Metris Reports Net Income of $27.6 Million

MINNETONKA, MN – Metris Companies Inc. (NYSE: MXT) today reported net income of $27.6 million for the quarter ended March 31, 2005, or earnings of $0.15 per diluted common share. This compares to net income of $41.6 million for the quarter ended March 31, 2004, or earnings of $0.30 per diluted common share.

“We are very pleased with the operating results posted in the first quarter,” said Metris Chairman and Chief Executive Officer David Wesselink. “We saw substantial improvement in the performance of our credit card portfolio. The three-month average excess spread in the Metris Master Trust was 6.47%, which was considerably higher than the fourth quarter 2004 three-month average of 4.86%. As of March 31, 2005, the two-cycle plus delinquency rate in the Metris Master Trust was 8.3%, the lowest in almost four years, while the first-cycle delinquency rate of 4.1% in the Metris Master Trust is the lowest in our history. The decline in delinquencies is an encouraging sign for loss rates in the months ahead.”

Operating Data
New account originations for the quarter ended March 31, 2005 were 163,000. Gross active accounts were 2.2 million as of March 31, 2005, compared to 2.2 million as of December 31, 2004 and 2.4 million as of March 31, 2004. The Company’s managed credit card loans were $6.2 billion as of March 31, 2005, compared to $6.6 billion as of December 31, 2004 and $7.5 billion as of March 31, 2004. The Company’s owned credit card loan portfolio was $62.0 million as of March 31, 2005, compared to $74.1 million as of March 31, 2004.

The managed two-cycle plus delinquency rate was 8.3% as of March 31, 2005, compared to 9.1% as of December 31, 2004 and 10.4% as of March 31, 2004. The owned two-cycle plus delinquency rate was 10.0% as of March 31, 2005, compared to 11.4% as of December 31, 2004 and 15.0% as of March 31, 2004.

The managed net charge-off rate was 14.5% for the first quarter of 2005, compared to 15.5% in the previous quarter and 17.8% for the first quarter of 2004. The owned net charge-off rate was 10.1%, compared to 13.2% in the previous quarter and 71.0% in the first quarter of 2004.

Results of Operations – Revenues
Revenues for the quarter ended March 31, 2005 were $150.5 million, a $28.1 million or 15.7% decrease from $178.6 million for the quarter ended March 31, 2004. Securitization income was $108.1 million for the quarter ended March 31, 2005, a reduction of $10.9 million from the comparable period in 2004. This decrease is primarily due to a $28.0 million increase in loss on new securitizations and a $42.9 million decrease in the change in fair market value revenue, partially offset by a $14.0 million increase in interest-only revenue and a $32.1 million decrease in transaction and other costs. The increase in the loss on new securitizations resulted primarily from the loss on the defeasance of Series 2002-3, partially offset by a gain on the $52.8 million 2004-2 BB bond issuance during the current period. The decrease in the change in fair market value revenue from the first quarter of 2004 is primarily due to a $42.3 million decrease in the change in fair market value related to the change in conduit borrowings and receivable attrition, and an $8.6 million decrease due to lower levels of trapped excess spread released. These decreases were partially offset by a $10.3 million increase in fair market value due to the reduction of the discount rate for contractual retained interest, transferor and restricted cash from 16.0% to 15.0%. The increase in interest-only revenue resulted from a 186 basis point increase in average excess spread partially offset by a $1.3 billion reduction in average principal receivables. The $32.1 million decrease in transaction costs resulted from a reduction in financing activity during the first quarter of 2005 over the comparable period in 2004.

Servicing income on securitized receivables was $29.4 million, a decrease of $6.8 million from the first quarter of 2004 due to a $1.3 billion reduction in average principal receivables in the Metris Master Trust. Credit card loan fees, interchange and other income was $2.8 million, a decrease of $8.0 million from the first quarter of 2004 due primarily to the reduction in average owned credit card loans of $61.4 million between the two periods. Enhancement services income was $3.5 million for the first quarter of 2005, a decrease of $4.0 million from the first quarter of 2004 primarily due to the declining number of memberships resulting from a declining portfolio. The $1.8 million gain on sale of membership and warranty business resulted from the recognition of the remaining deferred portion of the gain due to the expiration of our obligations under a temporary servicing agreement with the purchaser.