##### 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, 2008 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
(Address of Principal Executive Offices)
    
    19477(Zip Code)
 
 þ o
  Large accelerated filer þ

 

    Accelerated filer o

 

Non-accelerated filer   o

    

 Smaller reporting company o(Do not check
if a smaller reporting company)
 o þ
  o o
   Class
    
    
    Outstanding at May 5, 2008Class A Common Stock, $.01 par value per share
    
    
    14,410,133 sharesClass B Common Stock, $.01 par value per share
    
    
    31,228,040 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
    
    
    21Item 3. Quantitative and Qualitative Disclosures
About Market Risk
    
    
    38Item 4. Controls and Procedures
    
    
    38PART II OTHER INFORMATION
    
    
    39Item 1. Legal Proceedings
    
    
    39Item 1A. Risk Factors
    
    
    39Item 6. Exhibits
    
    
    39Exhibit Index
    
    
    41PREFERRED
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)
    
    2008
    
    
    2007ASSETSCash
    
    $
    106,363
    
    
    $
    90,228Federal funds sold
    
    
    941,285
    
    
    
    872,587Investments available for sale
    
    
    305,590
    
    
    
    223,500Receivables, net:Held for sale
    
    
    217,457
    
    
    
    275,679Other
    
    
    693,671
    
    
    
    714,989Total receivables, net
    
    
    911,128
    
    
    
    990,668Accounts receivable from securitizations
    
    
    639,687
    
    
    
    349,581Premises and equipment, net
    
    
    16,263
    
    
    
    16,893Other assets
    
    
    209,299
    
    
    
    220,915Total assets
    
    $
    3,129,615
    
    
    $
    2,764,372LIABILITIESDeposits
    
    $
    1,929,717
    
    
    $
    1,651,737Debt
    
    
    215,200
    
    
    
    220,848Other borrowings
    
    
    35,000
    
    
    
    25,000Subordinated debt payable to preferred securities trust
    
    
    103,093
    
    
    
    103,093Other liabilities
    
    
    248,979
    
    
    
    177,913Total liabilities
    
    
    2,531,989
    
    
    
    2,178,591Commitments and contingenciesSTOCKHOLDERS EQUITYClass A preferred stock, $1,000 par value:Authorized, issued and outstanding  1,010 shares in
2008 and 2007
    
    
    1,010
    
    
    
    1,010Class A voting common stock, $.01 par value:Authorized  200,000,000 shares; issued  14,410,133
shares in 2008 and 2007
    
    
    144
    
    
    
    144Class B non-voting common stock, $.01 par value:Authorized  200,000,000 shares; issued  30,312,088
shares in 2008 and 29,618,641 shares in 2007
    
    
    303
    
    
    
    296Additional paid-in capital
    
    
    241,122
    
    
    
    238,416Unearned ESOP shares
    
    
    (8,681
    )
    
    
    (8,785
    )Accumulated other comprehensive loss
    
    
    (2,507
    )
    
    
    (1,674
    )Retained earnings
    
    
    403,656
    
    
    
    393,795Treasury stock at cost, 1,563,736 Class B common shares
in 2008 and 2007
    
    
    (37,421
    )
    
    
    (37,421
    )Total stockholders equity
    
    
    597,626
    
    
    
    585,781Total liabilities and stockholders equity
    
    $
    3,129,615
    
    
    $
    2,764,372
 See accompanying notes to consolidated financial statements.
 3




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ADVANTA CORP. AND SUBSIDIARIES
 
 CONSOLIDATED INCOME STATEMENTS (Unaudited)
 Three Months EndedMarch 31,(In thousands, except per share amounts)
    
    2008
    
    2007Interest income:Receivables
    
    $
    29,130
    
    
    $
    35,567Investments
    
    
    9,932
    
    
    
    7,682Other interest income
    
    
    6,985
    
    
    
    5,106Total interest income
    
    
    46,047
    
    
    
    48,355Interest expense:Deposits
    
    
    21,919
    
    
    
    16,537Debt and other borrowings
    
    
    3,908
    
    
    
    3,708Subordinated debt payable to preferred securities trust
    
    
    2,317
    
    
    
    2,317Total interest expense
    
    
    28,144
    
    
    
    22,562Net interest income
    
    
    17,903
    
    
    
    25,793Provision for credit losses
    
    
    28,382
    
    
    
    10,083Net interest income after provision for credit losses
    
    
    (10,479
    )
    
    
    15,710Noninterest revenues:Securitization income
    
    
    16,997
    
    
    
    23,511Servicing revenues
    
    
    26,092
    
    
    
    20,376Other revenues, net
    
    
    66,568
    
    
    
    42,481Total noninterest revenues
    
    
    109,657
    
    
    
    86,368Operating expenses
    
    
    69,488
    
    
    
    66,802Income before income taxes
    
    
    29,690
    
    
    
    35,276Income tax expense
    
    
    11,328
    
    
    
    13,828Net income
    
    $
    18,362
    
    
    $
    21,448Basic net income per common shareClass A
    
    $
    0.42
    
    
    $
    0.49Class B
    
    
    0.47
    
    
    
    0.53Diluted net income per common shareClass A
    
    $
    0.41
    
    
    $
    0.47Class B
    
    
    0.45
    
    
    
    0.48Basic weighted average common shares outstandingClass A
    
    
    13,368
    
    
    
    13,318Class B
    
    
    27,022
    
    
    
    27,734Diluted weighted average common shares outstandingClass A
    
    
    13,368
    
    
    
    13,318Class B
    
    
    28,243
    
    
    
    31,172
 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 B
    
    
    AdditionalComprehensive
    
    
    Preferred
    
    
    Class A
    
    
    Common
    
    
    Paid-In($ in thousands)
    
    Income (Loss)
    
    
    Stock
    
    
    Common Stock
    
    
    Stock
    
    
    CapitalBalance at December 31, 2006
    
    
    
    
    
    $
    1,010
    
    
    $
    151
    
    
    $
    351
    
    
    $
    308,051Effect of applying the provisions
of FIN No. 48 (See Note 12)Net income
    
    $
    72,050Other comprehensive income (loss):Unrealized appreciation
(depreciation) of 
investments,
net of tax benefit
(expense) of
$830


    (1,542
    )Actuarial gain (loss), net of
tax benefit 
(expense) of ($84)
    
    
    156Comprehensive income
    
    $
    70,664Preferred and common cash
dividends declaredExercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    6,630Stock option exchange program
stock distributionEmployee stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,448Nonemployee stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21
    )Excess tax benefits from stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,743Issuance of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    (3
    )Amortization of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,834Forfeitures of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (116
    )Treasury stock acquiredTreasury stock retired
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    (63
    )
    
    
    (93,101
    )ESOP shares committed to be
released
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    951Balance at December 31, 2007
    
    
    
    
    
    $
    1,010
    
    
    $
    144
    
    
    $
    296
    
    
    $
    238,416Net income
    
    $
    18,362Other comprehensive income (loss):Unrealized appreciation
(depreciation) of investments,
net of tax benefit (expense)
of $449
    
    
    (833
    )Comprehensive income
    
    $
    17,529Preferred and common cash
dividends declaredExercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13Employee stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,420Excess tax benefits from
stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    163Issuance of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    (7
    )Amortization of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,082ESOP shares committed to be
released
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35Balance at March 31, 2008
    
    
    
    
    
    $
    1,010
    
    
    $
    144
    
    
    $
    303
    
    
    $
    241,122
 See accompanying notes to consolidated financial statements.
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ADVANTA CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (Unaudited)  continued
 AccumulatedOther
    
    
    
    
    
    
    
    
    
    TotalUnearned
    
    Comprehensive
    
    Retained
    
    Treasury
    
    Stockholders($ in thousands)
    
    ESOP Shares
    
    Income (Loss)
    
    Earnings
    
    Stock
    
    EquityBalance at December 31, 2006
    
    $
    (9,204
    )
    
    $
    (288
    )
    
    $
    359,813
    
    
    $
    (92,723
    )
    
    $
    567,161Effect of applying the provisions of
FIN No. 48 (See Note 12)
    
    
    
    
    
    
    
    
    
    
    (6,103
    )
    
    
    
    
    
    
    (6,103
    )Net income
    
    
    
    
    
    
    
    
    
    
    72,050
    
    
    
    
    
    
    
    72,050Other comprehensive income (loss):Unrealized appreciation
(depreciation) of 
investments, net
of tax benefit (expense) of
$830



    
    
    
    (1,542
    )
    
    
    
    
    
    
    
    
    
    
    (1,542
    )Actuarial gain (loss), net of tax

benefit (expense) of ($84)
    
    
    
    
    
    
    156
    
    
    
    
    
    
    
    
    
    
    
    156Comprehensive incomePreferred and common cash dividends
declared
    
    
    
    
    
    
    
    
    
    
    (31,965
    )
    
    
    
    
    
    
    (31,965
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,637Stock option exchange program stock
distribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    388
    
    
    
    388Employee stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,448Nonemployee stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21
    )Excess tax benefits from stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,743Issuance of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0Amortization of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,834Forfeitures of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (118
    )Treasury stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38,257
    )
    
    
    (38,257
    )Treasury stock retired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    93,171
    
    
    
    0ESOP shares committed to be released
    
    
    419
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,370Balance at December 31, 2007
    
    $
    (8,785
    )
    
    $
    (1,674
    )
    
    $
    393,795
    
    
    $
    (37,421
    )
    
    $
    585,781Net income
    
    
    
    
    
    
    
    
    
    
    18,362
    
    
    
    
    
    
    
    18,362Other comprehensive income (loss):Unrealized appreciation
(depreciation) of 
investments, net
of tax benefit (expense) of $449



    
    
    
    (833
    )
    
    
    
    
    
    
    
    
    
    
    (833
    )Comprehensive incomePreferred and common cash dividends
declared
    
    
    
    
    
    
    
    
    
    
    (8,501
    )
    
    
    
    
    
    
    (8,501
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13Employee stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,420Excess tax benefits from stock based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    163Issuance of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0Amortization of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,082ESOP shares committed to be released
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    139Balance at March 31, 2008
    
    $
    (8,681
    )
    
    $
    (2,507
    )
    
    $
    403,656
    
    
    $
    (37,421
    )
    
    $
    597,626
 See accompanying notes to consolidated financial statements.
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ADVANTA CORP. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 Three Months EndedMarch 31,($ in thousands)
    
    2008
    
    2007OPERATING ACTIVITIES  CONTINUING OPERATIONSNet income
    
    $
    18,362
    
    
    $
    21,448Adjustments to reconcile net income to net cash (used in)
provided by operating activities:Investment securities gains, net
    
    
    (18,013
    )
    
    
    (990
    )Depreciation and amortization
    
    
    1,559
    
    
    
    1,416Stock-based compensation expense
    
    
    2,502
    
    
    
    2,442Provision for credit losses
    
    
    28,382
    
    
    
    10,083Provision for interest and fee losses
    
    
    4,361
    
    
    
    2,446Change in deferred origination costs, net of deferred fees
    
    
    1,484
    
    
    
    434Change in receivables held for sale
    
    
    (66,478
    )
    
    
    (306,402
    )Proceeds from sale of receivables held for sale
    
    
    124,700
    
    
    
    357,658Change in accounts receivable from securitizations
    
    
    (290,106
    )
    
    
    (1,138
    )Excess tax benefits from stock-based compensation
    
    
    (163
    )
    
    
    (2,387
    )Change in other assets and other liabilities
    
    
    102,786
    
    
    
    39,195Net cash (used in) provided by operating activities
    
    
    (90,624
    )
    
    
    124,205INVESTING ACTIVITIES  CONTINUING OPERATIONSChange in federal funds sold and restricted
interest-bearing deposits
    
    
    (68,698
    )
    
    
    43,860Purchase of investments available for sale
    
    
    (277,164
    )
    
    
    (273,366
    )Proceeds from sales of investments available for sale
    
    
    157,102
    
    
    
    202,521Proceeds from sales of other investments
    
    
    18,015
    
    
    
    0Proceeds from maturing investments available for sale
    
    
    36,688
    
    
    
    16,105Change in receivables not held for sale
    
    
    (12,909
    )
    
    
    (72,409
    )Purchases of premises and equipment, net
    
    
    (925
    )
    
    
    (2,122
    )Net cash used in investing activities
    
    
    (147,891
    )
    
    
    (85,411
    )FINANCING ACTIVITIES  CONTINUING OPERATIONSChange in demand and savings deposits
    
    
    (8,507
    )
    
    
    11,909Proceeds from issuance of time deposits
    
    
    412,079
    
    
    
    116,025Payments for maturing time deposits
    
    
    (136,901
    )
    
    
    (152,289
    )Proceeds from issuance of debt
    
    
    14,142
    
    
    
    9,659Payments on redemption of debt
    
    
    (20,592
    )
    
    
    (10,353
    )Change in cash overdraft and other borrowings
    
    
    3,027
    
    
    
    (5,597
    )Proceeds from exercise of stock options
    
    
    13
    
    
    
    1,688Cash dividends paid
    
    
    (8,501
    )
    
    
    (6,964
    )Excess tax benefits from stock-based compensation
    
    
    163
    
    
    
    2,387Treasury stock acquired
    
    
    0
    
    
    
    (592
    )Net cash provided by (used in) financing activities
    
    
    254,923
    
    
    
    (34,127
    )DISCONTINUED OPERATIONSNet cash (used in) provided by operating activities of
discontinued operations
    
    
    (273
    )
    
    
    227Net increase in cash
    
    
    16,135
    
    
    
    4,894Cash at beginning of period
    
    
    90,228
    
    
    
    35,055Cash at end of period
    
    $
    106,363
    
    
    $
    39,949
 See accompanying 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, 2008
(Unaudited)
  Note 1) Basis of Presentation
     Note 2) Recently Issued Accounting Standards
 Fair Value
Measurements Effective Date of FASB
Statement No. 157
 8




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The Fair Value Option for Financial Assets
and Financial Liabilities
 Accounting for Collateral Assignment Split-Dollar Life
Insurance Arrangements.
 Accounting for Transfers of Financial Assets  An Amendment of FASB Statement No.
140 Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities Consolidation of Variable Interest Entities.
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Note 3) Investments Available for Sale
  March 31, 2008
    
    December 31, 2007Amortized
    
    Fair
    
    Amortized
    
    FairCost
    
    Value
    
    Cost
    
    ValueU.S. Treasury and government
agency securities
    
    $
    115,930
    
    
    $
    116,022
    
    
    $
    18,416
    
    
    $
    18,469State and municipal securities
    
    
    17,158
    
    
    
    17,337
    
    
    
    18,554
    
    
    
    18,651Commercial paper
    
    
    2,795
    
    
    
    2,792
    
    
    
    0
    
    
    
    0Corporate bonds
    
    
    6,006
    
    
    
    6,007
    
    
    
    7,525
    
    
    
    7,499Asset-backed securities(1)
    
    
    36,145
    
    
    
    31,686
    
    
    
    40,234
    
    
    
    37,340Equity securities(2)
    
    
    52,891
    
    
    
    52,984
    
    
    
    8,066
    
    
    
    8,021Money market funds
    
    
    78,396
    
    
    
    78,396
    
    
    
    133,159
    
    
    
    133,159Other
    
    
    366
    
    
    
    366
    
    
    
    361
    
    
    
    361Total investments available for sale
    
    $
    309,687
    
    
    $
    305,590
    
    
    $
    226,315
    
    
    $
    223,500
 (1)
    
    Includes mortgage-backed securities.(2)
    
    Includes venture capital investments of $265 thousand at March 31, 2008 and $413
thousand at December 31, 2007. The amount shown as amortized cost represents fair
value for venture capital investments. Equity securities at March 31, 2008 also
include an investment in Eaton Vance Institutional Short Term Income Fund with an
amortized cost of $45.0 million and fair value of $45.1 million.
 Note 4) Receivables
  March 31,
    
    December 31,2008
    
    2007Business credit card receivables
    
    $
    966,145
    
    
    $
    1,031,607Other receivables
    
    
    7,341
    
    
    
    7,330Gross receivables
    
    
    973,486
    
    
    
    1,038,937Add: Deferred origination costs, net of deferred fees
    
    
    18,787
    
    
    
    20,271Less: Allowance for receivable lossesBusiness credit cards
    
    
    (79,972
    )
    
    
    (67,368
    )Other receivables
    
    
    (1,173
    )
    
    
    (1,172
    )Total allowance for receivable losses
    
    
    (81,145
    )
    
    
    (68,540
    )Receivables, net
    
    $
    911,128
    
    
    $
    990,668
  10




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##### Table of Contents



Note 5) Allowance for Receivable Losses
  Three Months EndedMarch 31,2008
    
    2007Balance at January 1
    
    $
    68,540
    
    
    $
    50,926Provision for credit losses
    
    
    28,382
    
    
    
    10,083Provision for interest and fee losses
    
    
    4,361
    
    
    
    2,446Gross principal charge-offs:Business credit cards
    
    
    (16,579
    )
    
    
    (10,996
    )Principal recoveries:Business credit cards
    
    
    273
    
    
    
    1,213Net principal charge-offs
    
    
    (16,306
    )
    
    
    (9,783
    )Interest and fee charge-offs:Business credit cards
    
    
    (3,832
    )
    
    
    (2,466
    )Balance at March 31
    
    $
    81,145
    
    
    $
    51,206
 Note 6) Securitization Activities
  March 31,
    
    December 31,2008
    
    2007Retained interests in securitizations
    
    $
    226,040
    
    
    $
    213,077Amounts due from the securitization trust
    
    
    325,034
    
    
    
    48,452Accrued interest and fees on securitized
receivables, net(1)
    
    
    88,613
    
    
    
    88,052Total accounts receivable from securitizations
    
    $
    639,687
    
    
    $
    349,581
 (1)
    
    Reduced by an estimate for uncollectible interest and fees of $20.5 million at March
31, 2008 and $17.3 million at December 31, 2007.
  Three Months EndedMarch 31,2008
    
    2007Average securitized receivables
    
    $
    5,350,034
    
    
    $
    4,152,857Securitization income
    
    
    16,997
    
    
    
    23,511Discount accretion
    
    
    6,985
    
    
    
    5,106Interchange income
    
    
    55,445
    
    
    
    42,414Servicing revenues
    
    
    26,092
    
    
    
    20,376Proceeds from new securitizations
    
    
    124,700
    
    
    
    357,658Proceeds from collections reinvested in
revolving-period securitizations
    
    
    2,552,077
    
    
    
    2,383,984Cash flows received on retained interests
    
    
    79,935
    
    
    
    84,756Key assumptions:Discount rate
    
    
    12.21% - 17.62
    %
    
    
    8.15% - 9.84
    %Monthly payment rate
    
    
    18.84% - 20.46
    %
    
    
    20.04% - 23.10
    %Loss rate
    
    
    6.20% - 9.02
    %
    
    
    3.70% - 4.24
    %Interest yield, net of interest
earned by noteholders
    
    
    8.79% - 11.36
    %
    
    
    7.29% - 7.30
    %
  11




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##### Table of Contents



March 31,
    
    December 31,2008
    
    2007Discount rate
    
    
    17.20% - 17.62
    %
    
    
    13.25% - 15.28
    %Monthly payment rate
    
    
    19.09% - 20.46
    %
    
    
    19.34% - 20.46
    %Loss rate
    
    
    7.85% - 9.02
    %
    
    
    6.20% - 7.13
    %Interest yield, net of interest
earned by noteholders
    
    
    11.36
    %
    
    
    8.79
    %
   Effect on estimated fair value of the following hypothetical
changes in key assumptions:Discount rate increased 200 basis points
    
    $
    (2,958
    )Discount rate increased 400 basis points
    
    
    (5,979
    )Monthly payment rate at 110% of base assumption
    
    
    (521
    )Monthly payment rate at 125% of base assumption
    
    
    (1,805
    )Loss rate at 110% of base assumption
    
    
    (10,102
    )Loss rate at 125% of base assumption
    
    
    (25,499
    )Interest yield, net of interest earned by noteholders,
decreased 100 basis points
    
    
    (12,920
    )Interest yield, net of interest earned by noteholders,
decreased 200 basis points
    
    
    (26,004
    )
  12




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##### Table of Contents



Managed business credit card receivable data
  March 31,
    
    December 31,
    
    March 31,2008
    
    2007
    
    2007Owned business credit card receivables
    
    $
    966,145
    
    
    $
    1,031,607
    
    
    $
    1,142,006Securitized business credit card receivables
    
    
    5,303,936
    
    
    
    5,315,421
    
    
    
    4,444,055Total managed receivables
    
    $
    6,270,081
    
    
    $
    6,347,028
    
    
    $
    5,586,061Receivables 30 days or more delinquent:Owned
    
    $
    51,900
    
    
    $
    42,424
    
    
    $
    28,544Securitized
    
    
    280,208
    
    
    
    229,808
    
    
    
    122,426Total managed
    
    
    332,108
    
    
    
    272,232
    
    
    
    150,970Receivables 90 days or more delinquent:Owned
    
    
    24,028
    
    
    
    19,204
    
    
    
    12,878Securitized
    
    
    130,436
    
    
    
    105,577
    
    
    
    54,633Total managed
    
    
    154,464
    
    
    
    124,781
    
    
    
    67,511Nonaccrual receivables:Owned
    
    
    11,008
    
    
    
    10,104
    
    
    
    10,711Securitized
    
    
    66,120
    
    
    
    59,131
    
    
    
    47,402Total managed
    
    
    77,128
    
    
    
    69,235
    
    
    
    58,113Accruing receivables past due 90 days or more:Owned
    
    
    21,835
    
    
    
    17,213
    
    
    
    11,373Securitized
    
    
    117,118
    
    
    
    94,139
    
    
    
    47,974Total managed
    
    
    138,953
    
    
    
    111,352
    
    
    
    59,347Net principal charge-offs for the three
months ended March 31 and December 31:Owned
    
    
    16,306
    
    
    
    11,542
    
    
    
    9,783Securitized
    
    
    85,753
    
    
    
    53,572
    
    
    
    35,082Total managed
    
    
    102,059
    
    
    
    65,114
    
    
    
    44,865
 Note 7) Other Assets and Liabilities
  March 31,
    
    December 31,2008
    
    2007Investment in Fleet Credit Card Services, L.P.
    
    $
    32,095
    
    
    $
    32,095Net deferred tax asset
    
    
    30,293
    
    
    
    38,147Investment in preferred securities trust
    
    
    3,163
    
    
    
    3,093Other
    
    
    143,748
    
    
    
    147,580Total other assets
    
    $
    209,299
    
    
    $
    220,915
  13




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##### Table of Contents



March 31,
    
    December 31,2008
    
    2007Amounts due to the securitization trust
    
    $
    77,954
    
    
    $
    9,258Liability for unrecognized tax benefits
    
    
    39,834
    
    
    
    39,495Accounts payable and accrued expenses
    
    
    32,327
    
    
    
    31,563Business rewards liability
    
    
    30,442
    
    
    
    29,768Cash back rewards liability
    
    
    10,122
    
    
    
    9,590Cash overdraft
    
    
    17,020
    
    
    
    23,993Current income taxes payable
    
    
    3,352
    
    
    
    2,464Liabilities of discontinued operations
    
    
    2,694
    
    
    
    2,967Other
    
    
    35,234
    
    
    
    28,815Total other liabilities
    
    $
    248,979
    
    
    $
    177,913
 Note 8) Deposits
  March 31,
    
    December 31,2008
    
    2007Demand deposits
    
    $
    8,163
    
    
    $
    8,874Money market savings
    
    
    77,008
    
    
    
    84,804Time deposits of $100,000 or less
    
    
    1,006,137
    
    
    
    867,263Time deposits of more than $100,000
    
    
    838,409
    
    
    
    690,796Total deposits
    
    $
    1,929,717
    
    
    $
    1,651,737
  Year Ending December 31,2008
    
    $
    924,4732009
    
    
    646,7062010
    
    
    162,6162011
    
    
    46,9082012 and thereafter
    
    
    63,843
 Note 9) Commitments and Contingencies
  14




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Note 10) Capital Stock
  Three Months EndedMarch 31,2008
    
    2007Class A Common Stock
    
    $
    0.1771
    
    
    $
    0.1417Class B Common Stock
    
    
    0.2125
    
    
    
    0.1700
   Note 11) Segment Information
  AdvantaBusinessCards
    
    Other(1)
    
    TotalThree months ended March 31, 2008Interest income
    
    $
    36,016
    
    
    $
    10,031
    
    
    $
    46,047Interest expense
    
    
    18,198
    
    
    
    9,946
    
    
    
    28,144Noninterest revenues
    
    
    96,201
    
    
    
    13,456
    
    
    
    109,657Pretax income
    
    
    10,783
    
    
    
    18,907
    
    
    
    29,690Three 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
    
    
    
    35,276
 (1)
    
    Other includes venture capital operations as well as investment and other
activities not attributable to the Advanta Business Cards segment. In
addition, pretax income in the three months ended March 31, 2008 includes a
$13.4 million gain on the redemption of Visa Inc. shares and the benefit of a
$5.5 million decrease in Visa indemnification reserves.
 15




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##### Table of Contents



Note 12) Income Taxes
  Three Months EndedMarch 31,2008
    
    2007Current:Federal
    
    $
    2,596
    
    
    $
    6,341State
    
    
    429
    
    
    
    1,123Total current
    
    
    3,025
    
    
    
    7,464Deferred:Federal
    
    
    8,255
    
    
    
    6,296State
    
    
    48
    
    
    
    68Total deferred
    
    
    8,303
    
    
    
    6,364Income tax expense
    
    $
    11,328
    
    
    $
    13,828
  Three Months EndedMarch 31,2008
    
    2007Statutory federal income tax
    
    $
    10,392
    
    
    $
    12,346State income taxes, net of
federal income tax benefit
    
    
    298
    
    
    
    934Compensation limitation
    
    
    99
    
    
    
    338Nondeductible expenses
    
    
    140
    
    
    
    181Other
    
    
    399
    
    
    
    29Income tax expense
    
    $
    11,328
    
    
    $
    13,828
   March 31,
    
    December 31,2008
    
    2007Deferred tax assets
    
    $
    54,057
    
    
    $
    62,351Deferred tax liabilities
    
    
    (23,764
    )
    
    
    (24,204
    )Net deferred tax asset
    
    $
    30,293
    
    
    $
    38,147
 16




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##### Table of Contents



March 31,
    
    December 31,2008
    
    2007Deferred revenue
    
    $
    (15,449
    )
    
    $
    (15,138
    )Rewards programs
    
    
    14,198
    
    
    
    13,775Federal tax benefit of state tax positions
    
    
    11,193
    
    
    
    11,028Receivable losses
    
    
    7,467
    
    
    
    8,506Deferred origination costs, net of deferred fees
    
    
    (6,637
    )
    
    
    (7,167
    )Incentive and deferred compensation
    
    
    4,721
    
    
    
    6,169Visa indemnification
    
    
    2,269
    
    
    
    4,194Securitization income
    
    
    1,993
    
    
    
    3,393Unrealized venture capital investment
losses
    
    
    246
    
    
    
    148Capital loss carryforwards
    
    
    0
    
    
    
    4,248Other
    
    
    10,292
    
    
    
    8,991Net deferred tax asset
    
    $
    30,293
    
    
    $
    38,147
 Accounting for Uncertainty
in Income Taxes  an Interpretation of FASB Statement No. 109,
 Three Months EndedMarch 31, 2008Balance at December 31, 2007
    
    $
    39,495Additions based on tax positions related to the current
year
    
    
    564Additions for tax positions of prior years
    
    
    618Reductions for tax positions of prior years
    
    
    (523
    )Settlements
    
    
    (320
    )Balance at March 31, 2008
    
    $
    39,834
  17




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##### Table of Contents



Note 13) Calculation of Earnings Per Share
  Three Months EndedMarch 31,2008
    
    2007Net income
    
    $
    18,362
    
    
    $
    21,448Less: Preferred A dividends
    
    
    (141
    )
    
    
    (141
    )Net income available to common stockholders
    
    
    18,221
    
    
    
    21,307Less: Class A dividends declared
    
    
    (2,368
    )
    
    
    (1,880
    )Less: Class B dividends declared
    
    
    (5,992
    )
    
    
    (4,943
    )Undistributed net income
    
    $
    9,861
    
    
    $
    14,484Basic net income per common shareClass A
    
    $
    0.42
    
    
    $
    0.49Class B
    
    
    0.47
    
    
    
    0.53Combined(1)
    
    
    0.45
    
    
    
    0.52Diluted net income per common shareClass A
    
    $
    0.41
    
    
    $
    0.47Class B
    
    
    0.45
    
    
    
    0.48Combined(1)
    
    
    0.44
    
    
    
    0.48Basic weighted average common shares outstandingClass A
    
    
    13,368
    
    
    
    13,318Class B
    
    
    27,022
    
    
    
    27,734Combined
    
    
    40,390
    
    
    
    41,052Dilutive effect ofOptions Class B
    
    
    1,104
    
    
    
    2,959Nonvested shares Class B
    
    
    117
    
    
    
    479Diluted weighted average common shares outstandingClass A
    
    
    13,368
    
    
    
    13,318Class B
    
    
    28,243
    
    
    
    31,172Combined
    
    
    41,611
    
    
    
    44,490Antidilutive sharesOptions Class B
    
    
    3,920
    
    
    
    597Nonvested shares Class B
    
    
    1,237
    
    
    
    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.
 18




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##### Table of Contents



Note 14) Fair Value of Financial Instruments
 Fair Value Hierarchy
  
    
    Level 1  Quoted prices for identical instruments in
active markets accessible at the measurement date.
    
    Level 2  Quoted prices for similar instruments in active markets; quoted prices
for identical or similar instruments in markets that are not active; and valuations
in which all significant inputs are observable in active markets. Inputs are
observable for substantially the full term of the financial instrument.
    
    Level 3  Valuations derived from one or more significant inputs that are unobservable.
 Determination of Fair Value
  Investments Available for Sale
  19




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##### Table of Contents



Retained Interests in Securitizations
  Assets and Liabilities Measured at Fair Value on a Recurring Basis
  QuotedPrices inActive
    
    SignificantMarkets for
    
    Other
    
    SignificantIdentical
    
    Observable
    
    UnobservableInstruments
    
    Inputs
    
    Inputs(Level 1)
    
    (Level 2)
    
    (Level 3)
    
    TotalInvestments available for sale:U.S. Treasury and government
agency securities
    
    $
    106,333
    
    
    $
    9,689
    
    
    $
    0
    
    
    $
    116,022State and municipal securities
    
    
    0
    
    
    
    17,337
    
    
    
    0
    
    
    
    17,337Commercial paper
    
    
    0
    
    
    
    2,792
    
    
    
    0
    
    
    
    2,792Corporate bonds
    
    
    0
    
    
    
    6,007
    
    
    
    0
    
    
    
    6,007Asset-backed securities
    
    
    0
    
    
    
    3,258
    
    
    
    28,428
    
    
    
    31,686Equity securities
    
    
    52,719
    
    
    
    0
    
    
    
    265
    
    
    
    52,984Money market funds
    
    
    78,396
    
    
    
    0
    
    
    
    0
    
    
    
    78,396Other
    
    
    0
    
    
    
    366
    
    
    
    0
    
    
    
    366Retained interests in
securitizations
    
    
    0
    
    
    
    0
    
    
    
    226,040
    
    
    
    226,040Total assets measured at
fair value
    
    $
    237,448
    
    
    $
    39,449
    
    
    $
    254,733
    
    
    $
    531,630
 Changes in Level 3 Assets Measured at Fair Value on a Recurring Basis
 Asset-Backed
    
    Retained InterestsSecurities
    
    in Securitizations
    
    TotalFair value at January 1, 2008
    
    $
    33,989
    
    
    $
    213,077
    
    
    $
    247,066Unrealized gain(1)
    
    
    0
    
    
    
    4,000
    (1)
    
    
    4,000Unrealized loss in other
comprehensive income
    
    
    (1,611
    )
    
    
    0
    
    
    
    (1,611
    )Purchases, sales, issuances,
settlement, net
    
    
    (3,950
    )
    
    
    8,963
    
    
    
    5,013Transfers in and/or out of Level 3
    
    
    0
    
    
    
    0
    
    
    
    0Fair value at March 31, 2008
    
    $
    28,428
    
    
    $
    226,040
    
    
    $
    254,468
 (1)
    
    Unrealized gains or losses on retained interests in securitizations are included in
securitization income on the consolidated income statements.
 20




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##### Table of Contents



OVERVIEW
  Three Months EndedMarch 31,($ in thousands, except per share data)
    
    2008
    
    2007Pretax income:Advanta Business Cards
    
    $
    10,783
    
    
    $
    34,811Other(1)
    
    
    18,907
    
    
    
    465Total pretax income
    
    
    29,690
    
    
    
    35,276Income tax expense
    
    
    11,328
    
    
    
    13,828Net income
    
    $
    18,362
    
    
    $
    21,448Per combined common share, assuming
dilution
    
    $
    0.44
    
    
    $
    0.48
 (1)
    
    The three months ended March 31, 2008 include a $13.4 million gain on the redemption
of Visa Inc. shares and the benefit of a $5.5 million decrease in Visa indemnification
reserves.
   21




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  ADVANTA BUSINESS CARDS
  Three Months EndedMarch 31,($ in thousands)
    
    2008
    
    2007Average owned receivables
    
    $
    999,130
    
    
    $
    1,284,900Average securitized receivables
    
    $
    5,350,034
    
    
    $
    4,152,857Customer transaction volume
    
    $
    3,438,113
    
    
    $
    3,389,065New account originations
    
    
    67,094
    
    
    
    96,781Average number of active accounts(1)
    
    
    956,100
    
    
    
    848,375Ending number of accounts at March 31
    
    
    1,331,496
    
    
    
    1,191,820
 (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.
 22




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##### Table of Contents



Three Months EndedMarch 31,($ in thousands)
    
    2008
    
    2007Net interest income on owned interest-earning assets
    
    $
    17,818
    
    
    $
    27,243Noninterest revenues
    
    
    96,201
    
    
    
    84,326Provision for credit losses
    
    
    (28,382
    )
    
    
    (10,083
    )Operating expenses
    
    
    (74,854
    )
    
    
    (66,675
    )Pretax income
    
    $
    10,783
    
    
    $
    34,811
   23




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##### Table of Contents



INTEREST INCOME AND EXPENSE
 Three Months EndedMarch 31,($ in thousands)
    
    2008
    
    2007Interest income
    
    $
    46,047
    
    
    $
    48,355Interest expense
    
    
    28,144
    
    
    
    22,562
   24




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##### Table of Contents



INTEREST RATE ANALYSIS AND AVERAGE BALANCES
 Three Months Ended March 31,2008
    
    
    2007Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average($ in thousands)
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest-earning assets:Owned receivables:Business credit cards(1)
    
    $
    999,130
    
    
    $
    29,031
    
    
    
    11.69
    %
    
    $
    1,284,900
    
    
    $
    35,443
    
    
    
    11.19
    %Other receivables
    
    
    7,331
    
    
    
    99
    
    
    
    5.44
    
    
    
    7,671
    
    
    
    124
    
    
    
    6.54Total receivables
    
    
    1,006,461
    
    
    
    29,130
    
    
    
    11.64
    
    
    
    1,292,571
    
    
    
    35,567
    
    
    
    11.16Investments(2)
    
    
    1,204,163
    
    
    
    9,934
    
    
    
    3.27
    
    
    
    595,568
    
    
    
    7,682
    
    
    
    5.16Retained interests in securitizations
    
    
    221,002
    
    
    
    6,985
    
    
    
    12.64
    
    
    
    230,817
    
    
    
    5,106
    
    
    
    8.85Total interest-earning
assets(3)
    
    
    2,431,626
    
    
    $
    46,049
    
    
    
    7.58
    %
    
    
    2,118,956
    
    
    $
    48,355
    
    
    
    9.22
    %Noninterest-earning assets
    
    
    516,086
    
    
    
    
    
    
    
    
    
    
    
    298,622Total assets
    
    $
    2,947,712
    
    
    
    
    
    
    
    
    
    
    $
    2,417,578Interest-bearing liabilities:Deposits
    
    $
    1,771,414
    
    
    $
    21,919
    
    
    
    4.98
    %
    
    $
    1,344,066
    
    
    $
    16,537
    
    
    
    4.99
    %Debt
    
    
    215,675
    
    
    
    3,441
    
    
    
    6.42
    
    
    
    227,501
    
    
    
    3,707
    
    
    
    6.61Subordinated debt payable to
preferred securities trust
    
    
    103,093
    
    
    
    2,317
    
    
    
    8.99
    
    
    
    103,093
    
    
    
    2,317
    
    
    
    8.99Other borrowings
    
    
    25,220
    
    
    
    467
    
    
    
    7.33
    
    
    
    111
    
    
    
    1
    
    
    
    5.27Total interest-bearing liabilities
    
    
    2,115,402
    
    
    $
    28,144
    
    
    
    5.35
    %
    
    
    1,674,771
    
    
    $
    22,562
    
    
    
    5.46
    %Noninterest-bearing liabilities
    
    
    240,454
    
    
    
    
    
    
    
    
    
    
    
    169,317Total liabilities
    
    
    2,355,856
    
    
    
    
    
    
    
    
    
    
    
    1,844,088Stockholders equity
    
    
    591,856
    
    
    
    
    
    
    
    
    
    
    
    573,490Total liabilities and stockholders
equity
    
    $
    2,947,712
    
    
    
    
    
    
    
    
    
    
    $
    2,417,578Net interest spread
    
    
    
    
    
    
    
    
    
    
    2.23
    %
    
    
    
    
    
    
    
    
    
    
    3.76
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    2.96
    %
    
    
    
    
    
    
    
    
    
    
    4.94
    %
 (1)
    
    Interest income includes late fees for owned business credit card receivables of
$1.8 million for the three months ended March 31, 2008 and $2.5 million for the same
period of 2007.(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.
 25




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##### Table of Contents



PROVISION AND ALLOWANCE FOR RECEIVABLE LOSSES
 Three Months EndedMarch 31,($ in thousands)
    
    2008
    
    2007Provision for credit losses
    
    $
    28,382
    
    
    $
    10,083Provision for interest and fee losses
    
    
    4,361
    
    
    
    2,446
    March 31,
    
    December 31,
    
    March 31,($ in thousands)
    
    2008
    
    2007
    
    2007Business Credit Cards  OwnedAllowance for receivable losses
    
    $
    79,972
    
    
    $
    67,368
    
    
    $
    49,995Receivables 30 days or more delinquent
    
    
    51,900
    
    
    
    42,424
    
    
    
    28,544Receivables 90 days or more delinquent
    
    
    24,028
    
    
    
    19,204
    
    
    
    12,878Nonaccrual receivables
    
    
    11,008
    
    
    
    10,104
    
    
    
    10,711Accruing receivables past due 90 days or more
    
    
    21,835
    
    
    
    17,213
    
    
    
    11,373As a percentage of gross receivables:Allowance for receivable losses
    
    
    8.28
    %
    
    
    6.53
    %
    
    
    4.38
    %Receivables 30 days or more delinquent
    
    
    5.37
    
    
    
    4.11
    
    
    
    2.50Receivables 90 days or more delinquent
    
    
    2.49
    
    
    
    1.86
    
    
    
    1.13Nonaccrual receivables
    
    
    1.14
    
    
    
    0.98
    
    
    
    0.94Accruing receivables past due 90 days or more
    
    
    2.26
    
    
    
    1.67
    
    
    
    1.00Net principal charge-offs for the three months
ended March 31 and December 31
    
    $
    16,306
    
    
    $
    11,542
    
    
    $
    9,783As a percentage of average gross receivables
(annualized):Net principal charge-offs for the three
months ended March 31 and December 31
    
    
    6.53
    %
    
    
    3.96
    %
    
    
    3.05
    %
 26




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SECURITIZATION INCOME
   Managed Receivable Data
  27




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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
March 31, 2008Net interest income
    
    $
    17,818
    
    
    
    5.84
    %
    
    $
    109,848
    
    
    $
    127,666
    
    
    
    8.04
    %Provision for credit losses
    
    
    28,382
    
    
    
    9.30
    
    
    
    81,753
    (2)
    
    
    110,135
    
    
    
    6.94Noninterest revenues
    
    
    96,201
    
    
    
    31.54
    
    
    
    (28,095
    )
    
    
    68,106
    
    
    
    4.29Average business credit
card interest-earning
assets
    
    
    1,220,132
    
    
    
    
    
    
    
    5,129,032
    
    
    
    6,349,164Three 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
    
    
    
    5,437,757As of March 31, 2008Ending business credit
card receivables
    
    $
    966,145
    
    
    
    
    
    
    $
    5,303,936
    
    
    $
    6,270,081Receivables 30 days or
more delinquent
    
    
    51,900
    
    
    
    5.37
    %
    
    
    280,208
    
    
    
    332,108
    
    
    
    5.30
    %Receivables 90 days or
more delinquent
    
    
    24,028
    
    
    
    2.49
    
    
    
    130,436
    
    
    
    154,464
    
    
    
    2.46As of December 31, 2007Ending business credit
card receivables
    
    $
    1,031,607
    
    
    
    
    
    
    $
    5,315,421
    
    
    $
    6,347,028Receivables 30 days or
more delinquent
    
    
    42,424
    
    
    
    4.11
    %
    
    
    229,808
    
    
    
    272,232
    
    
    
    4.29
    %Receivables 90 days or
more delinquent
    
    
    19,204
    
    
    
    1.86
    
    
    
    105,577
    
    
    
    124,781
    
    
    
    1.97As 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
    
    
    
    1.21
 (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, a favorable valuation adjustment to
retained interests in securitizations of $4.0 million in the three months ended March 31,
2008 is included as a decrease to provision for credit losses.
 28




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SERVICING REVENUES
  OTHER REVENUES
 Three Months Ended($ in thousands)
    
    March 31,2008
    
    2007Interchange income
    
    $
    65,648
    
    
    $
    55,234Cash back rewards
    
    
    (14,583
    )
    
    
    (13,400
    )Business rewards
    
    
    (6,582
    )
    
    
    (5,932
    )Investment securities gains, net
    
    
    18,013
    
    
    
    990Balance transfer fees
    
    
    2,180
    
    
    
    1,829Cash usage fees
    
    
    826
    
    
    
    1,133Other business credit card fees
    
    
    909
    
    
    
    1,225Other, net
    
    
    157
    
    
    
    1,402Total other revenues, net
    
    $
    66,568
    
    
    $
    42,481
      29




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OPERATING EXPENSES
 Three Months Ended($ in thousands)
    
    March 31,2008
    
    2007Salaries and employee benefits
    
    $
    28,528
    
    
    $
    26,098Amortization of deferred
origination costs, net
    
    
    10,944
    
    
    
    12,867External processing
    
    
    8,245
    
    
    
    6,700Professional fees
    
    
    5,591
    
    
    
    3,905Visa indemnification
    
    
    (5,501
    )
    
    
    0Marketing
    
    
    5,236
    
    
    
    3,235Equipment
    
    
    3,232
    
    
    
    2,595Occupancy
    
    
    2,471
    
    
    
    2,302Fraud
    
    
    2,032
    
    
    
    1,468Credit
    
    
    2,027
    
    
    
    1,290Postage
    
    
    1,607
    
    
    
    1,394Other
    
    
    5,076
    
    
    
    4,948Total operating expenses
    
    $
    69,488
    
    
    $
    66,802
      30




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##### Table of Contents



CONTINGENCIES
   INCOME TAXES
  Three Months Ended($ in thousands)
    
    March 31,2008
    
    2007Income tax expense
    
    $
    11,328
    
    
    $
    13,828Effective tax rate
    
    
    38.2
    %
    
    
    39.2
    %
  31




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OFF-BALANCE SHEET ARRANGEMENTS
   Three Months Ended($ in thousands)
    
    March 31,2008
    
    2007Average securitized receivables
    
    $
    5,350,034
    
    
    $
    4,152,857Securitization income
    
    
    16,997
    
    
    
    23,511Discount accretion
    
    
    6,985
    
    
    
    5,106Interchange income
    
    
    55,445
    
    
    
    42,414Servicing revenues
    
    
    26,092
    
    
    
    20,376Proceeds from new securitizations
    
    
    124,700
    
    
    
    357,658Proceeds from collections reinvested in
revolving-period securitizations
    
    
    2,552,077
    
    
    
    2,383,984Cash flows received on retained
interests
    
    
    79,935
    
    
    
    84,756
   32




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##### Table of Contents



Accounting for Transfers of
Financial Assets  An Amendment of FASB Statement No. 140 Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities Consolidation of Variable Interest Entities.
  MARKET RISK SENSITIVITY
  LIQUIDITY, CAPITAL RESOURCES AND ANALYSIS OF FINANCIAL CONDITION
   33




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##### Table of Contents



March 31, 2008
    
    December 31, 2007($ in thousands)
    
    Amount
    
    %
    
    Amount
    
    %Off-balance sheet securitized
receivables(1)
    
    $
    5,153,509
    
    
    
    64
    %
    
    $
    5,173,404
    
    
    
    67
    %Deposits
    
    
    1,929,717
    
    
    
    24
    
    
    
    1,651,737
    
    
    
    21Debt
    
    
    215,200
    
    
    
    3
    
    
    
    220,848
    
    
    
    3Other borrowings
    
    
    35,000
    
    
    
    1
    
    
    
    25,000
    
    
    
    0Subordinated debt payable to preferred
securities trust
    
    
    103,093
    
    
    
    1
    
    
    
    103,093
    
    
    
    1Equity
    
    
    597,626
    
    
    
    7
    
    
    
    585,781
    
    
    
    8Total
    
    $
    8,034,145
    
    
    
    100
    %
    
    $
    7,759,863
    
    
    
    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.   34




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##### Table of Contents



VALUATION OF FINANCIAL INSTRUMENTS
 Fair Value Measurements
 35




---



##### Table of Contents



CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
   36




---



##### 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, 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, changes in terms on their accounts, or
changes in programs or product offerings;(5)
    
    interest rate and credit spread fluctuations;(6)
    
    the level of expenses;(7)
    
    funding decisions and the potential timing of the securitizations of
our receivables;(8)
    
    government regulation, including the effects of restrictions and
limitations imposed by banking laws, regulators, and examinations and
the effects of, and changes in, statutes, the level of regulatory
scrutiny, regulatory requirements or regulatory policies, guidance,
interpretations and initiatives, including mandatory and possible
discretionary actions by federal and state regulators;(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 and 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;
 37




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##### Table of Contents



(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 and legal, regulatory, administrative or
other claims, investigations or proceedings 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.
  
   
    38




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##### Table of Contents



PART II  OTHER INFORMATION
 
   
   
   ExhibitNumber
    
    Description of Document10.1
    
    Preferred Pricing Agreement, effective March 19, 2008, 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
 39




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##### Table of Contents



SIGNATURES
  Advanta Corp.
(Registrant)By
    
    /s/ Philip M. BrowneSenior Vice President and
Chief Financial Officer
May 9, 2008By
    
    /s/ David B. WeinstockVice President and
Chief Accounting Officer
May 9, 2008
 40




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##### Table of Contents



EXHIBIT INDEX
 Manner ofExhibit
    
    Description
    
    Filing10.1
    
    Preferred Pricing Agreement, effective March 19, 2008,
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. 41