##### 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 June 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
   o o
   Class A
    
    Outstanding at August 2, 2007Common Stock, $.01 par value
    
    14,410,133 sharesClass B
    
    Outstanding at August 2, 2007Common Stock, $.01 par value
    
    29,043,498 shares




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##### Table of Contents



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
    
    
    22Item 3. Quantitative and Qualitative Disclosures
About Market Risk
    
    
    42Item 4. Controls and Procedures
    
    
    42PART II- OTHER INFORMATION
    
    
    42Item 1. Legal Proceedings
    
    
    42Item 1A. Risk Factors
    
    
    42Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
    
    
    43Item 4. Submission of Matters to a Vote of Security Holders
    
    
    44Item 6. Exhibits
    
    
    45Exhibit Index
    
    
    47COMPUTATION 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)
 June 30,
    
    December 31,(In thousands, except share amounts)
    
    2007
    
    2006ASSETSCash
    
    $
    53,847
    
    
    $
    35,055Federal funds sold
    
    
    548,907
    
    
    
    547,631Restricted interest-bearing deposits
    
    
    364
    
    
    
    1,211Investments available for sale
    
    
    243,898
    
    
    
    197,477Receivables, net:Held for sale
    
    
    444,642
    
    
    
    568,456Other
    
    
    668,908
    
    
    
    546,553OtherTotal receivables, net
    
    
    1,113,550
    
    
    
    1,115,009Accounts receivable from securitizations
    
    
    344,166
    
    
    
    334,486Premises and equipment, net
    
    
    18,060
    
    
    
    16,715Other assets
    
    
    158,929
    
    
    
    165,554Total assets
    
    $
    2,481,721
    
    
    $
    2,413,138LIABILITIESDeposits
    
    $
    1,393,769
    
    
    $
    1,365,138Debt
    
    
    225,082
    
    
    
    227,126Subordinated debt payable to preferred securities trust
    
    
    103,093
    
    
    
    103,093Other liabilities
    
    
    160,567
    
    
    
    150,620Total liabilities
    
    
    1,882,511
    
    
    
    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  29,483,673
shares in 2007 and 35,138,413 shares in 2006
    
    
    295
    
    
    
    351Additional paid-in capital
    
    
    233,485
    
    
    
    308,051Unearned ESOP shares
    
    
    (8,994
    )
    
    
    (9,204
    )Accumulated other comprehensive loss
    
    
    (498
    )
    
    
    (288
    )Retained earnings
    
    
    387,371
    
    
    
    359,813Treasury stock at cost, 651,232 Class A common shares in
2006; 470,022 Class B common shares in 2007
and 6,436,183 Class B common shares in 2006
    
    
    (13,603
    )
    
    
    (92,723
    )Total stockholders equity
    
    
    599,210
    
    
    
    567,161Total liabilities and stockholders equity
    
    $
    2,481,721
    
    
    $
    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
    
    Six Months Ended(In thousands, except per share amounts)
    
    June 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Interest income:Receivables
    
    $
    34,070
    
    
    $
    30,139
    
    
    $
    69,637
    
    
    $
    59,066Investments
    
    
    8,809
    
    
    
    5,973
    
    
    
    16,491
    
    
    
    11,332Other interest income
    
    
    4,679
    
    
    
    4,399
    
    
    
    9,785
    
    
    
    8,381Total interest income
    
    
    47,558
    
    
    
    40,511
    
    
    
    95,913
    
    
    
    78,779Interest expense:Deposits
    
    
    17,361
    
    
    
    11,858
    
    
    
    33,898
    
    
    
    22,166Debt and other borrowings
    
    
    3,955
    
    
    
    3,331
    
    
    
    7,663
    
    
    
    6,689Subordinated debt payable to preferred
securities trust
    
    
    2,317
    
    
    
    2,290
    
    
    
    4,634
    
    
    
    4,579Total interest expense
    
    
    23,633
    
    
    
    17,479
    
    
    
    46,195
    
    
    
    33,434Net interest income
    
    
    23,925
    
    
    
    23,032
    
    
    
    49,718
    
    
    
    45,345Provision for credit losses
    
    
    11,806
    
    
    
    10,145
    
    
    
    21,889
    
    
    
    19,429Net interest income after provision for
credit losses
    
    
    12,119
    
    
    
    12,887
    
    
    
    27,829
    
    
    
    25,916Noninterest revenues:Securitization income
    
    
    22,766
    
    
    
    29,686
    
    
    
    46,277
    
    
    
    63,264Servicing revenues
    
    
    22,541
    
    
    
    15,329
    
    
    
    42,917
    
    
    
    29,011Other revenues, net
    
    
    47,996
    
    
    
    42,297
    
    
    
    90,477
    
    
    
    77,273Total noninterest revenues
    
    
    93,303
    
    
    
    87,312
    
    
    
    179,671
    
    
    
    169,548Operating expenses
    
    
    68,777
    
    
    
    62,736
    
    
    
    135,579
    
    
    
    122,375Income before income taxes
    
    
    36,645
    
    
    
    37,463
    
    
    
    71,921
    
    
    
    73,089Income tax expense
    
    
    13,933
    
    
    
    14,423
    
    
    
    27,761
    
    
    
    28,139Income from continuing operations
    
    
    22,712
    
    
    
    23,040
    
    
    
    44,160
    
    
    
    44,950Gain on discontinuance of mortgage
and leasing businesses, net of tax
    
    
    1,022
    
    
    
    738
    
    
    
    1,022
    
    
    
    738Net income
    
    $
    23,734
    
    
    $
    23,778
    
    
    $
    45,182
    
    
    $
    45,688Basic income from continuing operations
per common shareClass A
    
    $
    0.52
    
    
    $
    0.56
    
    
    $
    1.02
    
    
    $
    1.08Class B
    
    
    0.56
    
    
    
    0.58
    
    
    
    1.09
    
    
    
    1.13Combined
    
    
    0.55
    
    
    
    0.57
    
    
    
    1.07
    
    
    
    1.11Diluted income from continuing
operations per common shareClass A
    
    $
    0.50
    
    
    $
    0.52
    
    
    $
    0.96
    
    
    $
    1.01Class B
    
    
    0.51
    
    
    
    0.52
    
    
    
    1.00
    
    
    
    1.01Combined
    
    
    0.51
    
    
    
    0.52
    
    
    
    0.99
    
    
    
    1.01Basic net income per common shareClass A
    
    $
    0.55
    
    
    $
    0.58
    
    
    $
    1.04
    
    
    $
    1.10Class B
    
    
    0.59
    
    
    
    0.60
    
    
    
    1.12
    
    
    
    1.14Combined
    
    
    0.57
    
    
    
    0.59
    
    
    
    1.09
    
    
    
    1.13Diluted net income per common shareClass A
    
    $
    0.52
    
    
    $
    0.54
    
    
    $
    0.99
    
    
    $
    1.02Class B
    
    
    0.54
    
    
    
    0.54
    
    
    
    1.02
    
    
    
    1.03Combined
    
    
    0.53
    
    
    
    0.54
    
    
    
    1.01
    
    
    
    1.03Basic weighted average common shares
outstandingClass A
    
    
    13,331
    
    
    
    13,281
    
    
    
    13,324
    
    
    
    13,274Class B
    
    
    28,039
    
    
    
    26,918
    
    
    
    27,887
    
    
    
    27,039Combined
    
    
    41,370
    
    
    
    40,199
    
    
    
    41,211
    
    
    
    40,313Diluted weighted average common shares
outstandingClass A
    
    
    13,331
    
    
    
    13,281
    
    
    
    13,324
    
    
    
    13,274Class B
    
    
    31,343
    
    
    
    30,689
    
    
    
    31,258
    
    
    
    31,000Combined
    
    
    44,674
    
    
    
    43,970
    
    
    
    44,582
    
    
    
    44,274
 See accompanying notes to consolidated financial statements.
 4




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ADVANTA CORP. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (Unaudited)
 Class A
    
    
    
    
    
    
    Class B
    
    
    AdditionalComprehensive
    
    
    Preferred
    
    
    Class A
    
    
    Common
    
    
    Paid-In($ in thousands)
    
    Income (Loss)
    
    
    Stock
    
    
    Common 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 and ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
    
    $
    45,182Other comprehensive income:Unrealized appreciation
(depreciation) of investments,
net of tax benefit (expense)
of $113
    
    
    (210
    )Comprehensive income
    
    $
    44,972Preferred and common cash
dividends declaredExercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    6,024Stock-based employee
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,581Stock-based nonemployee
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95Excess tax benefits from
stock-based compensation and
ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,432Amortization of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,833Stock option exchange program
stock distributionTreasury stock acquiredTreasury stock retired
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    (63
    )
    
    
    (93,101
    )ESOP shares committed to be
released
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    570Balance at June 30, 2007
    
    
    
    
    
    $
    1,010
    
    
    $
    144
    
    
    $
    295
    
    
    $
    233,485
 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 and ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,149Issuance of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0Amortization of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,953Forfeitures of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (360
    )Reclassification of nonvested shares
    
    
    1,148
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0Treasury stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,576
    )
    
    
    (43,576
    )ESOP shares committed to be released
    
    
    418
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,239Balance at December 31, 2006
    
    $
    (9,204
    )
    
    $
    (288
    )
    
    $
    359,813
    
    
    $
    (92,723
    )
    
    $
    567,161Effect of applying the provisions
of FIN No. 48 (See Note 2)
    
    
    
    
    
    
    
    
    
    
    (2,099
    )
    
    
    
    
    
    
    (2,099
    )Net income
    
    
    
    
    
    
    
    
    
    
    45,182
    
    
    
    
    
    
    
    45,182Other comprehensive income:Unrealized appreciation
(depreciation) of investments,
net of tax benefit (expense)
of $113
    
    
    
    
    
    
    (210
    )
    
    
    
    
    
    
    
    
    
    
    (210
    )Comprehensive incomePreferred and common cash
dividends declared
    
    
    
    
    
    
    
    
    
    
    (15,525
    )
    
    
    
    
    
    
    (15,525
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,031Stock-based employee compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,581Stock-based nonemployee compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95Excess tax benefits from stock-based
compensation and ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,432Amortization of nonvested shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,833Stock option exchange program stock
distribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    388
    
    
    
    388Treasury stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,439
    )
    
    
    (14,439
    )Treasury stock retired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    93,171
    
    
    
    0ESOP shares committed to be released
    
    
    210
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    780Balance at June 30, 2007
    
    $
    (8,994
    )
    
    $
    (498
    )
    
    $
    387,371
    
    
    $
    (13,603
    )
    
    $
    599,210
 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)
 Six Months Ended($ in thousands)
    
    June 30,2007
    
    2006OPERATING ACTIVITIES  CONTINUING OPERATIONSNet income
    
    $
    45,182
    
    
    $
    45,688Adjustments to reconcile net income to net cash provided by
operating activities:Gain on discontinuance of mortgage and leasing businesses,
net of tax
    
    
    (1,022
    )
    
    
    (738
    )Investment securities gains, net
    
    
    (2,345
    )
    
    
    (3,532
    )Depreciation and amortization
    
    
    2,936
    
    
    
    3,092Stock-based compensation expense
    
    
    5,509
    
    
    
    1,647Provision for credit losses
    
    
    21,889
    
    
    
    19,429Provision for interest and fee losses
    
    
    5,027
    
    
    
    4,201Change in deferred origination costs, net of deferred fees
    
    
    (1,299
    )
    
    
    (3,856
    )Change in receivables held for sale
    
    
    (632,526
    )
    
    
    (1,173,053
    )Proceeds from sale of receivables held for sale
    
    
    756,340
    
    
    
    1,070,264Change in accounts receivable from securitizations
    
    
    (9,680
    )
    
    
    156,333Excess tax benefits from stock-based compensation and ESOP
    
    
    (6,432
    )
    
    
    (7,503
    )Change in other assets and other liabilities
    
    
    44,885
    
    
    
    (47,083
    )Net cash provided by operating activities
    
    
    228,464
    
    
    
    64,889INVESTING ACTIVITIES  CONTINUING OPERATIONSChange in federal funds sold and restricted interest-bearing
deposits
    
    
    (429
    )
    
    
    (62,745
    )Purchase of investments available for sale
    
    
    (555,902
    )
    
    
    (356,529
    )Proceeds from sales of investments available for sale
    
    
    467,433
    
    
    
    385,941Proceeds from maturing investments available for sale
    
    
    44,070
    
    
    
    38,106Change in receivables not held for sale
    
    
    (147,972
    )
    
    
    (98,923
    )Purchases of premises and equipment, net
    
    
    (4,274
    )
    
    
    (2,052
    )Net cash used in investing activities
    
    
    (197,074
    )
    
    
    (96,202
    )FINANCING ACTIVITIES  CONTINUING OPERATIONSChange in demand and savings deposits
    
    
    24,276
    
    
    
    37,501Proceeds from issuance of time deposits
    
    
    275,725
    
    
    
    297,735Payments for maturing time deposits
    
    
    (289,496
    )
    
    
    (255,398
    )Proceeds from issuance of debt
    
    
    14,272
    
    
    
    9,214Payments on redemption of debt
    
    
    (17,010
    )
    
    
    (26,096
    )Change in cash overdraft
    
    
    (3,026
    )
    
    
    11,537Proceeds from exercise of stock options
    
    
    6,031
    
    
    
    3,947Cash dividends paid
    
    
    (15,525
    )
    
    
    (10,236
    )Excess tax benefits from stock-based compensation and ESOP
    
    
    6,432
    
    
    
    7,503Treasury stock acquired
    
    
    (14,439
    )
    
    
    (43,513
    )Net cash (used in) provided by financing activities
    
    
    (12,760
    )
    
    
    32,194DISCONTINUED OPERATIONSNet cash provided by operating activities of
discontinued operations
    
    
    162
    
    
    
    2,903Net increase in cash
    
    
    18,792
    
    
    
    3,784Cash at beginning of period
    
    
    35,055
    
    
    
    34,109Cash at end of period
    
    $
    53,847
    
    
    $
    37,893
 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)
 June 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) Investments Available for Sale
  June 30, 2007
    
    December 31, 2006Amortized
    
    Fair
    
    Amortized
    
    FairCost
    
    Value
    
    Cost
    
    ValueU.S. Treasury and government
agency securities
    
    $
    43,602
    
    
    $
    43,528
    
    
    $
    21,098
    
    
    $
    20,940State and municipal securities
    
    
    16,149
    
    
    
    15,962
    
    
    
    13,247
    
    
    
    13,242Commercial paper
    
    
    8,298
    
    
    
    8,298
    
    
    
    6,944
    
    
    
    6,941Corporate bonds
    
    
    18,438
    
    
    
    18,355
    
    
    
    8,488
    
    
    
    8,364Asset-backed securities(1)
    
    
    44,337
    
    
    
    44,158
    
    
    
    46,214
    
    
    
    46,196Equity securities(2)
    
    
    10,081
    
    
    
    9,838
    
    
    
    10,118
    
    
    
    9,983Money market funds
    
    
    99,416
    
    
    
    99,416
    
    
    
    91,771
    
    
    
    91,771Other
    
    
    4,343
    
    
    
    4,343
    
    
    
    40
    
    
    
    40Total investments available for sale
    
    $
    244,664
    
    
    $
    243,898
    
    
    $
    197,920
    
    
    $
    197,477
 (1)
    
    Includes mortgage-backed securities.(2)
    
    Includes venture capital investments of $2.3 million at June 30, 2007 and $1.0 million
at December 31, 2006. The amount shown as amortized cost represents fair value for
these investments.
 10




---



##### Table of Contents



Note 4) Receivables
  June 30,
    
    December 31,2007
    
    2006Business credit card receivables
    
    $
    1,133,198
    
    
    $
    1,133,132Other receivables
    
    
    7,658
    
    
    
    7,673Gross receivables
    
    
    1,140,856
    
    
    
    1,140,805Add: Deferred origination costs, net of deferred fees
    
    
    26,429
    
    
    
    25,130Less: Allowance for receivable lossesBusiness credit cards
    
    
    (52,525
    )
    
    
    (49,715
    )Other receivables
    
    
    (1,210
    )
    
    
    (1,211
    )Total allowance for receivable losses
    
    
    (53,735
    )
    
    
    (50,926
    )Receivables, net
    
    $
    1,113,550
    
    
    $
    1,115,009
 Note 5) Allowance for Receivable Losses
  2007
    
    2006Balance at January 1
    
    $
    50,926
    
    
    $
    45,589Provision for credit losses
    
    
    21,889
    
    
    
    19,429Provision for interest and fee losses
    
    
    5,027
    
    
    
    4,201Gross principal charge-offs:Business credit cards
    
    
    (21,325
    )
    
    
    (17,272
    )Other receivables
    
    
    (1
    )
    
    
    (4
    )Total gross principal charge-offs
    
    
    (21,326
    )
    
    
    (17,276
    )Principal recoveries:Business credit cards
    
    
    1,986
    
    
    
    1,668Net principal charge-offs
    
    
    (19,340
    )
    
    
    (15,608
    )Interest and fee charge-offs:Business credit cards
    
    
    (4,767
    )
    
    
    (3,949
    )Balance at June 30
    
    $
    53,735
    
    
    $
    49,662
 Note 6) Securitization Activities
  June 30,
    
    December 31,2007
    
    2006Retained interests in securitizations
    
    $
    225,394
    
    
    $
    234,054Accrued interest and fees on securitized
receivables, net(1)
    
    
    74,754
    
    
    
    64,713Amounts due from the securitization trust
    
    
    44,018
    
    
    
    35,719Total accounts receivable from securitizations
    
    $
    344,166
    
    
    $
    334,486
 (1)
    
    Reduced by an estimate for uncollectible interest and fees of $11.3 million at June
30, 2007 and $8.7 million at December 31, 2006.
 11




---



##### Table of Contents



The following represents securitization data and the key assumptions used in estimating the
fair value of retained interests in securitizations at the time of each new securitization
or replenishment if quoted market prices were not available.
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Average securitized
receivables
    
    $
    4,581,666
    
    
    $
    3,222,380
    
    
    $
    4,368,446
    
    
    $
    3,090,577Securitization income
    
    
    22,766
    
    
    
    29,686
    
    
    
    46,277
    
    
    
    63,264Discount accretion
    
    
    4,679
    
    
    
    4,399
    
    
    
    9,785
    
    
    
    8,381Interchange income
    
    
    49,207
    
    
    
    39,127
    
    
    
    91,621
    
    
    
    72,841Servicing revenues
    
    
    22,541
    
    
    
    15,329
    
    
    
    42,917
    
    
    
    29,011Proceeds from new
securitizations
    
    
    398,682
    
    
    
    534,374
    
    
    
    756,340
    
    
    
    1,070,264Proceeds from collections
reinvested in revolving-
period securitizations
    
    
    2,681,748
    
    
    
    1,779,595
    
    
    
    5,065,732
    
    
    
    3,463,397Cash flows received on
retained interests
    
    
    79,731
    
    
    
    92,582
    
    
    
    164,487
    
    
    
    170,210Key assumptions:Discount rate
    
    
    8.15% - 9.76
    %
    
    
    8.91% - 10.43
    %
    
    
    8.15% - 9.84
    %
    
    
    8.71% - 10.43
    %Monthly payment rate
    
    
    19.36% - 23.10
    %
    
    
    22.07% - 25.00
    %
    
    
    19.36% - 23.10
    %
    
    
    22.07% - 25.00
    %Loss rate
    
    
    3.85% -  4.35
    %
    
    
    4.00% -  4.90
    %
    
    
    3.70%  - 4.35
    %
    
    
    4.00%  - 4.90
    %Interest yield, net of
interest earned by
noteholders
    
    
    7.29%  - 7.33
    %
    
    
    8.03%  - 8.86
    %
    
    
    7.29% - 7.33
    %
    
    
    8.03% - 9.95
    %
   June 30,
    
    December 31,2007
    
    2006Discount rate
    
    
    8.53% -  9.76
    %
    
    
    8.82% -  9.84
    %Monthly payment rate
    
    
    19.36% - 22.00
    %
    
    
    21.29% - 23.10
    %Loss rate
    
    
    3.95% -  4.35
    %
    
    
    3.70% -  4.07
    %Interest yield, net of interest earned by
noteholders
    
    
    7.33
    %
    
    
    7.30
    %
  12




---



##### Table of Contents



|Effect on estimated fair value of the following
hypothetical changes in key assumptions:Discount rate increased 200 basis points
    
    $
    (4,328
    )Discount rate increased 400 basis points
    
    
    (8,474
    )Monthly payment rate at 110% of base assumption
    
    
    (1,515
    )Monthly payment rate at 125% of base assumption
    
    
    (2,693
    )Loss rate at 110% of base assumption
    
    
    (5,040
    )Loss rate at 125% of base assumption
    
    
    (12,599
    )Interest yield, net of interest earned by noteholders,
decreased 100 basis points
    
    
    (12,758
    )Interest yield, net of interest earned by noteholders,
decreased 200 basis points
    
    
    (25,517
    )
  13




---



##### Table of Contents



Managed business credit card receivable data
  June 30,
    
    December 31,
    
    June 30,2007
    
    2006
    
    2006Owned business credit card receivables
    
    $
    1,133,198
    
    
    $
    1,133,132
    
    
    $
    1,062,249Securitized business credit card receivables
    
    
    4,856,001
    
    
    
    4,073,128
    
    
    
    3,323,869Total managed receivables
    
    $
    5,989,199
    
    
    $
    5,206,260
    
    
    $
    4,386,118Receivables 30 days or more delinquent:Owned
    
    $
    27,115
    
    
    $
    26,053
    
    
    $
    25,482Securitized
    
    
    136,468
    
    
    
    108,159
    
    
    
    90,987Total managed
    
    
    163,583
    
    
    
    134,212
    
    
    
    116,469Receivables 90 days or more delinquent:Owned
    
    
    13,466
    
    
    
    12,632
    
    
    
    12,560Securitized
    
    
    68,424
    
    
    
    52,279
    
    
    
    45,008Total managed
    
    
    81,890
    
    
    
    64,911
    
    
    
    57,568Nonaccrual receivables:Owned
    
    
    9,155
    
    
    
    10,524
    
    
    
    11,824Securitized
    
    
    47,416
    
    
    
    45,160
    
    
    
    42,938Total managed
    
    
    56,571
    
    
    
    55,684
    
    
    
    54,762Accruing receivables past due 90 days or more:Owned
    
    
    12,249
    
    
    
    11,302
    
    
    
    11,266Securitized
    
    
    62,360
    
    
    
    46,785
    
    
    
    40,436Total managed
    
    
    74,609
    
    
    
    58,087
    
    
    
    51,702Net principal charge-offs for the year-to-date
period ended June 30 and December 31:Owned
    
    
    19,339
    
    
    
    33,775
    
    
    
    15,604Securitized
    
    
    76,197
    
    
    
    116,227
    
    
    
    53,728Total managed
    
    
    95,536
    
    
    
    150,002
    
    
    
    69,332Net principal charge-offs for the three months
ended June 30 and December 31:Owned
    
    
    9,556
    
    
    
    9,169
    
    
    
    7,520Securitized
    
    
    41,115
    
    
    
    33,100
    
    
    
    26,633Total managed
    
    
    50,671
    
    
    
    42,269
    
    
    
    34,153
 Note 7) Commitments and Contingencies
  14




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##### Table of Contents



Note 8) Capital Stock
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Class A Common Stock
    
    $
    0.1771
    
    
    $
    0.1417
    
    
    $
    0.3188
    
    
    $
    0.2173Class B Common Stock
    
    
    0.2125
    
    
    
    0.1700
    
    
    
    0.3825
    
    
    
    0.2607
    Note 9) Stock-Based Compensation
   WeightedAverage PriceNumber of
    
    at Date ofShares
    
    IssuanceOutstanding at January 1
    
    
    1,238
    
    
    $
    20.88Granted
    
    
    72
    
    
    
    30.35Vested
    
    
    (239
    )
    
    
    24.22Forfeited
    
    
    (57
    )
    
    
    21.98Outstanding at June 30
    
    
    1,014
    
    
    $
    20.72
  15




---



##### Table of Contents



WeightedWeighted
    
    
    
    
    
    AverageAverage
    
    Aggregate
    
    RemainingNumber of
    
    Exercise
    
    Intrinsic
    
    ContractualOptions
    
    Price
    
    Value
    
    LifeOutstanding at January 1
    
    
    7,419
    
    
    $
    10.88Granted
    
    
    1,507
    
    
    
    30.53Exercised
    
    
    (759
    )
    
    
    10.10Forfeited
    
    
    (171
    )
    
    
    22.56Outstanding at June 30
    
    
    7,996
    
    
    $
    14.41
    
    
    $
    133,783
    
    
    5.5 yearsOptions exercisable at June 30
    
    
    5,098
    
    
    $
    7.81
    
    
    $
    118,951
    
    
    3.5 years
   Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Compensation expense
    
    $
    1,430
    
    
    $
    1,078
    
    
    $
    2,581
    
    
    $
    1,702Income tax benefit
    
    
    543
    
    
    
    415
    
    
    
    996
    
    
    
    655Weighted average fair
value of options
granted
    
    $
    9.69
    
    
    $
    10.19
    
    
    $
    9.85
    
    
    $
    10.10
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Expected life (in years)
    
    
    5.7
    
    
    
    5.4
    
    
    
    5.7
    
    
    
    5.4Expected volatility
    
    
    33.11
    %
    
    
    38.82
    %
    
    
    33.57
    %
    
    
    38.93
    %Risk-free interest rate
    
    
    4.55
    %
    
    
    5.02
    %
    
    
    4.57
    %
    
    
    4.98
    %Expected dividend yield
    
    
    4.86
    %
    
    
    4.22
    %
    
    
    4.86
    %
    
    
    4.26
    %Range of expected
dividend yield over
expected life
    
    
    2.78%-6.73
    %
    
    
    2.71%-5.85
    %
    
    
    2.78%-6.74
    %
    
    
    2.73%-5.90
    %
 16




---



##### Table of Contents



Note 10) Segment Information
  AdvantaBusinessCards
    
    Other (A)
    
    TotalThree months ended June 30, 2007Interest income
    
    $
    38,655
    
    
    $
    8,903
    
    
    $
    47,558Interest expense
    
    
    13,149
    
    
    
    10,484
    
    
    
    23,633Noninterest revenues
    
    
    90,737
    
    
    
    2,566
    
    
    
    93,303Pretax income from continuing operations
    
    
    35,824
    
    
    
    821
    
    
    
    36,645Three months ended June 30, 2006Interest income
    
    $
    34,450
    
    
    $
    6,061
    
    
    $
    40,511Interest expense
    
    
    10,400
    
    
    
    7,079
    
    
    
    17,479Noninterest revenues
    
    
    86,104
    
    
    
    1,208
    
    
    
    87,312Pretax income (loss) from continuing
operations
    
    
    37,464
    
    
    
    (1
    )
    
    
    37,463Six months ended June 30, 2007Interest income
    
    $
    79,204
    
    
    $
    16,709
    
    
    $
    95,913Interest expense
    
    
    26,455
    
    
    
    19,740
    
    
    
    46,195Noninterest revenues
    
    
    175,063
    
    
    
    4,608
    
    
    
    179,671Pretax income from continuing operations
    
    
    70,635
    
    
    
    1,286
    
    
    
    71,921Six months ended June 30, 2006Interest income
    
    $
    67,260
    
    
    $
    11,519
    
    
    $
    78,779Interest expense
    
    
    20,424
    
    
    
    13,010
    
    
    
    33,434Noninterest revenues
    
    
    167,442
    
    
    
    2,106
    
    
    
    169,548Pretax income from continuing operations
    
    
    72,757
    
    
    
    332
    
    
    
    73,089
 (A)
    
    Other includes venture capital operations as well as investment and other
activities not attributable to the Advanta Business Cards segment.
 17




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##### Table of Contents



Note 11) Income Taxes
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Income tax expense
attributable to:Continuing operations
    
    $
    13,933
    
    
    $
    14,423
    
    
    $
    27,761
    
    
    $
    28,139Discontinued operations
    
    
    643
    
    
    
    462
    
    
    
    643
    
    
    
    462Total income tax expense
    
    $
    14,576
    
    
    $
    14,885
    
    
    $
    28,404
    
    
    $
    28,601
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 302007
    
    2006
    
    2007
    
    2006Current:Federal
    
    $
    9,673
    
    
    $
    11,194
    
    
    $
    16,014
    
    
    $
    17,530State
    
    
    1,224
    
    
    
    1,591
    
    
    
    2,347
    
    
    
    2,941Total current
    
    
    10,897
    
    
    
    12,785
    
    
    
    18,361
    
    
    
    20,471Deferred:Federal
    
    
    3,065
    
    
    
    1,790
    
    
    
    9,361
    
    
    
    7,756State
    
    
    (29
    )
    
    
    (152
    )
    
    
    39
    
    
    
    (88
    )Total deferred
    
    
    3,036
    
    
    
    1,638
    
    
    
    9,400
    
    
    
    7,668Income tax expense
attributable
to continuing
operations
    
    $
    13,933
    
    
    $
    14,423
    
    
    $
    27,761
    
    
    $
    28,139
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Statutory federal income tax
    
    $
    12,826
    
    
    $
    13,112
    
    
    $
    25,172
    
    
    $
    25,581State income taxes, net of
federal income tax benefit
    
    
    1,047
    
    
    
    936
    
    
    
    1,981
    
    
    
    1,855Nondeductible expenses
    
    
    256
    
    
    
    151
    
    
    
    437
    
    
    
    322Compensation limitation
    
    
    (139
    )
    
    
    33
    
    
    
    199
    
    
    
    66Other
    
    
    (57
    )
    
    
    191
    
    
    
    (28
    )
    
    
    315Income tax expense
    
    $
    13,933
    
    
    $
    14,423
    
    
    $
    27,761
    
    
    $
    28,139
   June 30,
    
    December 31,2007
    
    2006Deferred tax assets
    
    $
    57,488
    
    
    $
    66,059Deferred tax
liabilities
    
    
    (28,252
    )
    
    
    (26,893
    )Net deferred tax asset
    
    $
    29,236
    
    
    $
    39,166
 18




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##### Table of Contents



June 30,
    
    December 31,2007
    
    2006Deferred revenue
    
    $
    (12,731
    )
    
    $
    (10,435
    )Rewards programs
    
    
    12,613
    
    
    
    11,492Alternative minimum tax credit carryforwards
    
    
    9,496
    
    
    
    17,249Deferred origination costs, net of deferred fees
    
    
    (9,353
    )
    
    
    (8,910
    )Receivable losses
    
    
    8,924
    
    
    
    8,864Capital loss carryforwards
    
    
    6,281
    
    
    
    6,653Incentive and deferred compensation
    
    
    5,017
    
    
    
    6,065Securitization income
    
    
    (2,624
    )
    
    
    (2,624
    )Unrealized venture capital investment losses
    
    
    992
    
    
    
    1,352Other
    
    
    10,621
    
    
    
    9,460Net deferred tax asset
    
    $
    29,236
    
    
    $
    39,166
     19




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##### Table of Contents



Note 12) Discontinued Operations
  Three and Six Months EndedJune 30, 2007
    
    June 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
   Three Months Ended June 30,
    
    Six Months Ended June 30,Advanta
    
    Advanta Leasing
    
    Advanta
    
    Advanta LeasingMortgage
    
    Services
    
    Mortgage
    
    Services2007
    
    2006
    
    2007
    
    2006
    
    2007
    
    2006
    
    2007
    
    2006Basic gain on discontinuance of mortgage and leasing businesses, net of tax, per common shareClass A
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.01Class B
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01Combined
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    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
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.01Class B
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01Combined
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
 20




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##### Table of Contents



Note 13) Calculation of Earnings Per Share
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Income from continuing operations
    
    $
    22,712
    
    
    $
    23,040
    
    
    $
    44,160
    
    
    $
    44,950Less: Preferred A dividends
    
    
    0
    
    
    
    0
    
    
    
    (141
    )
    
    
    (141
    )Income from continuing operations
available to common stockholders
    
    
    22,712
    
    
    
    23,040
    
    
    
    44,019
    
    
    
    44,809Gain on discontinuance
of mortgage and leasing businesses,
net of tax
    
    
    1,022
    
    
    
    738
    
    
    
    1,022
    
    
    
    738Net income available to common
stockholders
    
    
    23,734
    
    
    
    23,778
    
    
    
    45,041
    
    
    
    45,547Less: Class A dividends declared
    
    
    (2,396
    )
    
    
    (1,955
    )
    
    
    (4,276
    )
    
    
    (2,954
    )Less: Class B dividends declared
    
    
    (6,165
    )
    
    
    (4,565
    )
    
    
    (11,108
    )
    
    
    (7,141
    )Undistributed net income
    
    $
    15,173
    
    
    $
    17,258
    
    
    $
    29,657
    
    
    $
    35,452Basic income from continuing
operations per common shareClass A
    
    $
    0.52
    
    
    $
    0.56
    
    
    $
    1.02
    
    
    $
    1.08Class B
    
    
    0.56
    
    
    
    0.58
    
    
    
    1.09
    
    
    
    1.13Combined (1)
    
    
    0.55
    
    
    
    0.57
    
    
    
    1.07
    
    
    
    1.11Diluted income from continuing
operations per common shareClass A
    
    $
    0.50
    
    
    $
    0.52
    
    
    $
    0.96
    
    
    $
    1.01Class B
    
    
    0.51
    
    
    
    0.52
    
    
    
    1.00
    
    
    
    1.01Combined (1)
    
    
    0.51
    
    
    
    0.52
    
    
    
    0.99
    
    
    
    1.01Basic net income per common shareClass A
    
    $
    0.55
    
    
    $
    0.58
    
    
    $
    1.04
    
    
    $
    1.10Class B
    
    
    0.59
    
    
    
    0.60
    
    
    
    1.12
    
    
    
    1.14Combined (1)
    
    
    0.57
    
    
    
    0.59
    
    
    
    1.09
    
    
    
    1.13Diluted net income per common shareClass A
    
    $
    0.52
    
    
    $
    0.54
    
    
    $
    0.99
    
    
    $
    1.02Class B
    
    
    0.54
    
    
    
    0.54
    
    
    
    1.02
    
    
    
    1.03Combined (1)
    
    
    0.53
    
    
    
    0.54
    
    
    
    1.01
    
    
    
    1.03Basic weighted average common shares
outstandingClass A
    
    
    13,331
    
    
    
    13,281
    
    
    
    13,324
    
    
    
    13,274Class B
    
    
    28,039
    
    
    
    26,918
    
    
    
    27,887
    
    
    
    27,039Combined
    
    
    41,370
    
    
    
    40,199
    
    
    
    41,211
    
    
    
    40,313Dilutive effect ofOptions Class B
    
    
    2,910
    
    
    
    3,380
    
    
    
    2,935
    
    
    
    3,345Nonvested shares Class B
    
    
    394
    
    
    
    391
    
    
    
    436
    
    
    
    616Diluted weighted average common
shares outstandingClass A
    
    
    13,331
    
    
    
    13,281
    
    
    
    13,324
    
    
    
    13,274Class B
    
    
    31,343
    
    
    
    30,689
    
    
    
    31,258
    
    
    
    31,000Combined
    
    
    44,674
    
    
    
    43,970
    
    
    
    44,582
    
    
    
    44,274Antidilutive sharesOptions Class B
    
    
    1,542
    
    
    
    1,369
    
    
    
    1,072
    
    
    
    732
 (1)
    
    Combined represents income available to common stockholders divided by the combined
total of Class A and Class B weighted average common shares outstanding.
 21




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
   OVERVIEW
  Three Months Ended
    
    Six Months Ended($ in thousands, except per share data)
    
    June 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Pretax income (loss):Advanta Business Cards
    
    $
    35,824
    
    
    $
    37,464
    
    
    $
    70,635
    
    
    $
    72,757Other
    
    
    821
    
    
    
    (1
    )
    
    
    1,286
    
    
    
    332Total pretax income
    
    
    36,645
    
    
    
    37,463
    
    
    
    71,921
    
    
    
    73,089Income tax expense
    
    
    13,933
    
    
    
    14,423
    
    
    
    27,761
    
    
    
    28,139Income from continuing
operations
    
    $
    22,712
    
    
    $
    23,040
    
    
    $
    44,160
    
    
    $
    44,950Per combined common share,
assuming dilution
    
    $
    0.51
    
    
    $
    0.52
    
    
    $
    0.99
    
    
    $
    1.01
   22




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  ADVANTA BUSINESS CARDS
  Three Months Ended
    
    Six Months Ended($ in thousands)
    
    June 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Average owned receivables
    
    $
    1,248,235
    
    
    $
    997,754
    
    
    $
    1,266,466
    
    
    $
    963,962Average securitized receivables
    
    $
    4,581,666
    
    
    $
    3,222,380
    
    
    $
    4,368,446
    
    
    $
    3,090,577Customer transaction volume
    
    $
    3,692,780
    
    
    $
    3,031,493
    
    
    $
    7,081,845
    
    
    $
    5,765,415New account originations
    
    
    102,937
    
    
    
    86,398
    
    
    
    199,718
    
    
    
    169,015Average number of active
accounts (1)
    
    
    894,610
    
    
    
    687,912
    
    
    
    871,781
    
    
    
    668,814Ending number of accounts at
June 30
    
    
    1,255,557
    
    
    
    978,517
    
    
    
    1,255,557
    
    
    
    978,517
 (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 six months ended June 30.
 23




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##### Table of Contents



Projected Estimate at December 31, 2007Actual atDecember 31,
    
    Low End
    
    Percentage
    
    High End
    
    Percentage($ in thousands)
    
    2006
    
    of Range
    
    Increase
    
    of Range
    
    IncreaseOwned receivables
    
    $
    1,133,132
    
    
    $
    1,250,000
    
    
    
    10.0
    %
    
    $
    1,302,000
    
    
    
    15.0
    %Securitized receivables
    
    
    4,073,128
    
    
    
    4,998,000
    
    
    
    23.0
    %
    
    
    5,206,000
    
    
    
    28.0
    %Managed receivables
    
    $
    5,206,260
    
    
    $
    6,248,000
    
    
    
    20.0
    %
    
    $
    6,508,000
    
    
    
    25.0
    %
  Three Months Ended
    
    Six Months Ended($ in thousands)
    
    June 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Net interest income on owned
interest-earning assets
    
    $
    25,506
    
    
    $
    24,050
    
    
    $
    52,749
    
    
    $
    46,836Noninterest revenues
    
    
    90,737
    
    
    
    86,104
    
    
    
    175,063
    
    
    
    167,442Provision for credit losses
    
    
    (11,806
    )
    
    
    (10,145
    )
    
    
    (21,889
    )
    
    
    (19,479
    )Operating expenses
    
    
    (68,613
    )
    
    
    (62,545
    )
    
    
    (135,288
    )
    
    
    (122,042
    )Pretax income
    
    $
    35,824
    
    
    $
    37,464
    
    
    $
    70,635
    
    
    $
    72,757
   24




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##### Table of Contents



INTEREST INCOME AND EXPENSE
    25




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##### Table of Contents



INTEREST RATE ANALYSIS AND AVERAGE BALANCES
 Three Months Ended June 30,2007
    
    
    2006Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average($ in thousands)
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest-earning assets:Owned receivables:Business credit cards (1)
    
    $
    1,248,235
    
    
    $
    33,976
    
    
    
    10.92
    %
    
    $
    997,754
    
    
    $
    30,051
    
    
    
    12.08
    %Other receivables
    
    
    7,567
    
    
    
    94
    
    
    
    5.02
    
    
    
    7,440
    
    
    
    88
    
    
    
    4.75Total receivables
    
    
    1,255,802
    
    
    
    34,070
    
    
    
    10.88
    
    
    
    1,005,194
    
    
    
    30,139
    
    
    
    12.03Investments (2)
    
    
    665,063
    
    
    
    8,812
    
    
    
    5.25
    
    
    
    500,829
    
    
    
    5,975
    
    
    
    4.73Retained interests in
securitizations
    
    
    228,231
    
    
    
    4,679
    
    
    
    8.20
    
    
    
    195,118
    
    
    
    4,399
    
    
    
    9.02Total interest-earning
assets (3)
    
    
    2,149,096
    
    
    $
    47,561
    
    
    
    8.85
    %
    
    
    1,701,141
    
    
    $
    40,513
    
    
    
    9.53
    %Noninterest-earning assets
    
    
    306,068
    
    
    
    
    
    
    
    
    
    
    
    450,066Total assets
    
    $
    2,455,164
    
    
    
    
    
    
    
    
    
    
    $
    2,151,207Interest-bearing liabilities:Deposits
    
    $
    1,365,927
    
    
    $
    17,361
    
    
    
    5.10
    %
    
    $
    1,122,365
    
    
    $
    11,858
    
    
    
    4.24
    %Debt
    
    
    225,831
    
    
    
    3,953
    
    
    
    7.02
    
    
    
    211,736
    
    
    
    3,320
    
    
    
    6.29Subordinated debt
payable to preferred
securities trust
    
    
    103,093
    
    
    
    2,317
    
    
    
    8.99
    
    
    
    103,093
    
    
    
    2,290
    
    
    
    8.88Other borrowings
    
    
    110
    
    
    
    2
    
    
    
    5.27
    
    
    
    824
    
    
    
    11
    
    
    
    5.04Total interest-bearing
liabilities
    
    
    1,694,961
    
    
    $
    23,633
    
    
    
    5.59
    %
    
    
    1,438,018
    
    
    $
    17,479
    
    
    
    4.87
    %Noninterest-bearing
liabilities
    
    
    166,296
    
    
    
    
    
    
    
    
    
    
    
    183,379Total liabilities
    
    
    1,861,257
    
    
    
    
    
    
    
    
    
    
    
    1,621,397Stockholders equity
    
    
    593,907
    
    
    
    
    
    
    
    
    
    
    
    529,810Total liabilities and
stockholders equity
    
    $
    2,455,164
    
    
    
    
    
    
    
    
    
    
    $
    2,151,207Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.26
    %
    
    
    
    
    
    
    
    
    
    
    4.66
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    4.47
    %
    
    
    
    
    
    
    
    
    
    
    5.43
    %
 (1)
    
    Interest income includes late fees for owned business credit card receivables of
$2.3 million for the three months ended June 30, 2007 and $2.0 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.
 26




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##### Table of Contents



Six Months Ended June 30,2007
    
    
    2006Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average($ in thousands)
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest-earning assets:Owned receivables:Business credit cards (1)
    
    $
    1,266,466
    
    
    $
    69,419
    
    
    
    11.05
    %
    
    $
    963,962
    
    
    $
    58,879
    
    
    
    12.32
    %Other receivables
    
    
    7,619
    
    
    
    218
    
    
    
    5.78
    
    
    
    7,591
    
    
    
    187
    
    
    
    4.97Total receivables
    
    
    1,274,085
    
    
    
    69,637
    
    
    
    11.02
    
    
    
    971,553
    
    
    
    59,066
    
    
    
    12.26Investments (2)
    
    
    630,508
    
    
    
    16,494
    
    
    
    5.21
    
    
    
    500,228
    
    
    
    11,338
    
    
    
    4.51Retained interests in
securitizations
    
    
    229,517
    
    
    
    9,785
    
    
    
    8.53
    
    
    
    188,017
    
    
    
    8,381
    
    
    
    8.92Total interest-earning
assets (3)
    
    
    2,134,110
    
    
    $
    95,916
    
    
    
    9.04
    %
    
    
    1,659,798
    
    
    $
    78,785
    
    
    
    9.55
    %Noninterest-earning assets
    
    
    305,638
    
    
    
    
    
    
    
    
    
    
    
    478,458Total assets
    
    $
    2,439,748
    
    
    
    
    
    
    
    
    
    
    $
    2,138,256Interest-bearing liabilities:Deposits
    
    $
    1,355,056
    
    
    $
    33,898
    
    
    
    5.04
    %
    
    $
    1,097,783
    
    
    $
    22,166
    
    
    
    4.07
    %Debt
    
    
    226,661
    
    
    
    7,660
    
    
    
    6.81
    
    
    
    216,565
    
    
    
    6,677
    
    
    
    6.22Subordinated debt
payable to preferred
securities trust
    
    
    103,093
    
    
    
    4,634
    
    
    
    8.99
    
    
    
    103,093
    
    
    
    4,579
    
    
    
    8.88Other borrowings
    
    
    111
    
    
    
    3
    
    
    
    5.27
    
    
    
    463
    
    
    
    12
    
    
    
    5.02Total interest-bearing
liabilities
    
    
    1,684,921
    
    
    $
    46,195
    
    
    
    5.52
    %
    
    
    1,417,904
    
    
    $
    33,434
    
    
    
    4.75
    %Noninterest-bearing
liabilities
    
    
    169,151
    
    
    
    
    
    
    
    
    
    
    
    193,147Total liabilities
    
    
    1,854,072
    
    
    
    
    
    
    
    
    
    
    
    1,611,051Stockholders equity
    
    
    585,676
    
    
    
    
    
    
    
    
    
    
    
    527,205Total liabilities and
stockholders equity
    
    $
    2,439,748
    
    
    
    
    
    
    
    
    
    
    $
    2,138,256Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.52
    %
    
    
    
    
    
    
    
    
    
    
    4.80
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    4.70
    %
    
    
    
    
    
    
    
    
    
    
    5.51
    %
 (1)
    
    Interest income includes late fees for owned business credit card receivables of
$4.8 million for the six months ended June 30, 2007 and $3.8 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.
 27




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##### Table of Contents



PROVISION AND ALLOWANCE FOR RECEIVABLE LOSSES
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,($ in thousands)
    
    2007
    
    2006
    
    2007
    
    2006Provision for credit losses
    
    $
    11,806
    
    
    $
    10,145
    
    
    $
    21,889
    
    
    $
    19,429Provision for interest and fee losses
    
    
    2,581
    
    
    
    2,163
    
    
    
    5,027
    
    
    
    4,201
   Interagency Policy Statement on the Allowance for Loan and Lease Losses
  28




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##### Table of Contents



June 30,
    
    December 31,
    
    June 30,($ in thousands)
    
    2007
    
    2006
    
    2006Consolidated  OwnedAllowance for receivable losses
    
    $
    53,735
    
    
    $
    50,926
    
    
    $
    49,662Receivables 30 days or more delinquent
    
    
    27,115
    
    
    
    26,053
    
    
    
    25,482Receivables 90 days or more delinquent
    
    
    13,446
    
    
    
    12,632
    
    
    
    12,560Nonaccrual receivables
    
    
    9,155
    
    
    
    10,524
    
    
    
    11,824Accruing receivables past due 90 days or more
    
    
    12,249
    
    
    
    11,302
    
    
    
    11,266As a percentage of gross receivables:Allowance for receivable losses
    
    
    4.71
    %
    
    
    4.46
    %
    
    
    4.64
    %Receivables 30 days or more delinquent
    
    
    2.38
    
    
    
    2.28
    
    
    
    2.38Receivables 90 days or more delinquent
    
    
    1.18
    
    
    
    1.11
    
    
    
    1.17Nonaccrual receivables
    
    
    0.80
    
    
    
    0.92
    
    
    
    1.11Accruing receivables past due 90 days or more
    
    
    1.07
    
    
    
    0.99
    
    
    
    1.05Net principal charge-offs for the year-to-date
period ended June 30 and December 31
    
    $
    19,340
    
    
    $
    33,780
    
    
    $
    15,608Net principal charge-offs for the three months
ended June 30 and December 31
    
    
    9,557
    
    
    
    9,170
    
    
    
    7,524As a percentage of average gross receivables
(annualized):Net principal charge-offs for the year-to-date
period ended June 30 and December 31
    
    
    3.04
    %
    
    
    3.17
    %
    
    
    3.21
    %Net principal charge-offs for the three months
ended June 30 and December 31
    
    
    3.04
    
    
    
    3.05
    
    
    
    2.99Business Credit Cards  OwnedAllowance for receivable losses
    
    $
    52,525
    
    
    $
    49,715
    
    
    $
    48,450Receivables 30 days or more delinquent
    
    
    27,115
    
    
    
    26,053
    
    
    
    25,482Receivables 90 days or more delinquent
    
    
    13,466
    
    
    
    12,632
    
    
    
    12,560Nonaccrual receivables
    
    
    9,155
    
    
    
    10,524
    
    
    
    11,824Accruing receivables past due 90 days or more
    
    
    12,249
    
    
    
    11,302
    
    
    
    11,266As a percentage of gross receivables:Allowance for receivable losses
    
    
    4.64
    %
    
    
    4.39
    %
    
    
    4.56
    %Receivables 30 days or more delinquent
    
    
    2.39
    
    
    
    2.30
    
    
    
    2.40Receivables 90 days or more delinquent
    
    
    1.19
    
    
    
    1.11
    
    
    
    1.18Nonaccrual receivables
    
    
    0.81
    
    
    
    0.93
    
    
    
    1.11Accruing receivables past due 90 days or more
    
    
    1.08
    
    
    
    1.00
    
    
    
    1.06Net principal charge-offs for the year-to-date
period ended June 30 and December 31
    
    $
    19,339
    
    
    $
    33,775
    
    
    $
    15,604Net principal charge-offs for the three months
ended June 30 and December 31
    
    
    9,556
    
    
    
    9,169
    
    
    
    7,520As a percentage of average gross receivables
(annualized):Net principal charge-offs for the year-to-date
period ended June 30 and December 31
    
    
    3.05
    %
    
    
    3.19
    %
    
    
    3.24
    %Net principal charge-offs for the three months
ended June 30 and December 31
    
    
    3.06
    
    
    
    3.07
    
    
    
    3.01
 29




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##### Table of Contents



SECURITIZATION INCOME
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,($ in thousands)
    
    2007
    
    2006
    
    2007
    
    2006Securitization income
    
    $
    22,766
    
    
    $
    29,686
    
    
    $
    46,277
    
    
    $
    63,264Interest income (discount
accretion)
    
    
    4,679
    
    
    
    4,399
    
    
    
    9,785
    
    
    
    8,381Interchange income
    
    
    49,207
    
    
    
    39,127
    
    
    
    91,621
    
    
    
    72,841Servicing revenues
    
    
    22,541
    
    
    
    15,329
    
    
    
    42,917
    
    
    
    29,011Total
    
    $
    99,193
    
    
    $
    88,541
    
    
    $
    190,600
    
    
    $
    173,497
   Managed Receivable Data
  30




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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 June 30, 2007Net interest income
    
    $
    25,506
    
    
    
    6.91
    %
    
    $
    74,990
    
    
    $
    100,496
    
    
    
    6.90
    %Provision for credit losses
    
    
    11,806
    
    
    
    3.20
    
    
    
    41,115
    (2)
    
    
    52,921
    
    
    
    3.63Noninterest revenues
    
    
    90,737
    
    
    
    24.58
    
    
    
    (33,875
    )
    
    
    56,862
    
    
    
    3.90Average business credit card
interest-earning assets
    
    
    1,476,466
    
    
    
    
    
    
    
    4,353,435
    
    
    
    5,829,901Three months ended June 30, 2006Net interest income
    
    $
    24,050
    
    
    
    8.06
    %
    
    $
    64,511
    
    
    $
    88,561
    
    
    
    8.39
    %Provision for credit losses
    
    
    10,145
    
    
    
    3.40
    
    
    
    28,833
    (2)
    
    
    38,978
    
    
    
    3.69Noninterest revenues
    
    
    86,104
    
    
    
    28.87
    
    
    
    (35,678
    )
    
    
    50,426
    
    
    
    4.78Average business credit card
interest-earning assets
    
    
    1,192,872
    
    
    
    
    
    
    
    3,027,262
    
    
    
    4,220,134Six months ended June 30, 2007Net interest income
    
    $
    52,749
    
    
    
    7.05
    %
    
    $
    143,195
    
    
    $
    195,944
    
    
    
    6.95
    %Provision for credit losses
    
    
    21,889
    
    
    
    2.93
    
    
    
    76,197
    (2)
    
    
    98,086
    
    
    
    3.48Noninterest revenues
    
    
    175,063
    
    
    
    23.40
    
    
    
    (66,998
    )
    
    
    108,065
    
    
    
    3.84Average business credit card
interest-earning assets
    
    
    1,495,983
    
    
    
    
    
    
    
    4,138,929
    
    
    
    5,634,912Six months ended June 30, 2006Net interest income
    
    $
    46,836
    
    
    
    8.13
    %
    
    $
    130,896
    
    
    $
    177,732
    
    
    
    8.77
    %Provision for credit losses
    
    
    19,479
    
    
    
    3.38
    
    
    
    57,228
    (2)
    
    
    76,707
    
    
    
    3.78Noninterest revenues
    
    
    167,442
    
    
    
    29.07
    
    
    
    (73,668
    )
    
    
    93,774
    
    
    
    4.63Average business credit card
interest-earning assets
    
    
    1,151,979
    
    
    
    
    
    
    
    2,902,560
    
    
    
    4,054,539As of June 30, 2007Ending business credit card
receivables
    
    $
    1,133,198
    
    
    
    
    
    
    $
    4,856,001
    
    
    $
    5,989,199Receivables 30 days or more
delinquent
    
    
    27,115
    
    
    
    2.39
    %
    
    
    136,468
    
    
    
    163,583
    
    
    
    2.73
    %Receivables 90 days or more
delinquent
    
    
    13,466
    
    
    
    1.19
    
    
    
    68,424
    
    
    
    81,890
    
    
    
    1.37As 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 June 30, 2006Ending business credit card
receivables
    
    $
    1,062,249
    
    
    
    
    
    
    $
    3,323,869
    
    
    $
    4,386,118Receivables 30 days or more
delinquent
    
    
    25,482
    
    
    
    2.40
    %
    
    
    90,987
    
    
    
    116,469
    
    
    
    2.66
    %Receivables 90 days or more
delinquent
    
    
    12,560
    
    
    
    1.18
    
    
    
    45,008
    
    
    
    57,568
    
    
    
    1.31
 (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 $2.2 million in the three months ended June 30, 2006
and $3.5 million in the six months ended June 30, 2006 are included as increases to provision
for credit losses.
 31




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##### Table of Contents



SERVICING REVENUES
  ($ in thousands)
    
    2007
    
    2006Three months ended June 30
    
    $
    22,541
    
    
    $
    15,329Six months ended June 30
    
    
    42,917
    
    
    
    29,011
  OTHER REVENUES
 Three Months Ended
    
    Six Months Ended($ in thousands)
    
    June 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Interchange income
    
    $
    62,130
    
    
    $
    51,217
    
    
    $
    117,364
    
    
    $
    95,610Cash back rewards
    
    
    (15,346
    )
    
    
    (10,852
    )
    
    
    (28,746
    )
    
    
    (20,365
    )Business rewards
    
    
    (6,007
    )
    
    
    (5,444
    )
    
    
    (11,939
    )
    
    
    (10,048
    )Balance transfer fees
    
    
    2,162
    
    
    
    1,689
    
    
    
    3,991
    
    
    
    3,333Investment securities gains, net
    
    
    1,355
    
    
    
    2,824
    
    
    
    2,345
    
    
    
    3,532Cash usage fees
    
    
    1,020
    
    
    
    854
    
    
    
    2,153
    
    
    
    1,677Earnings on investment in Fleet
Credit Card Services, L.P.
    
    
    376
    
    
    
    819
    
    
    
    376
    
    
    
    819Other business credit card fees
    
    
    1,127
    
    
    
    753
    
    
    
    2,352
    
    
    
    1,605Other, net
    
    
    1,179
    
    
    
    437
    
    
    
    2,581
    
    
    
    1,110Total other revenues, net
    
    $
    47,996
    
    
    $
    42,297
    
    
    $
    90,477
    
    
    $
    77,273
    32




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##### Table of Contents



OPERATING EXPENSES
 Three Months Ended
    
    Six Months Ended($ in thousands)
    
    June 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Salaries and employee benefits
    
    $
    26,246
    
    
    $
    24,014
    
    
    $
    52,344
    
    
    $
    47,303Amortization of deferred
origination costs, net
    
    
    12,852
    
    
    
    11,711
    
    
    
    25,719
    
    
    
    23,659External processing
    
    
    7,007
    
    
    
    6,182
    
    
    
    13,707
    
    
    
    12,123Marketing
    
    
    4,075
    
    
    
    4,150
    
    
    
    7,310
    
    
    
    7,757Professional fees
    
    
    2,978
    
    
    
    2,918
    
    
    
    6,883
    
    
    
    5,495Equipment
    
    
    2,730
    
    
    
    2,371
    
    
    
    5,325
    
    
    
    4,988Occupancy
    
    
    2,343
    
    
    
    2,332
    
    
    
    4,645
    
    
    
    4,471Fraud
    
    
    2,217
    
    
    
    813
    
    
    
    3,685
    
    
    
    1,583Postage
    
    
    1,531
    
    
    
    1,178
    
    
    
    2,925
    
    
    
    2,333Credit
    
    
    1,157
    
    
    
    1,380
    
    
    
    2,447
    
    
    
    2,473Other
    
    
    5,641
    
    
    
    5,687
    
    
    
    10,589
    
    
    
    10,190Total operating expenses
    
    $
    68,777
    
    
    $
    62,736
    
    
    $
    135,579
    
    
    $
    122,375
  Accounting for Collateral Assignment Split-Dollar Life Insurance
Arrangements
     33




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##### Table of Contents



LITIGATION CONTINGENCIES
  INCOME TAXES
  Three Months Ended
    
    Six Months Ended($ in thousands)
    
    June 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Income tax expense
    
    $
    13,933
    
    
    $
    14,423
    
    
    $
    27,761
    
    
    $
    28,139Effective tax rate
    
    
    38.0
    %
    
    
    38.5
    %
    
    
    38.6
    %
    
    
    38.5
    %
    34




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##### Table of Contents



DISCONTINUED OPERATIONS
   OFF-BALANCE SHEET ARRANGEMENTS
   Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,($ in thousands)
    
    2007
    
    2006
    
    2007
    
    2006Average securitized receivables
    
    $
    4,581,666
    
    
    $
    3,222,380
    
    
    $
    4,368,446
    
    
    $
    3,090,577Securitization income
    
    
    22,766
    
    
    
    29,686
    
    
    
    46,277
    
    
    
    63,264Discount accretion
    
    
    4,679
    
    
    
    4,399
    
    
    
    9,785
    
    
    
    8,381Interchange income
    
    
    49,207
    
    
    
    39,127
    
    
    
    91,621
    
    
    
    72,841Servicing revenues
    
    
    22,541
    
    
    
    15,329
    
    
    
    42,917
    
    
    
    29,011Proceeds from new securitizations
    
    
    398,682
    
    
    
    534,374
    
    
    
    756,340
    
    
    
    1,070,264Proceeds from collections
reinvested in revolving-period
securitizations
    
    
    2,681,748
    
    
    
    1,779,595
    
    
    
    5,065,732
    
    
    
    3,463,397Cash flows received on retained
interests
    
    
    79,731
    
    
    
    92,582
    
    
    
    164,487
    
    
    
    170,210
  35




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##### Table of Contents



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-B1
    
    
    100,000
    
    
    Floating
    
    April 30, 20112007-A1
    
    
    200,000
    
    
    Floating
    
    May 31, 20112007-A3
    
    
    200,000
    
    
    Floating
    
    August 31, 2011
   Accounting for Transfers of
Financial Assets  An Amendment of FASB Statement No. 140
 36




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##### Table of Contents



MARKET RISK SENSITIVITY
  June 30,
    
    December 31,2007
    
    2006Estimated percentage increase (decrease) in net
interest income on owned assets:Assuming 200 basis point increase
    
    
    13
    %
    
    
    12
    %Assuming 200 basis point decrease
    
    
    (4
    )%
    
    
    (6
    )%Estimated percentage increase (decrease) in net
interest income on securitized receivables:Assuming 200 basis point increase
    
    
    (8
    )%
    
    
    (8
    )%Assuming 200 basis point decrease
    
    
    19
    %
    
    
    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
    %
   37




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##### Table of Contents



LIQUIDITY, CAPITAL RESOURCES AND ANALYSIS OF FINANCIAL CONDITION
    June 30, 2007
    
    December 31, 2006($ in thousands)
    
    Amount
    
    %
    
    Amount
    
    %Off-balance sheet securitized
receivables (1)
    
    $
    4,712,152
    
    
    
    67
    %
    
    $
    3,932,732
    
    
    
    63
    %Deposits
    
    
    1,393,769
    
    
    
    20
    
    
    
    1,365,138
    
    
    
    22Debt
    
    
    225,082
    
    
    
    3
    
    
    
    227,126
    
    
    
    4Subordinated debt payable to preferred
securities trust
    
    
    103,093
    
    
    
    1
    
    
    
    103,093
    
    
    
    2Equity
    
    
    599,210
    
    
    
    9
    
    
    
    567,161
    
    
    
    9Total
    
    $
    7,033,306
    
    
    
    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.
    38




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##### Table of Contents



39




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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 that affect
the level of new account originations, customer spending,
delinquencies and charge-offs;(4)
    
    factors affecting fluctuations in the number of accounts or receivable
balances, including the retention of customers after promotional
pricing periods have expired;(5)
    
    interest rate fluctuations;(6)
    
    the level of expenses;(7)
    
    the timing of the securitizations of our receivables;(8)
    
    the effects of government regulation, including restrictions and
limitations imposed by banking laws, regulators, and examinations;(9)
    
    effect of, and changes in, tax laws, rates, regulations and policies;
 40




---



##### Table of Contents



(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.
  41




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PART II  OTHER INFORMATION
 
   
   42




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##### 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 April 1, 2007 through June 30, 2007. In April
2007, the Board of Directors of Advanta Corp. approved a three-for-two stock split, in
the form of a 50% stock dividend payable June 15, 2007, on both Class A and Class B
Common Stock. We have adjusted all share amounts and per share data in the table below
to reflect the three-for-two stock split for all months presented. 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 (C)
    
    Programs (C)Class A:4/1/07  4/30/07
    
    
    0.0
    
    
    
    N/A
    *
    
    
    0.0
    
    
    
    0.05/1/07  5/31/07
    
    
    0.0
    
    
    
    N/A
    *
    
    
    0.0
    
    
    
    0.06/1/07  6/30/07
    
    
    0.2
    (B)
    
    $
    30.90
    
    
    
    0.0
    
    
    
    0.0Subtotal Class A
    
    
    0.2
    
    
    $
    30.90
    
    
    
    0.0
    
    
    
    0.0Class B:4/1/07  4/30/07
    
    
    24.1
    (A)
    
    $
    31.34
    
    
    
    0.0
    
    
    
    1,500.05/1/07  5/31/07
    
    
    242.6
    
    
    $
    30.99
    
    
    
    242.6
    
    
    
    1,257.46/1/07  6/30/07
    
    
    165.3
    (B)
    
    $
    33.70
    
    
    
    163.8
    
    
    
    1,093.6Subtotal Class B
    
    
    432.0
    
    
    $
    32.05
    
    
    
    406.4
    
    
    
    1,093.6Total
    
    
    432.2
    
    
    $
    32.05
    
    
    
    406.4
    
    
    
    1,093.6
 (A)
    
    In April 2007, in connection with the vesting of shares related to the 2006
performance year for our management incentive program, we withheld 24.1 thousand
vested shares from certain employees (including officers) to meet our minimum
statutory tax withholding requirements.(B)
    
    Includes cash paid in lieu of fractional shares related to the stock dividend payable
June 15, 2007.(C)
    
    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
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##### Table of Contents



(a)
    
    Advanta Corp. held its Annual Meeting of Stockholders on June 4, 2007 (the Annual Meeting).
The Annual Meeting occurred prior to June 15, 2007, the effective date of the three-for-two
stock split approved by the Board of Directors of Advanta Corp. in April 2007. The
information provided in (c) below has not been adjusted to reflect the stock split.(b)
    
    Not required.(c)
    
    The following proposals were submitted to a vote of stockholders. As described in (a) above,
the information below has not been adjusted to reflect the stock split.
  NOMINEES
    
    VOTES FOR
    
    VOTES WITHHELDDennis Alter
    
    
    6,852,662
    
    
    
    1,097,800Dana Becker Dunn
    
    
    6,504,875
    
    
    
    1,445,587
  FOR
    
    AGAINST
    
    ABSTAIN
    
    BROKER NON-VOTES7,591,537
    
    
    184,395
    
    
    
    174,530
    
    
    
    0
  FOR
    
    AGAINST
    
    ABSTAIN
    
    BROKER NON-VOTES7,641,995
    
    
    106,392
    
    
    
    202,115
    
    
    
    0
 (d)
    
    Not required.
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##### Table of Contents



ExhibitNumber
    
    Description of Document3.2
    
    Amended and Restated Bylaws3.3
    
    Rights Agreement, dated April 11, 2007, by and between us and Mellon Investor
Services LLC, as Rights Agent10.1
    
    Advanta Employees Severance Pay Plan, as amended and restated effective April 2,
200710.2
    
    Advanta Corp. Employee Change of Control Severance Plan, as amended and restated
effective April 2, 200710.3
    
    Advanta Senior Management Change of Control Severance Plan, as amended and restated
effective April 2, 200710.4
    
    Advanta Corp. Office of the Chairman Cash Bonus Plan12
    
    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
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##### Table of Contents



SIGNATURES
  Advanta Corp.
(Registrant)By
    
    /s/ Philip M. BrowneSenior Vice President and
Chief Financial Officer
August 8, 2007By
    
    /s/ David B. WeinstockVice President and
Chief Accounting Officer
August 8, 2007
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##### Table of Contents



EXHIBIT INDEX
 Manner ofExhibit
    
    Description
    
    Filing3.2
    
    Amended and Restated Bylaws
    
    *3.3
    
    Rights Agreement, dated April 11, 2007, by and between us and
Mellon Investor Services LLC, as Rights Agent
    
    **10.1
    
    Advanta Employees Severance Pay Plan, as amended and restated
effective April 2, 2007
    
    ***10.2
    
    Advanta Corp. Employee Change of Control Severance Plan, as
amended and restated effective April 2, 2007
    
    ****10.3
    
    Advanta Senior Management Change of Control Severance Plan, as
amended and restated effective April 2, 2007
    
    *****10.4
    
    Advanta Corp. Office of the Chairman Cash Bonus Plan
    
    ******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
    
    *******
 
 *
    
    Incorporated by reference to Exhibit 3.2 to the Registrants Current Report on Form
8-K filed April 5, 2007.**
    
    Incorporated by reference to Exhibit 1 to the Registrants Registration Statement on
Form 8-A filed with the United States Securities and Exchange Commission on April 11,
2007, including: The Form of Rights Certificate, attached as Exhibit A; and The
Summary of Rights to Purchase Series A Junior Participating Preferred Stock, attached
as Exhibit B.***
    
    Incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form
8-K filed April 5, 2007.****
    
    Incorporated by reference to Exhibit 10.2 to the Registrants Current Report on Form
8-K filed April 5, 2007.*****
    
    Incorporated by reference to Exhibit 10.3 to the Registrants Current Report on
Form 8-K filed April 5, 2007.******
    
    Incorporated by reference to Appendix A to the Registrants Definitive Proxy
Statement on Schedule 14A filed April 30, 2007.*******
    
    Filed electronically herewith.
 47