managed net interest  income was $2,109.3  million,
compared to $1,488.9  million for the same period in 1999, an increase of $620.4
million,  or 42%.  Managed net interest margin on average managed earning assets
decreased to 10.82% for the nine months ended  September  30, 2000,  from 12.35%
for the same  period in 1999.  The  decrease  was the  result  of the  Company's
decision to increase liquidity utilizing its investment  portfolio.  Managed net
interest  margin on  average  managed  loans  increased  to 12.90% for the three
months ended September 30, 2000, from 12.40% for the same period in 1999.

Statement of Average Balances, Income and Expense, Yields and Rates

     The  following  table  provides an analysis  of reported  interest  income,
interest  expense,  net interest spread,  and average balances for the three and
nine months  ended  September  30, 2000 and 1999.  Interest  income and interest
expense margins are presented as a percentage of average  earning assets,  which
include  interest-earning  consumer loan  portfolios  and  investments  held for
liquidity purposes.


                                       16
<PAGE>


<TABLE>
<CAPTION>
                                                                                Three Months Ended September 30
                                                      ------------------------------------------------------------------------------
                                                                           2000                                     1999
                                                      ---------------------------------------   ------------------------------------
                                                        Average           Income/      Yield/      Average         Income/    Yield/
(dollars in thousands)                                  Balance           Expense       Rate       Balance         Expense    Rate
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>              <C>              <C>      <C>            <C>            <C>
ASSETS:
Interest-earning assets
        Consumer loans                               $ 13,402,828     $    633,589     18.91%   $  8,994,243   $    424,597   18.88%
        Interest-earning cash                             151,473            2,454      6.48%        118,129          1,447    4.90%
        Federal funds sold                              1,014,041           16,782      6.62%        567,164          7,107    5.01%
        Investment securities                           2,239,629           38,500      6.88%        414,598          6,097    5.88%
                                                     ------------     ------------     -----    ------------   ------------   -----
Total interest-earning assets                          16,807,971     $    691,325     16.45%     10,094,134   $    439,248   17.41%

Allowance for loan losses                              (1,325,863)                                  (738,282)
Other assets                                            2,225,373                                  1,373,961
                                                     ------------                               ------------
Total assets                                         $ 17,707,481                               $ 10,729,813
                                                     ============                               ============

LIABILITIES AND EQUITY:
Interest-bearing liabilities
        Deposits                                     $ 13,296,600     $    211,312      6.36%   $  6,473,313   $     89,073    5.50%
        Borrowings                                        896,966           13,459      6.00%      1,920,960         28,546    5.94%
                                                     ------------     ------------     -----      ----------   ------------   -----
Total interest-bearing liabilities                     14,193,566     $    224,771      6.33%      8,394,273   $    117,619    5.60%

Other liabilities                                       1,663,614                                  1,076,182
                                                     ------------                               ------------
Total liabilities                                      15,857,180                                  9,470,455

Capital securities                                        160,000                                    160,000

Equity                                                  1,690,301                                  1,099,358
                                                     ------------                               ------------
Total liabilities and equity                         $ 17,707,481                               $ 10,729,813
                                                     ============                               ============

NET INTEREST SPREAD:                                                                   10.12%                                 11.81%
                                                                                       =====                                  =====

Interest income to
        average interest-earning assets                                                16.45%                                 17.41%
Interest expense to
        average interest-earning assets                                                 5.35%                                  4.66%
                                                                                       -----                                  -----
Net interest margin                                                                    11.10%                                 12.75%
                                                                                       =====                                  =====
</TABLE>



                                       17
<PAGE>



<TABLE>
<CAPTION>
                                                                                  Nine Months Ended September 30
                                                   -------------------------------------------------------------------------------
                                                                        2000                                     1999
                                                   -----------------------------------------     ---------------------------------
                                                      Average          Income/       Yield/       Average       Income/      Yield/
(dollars in thousands)                                Balance          Expense        Rate        Balance       Expense      Rate
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>              <C>              <C>      <C>            <C>            <C>
ASSETS:
Interest-earning assets
        Consumer loans                             $ 12,753,895     $  1,804,460     18.86%   $  7,697,174   $  1,062,171   18.40%
        Interest-earning cash                           135,156            6,170      6.09%        124,272          4,421    4.74%
        Federal funds sold                            1,475,452           68,130      6.16%        540,251         19,730    4.87%
        Investment securities                         1,844,321           94,043      6.80%        396,325         17,471    5.88%
                                                   ------------     ------------     -----    ------------   ------------   -----
Total interest-earning assets                        16,208,824     $  1,972,803     16.23%      8,758,022   $  1,103,793   16.80%

Allowance for loan losses                            (1,206,762)                                  (622,901)
Other assets                                          2,122,283                                  1,229,452
                                                   ------------                               ------------
Total assets                                       $ 17,124,345                               $  9,364,573
                                                   ============                               ============


LIABILITIES AND EQUITY:
Interest-bearing liabilities
        Deposits                                   $ 12,902,378     $    598,624      6.19%   $  5,666,742   $    227,302    5.35%
        Borrowings                                      997,168           47,676      6.37%      1,611,164         71,088    5.88%
                                                   ------------     ------------     -----    ------------   ------------   -----
Total interest-bearing liabilities                   13,899,546     $    646,300      6.20%      7,277,906   $    298,390    5.47%

Other liabilities                                     1,492,092                                    944,750
                                                   ------------                               ------------
Total liabilities                                    15,391,638                                  8,222,656

Capital securities                                      160,000                                    160,000

Equity                                                1,572,707                                    981,917
                                                   ------------                               ------------
Total liabilities and equity                       $ 17,124,345                               $  9,364,573
                                                   ============                               ============

NET INTEREST SPREAD:                                                                 10.03%                                 11.33%
                                                                                     =====                                  =====

Interest income to
        average interest-earning assets                                              16.23%                                 16.80%
Interest expense to
        average interest-earning assets                                               5.32%                                  4.54%
                                                                                     -----                                  -----
Net interest margin                                                                  10.91%                                 12.26%
                                                                                     =====                                  =====
</TABLE>

Interest Volume and Rate Variance Analysis

     Net  interest  income is affected by changes in the average  interest  rate
earned  on  interest-earning  assets  and  the  average  interest  rate  paid on
interest-bearing liabilities. Net interest income is also affected by changes in
the volume of  interest-earning  assets and  interest-bearing  liabilities.  The
following  table sets  forth the dollar  amount of the  increase  (decrease)  in
interest  income and interest  expense  resulting from changes in the volume and
rates:


                                       18
<PAGE>


<TABLE>
<CAPTION>
                                              Three Months Ended September 30                 Nine Months Ended September 30
                                                       2000 vs. 1999                                   2000 vs. 1999
                                          -----------------------------------------       -----------------------------------------
                                                               Change due to (1)                              Change due to (1)
                                           Increase       -------------------------        Increase       -------------------------
(dollars in thousands)                    (Decrease)        Volume           Rate         (Decrease)        Volume            Rate
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>             <C>             <C>             <C>             <C>             <C>
Interest Income:
Consumer loans                            $ 208,992       $ 208,316       $     676       $ 742,289       $ 715,078       $  27,211
Federal funds sold                            9,675           6,872           2,803          48,400          41,977           6,423
Other securities                             33,410          31,668           1,742          78,321          73,838           4,483
                                          ---------       ---------       ---------       ---------       ---------       ---------
    Total interest income                   252,077         246,856           5,221         869,010         830,893          38,117

Interest Expense:
Deposits                                    122,239         106,448          15,791         371,322         330,663          40,659
Borrowings                                  (15,087)        (15,372)            285         (23,412)        (28,928)          5,516
                                          ---------       ---------       ---------       ---------       ---------       ---------
    Total interest expense                  107,152          91,076          16,076         347,910         301,735          46,175
                                          ---------       ---------       ---------       ---------       ---------       ---------
    Net interest income                   $ 144,925       $ 155,780       $ (10,855)      $ 521,100       $ 529,158       $  (8,058)
                                          =========       =========       =========       =========       =========       =========
</TABLE>

(1) The changes due to both volume and rates have been  allocated in  proportion
to the  relationship  of the absolute  dollar amounts of the change in each. The
changes in interest  income and expense are  calculated  independently  for each
line in the schedule.

Non-Interest Income

     Non-interest   income,   which   consists   primarily  of   servicing   and
securitization income and credit product fee income,  represented  approximately
52% of gross  reported  revenues for the three months ended  September 30, 2000.
Total non-interest  income increased 15.2%, or $98.8 million,  to $749.9 million
for the three months ended  September 30, 2000,  compared to $651.1  million for
the same period in 1999.  For the nine months ended  September 30, 2000,  before
the one-time  adjustment related to the second quarter sale of home loans, total
non-interest  income  increased  31.6%,  or $536.7  million,  to $2.24  billion,
compared to $1.70 billion for the same period in 1999. The increase is primarily
attributable to increased credit product fee income realized from cross-marketed
products and loan  activity  fees  resulting  from growth in the customer  base.
After the one-time  second quarter  adjustment,  total  non-interest  income was
$2.30 billion for the nine months ended September 30, 2000.

Servicing and Securitization Income

     Servicing and securitization  income relates directly to securitized loans.
It includes a servicing  fee,  which  generally  offsets the  Company's  cost of
servicing the securitized  loans,  excess servicing income,  and gains or losses
from the transfer of financial  assets (see  "--Managed  Consumer Loan Portfolio
and the  Impact of  Securitization").  To the extent  subsequent  cash flows for
excess  servicing  income exceed the projected  amounts,  which were recorded at
present   value,   the  Company  will   recognize   additional   servicing   and
securitization income during the period in which the servicing is provided.

     As of  September  30,  2000,  securitizations  outstanding  provided  $10.1
billion in funding,  representing  37% of total managed  funding,  compared with
$8.6 billion,  or 45%, as of September 30, 1999. The decrease in securitizations
outstanding  as a percentage of total  managed  funding as of September 30, 2000
was due to the Company's  efforts to increase deposit  funding.  Securitization,
however,  remains a key element of the Company's funding strategy and, as market
conditions  warrant,  securitization as a component of total managed funding may
increase in future quarters. A more detailed discussion of the Company's funding
sources and the role of securitization  activities is set forth under "--Funding
and Liquidity."


                                       19
<PAGE>


     Because excess servicing income on securitized loans essentially represents
a  recharacterization  of net interest income and credit product fee income less
the provision for loan losses and servicing expense, it will vary based upon the
same factors that affect those items.  Thus,  changes in net credit  losses (see
"--Asset  Quality,  Net Credit  Losses")  and changes in interest  rates (to the
extent that the  receivables  and interest  payable to investors  are based upon
floating   rates)   will   cause   excess   servicing   income   to  vary   (see
"--Asset/Liability Risk Management").

     For the three months ended September 30, 2000, servicing and securitization
income  increased $85.1 million from the same period in 1999, to $242.9 million.
For the nine months ended  September  30,  2000,  servicing  and  securitization
income increased $112.3 million over the same period in 1999, to $550.1 million.
Excess servicing yields on securitized  loans improved for the first nine months
of 2000 due to decreases in net credit loss rates which were partially offset by
decreased finance charge and fee yields on securitized loans.

Credit Product Fee Income

     For the three months ended  September 30, 2000,  credit  product fee income
decreased  to $479.1  million  from $484.2  million for the same period in 1999,
reflecting a reduction of late and overlimit  fees  resulting from the change in
the third quarter to accelerate the  recognition of the estimated  uncollectible
portion of accrued fees on certain delinquent  accounts,  described in Note 7 to
the  condensed  consolidated  financial  statements.  For the nine months  ended
September 30, 2000, credit product fee income increased 29% to $1,600.8 million,
compared to $1,240.8 million for the same period in 1999.

     Credit product fee income  includes loan  performance  fees,  such as late,
overlimit and returned check charges,  as well as certain account activity fees,
such as  interchange  income,  annual  membership  income,  and cash advance and
processing  fees.  Account  activity  fees also include  other income  (formerly
referred to as "membership services" income) arising primarily from fee products
cross-marketed to the Company's customer base, which increased to $187.2 million
and  $597.3  million,  or 13% and  54%,  for the  three  and nine  months  ended
September 30, 2000, respectively,  compared to $165.2 million and $387.1 million
for the same periods in the prior year. These increases are primarily attributed
to increased sales of cross-marketed products to a growing customer base. Income
on products  cross-marketed to customers is recognized  ratably over the term of
the product, net of an allowance for estimated refunds,  beginning after the end
of the free or money-back guarantee period, if any. Certain fee revenue realized
from  securitized  loans is not  included  in credit  product  fee income but is
recorded as part of servicing and securitization income.

Non-Interest Expense

     Non-interest   expense  includes  employee  salaries  and  benefits;   loan
solicitation and advertising costs; occupancy,  furniture,  and equipment costs;
data processing and communication  costs; and other non-interest  expense.  Loan
solicitation and advertising  costs include  printing,  postage,  telemarketing,
list  processing,  and credit  bureau costs paid to third  parties in connection
with account solicitation  efforts. The Company also incurs advertising costs to
promote its consumer  financial  products.  In accordance with GAAP, the Company
has capitalized only the direct  nonsolicitation  costs (loan origination costs)
associated  with  successful  account  acquisition  efforts,   after  offsetting
up-front processing fees.  Capitalized loan origination costs are amortized over
the  privilege  period  (currently  one year) for credit card loans,  unless the
loans are securitized,  in which case the costs are taken as an expense prior to
the  securitization.  The  majority of loan  origination  costs are  expensed as
incurred.  For the three months ended  September 30, 2000 and 1999,  the Company
amortized  loan  origination  costs of $9.7 million and $14.6  million.  For the
three months ended September 30, 2000 and 1999, total loan  solicitation  costs,
including  amortized  loan  origination  costs,  were $138.8  million and $116.0
million.  The  increase  in  loan  solicitation  costs  reflects  new  marketing
initiatives,  including television and Internet advertising  campaigns.  For the
nine months ended September 30, 2000 and 1999,  total loan  solicitation  costs,
including  amortized  loan  origination  costs,  were $370.0  million and $317.7
million.


                                       20
<PAGE>


     Non-interest  expense also includes  salary and benefit  expenses,  such as
staffing costs associated with marketing,  customer  service,  collections,  and
administration.  Other non-interest expense includes third-party data processing
and communication  costs,  occupancy expenses,  and other operational  expenses,
such as collection costs,  fraud losses, and bankcard  association  assessments,
and for the second quarter of 2000 includes a one-time adjustment related to the
previously  mentioned  settlement.  The following  table  presents  non-interest
expense for the three and nine months ended September 30, 2000 and 1999:

<TABLE>
<CAPTION>
                                                             Three Months Ended September 30         Nine Months Ended September 30
                                                             -------------------------------        --------------------------------
(dollars in thousands)                                           2000                1999                2000                1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                 <C>                 <C>                 <C>
Non-interest expense
Salaries and employee benefits                                $  179,056          $  132,579          $  527,371          $  350,350
Solicitation and advertising                                     138,821             115,972             369,963             317,650
Occupancy, furniture, and equipment                               37,139              23,745             100,536              57,926
Data processing and communication                                 46,940              33,593             132,248              88,207
Other (1)                                                        147,792             127,299             700,992             314,001
                                                              ----------------------------------------------------------------------
       Total                                                  $  549,748          $  433,188          $1,831,110          $1,128,134
                                                              ======================================================================
</TABLE>

(1) Year 2000 expenses include the $272.6 million one-time adjustment related to
the previously mentioned settlement.


Income Taxes

     The  Company  recognized  income tax  expense of $133.8  million and $100.4
million for the three months ended  September  30, 2000 and 1999.  The Company's
effective  tax rate was 40.0% for the three months ended  September 30, 2000 and
1999.

Asset Quality

     The  Company's  delinquencies  and net credit losses  reflect,  among other
factors, the quality of loans, the average age of the Company's loans receivable
(generally referred to as "seasoning"),  the success of the Company's collection
efforts, and general economic conditions. The quality of loans is subject to the
segmentation and underwriting criteria used, account management,  seasoning, and
demographic and other factors.

     The level of net credit losses directly  affects earnings when reserves are
established through recognition of provisions for credit losses.  Provisions for
credit losses  generally  depend on  historical  levels of net credit losses and
current trends.  As new portfolios of consumer loans are originated or acquired,
management uses historical credit loss and delinquency analyses of similar, more
seasoned loan portfolios and other qualitative factors to establish an allowance
for credit  losses  inherent in the existing  portfolio  (see  "--Allowance  and
Provision  for Credit  Losses").  As net  credit  losses  are  experienced,  the
previously   established   reserve  is  used  to  absorb   the  credit   losses.
Additionally, the Company adjusts the allowance for credit losses to reflect the
sale of securitized loans and the removal of the related net book value from the
consolidated statements of financial condition.

     The  Company's  policy  is to  recognize  principal  credit  losses  on all
delinquent  unsecured  loans  (including the unsecured  portion of any partially
secured credit card loans) no later than 180 days after the delinquency  occurs,
unless the  accountholder  cures the  default by making a partial  payment  that
qualifies  under the  Company's  standards.  Accounts  of  bankrupt  credit card
customers are charged off upon notification of bankruptcy.  Accounts of deceased
credit card customers are charged off upon determination of uncollectibility but
in no case later than 180 days after such loans become delinquent. At the time a
loan is charged  off,  accrued  but unpaid  finance  charge  income is  reversed
against current earnings but is maintained on the customer's record in the event
of a  future  recovery.  After a loan is  charged  off,  the  Company  continues
collection  activity,  to the extent  legally  permissible.  Any  collections on
previously charged off loans are recognized as recoveries when realized.


                                       21
<PAGE>


Delinquencies

     An  account  is  contractually  delinquent  if the  minimum  payment is not
received by the next billing date. Total 30+ day  delinquencies on managed loans
increased to 6.71% as of  September  30, 2000 from 5.66% as of December 31, 1999
and 5.20% as of September 30, 1999. This increase reflects the overall change in
the loan portfolio  composition  including the previously mentioned sale of home
loans,  and  account  seasoning  in lower line credit  card asset  classes.  The
following  table presents the delinquency  trends of the Company's  reported and
managed consumer loan portfolios as of September 30, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                                         September 30
                                                           -------------------------------------------------------------------------
                                                                        2000                                      1999
                                                           ------------------------------             ------------------------------
                                                                                  % of                                        % of
                                                                                  Total                                       Total
(dollars in thousands)                                          Loans             Loans                   Loans               Loans
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                    <C>                <C>                    <C>
Reported:
Loans outstanding                                           $14,265,386            100.00%            $ 9,520,735            100.00%
Loans delinquent:
      30 - 59 days                                              397,955              2.79%                186,547              1.96%
      60 - 89 days                                              272,752              1.91%                133,714              1.40%
      90 or more days                                           480,395              3.37%                257,821              2.71%
                                                            -----------            ------             -----------            ------
      Total                                                 $ 1,151,102              8.07%            $   578,082              6.07%
                                                            ===========            ======             ===========            ======
Managed:
Loans outstanding                                           $24,549,526            100.00%            $18,356,168            100.00%
Loans delinquent:
      30 - 59 days                                              576,427              2.35%                319,267              1.74%
      60 - 89 days                                              386,292              1.57%                219,201              1.19%
      90 or more days                                           684,455              2.79%                415,887              2.27%
                                                            -----------            ------             -----------            ------
      Total                                                 $ 1,647,174              6.71%            $   954,355              5.20%
                                                            ===========            ======             ===========            ======
</TABLE>


Net Credit Losses

     Net credit losses for consumer  loans  represent  the  principal  amount of
losses from customers who have not paid their existing loan balances  (including
charged-off  bankrupt  and  deceased  customer  accounts)  less  current  period
recoveries.  The  principal  amounts  of  such  losses  include  cash  advances,
purchases, and certain financed cross-marketed product sales and exclude accrued
finance charge and fee income, and fraud losses.

     The  annualized  managed  net credit loss rate  increased  to 7.61% for the
three months ended September 30, 2000,  compared to 6.40% for the same period in
1999. The increased  managed net credit loss rate, which was less than expected,
reflects  increases in credit loss rates on the Company's lower line credit card
asset classes due to account seasoning. The continued seasoning of the Company's
lower line asset classes is expected to result in an increase in the managed net
credit loss rate to the 8% range in the fourth  quarter of 2000.  The  Company's
pricing for finance charge and fee income incorporates an expected higher credit
loss rate when  appropriate,  consistent with the Company's risk adjusted return
approach.

                                       22
<PAGE>

     The following  table  presents the Company's net credit losses for consumer
loans for the periods  indicated and is presented both on a financial  statement
reporting basis and a managed portfolio basis:

<TABLE>
<CAPTION>
                                                                   Three Months Ended                      Nine Months Ended
                                                                     September 30                             September 30
                                                            -------------------------------         -------------------------------
(dollars in thousands)                                         2000                1999                 2000                 1999
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                 <C>                 <C>                 <C>
Reported:
Average loans outstanding                                   $13,402,828         $ 8,994,243         $12,753,895         $ 7,697,174
Net credit losses                                           $   280,066         $   130,720         $   756,656         $   358,346
Net credit losses as a percentage
   of average loans outstanding                                    8.36%               5.81%               7.91%               6.21%

Managed:
Average loans outstanding                                   $23,395,018         $17,262,469         $22,529,959         $15,470,891
Net credit losses                                           $   445,140         $   276,398         $ 1,251,934         $   813,593
Net credit losses as a percentage
   of average loans outstanding                                    7.61%               6.40%               7.41%               7.01%
</TABLE>

Allowance and Provision for Credit Losses

     The Company  maintains the allowance for credit losses at a level estimated
to be adequate  to absorb  credit  losses,  net of  recoveries,  inherent in the
existing reported loan portfolio.  The allowance for credit losses is maintained
for reported loans only (see  "--Managed  Consumer Loan Portfolio and the Impact
of  Securitization").   Accordingly,   the  entire  allowance  is  allocated  to
designated portfolios or pools of the Company's reported loans.

     As part of the quantitative  evaluation of the allowance for credit losses,
the Company  segregates  loans by portfolio  type.  These include  portfolios of
various  types of  credit  card  products  and  acquired  loan  portfolios.  The
quantitative factors the Company uses to establish  portfolio-level reserves are
historical  delinquencies,  historical credit loss rates,  level of security (if
applicable),  customer  characteristics,  and other factors. Loan portfolios are
grouped into pools, and certain  qualitative factors are applied to those pools,
consistent with applicable bank regulatory guidelines. In evaluating the need to
establish additional  allowances on a pool or portfolio,  the Company takes into
consideration qualitative factors, including general economic conditions, trends
in loan portfolio volume and seasoning,  geographic  concentrations,  and recent
modifications to loan review and underwriting  procedures.  The Company compares
actual credit loss performance  against estimated credit losses,  and may modify
its loan loss allowance evaluation model accordingly.


                                       23
<PAGE>

     The  following  table sets forth the activity in the  allowance  for credit
losses for the three and nine months ended September 30, 2000 and 1999:


<TABLE>
<CAPTION>
                                                                      Three Months Ended                   Nine Months Ended
                                                                        September 30                           September 30
                                                                ------------------------------        -----------------------------
(dollars in thousands)                                             2000                1999              2000               1999
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>                <C>                <C>               <C>
Balance at beginning of period                                  $ 1,263,796        $   675,224        $ 1,028,377       $   451,245
Provision for credit losses                                         332,241            288,279          1,067,044           725,574
Reserve acquired / Other                                               --                 --              (22,617)           14,310
Foreign currency translation                                            214               --                   37              --
Credit losses                                                      (311,785)          (148,995)          (841,246)         (414,783)
Recoveries                                                           31,719             18,275             84,590            56,437
                                                                -----------        -----------        -----------       -----------
Net credit losses                                                  (280,066)          (130,720)          (756,656)         (358,346)
                                                                -----------        -----------        -----------       -----------
Balance at end of period                                        $ 1,316,185        $   832,783        $ 1,316,185       $   832,783
                                                                ===========        ===========        ===========       ===========

Allowance for credit losses to loans at period-end                                                          10.12%             8.75%
</TABLE>


The  allowance  for  credit  losses  increased  to $1.32  billion,  or 10.12% of
reported  loans,  as of September  30,  2000,  from $1.03  billion,  or 8.86% of
reported loans, as of December 31, 1999 and $832.8 million, or 8.75% of reported
loans, as of September 30, 1999. The increase in the allowance for credit losses
as a percentage of reported loans reflects an increase in lower line credit card
loans,  which are generally expected to experience higher credit loss rates (see
"--Risk Adjusted Revenue and Return").

Funding and Liquidity

     The Company funds its assets through a diversified mix of funding  products
designed to appeal to a broad range of  investors,  with the goal of  generating
funding at the lowest  cost  possible  while  maintaining  liquidity  at prudent
levels and managing interest rate risk.

     The primary goal of the  Company's  liquidity  management is to ensure that
funding will be  available to support  Company  operations  in varying  business
environments.  The  Company  employs  multiple  strategies  to maintain a strong
liquidity position,  including diversification of funding sources, dispersion of
maturities, maintenance of a prudent investment portfolio and cash balances, and
maintenance of committed credit facilities.

Funding Sources and Maturities

     The  Company  seeks to fund its  assets by  diversifying  its  distribution
channels and offering a variety of funding products.  Among the products offered
are retail and  institutional  deposits,  money  market  accounts,  term federal
funds, public and private asset  securitizations,  and bank notes.  Distribution
channels  include  direct  phone  and mail,  brokerage  and  investment  banking
relationships, and the Internet.

     The Company offers maturity terms for its funding  products that range from
one week to 30 years. Actual maturity  distributions  depend on several factors,
including expected asset duration, investor demand, relative costs, shape of the
yield  curve,  and  anticipated  issuances  in the  securitization  and  capital
markets.  Maturities are managed by the types of funding sources utilized and by
the rates  offered  on  different  products.  The  Company  seeks to  maintain a
balanced  distribution of maturities,  avoiding undue  concentration  in any one
period.  The  Company  monitors  existing  funding  maturities  and loan  growth
projections  with the goal of ensuring  that  liquidity  levels are  adequate to
support maturities.


                                       24
<PAGE>


     The following table  summarizes the  contractual  maturities of deposits at
the Company as of September 30, 2000 and December 31, 1999:


<TABLE>
<CAPTION>
                                                               September 30, 2000                       December 31, 1999
                                                   ---------------------------------------   ---------------------------------------
                                                      Direct         Other        Total         Direct       Other          Total
(dollars in thousands)                               Deposits      Deposits      Deposits      Deposits     Deposits       Deposits
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>           <C>           <C>           <C>           <C>           <C>
Three months or less                               $   950,970   $ 1,525,597   $ 2,476,567   $   675,158   $   271,852   $   947,010
Over three months through 12 months                  2,120,142     2,325,202     4,445,344     2,080,048     2,084,568     4,164,616
Over one year through five years                     1,937,348     3,384,661     5,322,009     1,426,006     2,609,582     4,035,588
Over five years                                             --       645,000       645,000            --       330,000       330,000
Deposits without contractual maturity                  893,691        37,212       930,903       999,753        61,156     1,060,909
                                                   ---------------------------------------   ---------------------------------------
     Total Deposits                                $ 5,902,151   $ 7,917,672   $13,819,823   $ 5,180,965   $ 5,357,158   $10,538,123
                                                   =======================================   =======================================
</TABLE>


     Deposits  increased to $13.8  billion as of  September  30, 2000 from $10.5
billion as of December 31, 1999.  This increase is attributable to the Company's
continuing  strategy to maintain a large deposit  funding base and strong demand
for FDIC-insured deposits.

     The Company  securitizes loans in order to diversify funding sources and to
obtain an efficient  all-in cost of funds,  including  the cost of capital.  The
securitizations  are  diversified  across the public and private  securitization
markets and across maturity terms.  Pools of securitized loans provide cash flow
for securities sold to investors under legal  structures that generally  provide
for an interest-only  (revolving) period and a principal repayment (amortization
or accumulation) period. During an amortization or accumulation period, payments
on the  securitized  loans are  distributed  or  accumulated  for payment to the
securitization  investors,  and the  portion of the  securitized  pool of assets
reported on the Company's statement of financial condition will increase.

     Private   securitizations   may  utilize  commercial   paper-based  conduit
facilities and other variable funding  programs to securitize loans  receivable.
The conduit  facilities and variable  funding  programs are generally  renewable
annually.  Balances  securitized  under conduit and variable funding  facilities
totaled approximately $3.3 billion as of September 30, 2000.

     During the first nine  months of 2000,  the  Company  completed  three term
securitizations  totaling approximately $1.9 billion. The Company securitized an
additional $1.3 billion in loans in October 2000.

     The  Company's  term  securitizations  are  expected to  amortize  over the
periods indicated below, based on currently outstanding  securitized loans as of
September 30, 2000:

                                                                  Amount
                                                              Amortizing
          Year                                     (dollars in millions)
          --------------------------------------------------------------
          2000                                              $   --
          2001                                                 945
          2002                                               1,562
          2003                                               1,403
          2004                                               1,818
          2005                                                 865

The Company  believes  that it can  attract  deposits,  borrow  funds from other
sources,  and issue  additional  asset-backed  securities to replace the funding
reflected in the amortization  schedule summarized above, although no assurances
can be given to that effect.

     The Company,  through one of its banking subsidiaries,  maintains a program
for the  issuance  of senior  and  subordinated  debt  instruments.  Under  this
program,  the Company  from time to time may issue  fixed or variable  rate debt
instruments with maturities ranging from seven days to 15 years.



                                       25
<PAGE>

     On August 23, 2000, the Company issued  $402,500,000  of 3.25%  Convertible
Senior  Notes  due  August  15,  2005  (the  "Notes")   with  interest   payable
semi-annually on February 15 and August 15 of each year,  commencing on February
15, 2001. The Notes are initially convertible,  at the option of the holders, at
the conversion rate of 7.2446 shares of the Company's common stock per $1,000 of
Note  principal.  The  Company  has the  option to redeem  the Notes on or after
August 20, 2003.

     The following table shows the Company's unsecured funding  availability and
outstandings as of September 30, 2000:

<TABLE>
<CAPTION>
                                                                                      September 30, 2000
                                                                   ------------------------------------------------------------
                                                                    Effective/                       Outstanding,       Final
(dollars or dollar equivalents in thousands)                       Issue Date     Availability(1)        Net          Maturity
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>           <C>              <C>              <C>
Senior and subordinated bank note program (2)(3)                         2/98       $2,970,000       $  731,721          2/13
Short-term credit facilities (three 364-day facilities)               Various          250,000             --         Various
Short-term U.K. credit facility (364-day facility)(4)                    4/99           37,853             --            4/01
Revolving credit facility                                                1/99          750,000             --            1/03
Providian Financial shelf registration                                   6/98        1,597,500          402,500          8/05
Capital Securities                                                       2/97             --            160,000          2/27
</TABLE>

(1)  Short-term bank notes issued under the bank note program and short-term and
     long-term  credit  facilities  are  revolving   funding  sources.   Funding
     availability is subject to market conditions and contractual provisions.

(2)  Includes  availability  to issue up to $500  million of  subordinated  bank
     notes, none outstanding as of September 30, 2000.

(3)  Bank  notes  currently   outstanding   under  the  bank  note  program  are
     medium-term senior bank notes.

(4)  (pound)25  million  sterling  facility in dollars using exchange rate as of
     September 30, 2000.

Investments

     The  Company  maintains  cash  reserves  to  provide  adequate   short-term
liquidity.  The Company also  maintains a portfolio of  high-quality  investment
securities  such as U.S.  government  and  agency  obligations,  mortgage-backed
securities,  commercial  paper,  interest-earning  deposits  with  other  banks,
federal funds sold, and other cash equivalents.  Investment securities increased
to $3,092.8  million as of September 30, 2000 from $581.5 million as of December
31, 1999,  due to steps taken to enhance the Company's  liquidity  position,  by
funding  opportunistically  at attractive  rates in the deposit market.  Federal
funds sold and securities  purchased under resale agreements decreased to $220.6
million as of September 30, 2000 from $1,298.0 million as of December 31, 1999.

Credit Facilities

     The Company has additional  backup  liquidity in the form of a $750 million
unsecured  committed  revolving  credit  facility  from  a  group  of  financial
institutions,  which is  scheduled to expire in January  2003.  Pursuant to this
credit facility, the Company's two banking subsidiaries, Providian National Bank
and Providian  Bank, as borrowers,  have access to revolving  loans,  which bear
interest  determined by a competitive  bid process or based on the federal funds
rate,  the London  Interbank  Offered Rate  (LIBOR),  or the prime rate,  plus a
spread. The Company guarantees the prompt and complete payment, when due, of the
borrowers'  obligations under the credit facility.  During the first nine months
of 2000, there were no borrowings under the credit facility. The Company is also
a party to three separate  364-day lines of credit totaling $250 million,  under
which short-term  borrowings are available for general corporate  purposes.  The
Company  did not borrow  funds under these  364-day  lines of credit  during the
first nine months of 2000. The United Kingdom branch of Providian  National Bank
is a party to a  sterling  denominated  364-day  line of credit in the amount of
(pound)25  million  ($37.9  million  equivalent  based on the  exchange  rate at
September 30, 2000), under which short-term borrowings are available for general
corporate purposes. The Company guarantees the prompt and complete payment, when
due, of the borrower's obligations under the sterling facility.


                                       26
<PAGE>


     The Company  follows a  contingency  funding  plan that  defines  tests for
management  to  monitor  the  Company's   liquidity   position  and   prescribes
management's actions in response to various circumstances.

Capital Adequacy

     Each of the Company's  banking  subsidiaries is subject to capital adequacy
guidelines as defined by its primary  federal  regulator.  Core capital (Tier 1)
consists  principally of  shareholders'  equity less goodwill.  Total risk-based
capital  (Tier 1 + Tier 2) includes a portion of the  reserve for credit  losses
and other capital  components.  Based on these  classifications of capital,  the
capital  adequacy  regulations  establish three capital adequacy ratios that are
used to  measure  whether  a  financial  institution  is "well  capitalized"  or
"adequately capitalized":


<TABLE>
<CAPTION>
                                                                          Well           Adequately
                                                                      Capitalized       Capitalized
 Capital Ratio                         Calculation                       Ratios            Ratios
---------------------------------------------------------------------------------------------------
<S>                    <C>                                               <C>            <C>
Total risk-based       (Tier 1 + Tier 2)/Total risk-based assets         => 10%         => 8% < 10%
Tier 1                 Tier 1/Total risk-based assets                    =>  6%         => 4% <  6%
Leverage               Tier 1/Adjusted average assets                    =>  5%         => 4% <  5%
</TABLE>

     At September 30, 2000, each of the Company's banking subsidiaries was "well
capitalized" in all regulatory capital ratio categories, as set forth below:

                                             Providian
                                              National          Providian
Capital Ratio                                   Bank               Bank
--------------------------------------------------------------------------
Total risk-based                                10.50%            14.71%
Tier 1                                           9.13%            13.42%
Leverage                                        10.89%             5.94%

The Company's banking subsidiaries' capital amounts and classifications are also
subject to qualitative  judgments by the regulators  with respect to components,
risk weightings, and other factors.

Asset/Liability Risk Management

     The  composition  of the  Company's  consolidated  statements  of financial
condition  consist  primarily of investments in  interest-earning  assets (loans
receivable   and   investment   securities)   that  are   primarily   funded  by
interest-bearing  liabilities  (deposits  and  borrowings).  As  a  result,  the
Company's earnings are subject to risk resulting from interest rate fluctuations
to the extent that there is a difference between the amount of  interest-earning
assets and the amount of interest-bearing  liabilities that mature,  reprice, or
prepay/withdraw in a specific period.

     The Company's receivables generally have a fixed yield or float at a spread
above the prime rate.  While the  Company's  fixed rate credit card  receivables
have no stated  maturity or  repricing  period,  the Company may adjust the rate
charged after providing notice to the customer.  Interest rates on the Company's
liabilities are generally  indexed to LIBOR or bear a fixed rate until maturity.
This asset/liability structure exposes the Company to two types of interest rate
risk: (a) repricing risk, which results from  differences  between the timing of
rate changes and the timing of cash flows; and (b) basis risk, which arises from
changing spread relationships between yield curves and indexes.



                                       27
<PAGE>


     The principal  objective of the Company's  asset/liability  risk management
activities is to monitor and control the Company's  exposure to adverse  effects
resulting from  movements of interest rates over time. The Company  measures and
manages  interest rate risk  individually  for each banking  subsidiary and on a
consolidated  basis,  including both reported and managed assets and liabilities
in its measurement and management. To measure exposure to interest rate changes,
the Company uses net interest income (NII) and market value of portfolio  equity
(MVPE) simulation analysis.

     The following table presents the estimated effects of positive and negative
parallel  shifts in interest rates as calculated at September 30, 2000 and takes
into consideration the Company's current hedging activity:

                                            September 30, 2000 (1)
                                        ----------------------------
                                            Percentage Change In
 Change in Interest Rates               ----------------------------
 (in basis points)                           NII(2)         MVPE(3)
 -------------------------------------------------------------------
 +200                                        (1.4)%         (6.5)%
 Flat                                           0%             0%
 -200                                         1.5%           7.3%

(1)  The   information   shown  is   presented   on  a   consolidated,   managed
asset/liability basis, giving effect to securitizations and related funding.

(2) The  percentage  change  in this  column  represents  NII for 12 months in a
stable interest rate environment versus the NII in the specified rate scenarios.

(3) The  percentage  change  in this  column  represents  the  MVPE in a  stable
interest rate environment versus the MVPE in the specified rate scenarios.  MVPE
is defined as the present value of expected net cash flows from existing assets,
minus the present  value of expected net cash flows from  existing  liabilities,
plus the present  value of  expected  net cash flows from  existing  off-balance
sheet transactions.

     As part of its interest  rate risk  measurement  process,  the Company must
make reasonable  estimates about how its customers and competitors  will respond
to changes in market  interest  rates.  In  addition,  the  repricing of certain
categories  of assets  and  liabilities  is  subject  to  competitive  and other
pressures  beyond  the  Company's  control.  As a  result,  certain  assets  and
liabilities  assumed to mature or otherwise  reprice within a certain period may
in  fact  mature  or  reprice  at  different  times  and at  different  volumes.
Therefore, the table above should be viewed as the Company's best estimate as to
the  general  effect of broad  and  sustained  interest  rate  movements  on the
Company's net income and portfolio value.

     The Company generally seeks to mitigate earnings volatility associated with
interest rate movement by matching the repricing characteristics of reported and
managed assets and liabilities.  When matching the repricing  characteristics of
reported and managed assets and  liabilities  is not possible or efficient,  the
Company  uses  derivative   financial   instruments,   including  swap  and  cap
agreements, to reduce interest rate risk.

     Foreign  currency  exchange  rate risk refers to the  potential  changes in
current  and  future  earnings  or capital  arising  from  movements  in foreign
exchange rates. The Company's  foreign currency  exchange rate risk is primarily
limited to the unhedged  portion of the Company's net  investment in its foreign
subsidiaries and branches. The Company uses forward exchange contracts to reduce
its exposure to foreign currency exchange rate risk.



                                       28
<PAGE>


     The Company does not trade in derivatives  or use  derivatives to speculate
on interest  rates or foreign  exchange rates or as an investment  vehicle.  The
following  table  presents  the  notional  amounts  of swap  and cap  agreements
purchased for the periods indicated:


<TABLE>
<CAPTION>
                                                                  Three Months Ended                         Nine Months Ended
                                                                     September 30                              September 30
                                                           -------------------------------           -------------------------------
(dollars in thousands)                                        2000                 1999                 2000                1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                  <C>                  <C>                  <C>
Swap agreements:
            Beginning balance                              $1,272,976           $  635,500           $1,050,476           $  635,500
            Additions                                          82,500              115,000              315,000              130,000
            Maturities                                           --                 10,000               10,000               25,000
                                                           ----------           ----------           ----------           ----------
            Ending balance                                 $1,355,476           $  740,500           $1,355,476           $  740,500
                                                           ==========           ==========           ==========           ==========

Interest rate caps:
            Beginning balance                              $  641,445           $  647,709           $  644,878           $  670,960
            Additions                                         149,179               96,750              360,155              159,000
            Maturities                                        150,633               98,161              365,042              183,662
                                                           ----------           ----------           ----------           ----------
            Ending balance                                 $  639,991           $  646,298           $  639,991           $  646,298
                                                           ==========           ==========           ==========           ==========
</TABLE>

     Notional amounts of swaps  outstanding  have increased to offset,  in part,
the  growth of fixed  rate  deposits.  As  market  conditions  or the  Company's
asset/liability  mix change,  the Company may  increase or decrease the notional
amount of swaps and caps  outstanding in order to manage the Company's  interest
rate risk profile.

     The  Company  manages  credit risk  arising  from  derivative  transactions
through an ongoing credit review,  approval,  and  monitoring  process.  "Credit
risk" for these derivative  transactions is defined as the risk that a loss will
occur as the result of a derivative  counterparty  defaulting on a contract when
the contract is in a favorable economic position to the Company. The Company may
enter into master netting,  market settlement,  or collateralization  agreements
with derivative  counterparties  to reduce the credit exposure  arising from its
hedging transactions.


                                       29
<PAGE>


PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings.

     Beginning  in May 1999,  the  Company  was the  subject  of media  coverage
concerning   complaints  made  by  some  customers  of  the  Company's   banking
subsidiaries  regarding certain sales and collections  practices.  Following the
initial media coverage,  the San Francisco  District  Attorney's Office began an
investigation  into the Company's sales and collections  practices.  In November
1999,  the  Connecticut  Attorney  General's  Office  began an inquiry  into the
Company's sales and collections practices. On June 19, 2000, the Company reached
a settlement with the Connecticut  Attorney  General's Office in which it agreed
to pay $1.6  million  to the State of  Connecticut,  to  develop  a  process  to
determine  whether  any  individual   Connecticut   consumers  are  entitled  to
restitution,  and to modify  certain  business  practices.  On June 28, 2000 the
Company's  national  bank  subsidiary,  Providian  National  Bank (the  "Bank"),
reached  a  settlement  with  the  Office  of the  Comptroller  of the  Currency
following an examination that included an investigation of customer  complaints,
and the Company  reached a settlement with the San Francisco  District  Attorney
and the  California  Attorney  General,  in which the Bank and the  Company  and
certain  subsidiaries  of the Company  agreed to make  certain  changes to their
business practices and to pay restitution to customers  determined in accordance
with the procedures in the settlement agreement.  The Company estimates that the
total  restitution,  which  is  subject  to a  floor  of $300  million,  will be
approximately  $310  million.  The Bank has  begun  mailing  checks  to  persons
entitled to restitution and expects that  substantially all the payments will be
made  in the  fourth  quarter  of  2000.  As part of the  settlement,  the  Bank
stipulated to the issuance by the Comptroller of a Consent Order  obligating the
Bank to make such  changes and to pay the  aforementioned  restitution,  and the
Company and certain of its  subsidiaries  stipulated  to the entry of a judgment
and  the  issuance  of  a  permanent  injunction  effecting  the  terms  of  the
settlement.  In  addition,  the  Company  agreed  to pay $5.5  million  in civil
penalties to the City and County of San Francisco.

     Since May 1999,  a number of lawsuits  have been filed  against the Company
and, in some cases, against certain of the Company's subsidiaries by current and
former customers of the Company's banking subsidiaries.  A consolidated putative
class action lawsuit (In re Providian Credit Card Litigation) (the "Consolidated
Action")  was filed in August 1999 in  California  state court in San  Francisco
against the Company,  the Bank, and certain other  subsidiaries  of the Company,
and seeks unspecified damages, including actual and punitive damages, attorneys'
fees and injunctive  relief. The complaint alleges unfair and deceptive business
practices,  including  failure to credit  payments in a timely  fashion,  adding
products and charging fees without  customer  authorization,  changing rates and
terms without proper notice or authorization,  and misleading or deceptive sales
practices.  Similar  actions  filed  in  other  California  counties  have  been
transferred  to San  Francisco  County  and  coordinated  with the  Consolidated
Action.


                                       30
<PAGE>

     As of November 14, 2000,  three class  actions were pending in state courts
in San Mateo County,  California,  Cook County,  Illinois,  and Bullock  County,
Alabama.  These actions have not been consolidated with the Consolidated  Action
and are proceeding  separately.  A class consisting of a relatively small number
of California  customers has been certified in the San Mateo County,  California
action.  No class has been  certified  in the Cook  County,  Illinois or Bullock
County,  Alabama actions.  A motion to dismiss the Cook County,  Illinois action
has been granted with  prejudice,  and the plaintiff has filed an appeal.  As of
November 14, 2000, one consolidated putative class action was pending in federal
court.  The federal action (the  "Multidistrict  Action") is a consolidation  of
several  different  actions that had been filed in various federal  courts,  and
transferred  by the Federal  Judicial Panel on  Multidistrict  Litigation to the
Eastern District of Pennsylvania.  A consolidated complaint in the Multidistrict
Action was filed on February 4, 2000.

     These  other  state and  federal  actions  contain  substantially  the same
allegations as those alleged in the Consolidated Action.  Certain of the actions
also  allege  one or more of the  following:  that the  account  agreement  with
customers  contained  unconscionable or improper terms and fees, that statements
sent to customers  failed to include credit  protection and other add-on fees in
the  calculation of the annual  percentage  rate disclosed in those  statements,
refusal to honor  cancellation  requests,  improper obtaining of credit reports,
breached  promises to raise credit limits,  and breached promises of high credit
limits.

     A putative class action (In re Providian Securities Litigation), which is a
consolidation  of complaints  filed in the United States  District Court for the
Eastern District of New York in June 1999, alleges, in general, that the Company
and certain of its officers made false and misleading  statements concerning its
future  prospects and financial  results in violation of the federal  securities
laws. The putative class,  which is alleged to have acquired the Company's stock
between  January  15, 1999 and May 26,  1999,  seeks  damages in an  unspecified
amount,  in addition  to  pre-judgment  and  post-judgment  interest,  costs and
attorneys'  fees. By order dated February 8, 2000, the Federal Judicial Panel on
Multidistrict  Litigation  transferred the consolidated  securities cases to the
Eastern  District of Pennsylvania  for inclusion with the  Multidistrict  Action
currently pending in that court. On June 9, 2000 an amended  consolidated  class
action  complaint  was  filed,  and  on  September  15,  2000 a  second  amended
consolidated  class action  complaint was filed. On September 30, 2000, a motion
to dismiss the second amended  consolidated  class action complaint was filed on
behalf of all defendants.

     Two  shareholder  derivative  actions,  one filed on June 30,  2000 and one
filed  on July 14,  2000,  have  been  filed in  California  state  court in San
Francisco.  In addition, on September 14, 2000 a shareholder  derivative lawsuit
was filed in Delaware  chancery  court.  These actions seek redress  against the
members of the Company's board of directors and certain  executive  officers for
breach of their  fiduciary  duties and for corporate  waste arising out of their
approval  of, or failure to  prevent,  the  Company's  alleged  unfair  business
practices,  which allegedly resulted in a liability, or potential liability, for
restitution,  penalties,  and litigation  costs. The unfair practices alleged in
these  complaints are similar to the ones at issue in the  Multidistrict  Action
and the Consolidated  Action, and many of them were covered by the Comptroller's
Consent Order  described  above.  These  complaints are at an early stage and no
response is yet due.

     An informed  assessment  of the  ultimate  outcome or  potential  liability
associated with the lawsuits  described  above and other  potential  claims that
could arise out of the alleged unfair business practices is not feasible at this
time. Due to the uncertainties of litigation, there can be no assurance that the
Company  will  prevail on all the claims made against it in the lawsuits or that
similar proceedings will not be brought.  However,  management believes that the
Company has substantive defenses and intends to defend the actions vigorously.

                                       31
<PAGE>

     In addition,  the Company is commonly  subject to various other pending and
threatened  legal  actions  arising in the ordinary  course of business from the
conduct of its business activities. In the opinion of the Company, any liability
that is likely to arise with respect to these additional actions will not have a
material  adverse effect on the consolidated  financial  condition or results of
operations of the Company.

Item 6.  Exhibits and Reports on Form 8-K.

(a)  Exhibits Required by Item 601 of Regulation S-K.

     Exhibit 12.1   Computation  of  Earnings  to  Fixed  Charges  and  Ratio of
                    Earnings  to Combined  Fixed  Charges  and  Preferred  Stock
                    Dividend Requirements.

     Exhibit 27.1   Financial Data Schedule.

(b)  Reports on Form 8-K.

     The Company filed a report on Form 8-K on July 7, 2000, attaching its press
     release dated June 28, 2000,  announcing a final settlement  agreement with
     the Office of the Comptroller of the Currency,  the San Francisco  District
     Attorney's Office and the California Attorney General.

     The Company  filed a report on Form 8-K on August 23, 2000 with  respect to
     its  Registration  Statement  on Form  S-3 and the  issuance  of its  3.25%
     Convertible Senior Notes due August 15, 2005.

(e)  Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined  Fixed
     Charges and Preferred Stock Dividend Requirements.

<TABLE>
<CAPTION>
                                              Nine Months
                                                 Ended               Year Ended December 31
                                               September    ---------------------------------------------
(dollars in thousands)                            2000      1999      1998      1997      1996      1995
---------------------------------------------------------------------------------------------------------
<S>                                              <C>        <C>      <C>       <C>        <C>       <C>
EARNINGS TO FIXED CHARGES:
           Excluding interest on deposits        12.55      9.83     10.88     14.20      5.93      4.90
           Including interest on deposits         2.10      2.99      2.93      2.66      2.34      2.34

EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK: (1)
           Excluding interest on deposits        12.55      9.83     10.88     13.28      5.19      4.32
           Including interest on deposits         2.10      2.99      2.93      2.63      2.25      2.24
</TABLE>

(1)  Preferred  stock dividend  requirements  are adjusted to represent a pretax
     earnings equivalent.


                                       32

<PAGE>


                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                           Providian Financial Corporation
                                           -------------------------------
                                                    (Registrant)


Date: November 14, 2000                    /s/ David J. Petrini
                                           -------------------------------
                                           David J. Petrini
                                           Executive Vice President and
                                           Chief Financial Officer
                                           (Principal Financial Officer and Duly
                                           Authorized Signatory)

Date: November 14, 2000                    /s/ Daniel Sanford
                                           -------------------------------------
                                           Daniel Sanford
                                           Senior Vice President and Controller
                                           (Chief Accounting Officer and Duly
                                           Authorized Signatory)


                                       33