##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
 for the quarterly period ended March 31, 2007
 or
 o
    
    Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
 for the transition period from  to
 Commission File Number 0-14120
 Advanta Corp.
  Delaware
    
    23-1462070(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 Welsh and McKean Roads, P.O. Box 844, Spring House, PA
    
    19477(Address of Principal Executive Offices)
    
    (Zip Code)
 
 þ o
  þ o o
 o þ
  o o
   Class A
    
    Outstanding at May 2, 2007Common Stock, $.01 par value
    
    9,606,862 sharesClass B
    
    Outstanding at May 2, 2007Common Stock, $.01 par value
    
    19,431,791 shares




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##### 



TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements
    
    
    3Consolidated Balance Sheets (Unaudited)
    
    
    3Consolidated Income Statements (Unaudited)
    
    
    4Consolidated Statements of Changes in Stockholders Equity (Unaudited)
    
    
    5-6Consolidated Statements of Cash Flows (Unaudited)
    
    
    7Notes to Consolidated Financial Statements (Unaudited)
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    35Item 4. Controls and Procedures
    
    
    35PART II- OTHER INFORMATION
    
    
    36Item 1. Legal Proceedings
    
    
    36Item 1A. Risk Factors
    
    
    36Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    36Item 6. Exhibits
    
    
    37Exhibit Index
    
    
    39Preferred Pricing AgreementComputation of Ratio of Earnings to Fixed ChargesCertification of CEO pursuant to Section 302Certification of CFO pursuant to Section 302Certification of CEO pursuant to Section 906Certification of CFO pursuant to Section 906
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
  ADVANTA CORP. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS (Unaudited)
 March 31,
    
    December 31,(In thousands, except share amounts)
    
    2007
    
    2006ASSETSCash
    
    $
    39,949
    
    
    $
    35,055Federal funds sold
    
    
    504,079
    
    
    
    547,631Restricted interest-bearing deposits
    
    
    903
    
    
    
    1,211Investments available for sale
    
    
    253,245
    
    
    
    197,477Receivables, net:Held for sale
    
    
    517,200
    
    
    
    568,456Other
    
    
    605,999
    
    
    
    546,553Total receivables, net
    
    
    1,123,199
    
    
    
    1,115,009Accounts receivable from securitizations
    
    
    335,624
    
    
    
    334,486Premises and equipment, net
    
    
    17,425
    
    
    
    16,715Other assets
    
    
    154,321
    
    
    
    165,554Total assets
    
    $
    2,428,745
    
    
    $
    2,413,138LIABILITIESDeposits
    
    $
    1,350,096
    
    
    $
    1,365,138Debt
    
    
    226,820
    
    
    
    227,126Subordinated debt payable to preferred securities trust
    
    
    103,093
    
    
    
    103,093Other liabilities
    
    
    162,865
    
    
    
    150,620Total liabilities
    
    
    1,842,874
    
    
    
    1,845,977Commitments and contingenciesSTOCKHOLDERS EQUITYClass A preferred stock, $1,000 par value:Authorized, issued and outstanding  1,010 shares in
2007 and 2006
    
    
    1,010
    
    
    
    1,010Class A voting common stock, $.01 par value:Authorized  200,000,000 shares; issued  10,041,017
shares in 2007 and 2006
    
    
    100
    
    
    
    100Class B non-voting common stock, $.01 par value:Authorized  200,000,000 shares; issued  23,615,867
shares in 2007 and 23,425,609 shares in 2006
    
    
    236
    
    
    
    234Additional paid-in capital
    
    
    315,004
    
    
    
    308,219Unearned ESOP shares
    
    
    (9,099
    )
    
    
    (9,204
    )Accumulated other comprehensive loss
    
    
    (263
    )
    
    
    (288
    )Retained earnings
    
    
    372,198
    
    
    
    359,813Treasury stock at cost, 434,155 Class A common shares in
2007 and 2006; 4,303,945 Class B common shares in 2007
and 4,290,789 Class B common shares in 2006
    
    
    (93,315
    )
    
    
    (92,723
    )Total stockholders equity
    
    
    585,871
    
    
    
    567,161Total liabilities and stockholders equity
    
    $
    2,428,745
    
    
    $
    2,413,138
 See notes to consolidated financial statements.
 3




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ADVANTA CORP. AND SUBSIDIARIES
 
 CONSOLIDATED INCOME STATEMENTS (Unaudited)
 Three Months Ended(In thousands, except per share amounts)
    
    March 31,2007
    
    2006Interest income:Receivables
    
    $
    35,567
    
    
    $
    28,927Investments
    
    
    7,682
    
    
    
    5,359Other interest income
    
    
    5,106
    
    
    
    3,982Total interest income
    
    
    48,355
    
    
    
    38,268Interest expense:Deposits
    
    
    16,537
    
    
    
    10,308Debt
    
    
    3,708
    
    
    
    3,358Subordinated debt payable to preferred
securities trust
    
    
    2,317
    
    
    
    2,289Total interest expense
    
    
    22,562
    
    
    
    15,955Net interest income
    
    
    25,793
    
    
    
    22,313Provision for credit losses
    
    
    10,083
    
    
    
    9,284Net interest income after provision for credit losses
    
    
    15,710
    
    
    
    13,029Noninterest revenues:Securitization income
    
    
    23,511
    
    
    
    33,578Servicing revenues
    
    
    20,376
    
    
    
    13,682Other revenues, net
    
    
    42,481
    
    
    
    34,976Total noninterest revenues
    
    
    86,368
    
    
    
    82,236Operating expenses
    
    
    66,802
    
    
    
    59,639Income before income taxes
    
    
    35,276
    
    
    
    35,626Income tax expense
    
    
    13,828
    
    
    
    13,716Net income
    
    $
    21,448
    
    
    $
    21,910Basic net income per common shareClass A
    
    $
    0.74
    
    
    $
    0.79Class B
    
    
    0.80
    
    
    
    0.82Combined
    
    
    0.78
    
    
    
    0.81Diluted net income per common shareClass A
    
    $
    0.70
    
    
    $
    0.73Class B
    
    
    0.73
    
    
    
    0.74Combined
    
    
    0.72
    
    
    
    0.73Basic weighted average common shares outstandingClass A
    
    
    8,879
    
    
    
    8,846Class B
    
    
    18,489
    
    
    
    18,107Combined
    
    
    27,368
    
    
    
    26,953Diluted weighted average common shares outstandingClass A
    
    
    8,879
    
    
    
    8,846Class B
    
    
    20,782
    
    
    
    20,876Combined
    
    
    29,661
    
    
    
    29,722
 See notes to consolidated financial statements.
 4




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ADVANTA CORP. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (Unaudited)
 Class A
    

    Class A
    

    Class B
    

    AdditionalComprehensive
    

    Preferred
    

    Common
    

    Common
    

    Paid-In($ in thousands)
    

    Income
    

    Stock
    

    Stock
    

    Stock
    

    CapitalBalance at December 31, 2005
    
    
    
    
    
    
    $
    1,010
    
    
    $
    100
    
    
    $
    219
    
    
    $
    276,231Net income
    
    
    $
    84,986Other comprehensive income:Unrealized appreciation
(depreciation) of investments,
net of tax benefit (expense)
of ($210)
    
    
    
    390Comprehensive income
    
    
    $
    85,376Preferred and common cash
dividends declaredExercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    10,499Stock-based nonemployee
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    238Stock-based employee
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,842Excess tax
benefits from stock-based compensation and ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,149Issuance of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    (7
    )Amortization of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,953Forfeitures of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (359
    )Reclassification of nonvested
shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,148
    )Treasury stock acquiredESOP shares committed to be
released
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    821Balance at December 31, 2006
    
    
    
    
    
    
    $
    1,010
    
    
    $
    100
    
    
    $
    234
    
    
    $
    308,219Effect of applying the provisions
of FIN No. 48 (See Note 2)Net income
    
    
    $
    21,448Other comprehensive income:Unrealized appreciation
(depreciation) of investments,
net of tax benefit (expense)
of ($13)
    
    
    
    25Comprehensive income
    
    
    $
    21,473Preferred and common cash
dividends declaredExercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    1,686Stock-based employee
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,151Excess tax benefits from
stock-based compensation and
ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,387Amortization of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,291Treasury stock acquiredESOP shares committed to be
released
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    270Balance at March 31, 2007
    
    
    
    
    
    
    $
    1,010
    
    
    $
    100
    
    
    $
    236
    
    
    $
    315,004
 See notes to consolidated financial statements.
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ADVANTA CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (Unaudited)  continued
 Unearned
    
    AccumulatedESOP Shares
    
    Other
    
    
    
    
    
    
    
    
    
    Total& Nonvested
    
    Comprehensive
    
    Retained
    
    Treasury
    
    Stockholders($ in thousands)
    
    Shares
    
    Income (Loss)
    
    Earnings
    
    Stock
    
    EquityBalance at December 31, 2005
    
    $
    (10,770
    )
    
    $
    (678
    )
    
    $
    298,472
    
    
    $
    (49,147
    )
    
    $
    515,437Net income
    
    
    
    
    
    
    
    
    
    
    84,986
    
    
    
    
    
    
    
    84,986Other comprehensive income:Unrealized appreciation
(depreciation) of investments,
net of tax benefit (expense)
of ($210)
    
    
    
    
    
    
    390
    
    
    
    
    
    
    
    
    
    
    
    390Comprehensive incomePreferred and common cash
dividends declared
    
    
    
    
    
    
    
    
    
    
    (23,645
    )
    
    
    
    
    
    
    (23,645
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,508Stock-based nonemployee
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    238Stock-based employee compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,842Excess tax benefits from stock-based compensation and ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,149Issuance of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0Amortization of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,953Forfeitures of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (360
    )Reclassification of nonvested shares
    
    
    1,148
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0Treasury stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,576
    )
    
    
    (43,576
    )ESOP shares committed to be released
    
    
    418
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,239Balance at December 31, 2006
    
    $
    (9,204
    )
    
    $
    (288
    )
    
    $
    359,813
    
    
    $
    (92,723
    )
    
    $
    567,161Effect of applying the provisions
of FIN No. 48 (See Note 2)
    
    
    
    
    
    
    
    
    
    
    (2,099
    )
    
    
    
    
    
    
    (2,099
    )Net income
    
    
    
    
    
    
    
    
    
    
    21,448
    
    
    
    
    
    
    
    21,448Other comprehensive income:Unrealized appreciation
(depreciation) of investments, net of tax benefit (expense) of ($13)
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    25Comprehensive incomePreferred and common cash
dividends declared
    
    
    
    
    
    
    
    
    
    
    (6,964
    )
    
    
    
    
    
    
    (6,964
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,688Stock-based employee compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,151Excess tax benefits from stock-based
compensation and ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,387Amortization of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,291Treasury stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (592
    )
    
    
    (592
    )ESOP shares committed to be released
    
    
    105
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    375Balance at March 31, 2007
    
    $
    (9,099
    )
    
    $
    (263
    )
    
    $
    372,198
    
    
    $
    (93,315
    )
    
    $
    585,871
 See notes to consolidated financial statements.
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ADVANTA CORP. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 Three Months Ended($ in thousands)
    
    March 31,2007
    
    2006OPERATING
ACTIVITIES  CONTINUING OPERATIONSNet income
    
    $
    21,448
    
    
    $
    21,910Adjustments to reconcile net income to net cash provided by
operating activities:Investment securities gains, net
    
    
    (990
    )
    
    
    (708
    )Depreciation and amortization
    
    
    1,416
    
    
    
    1,641Stock-based compensation expense
    
    
    2,442
    
    
    
    626Provision for credit losses
    
    
    10,083
    
    
    
    9,284Provision for interest and fee losses
    
    
    2,446
    
    
    
    2,038Change in deferred origination costs, net of deferred fees
    
    
    434
    
    
    
    (839
    )Change in receivables held for sale
    
    
    (306,402
    )
    
    
    (606,161
    )Proceeds from sale of receivables held for sale
    
    
    357,658
    
    
    
    535,890Change in accounts receivable from securitizations
    
    
    (1,138
    )
    
    
    176,557Excess tax benefits from stock-based compensation and ESOP
    
    
    (2,387
    )
    
    
    (787
    )Change in other assets and other liabilities
    
    
    39,195
    
    
    
    (65,148
    )Net cash provided by operating activities
    
    
    124,205
    
    
    
    74,303INVESTING
ACTIVITIES  CONTINUING OPERATIONSChange in federal funds sold and restricted interest-bearing
deposits
    
    
    43,860
    
    
    
    (14,766
    )Purchase of investments available for sale
    
    
    (273,366
    )
    
    
    (211,887
    )Proceeds from sales of investments available for sale
    
    
    202,521
    
    
    
    204,140Proceeds from maturing investments available for sale
    
    
    16,105
    
    
    
    19,730Change in receivables not held for sale
    
    
    (72,409
    )
    
    
    (42,325
    )Purchases of premises and equipment, net
    
    
    (2,122
    )
    
    
    (891
    )Net cash used in investing activities
    
    
    (85,411
    )
    
    
    (45,999
    )FINANCING
ACTIVITIES  CONTINUING OPERATIONSChange in demand and savings deposits
    
    
    11,909
    
    
    
    19,021Proceeds from issuance of time deposits
    
    
    116,025
    
    
    
    129,915Payments for maturing time deposits
    
    
    (152,289
    )
    
    
    (168,002
    )Proceeds from issuance of debt
    
    
    9,659
    
    
    
    4,280Payments on redemption of debt
    
    
    (10,353
    )
    
    
    (16,472
    )Change in cash overdraft
    
    
    (5,597
    )
    
    
    3,793Proceeds from exercise of stock options
    
    
    1,688
    
    
    
    2,367Cash dividends paid
    
    
    (6,964
    )
    
    
    (3,716
    )Excess tax benefits from stock-based compensation and ESOP
    
    
    2,387
    
    
    
    787Treasury stock acquired
    
    
    (592
    )
    
    
    0Net cash used in financing activities
    
    
    (34,127
    )
    
    
    (28,027
    )DISCONTINUED OPERATIONSNet cash provided by operating activities of discontinued
operations
    
    
    227
    
    
    
    954Net increase in cash
    
    
    4,894
    
    
    
    1,231Cash at beginning of period
    
    
    35,055
    
    
    
    34,109Cash at end of period
    
    $
    39,949
    
    
    $
    35,340
 See
notes to consolidated financial statements.
 7




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ADVANTA CORP. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (IN THOUSANDS EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE NOTED)
 March 31, 2007
(Unaudited)
  Note 1) Basis of Presentation
    Note 2) Recently Issued Accounting Standards
 Accounting for Transfers of Financial Assets  An Amendment of FASB Statement No.
140
 Accounting for Certain Hybrid Financial Instruments Accounting for Derivative Instruments and Hedging Activities Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities  a replacement of FASB Statement No. 125 , Application of Statement 133 to
Beneficial Interests in Securitized
 8




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Financial Assets
 Accounting for Servicing of Financial Assets
 Accounting for Uncertainty in Income
Taxes  an Interpretation of FASB Statement No. 109,
 Fair Value Measurements.
 The Fair Value Option for Financial Assets
and Financial Liabilities
 9




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Note 3) Investments Available for Sale
  March 31, 2007
    
    December 31, 2006Amortized
    
    Fair
    
    Amortized
    
    FairCost
    
    Value
    
    Cost
    
    ValueU.S. Treasury and government
agency securities
    
    $
    31,105
    
    
    $
    31,009
    
    
    $
    21,098
    
    
    $
    20,940State and municipal securities
    
    
    13,429
    
    
    
    13,443
    
    
    
    13,247
    
    
    
    13,242Commercial paper
    
    
    7,783
    
    
    
    7,781
    
    
    
    6,944
    
    
    
    6,941Corporate bonds
    
    
    8,463
    
    
    
    8,368
    
    
    
    8,488
    
    
    
    8,364Asset-backed securities(1)
    
    
    45,991
    
    
    
    45,879
    
    
    
    46,214
    
    
    
    46,196Equity securities(2)
    
    
    9,374
    
    
    
    9,260
    
    
    
    10,118
    
    
    
    9,983Money market funds
    
    
    133,162
    
    
    
    133,162
    
    
    
    91,771
    
    
    
    91,771Other
    
    
    4,343
    
    
    
    4,343
    
    
    
    40
    
    
    
    40Total investments available for sale
    
    $
    253,650
    
    
    $
    253,245
    
    
    $
    197,920
    
    
    $
    197,477
 (1)
    
    Includes mortgage-backed securities.(2)
    
    Includes venture capital investments of $1.5 million at March 31, 2007 and $1.0
million at December 31, 2006. The amount shown as amortized cost represents fair value
for these investments.
 Note 4) Receivables
  March 31,
    
    December 31,2007
    
    2006Business credit card receivables
    
    $
    1,142,006
    
    
    $
    1,133,132Other receivables
    
    
    7,703
    
    
    
    7,673Gross receivables
    
    
    1,149,709
    
    
    
    1,140,805Add: Deferred origination costs, net of deferred fees
    
    
    24,696
    
    
    
    25,130Less: Allowance for receivable lossesBusiness credit cards
    
    
    (49,995
    )
    
    
    (49,715
    )Other receivables
    
    
    (1,211
    )
    
    
    (1,211
    )Total allowance for receivable losses
    
    
    (51,206
    )
    
    
    (50,926
    )Receivables, net
    
    $
    1,123,199
    
    
    $
    1,115,009
 10




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Note 5) Allowance for Receivable Losses
  2007
    
    2006Balance at January 1
    
    $
    50,926
    
    
    $
    45,589Provision for credit losses
    
    
    10,083
    
    
    
    9,284Provision for interest and fee losses
    
    
    2,446
    
    
    
    2,038Gross principal charge-offs:Business credit cards
    
    
    (10,996
    )
    
    
    (9,059
    )Principal recoveries:Business credit cards
    
    
    1,213
    
    
    
    975Net principal charge-offs
    
    
    (9,783
    )
    
    
    (8,084
    )Interest and fee charge-offs:Business credit cards
    
    
    (2,466
    )
    
    
    (2,031
    )Balance at March 31
    
    $
    51,206
    
    
    $
    46,796
 Note 6) Securitization Activities
  March 31,
    
    December 31,2007
    
    2006Retained interests in securitizations
    
    $
    225,619
    
    
    $
    234,054Accrued interest and fees on securitized
receivables, net(1)
    
    
    67,320
    
    
    
    64,713Amounts due from the securitization trust
    
    
    42,685
    
    
    
    35,719Total accounts receivable from securitizations
    
    $
    335,624
    
    
    $
    334,486
 (1)
    
    Reduced by an estimate for uncollectible interest and fees of $9.4 million at March
31, 2007 and $8.7 million at December 31, 2006.
  Three Months EndedMarch 31,2007
    
    2006Average securitized receivables
    
    $
    4,152,857
    
    
    $
    2,957,309Securitization income
    
    
    23,511
    
    
    
    33,578Discount accretion
    
    
    5,106
    
    
    
    3,982Interchange income
    
    
    42,414
    
    
    
    33,714Servicing revenues
    
    
    20,376
    
    
    
    13,682Proceeds from new securitizations
    
    
    357,658
    
    
    
    535,890Proceeds from collections reinvested
in revolving-period securitizations
    
    
    2,383,984
    
    
    
    1,683,802Cash flows received on retained
interests
    
    
    84,756
    
    
    
    77,628Key assumptions:Discount rate
    
    
    8.15% -  9.84
    %
    
    
    8.71% - 10.14
    %Monthly payment rate
    
    
    20.04% - 23.10
    %
    
    
    22.75% - 25.00
    %Loss rate
    
    
    3.70% -  4.24
    %
    
    
    4.25% -  4.90
    %Interest yield, net of interest
earned by noteholders
    
    
    7.29% -  7.30
    %
    
    
    8.86% -  9.95
    %
   11




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##### Table of Contents



March 31,
    
    December 31,2007
    
    2006Discount rate
    
    
    8.15% -  8.98
    %
    
    
    8.82% -  9.84
    %Monthly payment rate
    
    
    20.04% - 23.10
    %
    
    
    21.29% - 23.10
    %Loss rate
    
    
    3.85% -  4.24
    %
    
    
    3.70% -  4.07
    %Interest yield, net of interest earned by
noteholders
    
    
    7.29
    %
    
    
    7.30
    %
   Effect on estimated fair value of the following
hypothetical changes in key assumptions:Discount rate increased 200 basis points
    
    $
    (4,214
    )Discount rate increased 400 basis points
    
    
    (8,239
    )Monthly payment rate at 115% of base assumption
    
    
    (1,126
    )Monthly payment rate at 130% of base assumption
    
    
    (2,611
    )Loss rate at 110% of base assumption
    
    
    (4,131
    )Loss rate at 125% of base assumption
    
    
    (10,328
    )Interest yield, net of interest earned by noteholders,
decreased 100 basis points
    
    
    (10,731
    )Interest yield, net of interest earned by noteholders,
decreased 200 basis points
    
    
    (21,461
    )
  12




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Managed business credit card receivable data
  March 31,
    
    December 31,
    
    March 31,2007
    
    2006
    
    2006Owned business credit card receivables
    
    $
    1,142,006
    
    
    $
    1,133,132
    
    
    $
    982,251Securitized business credit card receivables
    
    
    4,444,055
    
    
    
    4,073,128
    
    
    
    3,045,600Total managed receivables
    
    $
    5,586,061
    
    
    $
    5,206,260
    
    
    $
    4,027,851Receivables 30 days or more delinquent:Owned
    
    $
    28,544
    
    
    $
    26,053
    
    
    $
    26,335Securitized
    
    
    122,426
    
    
    
    108,159
    
    
    
    91,029Total managed
    
    
    150,970
    
    
    
    134,212
    
    
    
    117,364Receivables 90 days or more delinquent:Owned
    
    
    12,878
    
    
    
    12,632
    
    
    
    11,637Securitized
    
    
    54,633
    
    
    
    52,279
    
    
    
    40,131Total managed
    
    
    67,511
    
    
    
    64,911
    
    
    
    51,768Nonaccrual receivables:Owned
    
    
    10,711
    
    
    
    10,524
    
    
    
    11,710Securitized
    
    
    47,402
    
    
    
    45,160
    
    
    
    41,002Total managed
    
    
    58,113
    
    
    
    55,684
    
    
    
    52,712Accruing receivables past due 90 days or more:Owned
    
    
    11,373
    
    
    
    11,302
    
    
    
    10,447Securitized
    
    
    47,974
    
    
    
    46,785
    
    
    
    36,003Total managed
    
    
    59,347
    
    
    
    58,087
    
    
    
    46,450Net principal charge-offs for the three months
ended March 31 and December 31:Owned
    
    
    9,783
    
    
    
    9,169
    
    
    
    8,084Securitized
    
    
    35,082
    
    
    
    33,100
    
    
    
    27,095Total managed
    
    
    44,865
    
    
    
    42,269
    
    
    
    35,179
 Note 7) Commitments and Contingencies
  13




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Note 8) Capital Stock
  Three Months EndedMarch 31,2007
    
    2006Class A Common Stock
    
    $
    0.2125
    
    
    $
    0.1134Class B Common Stock
    
    
    0.2550
    
    
    
    0.1361
   Note 9) Segment Information
  AdvantaBusinessCards
    
    Other(1)
    
    TotalThree months ended March 31, 2007Interest income
    
    $
    40,549
    
    
    $
    7,806
    
    
    $
    48,355Interest expense
    
    
    13,306
    
    
    
    9,256
    
    
    
    22,562Noninterest revenues
    
    
    84,326
    
    
    
    2,042
    
    
    
    86,368Pretax income
    
    
    34,811
    
    
    
    465
    
    
    
    35,276Total assets at beginning of period
    
    
    1,495,544
    
    
    
    917,594
    
    
    
    2,413,138Total assets at end of period
    
    
    1,509,317
    
    
    
    919,428
    
    
    
    2,428,745Three months ended March 31, 2006Interest income
    
    $
    32,810
    
    
    $
    5,458
    
    
    $
    38,268Interest expense
    
    
    10,024
    
    
    
    5,931
    
    
    
    15,955Noninterest revenues
    
    
    81,338
    
    
    
    898
    
    
    
    82,236Pretax income
    
    
    35,293
    
    
    
    333
    
    
    
    35,626Total assets at beginning of period
    
    
    1,362,133
    
    
    
    765,270
    
    
    
    2,127,403Total assets at end of period
    
    
    1,280,102
    
    
    
    760,537
    
    
    
    2,040,639
 (1)
    
    Other includes venture capital operations as well as investment and other
activities not attributable to the Advanta Business Cards segment.
 14




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Note 10) Income Taxes
  2007
    
    2006Current:Federal
    
    $
    6,341
    
    
    $
    6,336State
    
    
    1,123
    
    
    
    1,350Total current
    
    
    7,464
    
    
    
    7,686Deferred:Federal
    
    
    6,296
    
    
    
    5,966State
    
    
    68
    
    
    
    64Total deferred
    
    
    6,364
    
    
    
    6,030Income tax expense
    
    $
    13,828
    
    
    $
    13,716
  2007
    
    2006Statutory federal income tax
    
    $
    12,346
    
    
    $
    12,469State income taxes, net of
federal income tax benefit
    
    
    934
    
    
    
    919Compensation limitation
    
    
    338
    
    
    
    33Nondeductible expenses
    
    
    181
    
    
    
    171Other
    
    
    29
    
    
    
    124Income tax expense
    
    $
    13,828
    
    
    $
    13,716
   March 31,
    
    December 31,2007
    
    2006Deferred tax assets
    
    $
    60,771
    
    
    $
    66,059Deferred tax
liabilities
    
    
    (27,982
    )
    
    
    (26,893
    )Net deferred tax asset
    
    $
    32,789
    
    
    $
    39,166
  March 31,
    
    December 31,2007
    
    2006Alternative minimum tax credit carryforwards
    
    $
    13,861
    
    
    $
    17,249Deferred revenue
    
    
    (12,501
    )
    
    
    (10,435
    )Business credit card rewards
    
    
    12,184
    
    
    
    11,492Receivable losses
    
    
    8,920
    
    
    
    8,864Deferred origination costs, net of deferred fees
    
    
    (8,751
    )
    
    
    (8,910
    )Capital loss carryforwards
    
    
    6,469
    
    
    
    6,653Incentive and deferred compensation
    
    
    3,976
    
    
    
    6,065Securitization income
    
    
    (2,624
    )
    
    
    (2,624
    )Unrealized venture capital investment losses
    
    
    1,191
    
    
    
    1,352Other
    
    
    10,064
    
    
    
    9,460Net deferred tax asset
    
    $
    32,789
    
    
    $
    39,166
 15




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Note 11) Calculation of Earnings Per Share
  Three Months EndedMarch 31,2007
    
    2006Net income
    
    $
    21,448
    
    
    $
    21,910Less: Preferred A dividends
    
    
    (141
    )
    
    
    (141
    )Net income available to common
stockholders
    
    
    21,307
    
    
    
    21,769Less: Class A dividends declared
    
    
    (1,880
    )
    
    
    (999
    )Less: Class B dividends declared
    
    
    (4,943
    )
    
    
    (2,576
    )Undistributed net income
    
    $
    14,484
    
    
    $
    18,194Basic net income per common shareClass A
    
    $
    0.74
    
    
    $
    0.79Class B
    
    
    0.80
    
    
    
    0.82Combined(1)
    
    
    0.78
    
    
    
    0.81Diluted net income per common shareClass A
    
    $
    0.70
    
    
    $
    0.73Class B
    
    
    0.73
    
    
    
    0.74Combined(1)
    
    
    0.72
    
    
    
    0.73Basic weighted average common shares
outstandingClass A
    
    
    8,879
    
    
    
    8,846Class B
    
    
    18,489
    
    
    
    18,107Combined
    
    
    27,368
    
    
    
    26,953Dilutive effect ofOptions Class B
    
    
    1,973
    
    
    
    2,207Nonvested shares Class B
    
    
    320
    
    
    
    562Diluted weighted average common
shares outstandingClass A
    
    
    8,879
    
    
    
    8,846Class B
    
    
    20,782
    
    
    
    20,876Combined
    
    
    29,661
    
    
    
    29,722Antidilutive sharesOptions Class B
    
    
    398
    
    
    
    63
 (1)
    
    Combined represents income available to common stockholders divided by the combined
total of Class A and Class B weighted average common shares outstanding.
 17




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##### Table of Contents



OVERVIEW
  ($ in thousands, except per share data)2007
    
    2006Pretax income:Advanta Business Cards
    
    $
    34,811
    
    
    $
    35,293Other
    
    
    465
    
    
    
    333Total pretax income
    
    
    35,276
    
    
    
    35,626Income tax expense
    
    
    13,828
    
    
    
    13,716Net income
    
    $
    21,448
    
    
    $
    21,910Per combined common share, assuming dilution
    
    $
    0.72
    
    
    $
    0.73
  CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  18




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ADVANTA BUSINESS CARDS
  Three Months Ended($ in thousands)
    
    March 31,2007
    
    2006Average owned receivables
    
    $
    1,284,900
    
    
    $
    929,795Average securitized receivables
    
    $
    4,152,857
    
    
    $
    2,957,309Customer transaction volume
    
    $
    3,389,065
    
    
    $
    2,733,922New account originations
    
    
    96,781
    
    
    
    82,617Average number of active accounts(1)
    
    
    848,375
    
    
    
    649,384Ending number of accounts at March 31
    
    
    1,191,820
    
    
    
    921,841
 (1)
    
    Active accounts are defined as accounts with a balance at month-end. Active account
statistics do not include charged-off accounts. The statistics reported above are the
average number of active accounts for the three months ended March 31.
   Three Months Ended($ in thousands)
    
    March 31,2007
    
    2006Net interest income on owned
interest-earning assets
    
    $
    27,243
    
    
    $
    22,786Noninterest revenues
    
    
    84,326
    
    
    
    81,338Provision for credit losses
    
    
    (10,083
    )
    
    
    (9,334
    )Operating expenses
    
    
    (66,675
    )
    
    
    (59,497
    )Pretax income
    
    $
    34,811
    
    
    $
    35,293
   19




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INTEREST INCOME AND EXPENSE
    20




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INTEREST RATE ANALYSIS AND AVERAGE BALANCES
 Three Months Ended March 31,2007
    
    
    2006Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average($ in thousands)
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest-earning assets:Owned receivables:Business credit cards(1)
    
    $
    1,284,900
    
    
    $
    35,443
    
    
    
    11.19
    %
    
    $
    929,795
    
    
    $
    28,828
    
    
    
    12.57
    %Other receivables
    
    
    7,671
    
    
    
    124
    
    
    
    6.54
    
    
    
    7,743
    
    
    
    99
    
    
    
    5.18Total receivables
    
    
    1,292,571
    
    
    
    35,567
    
    
    
    11.16
    
    
    
    937,538
    
    
    
    28,927
    
    
    
    12.51Investments(2)
    
    
    595,568
    
    
    
    7,682
    
    
    
    5.16
    
    
    
    499,619
    
    
    
    5,363
    
    
    
    4.30Retained interests in
securitizations
    
    
    230,817
    
    
    
    5,106
    
    
    
    8.85
    
    
    
    180,836
    
    
    
    3,982
    
    
    
    8.81Total interest-earning
assets(3)
    
    
    2,118,956
    
    
    $
    48,355
    
    
    
    9.22
    %
    
    
    1,617,993
    
    
    $
    38,272
    
    
    
    9.56
    %Noninterest-earning assets
    
    
    302,626
    
    
    
    
    
    
    
    
    
    
    
    482,908Total assets
    
    $
    2,421,582
    
    
    
    
    
    
    
    
    
    
    $
    2,100,901Interest-bearing liabilities:Deposits
    
    $
    1,344,066
    
    
    $
    16,537
    
    
    
    4.99
    %
    
    $
    1,072,928
    
    
    $
    10,308
    
    
    
    3.90
    %Debt
    
    
    227,501
    
    
    
    3,707
    
    
    
    6.61
    
    
    
    221,448
    
    
    
    3,357
    
    
    
    6.15Subordinated debt
payable to preferred
securities trust
    
    
    103,093
    
    
    
    2,317
    
    
    
    8.99
    
    
    
    103,093
    
    
    
    2,289
    
    
    
    8.88Other borrowings
    
    
    111
    
    
    
    1
    
    
    
    5.27
    
    
    
    97
    
    
    
    1
    
    
    
    4.77Total interest-bearing
liabilities
    
    
    1,674,771
    
    
    $
    22,562
    
    
    
    5.46
    %
    
    
    1,397,566
    
    
    $
    15,955
    
    
    
    4.62
    %Noninterest-bearing
liabilities
    
    
    169,317
    
    
    
    
    
    
    
    
    
    
    
    176,131Total liabilities
    
    
    1,844,088
    
    
    
    
    
    
    
    
    
    
    
    1,573,697Stockholders equity
    
    
    577,494
    
    
    
    
    
    
    
    
    
    
    
    527,204Total liabilities and
stockholders equity
    
    $
    2,421,582
    
    
    
    
    
    
    
    
    
    
    $
    2,100,901Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.76
    %
    
    
    
    
    
    
    
    
    
    
    4.94
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    4.94
    %
    
    
    
    
    
    
    
    
    
    
    5.59
    %
  
 (1)
    
    Interest income includes late fees for owned business credit card receivables of $2.5
million for the three months ended March 31, 2007 and $1.9 million for the same period
of 2006.(2)
    
    Interest and average rate for tax-free securities are computed on a tax equivalent
basis using a statutory rate of 35%.(3)
    
    Includes assets held and available for sale and nonaccrual receivables. PROVISION AND ALLOWANCE FOR RECEIVABLE LOSSES
  21




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March 31,
    
    December 31,
    
    March 31,($ in thousands)
    
    2007
    
    2006
    
    2006Consolidated  OwnedAllowance for receivable losses
    
    $
    51,206
    
    
    $
    50,926
    
    
    $
    46,796Receivables 30 days or more delinquent
    
    
    28,544
    
    
    
    26,053
    
    
    
    26,335Receivables 90 days or more delinquent
    
    
    12,878
    
    
    
    12,632
    
    
    
    11,637Nonaccrual receivables
    
    
    10,711
    
    
    
    10,524
    
    
    
    11,710Accruing receivables past due 90 days or more
    
    
    11,373
    
    
    
    11,302
    
    
    
    10,447As a percentage of gross receivables:Allowance for receivable losses
    
    
    4.45
    %
    
    
    4.46
    %
    
    
    4.73
    %Receivables 30 days or more delinquent
    
    
    2.48
    
    
    
    2.28
    
    
    
    2.66Receivables 90 days or more delinquent
    
    
    1.12
    
    
    
    1.11
    
    
    
    1.18Nonaccrual receivables
    
    
    0.93
    
    
    
    0.92
    
    
    
    1.18Accruing receivables past due 90 days or more
    
    
    0.99
    
    
    
    0.99
    
    
    
    1.06Net principal charge-offs for the year-to-date
period ended March 31 and December 31
    
    $
    9,783
    
    
    $
    33,780
    
    
    $
    8,084As a percentage of average gross receivables
(annualized):Net principal charge-offs for the year-to-date
period ended March 31 and December 31
    
    
    3.03
    %
    
    
    3.17
    %
    
    
    3.45
    %Business Credit Cards  OwnedAllowance for receivable losses
    
    $
    49,995
    
    
    $
    49,715
    
    
    $
    45,580Receivables 30 days or more delinquent
    
    
    28,544
    
    
    
    26,053
    
    
    
    26,335Receivables 90 days or more delinquent
    
    
    12,878
    
    
    
    12,632
    
    
    
    11,637Nonaccrual receivables
    
    
    10,711
    
    
    
    10,524
    
    
    
    11,710Accruing receivables past due 90 days or more
    
    
    11,373
    
    
    
    11,302
    
    
    
    10,447As a percentage of gross receivables:Allowance for receivable losses
    
    
    4.38
    %
    
    
    4.39
    %
    
    
    4.64
    %Receivables 30 days or more delinquent
    
    
    2.50
    
    
    
    2.30
    
    
    
    2.68Receivables 90 days or more delinquent
    
    
    1.13
    
    
    
    1.11
    
    
    
    1.18Nonaccrual receivables
    
    
    0.94
    
    
    
    0.93
    
    
    
    1.19Accruing receivables past due 90 days or more
    
    
    1.00
    
    
    
    1.00
    
    
    
    1.06Net principal charge-offs for the year-to-date
period ended March 31 and December 31
    
    $
    9,783
    
    
    $
    33,775
    
    
    $
    8,084As a percentage of average gross receivables
(annualized):Net principal charge-offs for the year-to-date
period ended March 31 and December 31
    
    
    3.05
    %
    
    
    3.19
    %
    
    
    3.48
    %
 23




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SECURITIZATION INCOME
  Three Months EndedMarch 31,($ in thousands)
    
    2007
    
    2006Securitization income
    
    $
    23,511
    
    
    $
    33,578Interest income (discount accretion)
    
    
    5,106
    
    
    
    3,982Interchange income
    
    
    42,414
    
    
    
    33,714Servicing revenues
    
    
    20,376
    
    
    
    13,682Total
    
    $
    91,407
    
    
    $
    84,956
   Managed Receivable Data
  24




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##### Table of Contents



Managed Financial Measures and Statistics
  Advanta
    
    
    
    
    
    
    
    
    
    AdvantaBusiness
    
    GAAP
    
    Securitization
    
    Business Cards
    
    Managed($ in thousands)
    
    Cards GAAP
    
    Ratio(1)
    
    Adjustments
    
    Managed
    
    Ratio(1)Three Months Ended March
31, 2007Net interest income
    
    $
    27,243
    
    
    
    7.19
    %
    
    $
    68,205
    
    
    $
    95,448
    
    
    
    7.02
    %Provision for credit losses
    
    
    10,083
    
    
    
    2.66
    
    
    
    35,082
    (2)
    
    
    45,165
    
    
    
    3.32Noninterest revenues
    
    
    84,326
    
    
    
    22.25
    
    
    
    (33,123
    )
    
    
    51,203
    
    
    
    3.77Average business credit
card interest-earning
assets
    
    
    1,515,717
    
    
    
    
    
    
    
    3,922,040
    
    
    
    5,437,757Three Months Ended March
31, 2006Net interest income
    
    $
    22,786
    
    
    
    8.21
    %
    
    $
    66,385
    
    
    $
    89,171
    
    
    
    9.18
    %Provision for credit losses
    
    
    9,334
    
    
    
    3.36
    
    
    
    28,395
    (2)
    
    
    37,729
    
    
    
    3.88Noninterest revenues
    
    
    81,338
    
    
    
    29.29
    
    
    
    (37,990
    )
    
    
    43,348
    
    
    
    4.46Average business credit
card interest-earning
assets
    
    
    1,110,631
    
    
    
    
    
    
    
    2,776,473
    
    
    
    3,887,104As of March 31, 2007Ending business credit card
receivables
    
    $
    1,142,006
    
    
    
    
    
    
    $
    4,444,055
    
    
    $
    5,586,061Receivables 30 days or more
delinquent
    
    
    28,544
    
    
    
    2.50
    %
    
    
    122,426
    
    
    
    150,970
    
    
    
    2.70
    %Receivables 90 days or more
delinquent
    
    
    12,878
    
    
    
    1.13
    
    
    
    54,633
    
    
    
    67,511
    
    
    
    1.21As of December 31, 2006Ending business credit card
receivables
    
    $
    1,133,132
    
    
    
    
    
    
    $
    4,073,128
    
    
    $
    5,206,260Receivables 30 days or more
delinquent
    
    
    26,053
    
    
    
    2.30
    %
    
    
    108,159
    
    
    
    134,212
    
    
    
    2.58
    %Receivables 90 days or more
delinquent
    
    
    12,632
    
    
    
    1.11
    
    
    
    52,279
    
    
    
    64,911
    
    
    
    1.25As of March 31, 2006Ending business credit card
receivables
    
    $
    982,251
    
    
    
    
    
    
    $
    3,045,600
    
    
    $
    4,027,851Receivables 30 days or more
delinquent
    
    
    26,335
    
    
    
    2.68
    %
    
    
    91,029
    
    
    
    117,364
    
    
    
    2.91
    %Receivables 90 days or more
delinquent
    
    
    11,637
    
    
    
    1.18
    
    
    
    40,131
    
    
    
    51,768
    
    
    
    1.29
 (1)
    
    Ratios are as a percentage of average business credit card interest-earning assets except
delinquency ratios which are as a percentage of ending business credit card receivables.(2)
    
    Includes the amount by which the credit losses would have been higher had the securitized
receivables remained as owned and the provision for credit losses on securitized receivables
been equal to actual reported charge-offs. In addition, the three months ended March 31,
2006 includes a $1.3 million unfavorable valuation adjustment to retained interests in
securitizations as an increase to provision for credit losses. 25




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##### Table of Contents



SERVICING REVENUES
  OTHER REVENUES
 Three Months Ended($ in thousands)
    
    March 31,2007
    
    2006Interchange income
    
    $
    55,234
    
    
    $
    44,393Cash back rewards
    
    
    (13,400
    )
    
    
    (9,513
    )Business rewards
    
    
    (5,932
    )
    
    
    (4,604
    )Balance transfer fees
    
    
    1,829
    
    
    
    1,644Cash usage fees
    
    
    1,133
    
    
    
    823Other business credit card fees
    
    
    1,225
    
    
    
    852Investment securities gains, net
    
    
    990
    
    
    
    708Other, net
    
    
    1,402
    
    
    
    673Total other revenues, net
    
    $
    42,481
    
    
    $
    34,976
     26




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##### Table of Contents



OPERATING EXPENSES
 Three Months Ended($ in thousands)
    
    March 31,2007
    
    2006Salaries and employee benefits
    
    $
    26,098
    
    
    $
    23,289Amortization of deferred
origination costs, net
    
    
    12,867
    
    
    
    11,948External processing
    
    
    6,700
    
    
    
    5,941Professional fees
    
    
    3,905
    
    
    
    2,577Marketing
    
    
    3,235
    
    
    
    3,607Equipment
    
    
    2,595
    
    
    
    2,617Occupancy
    
    
    2,302
    
    
    
    2,139Fraud
    
    
    1,468
    
    
    
    770Postage
    
    
    1,394
    
    
    
    1,155Credit
    
    
    1,290
    
    
    
    1,093Other
    
    
    4,948
    
    
    
    4,503Total operating expenses
    
    $
    66,802
    
    
    $
    59,639
      LITIGATION CONTINGENCIES
  27




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##### Table of Contents



INCOME TAXES
  ($ in thousands)
  2007
    
    2006Income tax expense
    
    $
    13,828
    
    
    $
    13,716Effective tax rate
    
    
    39.2
    %
    
    
    38.5
    %
    OFF-BALANCE SHEET ARRANGEMENTS
  28




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##### Table of Contents



Three Months EndedMarch 31,($ in thousands)
    
    2007
    
    2006Average securitized receivables
    
    $
    4,152,857
    
    
    $
    2,957,309Securitization income
    
    
    23,511
    
    
    
    33,578Discount accretion
    
    
    5,106
    
    
    
    3,982Interchange income
    
    
    42,414
    
    
    
    33,714Servicing revenues
    
    
    20,376
    
    
    
    13,682Proceeds from new securitizations
    
    
    357,658
    
    
    
    535,890Proceeds from collections reinvested in
revolving-period securitizations
    
    
    2,383,984
    
    
    
    1,683,802Cash flows received on retained interests
    
    
    84,756
    
    
    
    77,628
   NoteholderPrincipal
    
    Coupon
    
    Scheduled End of($ in thousands)
    
    Balance
    
    Type
    
    Revolving PeriodSeries 2007-A
    
    $
    153,453
    (1)
    
    Floating
    
    January 15, 2008AdvantaSeries:2007-A1
    
    
    200,000
    
    
    Floating
    
    May 31, 20112007-B1
    
    
    100,000
    
    
    Floating
    
    April 30, 20112007-D1
    
    
    25,000
    
    
    Floating
    
    May 31, 2009
 (1)
    
    A portion of the noteholder principal balance of securitized receivables as of
March 31, 2007 was owned by Advanta and included in accounts receivable from
securitizations on the consolidated balance sheet. The principal balances owned by
Advanta are subordinated to the other noteholders interests.   Accounting for Transfers of
Financial Assets  An Amendment of FASB Statement No. 140
 29




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##### Table of Contents



MARKET RISK SENSITIVITY
  March 31,
    
    December 31,2007
    
    2006Estimated percentage increase (decrease) in
net interest income on owned assets:Assuming 200 basis point increase
    
    
    11
    %
    
    
    12
    %Assuming 200 basis point decrease
    
    
    (2
    )%
    
    
    (6
    )%Estimated percentage increase (decrease) in
net interest income on securitized
receivables:Assuming 200 basis point increase
    
    
    (9
    )%
    
    
    (8
    )%Assuming 200 basis point decrease
    
    
    19
    %
    
    
    15
    %Estimated percentage increase (decrease) in
net interest income on managed assets:Assuming 200 basis point increase
    
    
    (4
    )%
    
    
    (3
    )%Assuming 200 basis point decrease
    
    
    14
    %
    
    
    10
    %
   30




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##### Table of Contents



LIQUIDITY, CAPITAL RESOURCES AND ANALYSIS OF FINANCIAL CONDITION
    March 31, 2007
    
    December 31, 2006($ in thousands)
    
    Amount
    
    %
    
    Amount
    
    %Off-balance sheet securitized
receivables(1)
    
    $
    4,300,206
    
    
    
    65
    %
    
    $
    3,932,732
    
    
    
    63
    %Deposits
    
    
    1,350,096
    
    
    
    21
    
    
    
    1,365,138
    
    
    
    22Debt
    
    
    226,820
    
    
    
    3
    
    
    
    227,126
    
    
    
    4Subordinated debt payable to preferred
securities trust
    
    
    103,093
    
    
    
    2
    
    
    
    103,093
    
    
    
    2Equity
    
    
    585,871
    
    
    
    9
    
    
    
    567,161
    
    
    
    9Total
    
    $
    6,566,086
    
    
    
    100
    %
    
    $
    6,195,250
    
    
    
    100
    %
 (1)
    
    Excludes our ownership interest in the noteholder principal balance of securitizations
(subordinated trust assets) that are held on-balance sheet and classified as retained
interests in securitizations.    31




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CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
  32




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##### Table of Contents



(1)
    
    factors affecting our net interest income on owned and securitized receivables,
including fluctuations in the volume of receivables and the range and timing of pricing
offers to customers;(2)
    
    competitive pressures, including product development and pricing, among financial
institutions;(3)
    
    political conditions, social conditions, monetary and fiscal policies and general
economic and other environmental conditions that affect the level of new account
originations, customer spending, delinquencies and charge-offs;(4)
    
    factors affecting fluctuations in the number of accounts or receivable balances,
including the retention of customers after promotional pricing periods have expired;(5)
    
    interest rate fluctuations;(6)
    
    the level of expenses;(7)
    
    the timing of the securitizations of our receivables;(8)
    
    the effects of government regulation, including restrictions and limitations
imposed by banking laws, regulators, and examinations;(9)
    
    effect of, and changes in, tax laws, rates, regulations and policies;(10)
    
    effect of legal and regulatory developments, including changes in bankruptcy laws
and regulations and the ultimate resolution
 33




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##### Table of Contents



of industry-related judicial proceedings
relating to the legality of certain interchange rates;
 (11)
    
    relationships with customers, significant vendors and business partners;(12)
    
    difficulties or delays in the development, acquisition, production, testing and
marketing of products or services, including the ability and cost to obtain intellectual
property rights or a failure to implement new products or services when anticipated;(13)
    
    the amount and cost of financing available to us;(14)
    
    the ratings on the debt of Advanta Corp. and its subsidiaries;(15)
    
    the effects of changes in accounting policies or practices as may be required by
changes in U.S. generally accepted accounting principles;(16)
    
    the impact of litigation, including judgments, settlements and actual or
anticipated insurance recoveries for costs or judgments;(17)
    
    the proper design and operation of our disclosure controls and procedures; and(18)
    
    the ability to attract and retain key personnel.
  34




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##### Table of Contents



35




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##### Table of Contents



PART II  OTHER INFORMATION
 
   
   
  (a)
    
    None.(b)
    
    None.(c)
    
    The table below provides information with respect to all purchases of equity
securities by us during the period from January 1, 2007 through March 31, 2007. All shares
reported in the table below are shares of Class B Common Stock.
 ISSUER PURCHASES OF EQUITY SECURITIES(d) Maximum Number(c) Total Number
    
    (or Approximate(a) Total
    
    
    
    
    
    of Shares
    
    Dollar Value ofNumber of
    
    
    
    
    
    Purchased as
    
    Shares) That MayShares
    
    (b) Average
    
    Part of Publicly
    
    Yet Be PurchasedPurchased
    
    Price Paid
    
    Announced Plans
    
    Under the PlansPeriod
    
    (In Thousands)
    
    per Share
    
    or Programs (B)
    
    or Programs (B)1/1/07  1/31/07
    
    
    13.2
    (A)
    
    $
    44.98
    
    
    
    0
    
    
    
    02/1/07  2/28/07
    
    
    0.0
    
    
    
    N/A
    *
    
    
    0
    
    
    
    03/1/07  3/31/07
    
    
    0.0
    
    
    
    N/A
    *
    
    
    0
    
    
    
    0Total
    
    
    13.2
    
    
    $
    44.98
    
    
    
    0
    
    
    
    0
 (A)
    
    In January 2007, in connection with the exercise of an officers stock options,
13,156 shares were withheld to meet Advanta Corp.s minimum statutory tax withholding
requirements.(B)
    
    In April 2007, the Board of Directors of Advanta Corp.
authorized a three-for-two stock split and the repurchase
of up to 1.0 million shares of Advanta Corp.s Class B
Common Stock, or 1.5 million shares stated on split-adjusted basis.*
    
    N/A  Not Applicable 36




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##### Table of Contents



ExhibitNumber
    
    Description of Document10.1
    
    Preferred Pricing Agreement,
effective March 19, 2007, between Dun & Bradstreet,
Inc. and Advanta Bank Corp.12
    
    Computation of Ratio of Earnings to Fixed Charges31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 37




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SIGNATURES
  Advanta Corp.(Registrant)By
    
    /s/ Philip M. BrowneSenior Vice President
and Chief Financial OfficerMay 9, 2007By
    
    /s/ David B. WeinstockVice President and Chief Accounting OfficerMay 9, 2007
 38




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##### Table of Contents



EXHIBIT INDEX
 Manner ofExhibit
    
    Description
    
    Filing10.1
    
    Preferred Pricing Agreement,
effective March 19, 2007,
between Dun & Bradstreet, Inc. and Advanta Bank Corp.
    
    *12
    
    Computation of Ratio of Earnings to Fixed Charges
    
    *31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
    
    *31.2
    
    Certification of Chief Financial Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
    
    *32.1
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
    
    *32.2
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
    
    *
 
 *
    
    Filed electronically herewith. 39