##### 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 September 30, 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
(State or other jurisdiction of 
incorporation or organization)
    
    23-1462070
(I.R.S. Employer
Identification No.)
 
 
 þ o
  þ o o
 o þ
 Applicable only to issuers involved in bankruptcy proceedings during the preceding five
years:
  o o
 Applicable only to corporate issuers:
  Class A
    
    Outstanding at November 5, 2007Common Stock, $.01 par value
    
    14,410,133 sharesClass B
    
    Outstanding at November 5, 2007Common Stock, $.01 par value
    
    28,361,337 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
    
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    45Item 4. Controls and Procedures
    
    
    45PART II - OTHER INFORMATION
    
    
    45Item 1. Legal Proceedings
    
    
    45Item 1A. Risk Factors
    
    
    45Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    46Item 6. Exhibits
    
    
    47Exhibit Index
    
    
    49COMPUTATION 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)
 September 30,
    
    
    December 31,(In thousands, except share amounts)
    
    2007
    
    
    2006ASSETSCash
    
    $
    59,966
    
    
    $
    35,055Federal funds sold
    
    
    793,024
    
    
    
    547,631Restricted interest-bearing deposits
    
    
    368
    
    
    
    1,211Investments available for sale
    
    
    218,182
    
    
    
    197,477Receivables, net:Held for sale
    
    
    502,435
    
    
    
    568,456Other
    
    
    704,191
    
    
    
    546,553Total receivables, net
    
    
    1,206,626
    
    
    
    1,115,009Accounts receivable from securitizations
    
    
    352,368
    
    
    
    334,486Premises and equipment, net
    
    
    17,325
    
    
    
    16,715Other assets
    
    
    164,048
    
    
    
    165,554Total assets
    
    $
    2,811,907
    
    
    $
    2,413,138LIABILITIESDeposits
    
    $
    1,686,567
    
    
    $
    1,365,138Debt
    
    
    223,406
    
    
    
    227,126Subordinated debt payable to preferred securities trust
    
    
    103,093
    
    
    
    103,093Other liabilities
    
    
    207,022
    
    
    
    150,620Total liabilities
    
    
    2,220,088
    
    
    
    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  14,410,133
shares in 2007 and 15,061,525 in 2006
    
    
    144
    
    
    
    151Class B non-voting common stock, $.01 par value:Authorized  200,000,000 shares; issued  29,468,254
shares in 2007 and 35,138,413 shares in 2006
    
    
    295
    
    
    
    351Additional paid-in capital
    
    
    235,243
    
    
    
    308,051Unearned ESOP shares
    
    
    (8,890
    )
    
    
    (9,204
    )Accumulated other comprehensive loss
    
    
    (1,101
    )
    
    
    (288
    )Retained earnings
    
    
    396,936
    
    
    
    359,813Treasury stock at cost, 651,232 Class A common shares in
2006; 1,172,136 Class B common shares in 2007
and 6,436,183 Class B common shares in 2006
    
    
    (31,818
    )
    
    
    (92,723
    )Total stockholders equity
    
    
    591,819
    
    
    
    567,161Total liabilities and stockholders equity
    
    $
    2,811,907
    
    
    $
    2,413,138
 See accompanying notes to consolidated financial statements.
 3




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ADVANTA CORP. AND SUBSIDIARIES
 
 CONSOLIDATED INCOME STATEMENTS (Unaudited)
 Three Months Ended
    
    Nine Months Ended(In thousands, except per share amounts)
    
    September 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Interest income:Receivables
    
    $
    34,479
    
    
    $
    34,062
    
    
    $
    104,116
    
    
    $
    93,128Investments
    
    
    10,752
    
    
    
    7,195
    
    
    
    27,243
    
    
    
    18,527Other interest income
    
    
    4,729
    
    
    
    4,671
    
    
    
    14,514
    
    
    
    13,052Total interest income
    
    
    49,960
    
    
    
    45,928
    
    
    
    145,873
    
    
    
    124,707Interest expense:Deposits
    
    
    19,223
    
    
    
    13,861
    
    
    
    53,121
    
    
    
    36,027Debt and other borrowings
    
    
    4,066
    
    
    
    3,499
    
    
    
    11,729
    
    
    
    10,188Subordinated debt payable to preferred
securities trust
    
    
    2,317
    
    
    
    2,289
    
    
    
    6,951
    
    
    
    6,868Total interest expense
    
    
    25,606
    
    
    
    19,649
    
    
    
    71,801
    
    
    
    53,083Net interest income
    
    
    24,354
    
    
    
    26,279
    
    
    
    74,072
    
    
    
    71,624Provision for credit losses
    
    
    14,724
    
    
    
    9,202
    
    
    
    36,613
    
    
    
    28,631Net interest income after provision for
credit losses
    
    
    9,630
    
    
    
    17,077
    
    
    
    37,459
    
    
    
    42,993Noninterest revenues:Securitization income
    
    
    22,388
    
    
    
    26,232
    
    
    
    68,665
    
    
    
    89,496Servicing revenues
    
    
    24,218
    
    
    
    16,777
    
    
    
    67,135
    
    
    
    45,788Other revenues, net
    
    
    47,819
    
    
    
    40,188
    
    
    
    138,296
    
    
    
    117,461Total noninterest revenues
    
    
    94,425
    
    
    
    83,197
    
    
    
    274,096
    
    
    
    252,745Operating expenses
    
    
    68,141
    
    
    
    65,932
    
    
    
    203,720
    
    
    
    188,307Income before income taxes
    
    
    35,914
    
    
    
    34,342
    
    
    
    107,835
    
    
    
    107,431Income tax expense
    
    
    13,863
    
    
    
    13,222
    
    
    
    41,624
    
    
    
    41,361Income from continuing operations
    
    
    22,051
    
    
    
    21,120
    
    
    
    66,211
    
    
    
    66,070Gain on discontinuance of mortgage
and leasing businesses, net of tax
    
    
    0
    
    
    
    0
    
    
    
    1,022
    
    
    
    738Net income
    
    $
    22,051
    
    
    $
    21,120
    
    
    $
    67,233
    
    
    $
    66,808Basic income from continuing
operations per common shareClass A
    
    $
    0.51
    
    
    $
    0.50
    
    
    $
    1.52
    
    
    $
    1.59Class B
    
    
    0.55
    
    
    
    0.54
    
    
    
    1.64
    
    
    
    1.66Combined
    
    
    0.54
    
    
    
    0.53
    
    
    
    1.60
    
    
    
    1.64Diluted income from continuing
operations per common shareClass A
    
    $
    0.48
    
    
    $
    0.47
    
    
    $
    1.45
    
    
    $
    1.48Class B
    
    
    0.51
    
    
    
    0.49
    
    
    
    1.50
    
    
    
    1.50Combined
    
    
    0.50
    
    
    
    0.49
    
    
    
    1.49
    
    
    
    1.50Basic net income per common shareClass A
    
    $
    0.51
    
    
    $
    0.50
    
    
    $
    1.55
    
    
    $
    1.60Class B
    
    
    0.55
    
    
    
    0.54
    
    
    
    1.67
    
    
    
    1.68Combined
    
    
    0.54
    
    
    
    0.53
    
    
    
    1.63
    
    
    
    1.66Diluted net income per common shareClass A
    
    $
    0.48
    
    
    $
    0.47
    
    
    $
    1.47
    
    
    $
    1.50Class B
    
    
    0.51
    
    
    
    0.49
    
    
    
    1.53
    
    
    
    1.52Combined
    
    
    0.50
    
    
    
    0.49
    
    
    
    1.51
    
    
    
    1.51Basic weighted average common shares
outstandingClass A
    
    
    13,343
    
    
    
    13,293
    
    
    
    13,331
    
    
    
    13,281Class B
    
    
    27,800
    
    
    
    26,831
    
    
    
    27,858
    
    
    
    26,969Combined
    
    
    41,143
    
    
    
    40,124
    
    
    
    41,189
    
    
    
    40,250Diluted weighted average common shares
outstandingClass A
    
    
    13,343
    
    
    
    13,293
    
    
    
    13,331
    
    
    
    13,281Class B
    
    
    30,762
    
    
    
    30,251
    
    
    
    31,091
    
    
    
    30,747Combined
    
    
    44,105
    
    
    
    43,544
    
    
    
    44,422
    
    
    
    44,028
 See accompanying notes to consolidated financial statements.
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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 (Loss)
    
    
    Stock
    
    
    Stock
    
    
    Stock
    
    
    CapitalBalance at December 31, 2005
    
    
    
    
    
    $
    1,010
    
    
    $
    151
    
    
    $
    329
    
    
    $
    276,070Net 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    10,495Stock-based employee compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,842Stock-based nonemployee
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    238Excess tax benefits from stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,149Issuance of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    (11
    )Amortization of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,953Forfeitures of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (358
    )Reclassification of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,148
    )Treasury stock acquiredESOP shares committed to be released
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    821Balance at December 31, 2006
    
    
    
    
    
    $
    1,010
    
    
    $
    151
    
    
    $
    351
    
    
    $
    308,051Effect of applying the provisions
of FIN No. 48 (See Note 2)Net income
    
    $
    67,233Other comprehensive income:Unrealized appreciation
(depreciation) of investments,
net of tax benefit (expense)
of $438
    
    
    (813
    )Comprehensive income
    
    $
    66,420Preferred and common cash
dividends declaredExercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    6,549Stock-based employee compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,007Stock-based nonemployee compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54Excess tax benefits from stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,620Issuance of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    (1
    )Amortization of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,279Forfeitures of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (43
    )Stock option exchange program stock
distributionTreasury stock acquiredTreasury stock retired
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    (63
    )
    
    
    (93,101
    )ESOP shares committed to be released
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    828Balance at September 30, 2007
    
    
    
    
    
    $
    1,010
    
    
    $
    144
    
    
    $
    295
    
    
    $
    235,243
 See accompanying notes to consolidated financial statements.
 5




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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 employee compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,842Stock-based nonemployee
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    238Excess tax benefits from stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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)
    
    
    
    
    
    
    
    
    
    
    (6,103
    )
    
    
    
    
    
    
    (6,103
    )Net income
    
    
    
    
    
    
    
    
    
    
    67,233
    
    
    
    
    
    
    
    67,233Other comprehensive income:Unrealized appreciation
(depreciation) of investments,
net of tax benefit (expense)
of $438
    
    
    
    
    
    
    (813
    )
    
    
    
    
    
    
    
    
    
    
    (813
    )Comprehensive incomePreferred and common cash
dividends declared
    
    
    
    
    
    
    
    
    
    
    (24,007
    )
    
    
    
    
    
    
    (24,007
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,556Stock-based employee compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,007Stock-based nonemployee compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54Excess tax benefits from stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,620Issuance of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0Amortization of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,279Forfeitures of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44
    )Stock option exchange program stock
distribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    388
    
    
    
    388Treasury stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,654
    )
    
    
    (32,654
    )Treasury stock retired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    93,171
    
    
    
    0ESOP shares committed to be released
    
    
    314
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,142Balance at September 30, 2007
    
    $
    (8,890
    )
    
    $
    (1,101
    )
    
    $
    396,936
    
    
    $
    (31,818
    )
    
    $
    591,819
 See accompanying notes to consolidated financial statements.
 6




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##### Table of Contents



ADVANTA CORP. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 Nine Months Ended($ in thousands)
    
    September 30,2007
    
    2006OPERATING ACTIVITIES  CONTINUING OPERATIONSNet income
    
    $
    67,233
    
    
    $
    66,808Adjustments to reconcile net income to net cash provided by
(used in) operating activities:Gain on discontinuance of mortgage and leasing businesses,
net of tax
    
    
    (1,022
    )
    
    
    (738
    )Investment securities gains, net
    
    
    (5,666
    )
    
    
    (4,623
    )Depreciation and amortization
    
    
    4,526
    
    
    
    4,443Stock-based compensation expense
    
    
    7,296
    
    
    
    7,131Provision for credit losses
    
    
    36,613
    
    
    
    28,631Provision for interest and fee losses
    
    
    7,921
    
    
    
    6,551Change in deferred origination costs, net of deferred fees
    
    
    1,179
    
    
    
    (3,405
    )Change in receivables held for sale
    
    
    (803,352
    )
    
    
    (1,436,404
    )Proceeds from sale of receivables held for sale
    
    
    869,373
    
    
    
    1,191,855Change in accounts receivable from securitizations
    
    
    (17,882
    )
    
    
    (40,631
    )Excess tax benefits from stock-based compensation
    
    
    (5,620
    )
    
    
    (10,161
    )Change in other assets and other liabilities
    
    
    77,074
    
    
    
    96,654Net cash provided by (used in) operating activities
    
    
    237,673
    
    
    
    (93,889
    )INVESTING ACTIVITIES  CONTINUING OPERATIONSChange in federal funds sold and restricted interest-bearing
deposits
    
    
    (244,550
    )
    
    
    23,210Purchase of investments available for sale
    
    
    (831,179
    )
    
    
    (497,787
    )Proceeds from sales of investments available for sale
    
    
    721,743
    
    
    
    492,335Proceeds from sale of other investments
    
    
    0
    
    
    
    2,440Proceeds from maturing investments available for sale
    
    
    90,277
    
    
    
    67,839Change in receivables not held for sale
    
    
    (203,351
    )
    
    
    (105,045
    )Purchases of premises and equipment, net
    
    
    (5,125
    )
    
    
    (2,634
    )Net cash used in investing activities
    
    
    (472,185
    )
    
    
    (19,642
    )FINANCING ACTIVITIES  CONTINUING OPERATIONSChange in demand and savings deposits
    
    
    24,181
    
    
    
    41,644Proceeds from issuance of time deposits
    
    
    662,889
    
    
    
    495,428Payments for maturing time deposits
    
    
    (392,600
    )
    
    
    (405,231
    )Proceeds from issuance of debt
    
    
    21,148
    
    
    
    20,971Payments on redemption of debt
    
    
    (26,224
    )
    
    
    (32,612
    )Change in cash overdraft and other borrowings
    
    
    10,814
    
    
    
    83,125Proceeds from exercise of stock options
    
    
    6,556
    
    
    
    8,286Cash dividends paid
    
    
    (24,007
    )
    
    
    (16,874
    )Excess tax benefits from stock-based compensation
    
    
    5,620
    
    
    
    10,161Treasury stock acquired
    
    
    (32,654
    )
    
    
    (43,576
    )Net cash provided by financing activities
    
    
    255,723
    
    
    
    161,322DISCONTINUED OPERATIONSNet cash provided by operating activities of
discontinued operations
    
    
    3,700
    
    
    
    2,951Net increase in cash
    
    
    24,911
    
    
    
    50,742Cash at beginning of period
    
    
    35,055
    
    
    
    34,109Cash at end of period
    
    $
    59,966
    
    
    $
    84,851
 See accompanying notes to consolidated financial statements.
 7




---



##### Table of Contents



ADVANTA CORP. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE NOTED)
 September 30, 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
 8




---



##### Table of Contents



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




---



##### Table of Contents



The Fair Value Option for Financial Assets
and Financial Liabilities
 Accounting for Collateral Assignment Split-Dollar Life
Insurance Arrangements.
 Note 3) Receivables
  September 30,
    
    December 31,2007
    
    2006Business credit card receivables
    
    $
    1,233,233
    
    
    $
    1,133,132Other receivables
    
    
    7,288
    
    
    
    7,673Gross receivables
    
    
    1,240,521
    
    
    
    1,140,805Add: Deferred origination costs, net of deferred fees
    
    
    23,951
    
    
    
    25,130Less: Allowance for receivable lossesBusiness credit cards
    
    
    (56,636
    )
    
    
    (49,715
    )Other receivables
    
    
    (1,210
    )
    
    
    (1,211
    )Total allowance for receivable losses
    
    
    (57,846
    )
    
    
    (50,926
    )Receivables, net
    
    $
    1,206,626
    
    
    $
    1,115,009
 10




---



##### Table of Contents



Note 4) Allowance for Receivable Losses
  2007
    
    2006Balance at January 1
    
    $
    50,926
    
    
    $
    45,589Provision for credit losses
    
    
    36,613
    
    
    
    28,631Provision for interest and fee losses
    
    
    7,921
    
    
    
    6,551Gross principal charge-offs:Business credit cards
    
    
    (33,055
    )
    
    
    (27,298
    )Other receivables
    
    
    (1
    )
    
    
    (4
    )Total gross principal charge-offs
    
    
    (33,056
    )
    
    
    (27,302
    )Principal recoveries:Business credit cards
    
    
    3,008
    
    
    
    2,692Net principal charge-offs
    
    
    (30,048
    )
    
    
    (24,610
    )Interest and fee charge-offs:Business credit cards
    
    
    (7,566
    )
    
    
    (6,209
    )Balance at September 30
    
    $
    57,846
    
    
    $
    49,952
 Note 5) Securitization Activities
  September 30,
    
    December 31,2007
    
    2006Retained interests in securitizations
    
    $
    226,894
    
    
    $
    234,054Accrued interest and fees on securitized
receivables, net (1)
    
    
    81,663
    
    
    
    64,713Amounts due from the securitization trust
    
    
    43,811
    
    
    
    35,719Total accounts receivable from securitizations
    
    $
    352,368
    
    
    $
    334,486
 
 (1)
    
    Reduced by an estimate for uncollectible interest and fees of $12.6 million at
September 30, 2007 and $8.7 million at December 31, 2006. 11




---



##### Table of Contents



Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Average securitized
receivables
    
    $
    4,889,381
    
    
    $
    3,388,784
    
    
    $
    4,543,999
    
    
    $
    3,191,071Securitization income
    
    
    22,388
    
    
    
    26,232
    
    
    
    68,665
    
    
    
    89,496Discount accretion
    
    
    4,729
    
    
    
    4,671
    
    
    
    14,514
    
    
    
    13,052Interchange income
    
    
    50,800
    
    
    
    40,038
    
    
    
    142,421
    
    
    
    112,879Servicing revenues
    
    
    24,218
    
    
    
    16,777
    
    
    
    67,135
    
    
    
    45,788Proceeds from new
securitizations
    
    
    113,033
    
    
    
    121,591
    
    
    
    869,373
    
    
    
    1,191,855Proceeds from collections
reinvested in revolving-period securitizations
    
    
    2,801,202
    
    
    
    2,003,338
    
    
    
    7,866,934
    
    
    
    5,466,735Cash flows received on
retained interests
    
    
    77,377
    
    
    
    66,270
    
    
    
    241,864
    
    
    
    236,480Key assumptions:Discount rate
    
    
    8.53% - 11.95
    %
    
    
    8.90% - 10.43
    %
    
    
    8.15% - 11.95
    %
    
    
    8.71% - 10.43
    %Monthly payment rate
    
    
    19.28% - 22.00
    %
    
    
    21.91% - 24.07
    %
    
    
    19.28% - 23.10
    %
    
    
    21.91% - 25.00
    %Loss rate
    
    
    3.95% -  5.23
    %
    
    
    3.70% -  4.57
    %
    
    
    3.70% -  5.23
    %
    
    
    3.70% -  4.90
    %Interest yield, net of
interest earned by
noteholders
    
    
    7.33% -  8.42
    %
    
    
    7.60% -  8.03
    %
    
    
    7.29% -  8.42
    %
    
    
    7.60% -  9.95
    %
   September 30,
    
    December 31,2007
    
    2006Discount rate
    
    
    10.51% - 11.95
    %
    
    
    8.82% -  9.84
    %Monthly payment rate
    
    
    19.28% - 22.00
    %
    
    
    21.29% - 23.10
    %Loss rate
    
    
    4.55% -  5.23
    %
    
    
    3.70% -  4.07
    %Interest yield, net of interest earned by
noteholders
    
    
    8.42
    %
    
    
    7.30
    %
  12




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##### Table of Contents



Effect on estimated fair value of the following
hypothetical changes in key assumptions:Discount rate increased 200 basis points
    
    $
    (3,968
    )Discount rate increased 400 basis points
    
    
    (7,784
    )Monthly payment rate at 110% of base assumption
    
    
    (1,749
    )Monthly payment rate at 125% of base assumption
    
    
    (3,369
    )Loss rate at 110% of base assumption
    
    
    (5,910
    )Loss rate at 125% of base assumption
    
    
    (14,774
    )Interest yield, net of interest earned by noteholders,
decreased 100 basis points
    
    
    (12,988
    )Interest yield, net of interest earned by noteholders,
decreased 200 basis points
    
    
    (25,976
    )
  13




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##### Table of Contents



Managed business credit card receivable data
  September 30,
    
    December 31,
    
    September 30,2007
    
    2006
    
    2006Owned business credit card receivables
    
    $
    1,233,233
    
    
    $
    1,133,132
    
    
    $
    1,198,550Securitized business credit card receivables
    
    
    4,980,737
    
    
    
    4,073,128
    
    
    
    3,449,366Total managed receivables
    
    $
    6,213,970
    
    
    $
    5,206,260
    
    
    $
    4,647,916Receivables 30 days or more delinquent:Owned
    
    $
    35,276
    
    
    $
    26,053
    
    
    $
    29,081Securitized
    
    
    160,375
    
    
    
    108,159
    
    
    
    96,240Total managed
    
    
    195,651
    
    
    
    134,212
    
    
    
    125,321Receivables 90 days or more delinquent:Owned
    
    
    15,693
    
    
    
    12,632
    
    
    
    13,182Securitized
    
    
    71,951
    
    
    
    52,279
    
    
    
    43,911Total managed
    
    
    87,644
    
    
    
    64,911
    
    
    
    57,093Nonaccrual receivables:Owned
    
    
    10,847
    
    
    
    10,524
    
    
    
    12,492Securitized
    
    
    51,831
    
    
    
    45,160
    
    
    
    42,520Total managed
    
    
    62,678
    
    
    
    55,684
    
    
    
    55,012Accruing receivables past due 90 days or more:Owned
    
    
    13,838
    
    
    
    11,302
    
    
    
    11,870Securitized
    
    
    63,078
    
    
    
    46,785
    
    
    
    39,493Total managed
    
    
    76,916
    
    
    
    58,087
    
    
    
    51,363Net principal charge-offs for the year-to-date
period ended September 30 and December 31:Owned
    
    
    30,047
    
    
    
    33,775
    
    
    
    24,606Securitized
    
    
    124,601
    
    
    
    116,227
    
    
    
    83,127Total managed
    
    
    154,648
    
    
    
    150,002
    
    
    
    107,733Net principal charge-offs for the three months
ended September 30 and December 31:Owned
    
    
    10,708
    
    
    
    9,169
    
    
    
    9,002Securitized
    
    
    48,404
    
    
    
    33,100
    
    
    
    29,399Total managed
    
    
    59,112
    
    
    
    42,269
    
    
    
    38,401
 14




---



##### Table of Contents



Note 6) Selected Balance Sheet Information
  September 30,
    
    December 31,2007
    
    2006Net deferred tax asset
    
    $
    33,861
    
    
    $
    39,166Investment in Fleet Credit Card Services, L.P.
    
    
    32,095
    
    
    
    32,095Investment in preferred securities trust
    
    
    3,163
    
    
    
    3,093Other
    
    
    94,929
    
    
    
    91,200Total other assets
    
    $
    164,048
    
    
    $
    165,554
  September 30,
    
    December 31,2007
    
    2006Cash overdraft
    
    $
    52,002
    
    
    $
    41,188Unrecognized tax benefits
    
    
    38,641
    
    
    
    0Business rewards liability
    
    
    29,536
    
    
    
    25,467Cash back rewards liability
    
    
    8,734
    
    
    
    7,366Accounts payable and accrued expenses
    
    
    25,346
    
    
    
    31,628Amounts due to the securitization trust
    
    
    9,972
    
    
    
    7,287Current income taxes payable
    
    
    6,002
    
    
    
    21,473Other
    
    
    36,789
    
    
    
    16,211Total other liabilities
    
    $
    207,022
    
    
    $
    150,620
 Note 7) Deposits
  September 30,
    
    December 31,2007
    
    2006Demand deposits
    
    $
    6,392
    
    
    $
    4,889Money market savings
    
    
    95,203
    
    
    
    72,525Time deposits of $100,000 or less
    
    
    829,320
    
    
    
    668,398Time deposits of more than $100,000
    
    
    755,652
    
    
    
    619,326Total deposits
    
    $
    1,686,567
    
    
    $
    1,365,138
  Year Ended December 31,2007
    
    $
    258,8722008
    
    
    902,0592009
    
    
    327,8482010
    
    
    61,6122011 and thereafter
    
    
    34,581
 Note 8) Commitments and Contingencies
  15




---



##### Table of Contents



Note 9) Capital Stock
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Class A Common Stock
    
    $
    0.1771
    
    
    $
    0.1417
    
    
    $
    0.4959
    
    
    $
    0.3589Class B Common Stock
    
    
    0.2125
    
    
    
    0.1700
    
    
    
    0.5950
    
    
    
    0.4307
    Note 10) Stock-Based Compensation
   WeightedAverage PriceNumber of
    
    at Date ofShares
    
    IssuanceOutstanding at January 1
    
    
    1,238
    
    
    $
    20.88Granted
    
    
    89
    
    
    
    29.84Vested
    
    
    (239
    )
    
    
    24.22Forfeited
    
    
    (130
    )
    
    
    22.68Outstanding at September 30
    
    
    958
    
    
    $
    20.65
  16




---



##### Table of Contents



WeightedWeighted
    
    
    
    
    
    AverageAverage
    
    Aggregate
    
    RemainingNumber of
    
    Exercise
    
    Intrinsic
    
    ContractualOptions
    
    Price
    
    Value
    
    LifeOutstanding at January 1
    
    
    7,419
    
    
    $
    10.88Granted
    
    
    1,532
    
    
    
    30.47Exercised
    
    
    (800
    )
    
    
    10.25Forfeited
    
    
    (328
    )
    
    
    24.79Outstanding at September 30
    
    
    7,823
    
    
    $
    14.20
    
    
    $
    107,895
    
    
    5.2 yearsOptions exercisable at
September 30
    
    
    5,073
    
    
    $
    7.78
    
    
    $
    99,615
    
    
    3.2 years
   Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Compensation expense
    
    $
    1,426
    
    
    $
    1,045
    
    
    $
    4,007
    
    
    $
    2,747Income tax benefit
    
    
    550
    
    
    
    402
    
    
    
    1,546
    
    
    
    1,057Weighted average
fair value of
options granted
    
    $
    4.71
    
    
    $
    4.72
    
    
    $
    6.54
    
    
    $
    6.70
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Expected life (in years)
    
    
    4.0
    
    
    
    4.0
    
    
    
    5.7
    
    
    
    5.3Expected volatility
    
    
    29.26
    %
    
    
    29.50
    %
    
    
    33.50
    %
    
    
    38.76
    %Risk-free interest rate
    
    
    4.28
    %
    
    
    4.90
    %
    
    
    4.57
    %
    
    
    4.98
    %Expected dividend yield
    
    
    5.34
    %
    
    
    4.43
    %
    
    
    4.87
    %
    
    
    4.26
    %Range of expected
dividend yield over
expected life
    
    
    3.13%-7.57
    %
    
    
    2.89%-6.24
    %
    
    
    2.79%-6.75
    %
    
    
    2.73%-5.91
    %
 17




---



##### Table of Contents



Note 11) Segment Information
  AdvantaBusinessCards
    
    Other(1)
    
    TotalThree months ended September 30, 2007Interest income
    
    $
    39,106
    
    
    $
    10,854
    
    
    $
    49,960Interest expense
    
    
    13,484
    
    
    
    12,122
    
    
    
    25,606Noninterest revenues
    
    
    93,095
    
    
    
    1,330
    
    
    
    94,425Pretax income (loss) from continuing
operations
    
    
    35,982
    
    
    
    (68
    )
    
    
    35,914Three months ended September 30, 2006Interest income
    
    $
    38,639
    
    
    $
    7,289
    
    
    $
    45,928Interest expense
    
    
    11,743
    
    
    
    7,906
    
    
    
    19,649Noninterest revenues
    
    
    81,832
    
    
    
    1,365
    
    
    
    83,197Pretax income from continuing operations
    
    
    33,737
    
    
    
    605
    
    
    
    34,342Nine months ended September 30, 2007Interest income
    
    $
    118,310
    
    
    $
    27,563
    
    
    $
    145,873Interest expense
    
    
    39,939
    
    
    
    31,862
    
    
    
    71,801Noninterest revenues
    
    
    268,158
    
    
    
    5,938
    
    
    
    274,096Pretax income from continuing operations
    
    
    106,617
    
    
    
    1,218
    
    
    
    107,835Nine months ended September 30, 2006Interest income
    
    $
    105,899
    
    
    $
    18,808
    
    
    $
    124,707Interest expense
    
    
    32,167
    
    
    
    20,916
    
    
    
    53,083Noninterest revenues
    
    
    249,274
    
    
    
    3,471
    
    
    
    252,745Pretax income from continuing operations
    
    
    106,494
    
    
    
    937
    
    
    
    107,431
 
 (1)
    
    Other includes venture capital operations as well as investment and other
activities not attributable to the Advanta Business Cards segment. Note 12) Income Taxes
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Income tax expense
attributable to:Continuing operations
    
    $
    13,863
    
    
    $
    13,222
    
    
    $
    41,624
    
    
    $
    41,361Discontinued operations
    
    
    0
    
    
    
    0
    
    
    
    643
    
    
    
    462Total income tax expense
    
    $
    13,863
    
    
    $
    13,222
    
    
    $
    42,267
    
    
    $
    41,823
 18




---



##### Table of Contents



Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Current:Federal
    
    $
    10,254
    
    
    $
    (5,189
    )
    
    $
    26,268
    
    
    $
    12,341State
    
    
    2,001
    
    
    
    1,611
    
    
    
    4,348
    
    
    
    4,552Total current
    
    
    12,255
    
    
    
    (3,578
    )
    
    
    30,616
    
    
    
    16,893Deferred:Federal
    
    
    1,574
    
    
    
    16,824
    
    
    
    10,935
    
    
    
    24,580State
    
    
    34
    
    
    
    (24
    )
    
    
    73
    
    
    
    (112
    )Total deferred
    
    
    1,608
    
    
    
    16,800
    
    
    
    11,008
    
    
    
    24,468Income tax expense
attributable
to
continuing
operations
    
    $
    13,863
    
    
    $
    13,222
    
    
    $
    41,624
    
    
    $
    41,361
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Statutory federal income tax
    
    $
    12,570
    
    
    $
    12,020
    
    
    $
    37,742
    
    
    $
    37,601State income taxes, net of
federal income tax benefit
    
    
    970
    
    
    
    1,031
    
    
    
    2,951
    
    
    
    2,886Compensation limitation
    
    
    99
    
    
    
    85
    
    
    
    298
    
    
    
    151Nondeductible expenses
    
    
    51
    
    
    
    137
    
    
    
    488
    
    
    
    459Other
    
    
    173
    
    
    
    (51
    )
    
    
    145
    
    
    
    264Income tax expense
    
    $
    13,863
    
    
    $
    13,222
    
    
    $
    41,624
    
    
    $
    41,361
   September 30,
    
    December 31,2007
    
    2006Deferred tax assets
    
    $
    60,948
    
    
    $
    66,059Deferred tax liabilities
    
    
    (27,087
    )
    
    
    (26,893
    )Net deferred tax asset
    
    $
    33,861
    
    
    $
    39,166
 19




---



##### Table of Contents



September 30,
    
    December 31,2007
    
    2006Rewards programs
    
    $
    13,395
    
    
    $
    11,492Deferred revenue
    
    
    (13,074
    )
    
    
    (10,435
    )Federal tax benefit of state tax positions
    
    
    10,811
    
    
    
    4,004Receivable losses
    
    
    10,062
    
    
    
    8,864Deferred origination costs, net of deferred fees
    
    
    (8,480
    )
    
    
    (8,910
    )Capital loss carryforwards
    
    
    5,860
    
    
    
    6,653Incentive and deferred compensation
    
    
    5,362
    
    
    
    6,065Alternative minimum tax credit carryforwards
    
    
    3,112
    
    
    
    17,249Securitization income
    
    
    (2,624
    )
    
    
    (2,624
    )Unrealized venture capital investment
(gains) losses
    
    
    (167
    )
    
    
    1,352Other
    
    
    9,604
    
    
    
    5,456Net deferred tax asset
    
    $
    33,861
    
    
    $
    39,166
     20




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##### Table of Contents



Note 13) Discontinued Operations
  Nine Months EndedSeptember 30, 2007
    
    September 30, 2006Advanta
    
    
    
    
    
    AdvantaAdvanta
    
    Leasing
    
    Advanta
    
    LeasingMortgage
    
    Services
    
    Mortgage
    
    ServicesPretax gain on
discontinuance of
mortgage and
leasing businesses
    
    $
    800
    
    
    $
    865
    
    
    $
    500
    
    
    $
    700Income tax expense
    
    
    (309
    )
    
    
    (334
    )
    
    
    (193
    )
    
    
    (269
    )Gain on
discontinuance of
mortgage and
leasing businesses,
net of tax
    
    $
    491
    
    
    $
    531
    
    
    $
    307
    
    
    $
    431
   Advanta
    
    Advanta LeasingMortgage
    
    Services2007
    
    2006
    
    2007
    
    2006Basic gain on
discontinuance of
mortgage and
leasing businesses,
net of
tax, per common shareClass A
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.01Class B
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01Combined
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01Diluted gain on
discontinuance of
mortgage and
leasing businesses,
net of
tax, per common shareClass A
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.01Class B
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01Combined
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
 21




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##### Table of Contents



Note 14) Calculation of Earnings Per Share
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Income from continuing operations
    
    $
    22,051
    
    
    $
    21,120
    
    
    $
    66,211
    
    
    $
    66,070Less: Preferred A dividends
    
    
    0
    
    
    
    0
    
    
    
    (141
    )
    
    
    (141
    )Income from continuing operations
available to common stockholders
    
    
    22,051
    
    
    
    21,120
    
    
    
    66,070
    
    
    
    65,929Gain on discontinuance
of mortgage and leasing businesses,
net of tax
    
    
    0
    
    
    
    0
    
    
    
    1,022
    
    
    
    738Net income available to common
stockholders
    
    
    22,051
    
    
    
    21,120
    
    
    
    67,092
    
    
    
    66,667Less: Class A dividends declared
    
    
    (2,358
    )
    
    
    (1,879
    )
    
    
    (6,634
    )
    
    
    (4,833
    )Less: Class B dividends declared
    
    
    (6,124
    )
    
    
    (4,759
    )
    
    
    (17,232
    )
    
    
    (11,900
    )Undistributed net income
    
    $
    13,569
    
    
    $
    14,482
    
    
    $
    43,226
    
    
    $
    49,934Basic income from continuing
operations per common shareClass A
    
    $
    0.51
    
    
    $
    0.50
    
    
    $
    1.52
    
    
    $
    1.59Class B
    
    
    0.55
    
    
    
    0.54
    
    
    
    1.64
    
    
    
    1.66Combined(1)
    
    
    0.54
    
    
    
    0.53
    
    
    
    1.60
    
    
    
    1.64Diluted income from continuing
operations per common shareClass A
    
    $
    0.48
    
    
    $
    0.47
    
    
    $
    1.45
    
    
    $
    1.48Class B
    
    
    0.51
    
    
    
    0.49
    
    
    
    1.50
    
    
    
    1.50Combined(1)
    
    
    0.50
    
    
    
    0.49
    
    
    
    1.49
    
    
    
    1.50Basic net income per common shareClass A
    
    $
    0.51
    
    
    $
    0.50
    
    
    $
    1.55
    
    
    $
    1.60Class B
    
    
    0.55
    
    
    
    0.54
    
    
    
    1.67
    
    
    
    1.68Combined(1)
    
    
    0.54
    
    
    
    0.53
    
    
    
    1.63
    
    
    
    1.66Diluted net income per common shareClass A
    
    $
    0.48
    
    
    $
    0.47
    
    
    $
    1.47
    
    
    $
    1.50Class B
    
    
    0.51
    
    
    
    0.49
    
    
    
    1.53
    
    
    
    1.52Combined(1)
    
    
    0.50
    
    
    
    0.49
    
    
    
    1.51
    
    
    
    1.51Basic weighted average common shares
outstandingClass A
    
    
    13,343
    
    
    
    13,293
    
    
    
    13,331
    
    
    
    13,281Class B
    
    
    27,800
    
    
    
    26,831
    
    
    
    27,858
    
    
    
    26,969Combined
    
    
    41,143
    
    
    
    40,124
    
    
    
    41,189
    
    
    
    40,250Dilutive effect ofOptions Class B
    
    
    2,664
    
    
    
    3,192
    
    
    
    2,843
    
    
    
    3,294Nonvested shares Class B
    
    
    298
    
    
    
    228
    
    
    
    390
    
    
    
    484Diluted weighted average common
shares outstandingClass A
    
    
    13,343
    
    
    
    13,293
    
    
    
    13,331
    
    
    
    13,281Class B
    
    
    30,762
    
    
    
    30,251
    
    
    
    31,091
    
    
    
    30,747Combined
    
    
    44,105
    
    
    
    43,544
    
    
    
    44,422
    
    
    
    44,028Antidilutive sharesOptions Class B
    
    
    2,610
    
    
    
    1,378
    
    
    
    1,590
    
    
    
    948Nonvested shares Class B
    
    
    3
    
    
    
    0
    
    
    
    1
    
    
    
    0
 
 (1)
    
    Combined represents income available to common stockholders divided by the combined
total of Class A and Class B weighted average common shares outstanding. 22




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##### Table of Contents



OVERVIEW
  Three Months Ended
    
    Nine Months Ended($ in thousands, except per share data)
    
    September 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Pretax income (loss):Advanta Business Cards
    
    $
    35,982
    
    
    $
    33,737
    
    
    $
    106,617
    
    
    $
    106,494Other
    
    
    (68
    )
    
    
    605
    
    
    
    1,218
    
    
    
    937Total pretax income
    
    
    35,914
    
    
    
    34,342
    
    
    
    107,835
    
    
    
    107,431Income tax expense
    
    
    13,863
    
    
    
    13,222
    
    
    
    41,624
    
    
    
    41,361Income from continuing operations
    
    $
    22,051
    
    
    $
    21,120
    
    
    $
    66,211
    
    
    $
    66,070Per combined common share,
assuming dilution
    
    $
    0.50
    
    
    $
    0.49
    
    
    $
    1.49
    
    
    $
    1.50
   23




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  ADVANTA BUSINESS CARDS
  Three Months Ended
    
    Nine Months Ended($ in thousands)
    
    September 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Average owned receivables
    
    $
    1,215,485
    
    
    $
    1,114,122
    
    
    $
    1,249,286
    
    
    $
    1,014,566Average securitized receivables
    
    $
    4,889,381
    
    
    $
    3,388,784
    
    
    $
    4,543,999
    
    
    $
    3,191,071Customer transaction volume
    
    $
    3,606,907
    
    
    $
    3,094,702
    
    
    $
    10,688,752
    
    
    $
    8,860,117New account originations
    
    
    74,195
    
    
    
    85,392
    
    
    
    273,913
    
    
    
    254,407Average number of active
accounts(1)
    
    
    930,102
    
    
    
    724,705
    
    
    
    890,454
    
    
    
    687,159Ending number of accounts at
September 30
    
    
    1,294,273
    
    
    
    1,037,161
    
    
    
    1,294,273
    
    
    
    1,037,161
 (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 and nine months ended September 30. 24




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##### Table of Contents



Projected Estimate at December 31, 2007PercentageActual at
    
    Low End
    
    Increase
    
    High End
    
    Percentage($ in thousands)
    
    December 31, 2006
    
    of Range
    
    (Decrease)
    
    of Range
    
    IncreaseOwned receivables
    
    $
    1,133,132
    
    
    $
    1,125,000
    
    
    
    (1.0
    %)
    
    $
    1,171,000
    
    
    
    3.0
    %Securitized receivables
    
    
    4,073,128
    
    
    
    5,123,000
    
    
    
    26.0
    %
    
    
    5,337,000
    
    
    
    31.0
    %Managed receivables
    
    $
    5,206,260
    
    
    $
    6,248,000
    
    
    
    20.0
    %
    
    $
    6,508,000
    
    
    
    25.0
    %
  Three Months Ended
    
    Nine Months Ended($ in thousands)
    
    September 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Net interest income on owned
interest-earning assets
    
    $
    25,622
    
    
    $
    26,896
    
    
    $
    78,371
    
    
    $
    73,732Noninterest revenues
    
    
    93,095
    
    
    
    81,832
    
    
    
    268,158
    
    
    
    249,274Provision for credit losses
    
    
    (14,724
    )
    
    
    (9,202
    )
    
    
    (36,613
    )
    
    
    (28,681
    )Operating expenses
    
    
    (68,011
    )
    
    
    (65,789
    )
    
    
    (203,299
    )
    
    
    (187,831
    )Pretax income
    
    $
    35,982
    
    
    $
    33,737
    
    
    $
    106,617
    
    
    $
    106,494
   25




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##### Table of Contents



INTEREST INCOME AND EXPENSE
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,($ in thousands)
    
    2007
    
    2006
    
    2007
    
    2006Interest income
    
    $
    49,960
    
    
    $
    45,928
    
    
    $
    145,873
    
    
    $
    124,707Interest expense
    
    
    25,606
    
    
    
    19,649
    
    
    
    71,801
    
    
    
    53,083
   26




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##### Table of Contents



INTEREST RATE ANALYSIS AND AVERAGE BALANCES
 Three Months Ended September 30,2007
    
    
    2006Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average($ in thousands)
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest-earning assets:Owned receivables:Business credit cards(1)
    
    $
    1,215,485
    
    
    $
    34,377
    
    
    
    11.22
    %
    
    $
    1,114,122
    
    
    $
    33,968
    
    
    
    12.10
    %Other receivables
    
    
    7,594
    
    
    
    102
    
    
    
    5.32
    
    
    
    7,732
    
    
    
    94
    
    
    
    4.82Total receivables
    
    
    1,223,079
    
    
    
    34,479
    
    
    
    11.18
    
    
    
    1,121,854
    
    
    
    34,062
    
    
    
    12.05Investments(2)
    
    
    814,185
    
    
    
    10,755
    
    
    
    5.18
    
    
    
    543,148
    
    
    
    7,198
    
    
    
    5.19Retained interests in
securitizations
    
    
    226,405
    
    
    
    4,729
    
    
    
    8.35
    
    
    
    207,912
    
    
    
    4,671
    
    
    
    8.99Total interest-earning
assets(3)
    
    
    2,263,669
    
    
    $
    49,963
    
    
    
    8.74
    %
    
    
    1,872,914
    
    
    $
    45,931
    
    
    
    9.72
    %Noninterest-earning assets
    
    
    337,047
    
    
    
    
    
    
    
    
    
    
    
    369,859Total assets
    
    $
    2,600,716
    
    
    
    
    
    
    
    
    
    
    $
    2,242,773Interest-bearing liabilities:Deposits
    
    $
    1,483,344
    
    
    $
    19,223
    
    
    
    5.14
    %
    
    $
    1,201,061
    
    
    $
    13,861
    
    
    
    4.58
    %Debt
    
    
    224,771
    
    
    
    4,064
    
    
    
    7.17
    
    
    
    213,312
    
    
    
    3,483
    
    
    
    6.48Subordinated debt
payable to preferred
securities trust
    
    
    103,093
    
    
    
    2,317
    
    
    
    8.99
    
    
    
    103,093
    
    
    
    2,289
    
    
    
    8.88Other borrowings
    
    
    109
    
    
    
    2
    
    
    
    6.47
    
    
    
    1,171
    
    
    
    16
    
    
    
    5.52Total interest-bearing
liabilities
    
    
    1,811,317
    
    
    $
    25,606
    
    
    
    5.61
    %
    
    
    1,518,637
    
    
    $
    19,649
    
    
    
    5.14
    %Noninterest-bearing
liabilities
    
    
    192,455
    
    
    
    
    
    
    
    
    
    
    
    190,079Total liabilities
    
    
    2,003,772
    
    
    
    
    
    
    
    
    
    
    
    1,708,716Stockholders equity
    
    
    596,944
    
    
    
    
    
    
    
    
    
    
    
    534,057Total liabilities and
stockholders equity
    
    $
    2,600,716
    
    
    
    
    
    
    
    
    
    
    $
    2,242,773Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.13
    %
    
    
    
    
    
    
    
    
    
    
    4.58
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    4.27
    %
    
    
    
    
    
    
    
    
    
    
    5.57
    %
 
 (1)
    
    Interest income includes late fees for owned business credit card receivables of
$2.3 million for both the three months ended September 30, 2007 and 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. 27




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##### Table of Contents



Nine Months Ended September 30,2007
    
    
    2006Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average($ in thousands)
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest-earning assets:Owned receivables:Business credit cards(1)
    
    $
    1,249,286
    
    
    $
    103,796
    
    
    
    11.11
    %
    
    $
    1,014,566
    
    
    $
    92,847
    
    
    
    12.24
    %Other receivables
    
    
    7,611
    
    
    
    320
    
    
    
    5.63
    
    
    
    7,638
    
    
    
    281
    
    
    
    4.92Total receivables
    
    
    1,256,897
    
    
    
    104,116
    
    
    
    11.08
    
    
    
    1,022,204
    
    
    
    93,128
    
    
    
    12.18Investments(2)
    
    
    692,406
    
    
    
    27,249
    
    
    
    5.20
    
    
    
    514,692
    
    
    
    18,536
    
    
    
    4.75Retained interests in
securitizations
    
    
    228,468
    
    
    
    14,514
    
    
    
    8.47
    
    
    
    194,721
    
    
    
    13,052
    
    
    
    8.94Total interest-earning
assets(3)
    
    
    2,177,771
    
    
    $
    145,879
    
    
    
    8.94
    %
    
    
    1,731,617
    
    
    $
    124,716
    
    
    
    9.61
    %Noninterest-earning assets
    
    
    319,765
    
    
    
    
    
    
    
    
    
    
    
    448,217Total assets
    
    $
    2,497,536
    
    
    
    
    
    
    
    
    
    
    $
    2,179,834Interest-bearing liabilities:Deposits
    
    $
    1,398,289
    
    
    $
    53,121
    
    
    
    5.08
    %
    
    $
    1,132,588
    
    
    $
    36,027
    
    
    
    4.25
    %Debt
    
    
    226,024
    
    
    
    11,724
    
    
    
    6.94
    
    
    
    215,469
    
    
    
    10,160
    
    
    
    6.30Subordinated debt
payable to preferred
securities trust
    
    
    103,093
    
    
    
    6,951
    
    
    
    8.99
    
    
    
    103,093
    
    
    
    6,868
    
    
    
    8.88Other borrowings
    
    
    110
    
    
    
    5
    
    
    
    5.67
    
    
    
    701
    
    
    
    28
    
    
    
    5.30Total interest-bearing
liabilities
    
    
    1,727,516
    
    
    $
    71,801
    
    
    
    5.56
    %
    
    
    1,451,851
    
    
    $
    53,083
    
    
    
    4.89
    %Noninterest-bearing
liabilities
    
    
    183,593
    
    
    
    
    
    
    
    
    
    
    
    197,413Total liabilities
    
    
    1,911,109
    
    
    
    
    
    
    
    
    
    
    
    1,649,264Stockholders equity
    
    
    586,427
    
    
    
    
    
    
    
    
    
    
    
    530,570Total liabilities and
stockholders equity
    
    $
    2,497,536
    
    
    
    
    
    
    
    
    
    
    $
    2,179,834Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.38
    %
    
    
    
    
    
    
    
    
    
    
    4.72
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    4.55
    %
    
    
    
    
    
    
    
    
    
    
    5.53
    %
 
 (1)
    
    Interest income includes late fees for owned business credit card receivables of
$7.1 million for the nine months ended September 30, 2007 and $6.2 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. 28




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##### Table of Contents



PROVISION AND ALLOWANCE FOR RECEIVABLE LOSSES
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,($ in thousands)
    
    2007
    
    2006
    
    2007
    
    2006Provision for credit losses
    
    $
    14,724
    
    
    $
    9,202
    
    
    $
    36,613
    
    
    $
    28,631Provision for interest and fee losses
    
    
    2,894
    
    
    
    2,350
    
    
    
    7,921
    
    
    
    6,551
   Interagency Policy Statement on the Allowance for Loan and Lease Losses
 29




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##### Table of Contents



September 30,
    
    December 31,
    
    September 30,($ in thousands)
    
    2007
    
    2006
    
    2006Consolidated  OwnedAllowance for receivable losses
    
    $
    57,846
    
    
    $
    50,926
    
    
    $
    49,952Receivables 30 days or more delinquent
    
    
    35,276
    
    
    
    26,053
    
    
    
    29,156Receivables 90 days or more delinquent
    
    
    15,693
    
    
    
    12,632
    
    
    
    13,182Nonaccrual receivables
    
    
    10,847
    
    
    
    10,524
    
    
    
    12,492Accruing receivables past due 90 days or more
    
    
    13,838
    
    
    
    11,302
    
    
    
    11,870As a percentage of gross receivables:Allowance for receivable losses
    
    
    4.66
    %
    
    
    4.46
    %
    
    
    4.14
    %Receivables 30 days or more delinquent
    
    
    2.84
    
    
    
    2.28
    
    
    
    2.42Receivables 90 days or more delinquent
    
    
    1.27
    
    
    
    1.11
    
    
    
    1.09Nonaccrual receivables
    
    
    0.87
    
    
    
    0.92
    
    
    
    1.04Accruing receivables past due 90 days or more
    
    
    1.12
    
    
    
    0.99
    
    
    
    0.98Net principal charge-offs for the year-to-date
period ended September 30 and December 31
    
    $
    30,048
    
    
    $
    33,780
    
    
    $
    24,610Net principal charge-offs for the three months
ended September 30 and December 31
    
    
    10,708
    
    
    
    9,170
    
    
    
    9,002As a percentage of average gross receivables
(annualized):Net principal charge-offs for the year-to-date
period ended September 30 and December 31
    
    
    3.19
    %
    
    
    3.17
    %
    
    
    3.21
    %Net principal charge-offs for the three months
ended September 30 and December 31
    
    
    3.50
    
    
    
    3.05
    
    
    
    3.21Business Credit Cards  OwnedAllowance for receivable losses
    
    $
    56,636
    
    
    $
    49,715
    
    
    $
    48,740Receivables 30 days or more delinquent
    
    
    35,276
    
    
    
    26,053
    
    
    
    29,081Receivables 90 days or more delinquent
    
    
    15,693
    
    
    
    12,632
    
    
    
    13,182Nonaccrual receivables
    
    
    10,847
    
    
    
    10,524
    
    
    
    12,492Accruing receivables past due 90 days or more
    
    
    13,838
    
    
    
    11,302
    
    
    
    11,870As a percentage of gross receivables:Allowance for receivable losses
    
    
    4.59
    %
    
    
    4.39
    %
    
    
    4.07
    %Receivables 30 days or more delinquent
    
    
    2.86
    
    
    
    2.30
    
    
    
    2.43Receivables 90 days or more delinquent
    
    
    1.27
    
    
    
    1.11
    
    
    
    1.10Nonaccrual receivables
    
    
    0.88
    
    
    
    0.93
    
    
    
    1.04Accruing receivables past due 90 days or more
    
    
    1.12
    
    
    
    1.00
    
    
    
    0.99Net principal charge-offs for the year-to-date
period ended September 30 and December 31
    
    $
    30,047
    
    
    $
    33,775
    
    
    $
    24,606Net principal charge-offs for the three months
ended September 30 and December 31
    
    
    10,708
    
    
    
    9,169
    
    
    
    9,002As a percentage of average gross receivables
(annualized):Net principal charge-offs for the year-to-date
period ended September 30 and December 31
    
    
    3.21
    %
    
    
    3.19
    %
    
    
    3.23
    %Net principal charge-offs for the three months
ended September 30 and December 31
    
    
    3.52
    
    
    
    3.07
    
    
    
    3.23
 30




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##### Table of Contents



SECURITIZATION INCOME
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,($ in thousands)
    
    2007
    
    2006
    
    2007
    
    2006Securitization income
    
    $
    22,388
    
    
    $
    26,232
    
    
    $
    68,665
    
    
    $
    89,496Interest income (discount
accretion)
    
    
    4,729
    
    
    
    4,671
    
    
    
    14,514
    
    
    
    13,052Interchange income
    
    
    50,800
    
    
    
    40,038
    
    
    
    142,421
    
    
    
    112,879Servicing revenues
    
    
    24,218
    
    
    
    16,777
    
    
    
    67,135
    
    
    
    45,788Total
    
    $
    102,135
    
    
    $
    87,718
    
    
    $
    292,735
    
    
    $
    261,215
   Managed Receivable Data
  31




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##### Table of Contents



Managed Financial Measures and StatisticsAdvanta
    
    
    
    
    
    
    
    
    
    AdvantaBusiness
    
    GAAP
    
    Securitization
    
    Business Cards
    
    Managed($ in thousands)
    
    Cards GAAP
    
    Ratio(1)
    
    Adjustments
    
    Managed
    
    Ratio(1)Three months ended September
30, 2007Net interest income
    
    $
    25,622
    
    
    
    7.11
    %
    
    $
    82,362
    
    
    $
    107,984
    
    
    
    7.08
    %Provision for credit losses
    
    
    14,724
    
    
    
    4.08
    
    
    
    48,404
    (2)
    
    
    63,128
    
    
    
    4.14Noninterest revenues
    
    
    93,095
    
    
    
    25.83
    
    
    
    (33,958
    )
    
    
    59,137
    
    
    
    3.87Average business credit card
interest-earning assets
    
    
    1,441,890
    
    
    
    
    
    
    
    4,662,976
    
    
    
    6,104,866Three months ended
September 30, 2006Net interest income
    
    $
    26,896
    
    
    
    8.14
    %
    
    $
    63,784
    
    
    $
    90,680
    
    
    
    8.06
    %Provision for credit losses
    
    
    9,202
    
    
    
    2.78
    
    
    
    29,399
    (2)
    
    
    38,601
    
    
    
    3.43Noninterest revenues
    
    
    81,832
    
    
    
    24.76
    
    
    
    (34,385
    )
    
    
    47,447
    
    
    
    4.21Average business credit card
interest-earning assets
    
    
    1,322,034
    
    
    
    
    
    
    
    3,180,872
    
    
    
    4,502,906Nine months ended
September 30, 2007Net interest income
    
    $
    78,371
    
    
    
    7.07
    %
    
    $
    225,557
    
    
    $
    303,928
    
    
    
    6.99
    %Provision for credit losses
    
    
    36,613
    
    
    
    3.30
    
    
    
    124,601
    (2)
    
    
    161,214
    
    
    
    3.71Noninterest revenues
    
    
    268,158
    
    
    
    24.20
    
    
    
    (100,956
    )
    
    
    167,202
    
    
    
    3.85Average business credit card
interest-earning assets
    
    
    1,477,754
    
    
    
    
    
    
    
    4,315,531
    
    
    
    5,793,285Nine months ended
September 30, 2006Net interest income
    
    $
    73,732
    
    
    
    8.13
    %
    
    $
    194,680
    
    
    $
    268,412
    
    
    
    8.51
    %Provision for credit losses
    
    
    28,681
    
    
    
    3.16
    
    
    
    86,627
    (2)
    
    
    115,308
    
    
    
    3.66Noninterest revenues
    
    
    249,274
    
    
    
    27.48
    
    
    
    (108,053
    )
    
    
    141,221
    
    
    
    4.48Average business credit card
interest-earning assets
    
    
    1,209,287
    
    
    
    
    
    
    
    2,996,350
    
    
    
    4,205,637As of September 30, 2007Ending business credit card
receivables
    
    $
    1,233,233
    
    
    
    
    
    
    $
    4,980,737
    
    
    $
    6,213,970Receivables 30 days or more
delinquent
    
    
    35,276
    
    
    
    2.86
    %
    
    
    160,375
    
    
    
    195,651
    
    
    
    3.15
    %Receivables 90 days or more
delinquent
    
    
    15,693
    
    
    
    1.27
    
    
    
    71,951
    
    
    
    87,644
    
    
    
    1.41As 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 September 30, 2006Ending business credit card
receivables
    
    $
    1,198,550
    
    
    
    
    
    
    $
    3,449,366
    
    
    $
    4,647,916Receivables 30 days or more
delinquent
    
    
    29,081
    
    
    
    2.43
    %
    
    
    96,240
    
    
    
    125,321
    
    
    
    2.70
    %Receivables 90 days or more
delinquent
    
    
    13,182
    
    
    
    1.10
    
    
    
    43,911
    
    
    
    57,093
    
    
    
    1.23
 
 (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, unfavorable valuation adjustments to
retained interests in securitizations of $3.5 million in the nine months ended September 30,
2006 are included as increases to provision for credit losses. 32




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##### Table of Contents



SERVICING REVENUES
  ($ in thousands)
    
    2007
    
    
    2006Three months ended September 30
    
    $
    24,218
    
    
    $
    16,777Nine months ended September 30
    
    
    67,135
    
    
    
    45,788
  OTHER REVENUES
 Three Months Ended
    
    Nine Months Ended($ in thousands)
    
    September 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Interchange income
    
    $
    62,771
    
    
    $
    52,835
    
    
    $
    180,135
    
    
    $
    148,445Cash back rewards
    
    
    (16,867
    )
    
    
    (12,244
    )
    
    
    (45,613
    )
    
    
    (32,609
    )Business rewards
    
    
    (6,658
    )
    
    
    (5,394
    )
    
    
    (18,597
    )
    
    
    (15,442
    )Investment securities gains, net
    
    
    3,321
    
    
    
    1,091
    
    
    
    5,666
    
    
    
    4,623Balance transfer fees
    
    
    1,812
    
    
    
    1,639
    
    
    
    5,803
    
    
    
    4,972Cash usage fees
    
    
    973
    
    
    
    732
    
    
    
    3,126
    
    
    
    2,409Earnings on investment in Fleet
Credit Card Services, L.P.
    
    
    842
    
    
    
    0
    
    
    
    1,218
    
    
    
    819Other business credit card fees
    
    
    1,236
    
    
    
    912
    
    
    
    3,588
    
    
    
    2,517Other, net
    
    
    389
    
    
    
    617
    
    
    
    2,970
    
    
    
    1,727Total other revenues, net
    
    $
    47,819
    
    
    $
    40,188
    
    
    $
    138,296
    
    
    $
    117,461
    33




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##### Table of Contents



OPERATING EXPENSES
 Three Months Ended
    
    Nine Months Ended($ in thousands)
    
    September 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Salaries and employee benefits
    
    $
    25,029
    
    
    $
    23,869
    
    
    $
    77,373
    
    
    $
    71,172Amortization of deferred
origination costs, net
    
    
    12,592
    
    
    
    11,984
    
    
    
    38,311
    
    
    
    35,643External processing
    
    
    7,049
    
    
    
    6,077
    
    
    
    20,756
    
    
    
    18,200Professional fees
    
    
    4,055
    
    
    
    3,216
    
    
    
    10,938
    
    
    
    8,711Marketing
    
    
    3,806
    
    
    
    7,895
    
    
    
    11,116
    
    
    
    15,652Equipment
    
    
    3,197
    
    
    
    2,351
    
    
    
    8,522
    
    
    
    7,339Occupancy
    
    
    2,465
    
    
    
    2,340
    
    
    
    7,110
    
    
    
    6,811Fraud
    
    
    2,251
    
    
    
    734
    
    
    
    5,936
    
    
    
    2,317Postage
    
    
    1,521
    
    
    
    1,148
    
    
    
    4,446
    
    
    
    3,481Other
    
    
    6,176
    
    
    
    6,318
    
    
    
    19,212
    
    
    
    18,981Total operating expenses
    
    $
    68,141
    
    
    $
    65,932
    
    
    $
    203,720
    
    
    $
    188,307
  Accounting for Collateral Assignment Split-Dollar Life
Insurance Arrangements.
  34




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##### Table of Contents



LITIGATION CONTINGENCIES
  INCOME TAXES
  Three Months Ended
    
    Nine Months Ended($ in thousands)
    
    September 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Income tax expense
    
    $
    13,863
    
    
    $
    13,222
    
    
    $
    41,624
    
    
    $
    41,361Effective tax rate
    
    
    38.6
    %
    
    
    38.5
    %
    
    
    38.6
    %
    
    
    38.5
    %
  35




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##### Table of Contents



DISCONTINUED OPERATIONS
   OFF-BALANCE SHEET ARRANGEMENTS
  36




---



##### Table of Contents



Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,($ in thousands)
    
    2007
    
    2006
    
    2007
    
    2006Average securitized receivables
    
    $
    4,889,381
    
    
    $
    3,388,784
    
    
    $
    4,543,999
    
    
    $
    3,191,071Securitization income
    
    
    22,388
    
    
    
    26,232
    
    
    
    68,665
    
    
    
    89,496Discount accretion
    
    
    4,729
    
    
    
    4,671
    
    
    
    14,514
    
    
    
    13,052Interchange income
    
    
    50,800
    
    
    
    40,038
    
    
    
    142,421
    
    
    
    112,879Servicing revenues
    
    
    24,218
    
    
    
    16,777
    
    
    
    67,135
    
    
    
    45,788Proceeds from new securitizations
    
    
    113,033
    
    
    
    121,591
    
    
    
    869,373
    
    
    
    1,191,855Proceeds from collections
reinvested in revolving-period
securitizations
    
    
    2,801,202
    
    
    
    2,003,338
    
    
    
    7,866,934
    
    
    
    5,466,735Cash flows received on retained
interests
    
    
    77,377
    
    
    
    66,270
    
    
    
    241,864
    
    
    
    236,480
   NoteholderPrincipal
    
    Coupon
    
    Scheduled End of($ in thousands)
    
    Balance
    
    Type
    
    Revolving PeriodAdvantaSeries:2007-D1
    
    $
    25,000
    
    
    Floating
    
    May 31, 20092007-A2
    
    
    225,000
    
    
    Fixed
    
    July 31, 20092007-A4
    
    
    200,000
    
    
    Floating
    
    August 31, 20092007-B2
    
    
    100,000
    
    
    Fixed
    
    October 31, 20092007-B1
    
    
    100,000
    
    
    Floating
    
    April 30, 20112007-A1
    
    
    200,000
    
    
    Floating
    
    May 31, 20112007-A3
    
    
    200,000
    
    
    Floating
    
    August 31, 2011
   37




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##### Table of Contents



Accounting for Transfers of
Financial Assets  An Amendment of FASB Statement No. 140
 38




---



##### Table of Contents



MARKET RISK SENSITIVITY
  September 30,
    
    December 31,2007
    
    2006Estimated percentage increase (decrease)
in net interest income on owned assets:Assuming 200 basis point increase
    
    
    16
    %
    
    
    12
    %Assuming 200 basis point decrease
    
    
    (7
    )%
    
    
    (6
    )%Estimated percentage increase (decrease)
in net interest income on securitized
receivables:Assuming 200 basis point increase
    
    
    (8
    )%
    
    
    (8
    )%Assuming 200 basis point decrease
    
    
    18
    %
    
    
    15
    %Estimated percentage increase (decrease)
in net interest income on managed assets:Assuming 200 basis point increase
    
    
    (3
    )%
    
    
    (3
    )%Assuming 200 basis point decrease
    
    
    13
    %
    
    
    10
    %
   39




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##### Table of Contents



LIQUIDITY, CAPITAL RESOURCES AND ANALYSIS OF FINANCIAL CONDITION
     40




---



##### Table of Contents



September 30, 2007
    
    December 31, 2006($ in thousands)
    
    Amount
    
    %
    
    Amount
    
    %Off-balance sheet securitized
receivables(1)
    
    $
    4,836,888
    
    
    
    65
    %
    
    $
    3,932,732
    
    
    
    63
    %Deposits
    
    
    1,686,567
    
    
    
    23
    
    
    
    1,365,138
    
    
    
    22Debt
    
    
    223,406
    
    
    
    3
    
    
    
    227,126
    
    
    
    4Subordinated debt payable to preferred
securities trust
    
    
    103,093
    
    
    
    1
    
    
    
    103,093
    
    
    
    2Equity
    
    
    591,819
    
    
    
    8
    
    
    
    567,161
    
    
    
    9Total
    
    $
    7,441,773
    
    
    
    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.      41




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##### Table of Contents



42




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##### Table of Contents



CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
   (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, including the
impact of the recent disruption in the capital markets, the deterioration
of the U.S. economy and potential for further deterioration and
disruption, that affect the level of new account originations,
customer spending, delinquencies, charge-offs, and other results of
operations;(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;
 43




---



##### Table of Contents



(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 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.
  44




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PART II  OTHER INFORMATION
 
   
   45




---



##### Table of Contents



(a)
    
    None.(b)
    
    None.(c)
    
    The table below provides information with respect to all purchases of equity
securities by us during the period from July 1, 2007 through September 30, 2007.
Shares are in thousands.
 ISSUER PURCHASES OF EQUITY SECURITIES
 (d)Maximum(c)Total
    
    Number (orNumber of
    
    ApproximateShares
    
    Dollar ValuePurchased as
    
    of Shares)Part of
    
    That May Yet(a)Total
    
    
    
    
    
    Publicly
    
    Be PurchasedNumber of
    
    (b)Average
    
    Announced
    
    Under theShares
    
    Price Paid
    
    Plans or
    
    Plans orPeriod
    
    Purchased
    
    per Share
    
    Programs (A)
    
    Programs (A)Class A:7/1/07-7/31/07
    
    
    0.0
    
    
    
    N/A
    *
    
    
    0.0
    
    
    
    0.08/1/07-8/31/07
    
    
    0.0
    
    
    
    N/A
    *
    
    
    0.0
    
    
    
    0.09/1/07-9/30/07
    
    
    0.0
    
    
    
    N/A
    *
    
    
    0.0
    
    
    
    0.0Subtotal Class A
    
    
    0.0
    
    
    
    N/A
    *
    
    
    0.0
    
    
    
    0.0Class B:7/1/07-7/31/07
    
    
    0.0
    
    
    
    N/A
    *
    
    
    0.0
    
    
    
    1,093.68/1/07-8/31/07
    
    
    482.8
    
    
    $
    25.93
    
    
    
    482.8
    
    
    
    610.89/1/07-9/30/07
    
    
    219.3
    
    
    
    25.96
    
    
    
    219.3
    
    
    
    391.5Subtotal Class B
    
    
    702.1
    
    
    $
    25.94
    
    
    
    702.1
    
    
    
    391.5Total
    
    
    702.1
    
    
    $
    25.94
    
    
    
    702.1
    
    
    
    391.5
 
 (A)
    
    In April 2007, the Board of Directors of Advanta Corp. authorized the repurchase
of up to 1.5 million shares of Advanta Corp.s Class B Common Stock.*
    
    N/A  Not Applicable 46




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##### Table of Contents



ExhibitNumber
    
    Description of Document12
    
    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
 47




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##### Table of Contents



SIGNATURES
  Advanta Corp.
(Registrant)By
    
    /s/ Philip M. BrowneSenior Vice President andChief Financial OfficerNovember 8, 2007By
    
    /s/ David B. WeinstockVice President andChief Accounting OfficerNovember 8, 2007
 48




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##### Table of Contents



EXHIBIT INDEX
 Manner ofExhibit
    
    Description
    
    Filing12
    
    
    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. 49