##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-Q

|    |  |                                                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|[X] |  | Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 2003
or
|   
|[ ] |  | 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.

(Exact name of registrant as specified in its charter)


|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization) |  | 23-1462070
(I.R.S. Employer
Identification No.)

Welsh and McKean Roads, P.O. Box 844, Spring House, PA 19477
(Address of Principal Executive Offices) (Zip Code)

(215) 657-4000
(Registrants telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X]   No [  ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes [X]   No [  ]



| |  | Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years:
| |  | ----------------------------------------------------------------------------------------------

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

Yes
[  ]   No [  ]



| |  | Applicable only to corporate issuers:
| |  | -------------------------------------

Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.

|                                     |  |                                                  
|------------------------------------ |  | -------------------------------------------------
|Class A
Common Stock, $.01 par value |  | Outstanding at November 4, 2003
9,646,885 shares 
|                                    
|Class B
Common Stock, $.01 par value |  | Outstanding at November 4, 2003
17,419,711 shares





---

TABLE OF CONTENTS



|                                                   |                                                                                               |                                                            |  |  |  |  |  | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------- |  |  |  |  |  | 
|                                                   | PART I - FINANCIAL INFORMATION                                                               
|                                                   | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                                                   |                                                                                               | CONSOLIDATED BALANCE SHEETS                               
|                                                   |                                                                                               | CONSOLIDATED INCOME STATEMENTS                            
|                                                   |                                                                                               | CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
|                                                   |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS                     
|                                                   |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|                                                   | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                   | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                                                   | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II  OTHER INFORMATION                       
|                                                   | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                                                   | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                                        
|EXHIBIT INDEX                                     
|LETTER AGREEMENT BETWEEN ADVANTA CORP. AND J. BECK
|COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 
|CERTIFICATION OF CEO PURSUANT TO SECTION 302      
|CERTIFICATION OF CFO PURSUANT TO SECTION 302      
|CERTIFICATION OF CEO PURSUANT TO SECTION 906      
|CERTIFICATION OF CFO PURSUANT TO SECTION 906      



---



##### Table of Contents



TABLE OF CONTENTS

|                               |                                                                                       |  |      |     | 
|------------------------------ | ------------------------------------------------------------------------------------- |  | ---- | --- | 
|                               |                                                                                       |  | Page
|PART I  FINANCIAL INFORMATION |                                                                                       |  | 3    |    
|Item 1.                        | Financial Statements                                                                  |  |      |     | 
|                               | Consolidated Balance Sheets (Unaudited)                                               |  |      | 3   | 
|                               | Consolidated Income Statements (Unaudited)                                            |  |      | 4   | 
|                               | Consolidated Statements of Changes in
Stockholders Equity (Unaudited)                |  |      | 5-6 | 
|                               | Consolidated Statements of Cash Flows (Unaudited)                                     |  |      | 7   | 
|                               | Notes to Consolidated Financial Statements (Unaudited)                                |  |      | 8   | 
|Item 2.                        | Managements Discussion and Analysis of Financial
Condition and Results of Operations |  |      | 26  | 
|Item 3.                        | Quantitative and Qualitative Disclosures
About Market Risk                            |  |      | 47  | 
|Item 4.                        | Controls and Procedures                                                               |  |      | 48  | 
|PART II- OTHER INFORMATION     |                                                                                       |  |      |    
|Item 1.                        | Legal Proceedings                                                                     |  |      | 48  | 
|Item 6.                        | Exhibits and Reports on Form 8-K                                                      |  |      | 49  | 

2



---



##### Table of Contents






PART I - FINANCIAL
INFORMATION




ITEM 1. FINANCIAL STATEMENTS




ADVANTA CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)

|                                                                                                                                                                       |                                                                         |               |           |               |         |              |           |       |         | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------- | --------- | ------------- | ------- | ------------ | --------- | ----- | ------- | 
|                                                                                                                                                                       |                                                                         |               |           | September 30, |         | December 31,
|(In thousands, except share data)                                                                                                                                      |                                                                         | 2003          |           | 2002         
|                                                                                                                                                                       |                                                                         |               |           |              
|ASSETS                                                                                                                                                                 |                                                                         |               |           |               |         |              |           |      
|Cash                                                                                                                                                                   |                                                                         | $             | 26,690    |               |         | $            | 14,834    |      
|Federal funds sold                                                                                                                                                     |                                                                         |               | 482,492   |               |         |              | 332,257   |      
|Restricted interest-bearing deposits                                                                                                                                   |                                                                         |               | 77,574    |               |         |              | 79,449    |      
|Investments available for sale                                                                                                                                         |                                                                         |               | 231,931   |               |         |              | 171,222   |      
|Receivables, net:                                                                                                                                                      |                                                                         |               |           |               |         |              |           |      
|                                                                                                                                                                       |                                                                         | Held for sale |           |               | 238,358 |              |           |       | 177,065 | 
|                                                                                                                                                                       |                                                                         | Other         |           |               | 283,160 |              |           |       | 278,282 | 
|                                                                                                                                                                       |                                                                         |               |           |               |         |              |           |      
|Total receivables, net                                                                                                                                                 |                                                                         |               | 521,518   |               |         |              | 455,347   |      
|Accounts receivable from securitizations                                                                                                                               |                                                                         |               | 218,512   |               |         |              | 198,238   |      
|Premises and equipment, net                                                                                                                                            |                                                                         |               | 19,463    |               |         |              | 25,496    |      
|Other assets                                                                                                                                                           |                                                                         |               | 282,928   |               |         |              | 277,658   |      
|Assets of discontinued operations, net                                                                                                                                 |                                                                         |               | 88,419    |               |         |              | 127,112   |      
|                                                                                                                                                                       |                                                                         |               |           |               |         |              |           |      
|Total assets                                                                                                                                                           |                                                                         | $             | 1,949,527 |               |         | $            | 1,681,613 |      
|                                                                                                                                                                       |                                                                         |               |           |               |         |              |           |      
|LIABILITIES                                                                                                                                                            |                                                                         |               |           |               |         |              |           |      
|Deposits                                                                                                                                                               |                                                                         | $             | 918,956   |               |         | $            | 714,028   |      
|Debt                                                                                                                                                                   |                                                                         |               | 319,308   |               |         |              | 315,886   |      
|Trust preferred securities                                                                                                                                             |                                                                         |               | 100,000   |               |         |              | 0         |      
|Other liabilities                                                                                                                                                      |                                                                         |               | 280,925   |               |         |              | 230,386   |      
|                                                                                                                                                                       |                                                                         |               |           |               |         |              |           |      
|Total liabilities                                                                                                                                                      |                                                                         |               | 1,619,189 |               |         |              | 1,260,300 |      
|                                                                                                                                                                       |                                                                         |               |           |               |         |              |           |      
|Commitments and contingencies                                                                                                                                          |                                                                         |               |           |               |         |              |           |      
|Company-obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely
subordinated debentures of Advanta Corp. (trust
preferred securities) |                                                                         |               | 0         |               |         |              | 100,000   |      
|STOCKHOLDERS EQUITY                                                                                                                                                   |                                                                         |               |           |               |         |              |           |      
|Class A preferred stock, $1,000 par value:                                                                                                                             |                                                                         |               |           |               |         |              |           |      
|                                                                                                                                                                       | Authorized, issued and outstanding  1,010
shares in 2003 and           |               |           |               |         |              |           |       |        
|                                                                                                                                                                       | 2002                                                                    |               |           | 1,010         |         |              |           | 1,010 |        
|Class A voting common stock, $.01 par value:                                                                                                                           |                                                                         |               |           |               |         |              |           |      
|                                                                                                                                                                       | Authorized  200,000,000 shares; issued  10,041,017
shares in 2003 and |               |           |               |         |              |           |       |        
|                                                                                                                                                                       | 2002                                                                    |               |           | 100           |         |              |           | 100   |        
|Class B
nonvoting common stock, $.01 par value:                                                                                                                       |                                                                         |               |           |               |         |              |           |      
|                                                                                                                                                                       | Authorized  200,000,000 shares; issued  20,587,361
shares in 2003 and |               |           |               |         |              |           |       |        
|                                                                                                                                                                       | 20,326,289 shares in 2002                                               |               |           | 206           |         |              |           | 204   |        
|Additional paid-in capital                                                                                                                                             |                                                                         |               | 245,674   |               |         |              | 243,910   |      
|Deferred compensation                                                                                                                                                  |                                                                         |               | (16,166   | )             |         |              | (17,837   | )    
|Unearned ESOP shares                                                                                                                                                   |                                                                         |               | (10,498   | )             |         |              | (10,831   | )    
|Accumulated other comprehensive income                                                                                                                                 |                                                                         |               | 229       |               |         |              | 186       |      
|Retained earnings                                                                                                                                                      |                                                                         |               | 158,474   |               |         |              | 147,205   |      
|Less: Treasury stock at cost, 354,132 Class A common
shares and 3,197,614 Class B common shares in 2003;
2,896,112 Class B common shares in 2002                       |                                                                         |               | (48,691   | )             |         |              | (42,634   | )    
|                                                                                                                                                                       |                                                                         |               |           |               |         |              |           |      
|Total stockholders equity                                                                                                                                             |                                                                         |               | 330,338   |               |         |              | 321,313   |      
|                                                                                                                                                                       |                                                                         |               |           |               |         |              |           |      
|Total liabilities and stockholders equity                                                                                                                             |                                                                         | $             | 1,949,527 |               |         | $            | 1,681,613 |      
|                                                                                                                                                                       |                                                                         |               |           |               |         |              |           |      

See Notes to Consolidated Financial Statements

3



---



##### Table of Contents






ADVANTA CORP. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS (Unaudited)

|                                                                            |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |         |        | 
|--------------------------------------------------------------------------- | ------------------------------------------------------ | -------- | ------ | ------------------ | ------ | ----------------- | ------ | ------ | ------ | - | ------- | ------- | ------ | - | ------- | ------- | ------ | 
|                                                                            |                                                        |          |        | Three Months Ended |        | Nine Months Ended
|                                                                            |                                                        |          |        | September 30,      |        | September 30,    
|                                                                            |                                                        |          |        |                    |        |                  
|(In thousands, except per share data)                                       |                                                        | 2003     |        | 2002               |        | 2003              |        | 2002  
|                                                                            |                                                        |          |        |                    |        |                   |        |       
|Interest income:                                                            |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |        
|                                                                            | Receivables                                            |          | $      | 27,701             |        |                   | $      | 18,770 |        |   | $       | 64,088  |        |   | $       | 60,253  |       
|                                                                            | Investments                                            |          |        | 1,794              |        |                   |        | 2,520  |        |   |         | 5,883   |        |   |         | 8,366   |       
|                                                                            | Other interest income                                  |          |        | 4,071              |        |                   |        | 2,629  |        |   |         | 12,036  |        |   |         | 7,941   |       
|                                                                            |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |         |       
|Total interest income                                                       |                                                        |          | 33,566 |                    |        |                   | 23,919 |        |        |   | 82,007  |         |        |   | 76,560  |        
|Interest expense:                                                           |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |        
|                                                                            | Deposits                                               |          |        | 7,134              |        |                   |        | 5,676  |        |   |         | 20,774  |        |   |         | 17,964  |       
|                                                                            | Debt and other borrowings                              |          |        | 5,831              |        |                   |        | 5,376  |        |   |         | 16,573  |        |   |         | 18,567  |       
|                                                                            | Trust preferred securities                             |          |        | 2,220              |        |                   |        | 0      |        |   |         | 2,220   |        |   |         | 0       |       
|                                                                            |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |         |       
|Total interest expense                                                      |                                                        |          | 15,185 |                    |        |                   | 11,052 |        |        |   | 39,567  |         |        |   | 36,531  |        
|                                                                            |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |         |       
|Net interest income                                                         |                                                        |          | 18,381 |                    |        |                   | 12,867 |        |        |   | 42,440  |         |        |   | 40,029  |        
|Provision for credit losses                                                 |                                                        |          | 16,563 |                    |        |                   | 9,421  |        |        |   | 35,274  |         |        |   | 31,462  |        
|                                                                            |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |         |       
|Net interest income after provision for
credit losses                       |                                                        |          | 1,818  |                    |        |                   | 3,446  |        |        |   | 7,166   |         |        |   | 8,567   |        
|Noninterest revenues:                                                       |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |        
|                                                                            | Securitization income                                  |          |        | 28,558             |        |                   |        | 29,168 |        |   |         | 89,920  |        |   |         | 88,838  |       
|                                                                            | Servicing revenues                                     |          |        | 9,549              |        |                   |        | 8,334  |        |   |         | 29,449  |        |   |         | 24,419  |       
|                                                                            | Other revenues, net                                    |          |        | 25,977             |        |                   |        | 20,519 |        |   |         | 76,338  |        |   |         | 61,396  |       
|                                                                            |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |         |       
|Total noninterest revenues                                                  |                                                        |          | 64,084 |                    |        |                   | 58,021 |        |        |   | 195,707 |         |        |   | 174,653 |        
|                                                                            |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |         |       
|Expenses:                                                                   |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |        
|                                                                            | Operating expenses                                     |          |        | 54,762             |        |                   |        | 48,977 |        |   |         | 167,479 |        |   |         | 147,822 |       
|                                                                            | Minority interest in income of
consolidated subsidiary |          |        | 0                  |        |                   |        | 2,220  |        |   |         | 4,440   |        |   |         | 6,660   |       
|                                                                            |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |         |       
|Total expenses                                                              |                                                        |          | 54,762 |                    |        |                   | 51,197 |        |        |   | 171,919 |         |        |   | 154,482 |        
|                                                                            |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |         |       
|Income before income taxes                                                  |                                                        |          | 11,140 |                    |        |                   | 10,270 |        |        |   | 30,954  |         |        |   | 28,738  |        
|Income tax expense                                                          |                                                        |          | 4,289  |                    |        |                   | 3,954  |        |        |   | 11,917  |         |        |   | 11,064  |        
|                                                                            |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |         |       
|Income from continuing operations                                           |                                                        |          | 6,851  |                    |        |                   | 6,316  |        |        |   | 19,037  |         |        |   | 17,674  |        
|Loss, net, on discontinuance of mortgage
and leasing businesses, net of tax |                                                        |          | 0      |                    |        |                   | 0      |        |        |   | (1,968  | )       |        |   | (8,610  | )      
|                                                                            |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |         |       
|Net income                                                                  |                                                        | $        | 6,851  |                    |        | $                 | 6,316  |        |        | $ | 17,069  |         |        | $ | 9,064   |        
|                                                                            |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |         |       
|Basic income from continuing operations
per
common share                    |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |        
|                                                                            |                                                        | Class A  |        | $                  | 0.27   |                   |        | $      | 0.24   |   |         | $       | 0.74   |   |         | $       | 0.65   | 
|                                                                            |                                                        | Class B  |        |                    | 0.29   |                   |        |        | 0.26   |   |         |         | 0.81   |   |         |         | 0.72   | 
|                                                                            |                                                        | Combined |        |                    | 0.28   |                   |        |        | 0.25   |   |         |         | 0.79   |   |         |         | 0.69   | 
|                                                                            |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |         |       
|Diluted income from continuing operations
per common share                  |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |        
|                                                                            |                                                        | Class A  |        | $                  | 0.26   |                   |        | $      | 0.23   |   |         | $       | 0.72   |   |         | $       | 0.63   | 
|                                                                            |                                                        | Class B  |        |                    | 0.28   |                   |        |        | 0.25   |   |         |         | 0.79   |   |         |         | 0.69   | 
|                                                                            |                                                        | Combined |        |                    | 0.27   |                   |        |        | 0.25   |   |         |         | 0.76   |   |         |         | 0.67   | 
|                                                                            |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |         |       
|Basic net income per common share                                           |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |        
|                                                                            |                                                        | Class A  |        | $                  | 0.27   |                   |        | $      | 0.24   |   |         | $       | 0.66   |   |         | $       | 0.31   | 
|                                                                            |                                                        | Class B  |        |                    | 0.29   |                   |        |        | 0.26   |   |         |         | 0.73   |   |         |         | 0.38   | 
|                                                                            |                                                        | Combined |        |                    | 0.28   |                   |        |        | 0.25   |   |         |         | 0.70   |   |         |         | 0.35   | 
|                                                                            |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |         |       
|Diluted net income per common share                                         |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |        
|                                                                            |                                                        | Class A  |        | $                  | 0.26   |                   |        | $      | 0.23   |   |         | $       | 0.64   |   |         | $       | 0.30   | 
|                                                                            |                                                        | Class B  |        |                    | 0.28   |                   |        |        | 0.25   |   |         |         | 0.71   |   |         |         | 0.36   | 
|                                                                            |                                                        | Combined |        |                    | 0.27   |                   |        |        | 0.25   |   |         |         | 0.68   |   |         |         | 0.34   | 
|                                                                            |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |         |       
|Basic weighted average common shares
outstanding                            |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |        
|                                                                            |                                                        | Class A  |        |                    | 8,978  |                   |        |        | 9,162  |   |         |         | 9,104  |   |         |         | 9,146  | 
|                                                                            |                                                        | Class B  |        |                    | 15,100 |                   |        |        | 15,876 |   |         |         | 14,936 |   |         |         | 16,117 | 
|                                                                            |                                                        | Combined |        |                    | 24,078 |                   |        |        | 25,038 |   |         |         | 24,040 |   |         |         | 25,263 | 
|                                                                            |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |         |       
|Diluted weighted average common shares
outstanding                          |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |        
|                                                                            |                                                        | Class A  |        |                    | 8,978  |                   |        |        | 9,163  |   |         |         | 9,104  |   |         |         | 9,151  | 
|                                                                            |                                                        | Class B  |        |                    | 16,251 |                   |        |        | 16,501 |   |         |         | 15,639 |   |         |         | 17,038 | 
|                                                                            |                                                        | Combined |        |                    | 25,229 |                   |        |        | 25,664 |   |         |         | 24,743 |   |         |         | 26,189 | 
|                                                                            |                                                        |          |        |                    |        |                   |        |        |        |   |         |         |        |   |         |         |       

See Notes to Consolidated Financial Statements

4



---



##### Table of Contents






ADVANTA CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (Unaudited)
($ in thousands)

|                                                 |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |   | 
|------------------------------------------------ | ------------------------------------------------------------------------------------------------------ | - | ------------- | ------ | --------- | - | ------- |  | ------- | - | ------- |  | ---------- | - | --- | - |  | - | ------- | - | 
|                                                 |                                                                                                        |   |               |        |           |   | Class A |  | Class A |   | Class B |  | Additional
|                                                 |                                                                                                        |   | Comprehensive |        | Preferred |   | Common  |  | Common  |   | Paid-In
|                                                 |                                                                                                        |   | Income (Loss) |        | Stock     |   | Stock   |  | Stock   |   | Capital
|                                                 |                                                                                                        |   |               |        |           |   |         |  |         |   |        
|Balance at December 31, 2001                     |                                                                                                        |   |               |        |           | $ | 1,010   |  |         | $ | 100     |  |            | $ | 179 |   |  | $ | 223,362 |  
|                                                 |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|Net income (loss)                                |                                                                                                        | $ | (24,182       | )      |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|Other comprehensive income (loss):               |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|                                                 | Change in unrealized
appreciation (depreciation)
of investments, net of tax
benefit (expense) of $577  |   |               | (1,073 | )         |   |         |  |         |   |         |  |            |   |     |   |  |   |         |   | 
|                                                 |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|Comprehensive income (loss)                      |                                                                                                        | $ | (25,255       | )      |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|                                                 |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|Preferred and common cash
dividends declared     |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|Exercise of stock options                        |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   | 1   |   |  |   | 362     |  
|Stock option exchange program
stock distribution |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|Issuance of restricted stock                     |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   | 28  |   |  |   | 22,529  |  
|Amortization of deferred
compensation            |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|Forfeitures of restricted stock                  |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   | (4  | ) |  |   | (2,275  | )
|Stock buyback                                    |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|ESOP shares committed to be
released             |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   | (68     | )
|                                                 |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|Balance at December 31, 2002                     |                                                                                                        |   |               |        |           | $ | 1,010   |  |         | $ | 100     |  |            | $ | 204 |   |  | $ | 243,910 |  
|                                                 |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|Net income (loss)                                |                                                                                                        | $ | 17,069        |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|Other comprehensive income (loss):               |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|                                                 | Change in unrealized
appreciation (depreciation)
of investments, net of tax
benefit (expense) of $(23) |   |               | 43     |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |   | 
|                                                 |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|Comprehensive income (loss)                      |                                                                                                        | $ | 17,112        |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|                                                 |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|Preferred and common cash
dividends declared     |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|Exercise of stock options                        |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   | 2   |   |  |   | 1,831   |  
|Stock option exchange program
stock distribution |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|Issuance of restricted stock                     |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   | 2   |   |  |   | 1,800   |  
|Amortization of deferred
compensation            |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|Forfeitures of restricted stock                  |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   | (2  | ) |  |   | (1,774  | )
|Stock buyback                                    |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|ESOP shares committed to be
released             |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   | (93     | )
|                                                 |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  
|Balance at September 30, 2003                    |                                                                                                        |   |               |        |           | $ | 1,010   |  |         | $ | 100     |  |            | $ | 206 |   |  | $ | 245,674 |  
|                                                 |                                                                                                        |   |               |        |           |   |         |  |         |   |         |  |            |   |     |   |  |   |         |  

See Notes to Consolidated Financial Statements

5



---



##### Table of Contents



($ in thousands)

|                                                 |                                                                                                        |   |              |   |               |   |          |        |          |   |               |   |  |   |         |   |  |   |         |        |  
|------------------------------------------------ | ------------------------------------------------------------------------------------------------------ | - | ------------ | - | ------------- | - | -------- | ------ | -------- | - | ------------- | - |  | - | ------- | - |  | - | ------- | ------ | -
|                                                 |                                                                                                        |   | Deferred     |   | Accumulated   |   |          |        |          |   |               |   |  |   |         |   | 
|                                                 |                                                                                                        |   | Compensation |   | Other         |   |          |        |          |   |               |   |  |   | Total  
|                                                 |                                                                                                        |   | & Unearned   |   | Comprehensive |   | Retained |        | Treasury |   | Stockholders
|                                                 |                                                                                                        |   | ESOP Shares  |   | Income (Loss) |   | Earnings |        | Stock    |   | Equity       
|                                                 |                                                                                                        |   |              |   |               |   |          |        |          |   |              
|Balance at December 31, 2001                     |                                                                                                        | $ | (11,359      | ) |               | $ | 1,259    |        |          | $ | 179,370       |   |  | $ | (27,622 | ) |  | $ | 366,299 |       
|                                                 |                                                                                                        |   |              |   |               |   |          |        |          |   |               |   |  |   |         |   |  |   |         |       
|Net income (loss)                                |                                                                                                        |   |              |   |               |   |          |        |          |   | (24,182       | ) |  |   |         |   |  |   | (24,182 | )     
|Other comprehensive income (loss):               |                                                                                                        |   |              |   |               |   |          |        |          |   |               |   |  |   |         |   |  |   |         |       
|                                                 | Change in unrealized
appreciation (depreciation)
of investments, net of tax
benefit (expense) of $577  |   |              |   |               |   |          | (1,073 | )        |   |               |   |  |   |         |   |  |   |         | (1,073 | )
|Comprehensive income (loss)                      |                                                                                                        |   |              |   |               |   |          |        |          |   |               |   |  |   |         |   |  |   |         |       
|Preferred and common cash
dividends declared     |                                                                                                        |   |              |   |               |   |          |        |          |   | (7,983        | ) |  |   |         |   |  |   | (7,983  | )     
|Exercise of stock options                        |                                                                                                        |   |              |   |               |   |          |        |          |   |               |   |  |   |         |   |  |   | 363     |       
|Stock option exchange program
stock distribution |                                                                                                        |   |              |   |               |   |          |        |          |   |               |   |  |   | 542     |   |  |   | 542     |       
|Issuance of restricted stock                     |                                                                                                        |   | (22,557      | ) |               |   |          |        |          |   |               |   |  |   |         |   |  |   | 0       |       
|Amortization of deferred
compensation            |                                                                                                        |   | 2,842        |   |               |   |          |        |          |   |               |   |  |   |         |   |  |   | 2,842   |       
|Forfeitures of restricted stock                  |                                                                                                        |   | 1,941        |   |               |   |          |        |          |   |               |   |  |   |         |   |  |   | (338    | )     
|Stock buyback                                    |                                                                                                        |   |              |   |               |   |          |        |          |   |               |   |  |   | (15,554 | ) |  |   | (15,554 | )     
|ESOP shares committed to be released             |                                                                                                        |   | 465          |   |               |   |          |        |          |   |               |   |  |   |         |   |  |   | 397     |       
|                                                 |                                                                                                        |   |              |   |               |   |          |        |          |   |               |   |  |   |         |   |  |   |         |       
|Balance at December 31, 2002                     |                                                                                                        | $ | (28,668      | ) |               | $ | 186      |        |          | $ | 147,205       |   |  | $ | (42,634 | ) |  | $ | 321,313 |       
|                                                 |                                                                                                        |   |              |   |               |   |          |        |          |   |               |   |  |   |         |   |  |   |         |       
|Net income (loss)                                |                                                                                                        |   |              |   |               |   |          |        |          |   | 17,069        |   |  |   |         |   |  |   | 17,069  |       
|Other comprehensive income (loss):               |                                                                                                        |   |              |   |               |   |          |        |          |   |               |   |  |   |         |   |  |   |         |       
|                                                 | Change in unrealized
appreciation (depreciation)
of investments, net of tax
benefit (expense) of $(23) |   |              |   |               |   |          | 43     |          |   |               |   |  |   |         |   |  |   |         | 43     |  
|Comprehensive income (loss)                      |                                                                                                        |   |              |   |               |   |          |        |          |   |               |   |  |   |         |   |  |   |         |       
|Preferred and common cash
dividends declared     |                                                                                                        |   |              |   |               |   |          |        |          |   | (5,800        | ) |  |   |         |   |  |   | (5,800  | )     
|Exercise of stock options                        |                                                                                                        |   |              |   |               |   |          |        |          |   |               |   |  |   |         |   |  |   | 1,833   |       
|Stock option exchange program
stock distribution |                                                                                                        |   |              |   |               |   |          |        |          |   |               |   |  |   | 183     |   |  |   | 183     |       
|Issuance of restricted stock                     |                                                                                                        |   | (1,802       | ) |               |   |          |        |          |   |               |   |  |   |         |   |  |   | 0       |       
|Amortization of deferred
compensation            |                                                                                                        |   | 1,906        |   |               |   |          |        |          |   |               |   |  |   |         |   |  |   | 1,906   |       
|Forfeitures of restricted stock                  |                                                                                                        |   | 1,567        |   |               |   |          |        |          |   |               |   |  |   |         |   |  |   | (209    | )     
|Stock buyback                                    |                                                                                                        |   |              |   |               |   |          |        |          |   |               |   |  |   | (6,240  | ) |  |   | (6,240  | )     
|ESOP shares committed to be released             |                                                                                                        |   | 333          |   |               |   |          |        |          |   |               |   |  |   |         |   |  |   | 240     |       
|                                                 |                                                                                                        |   |              |   |               |   |          |        |          |   |               |   |  |   |         |   |  |   |         |       
|Balance at September 30, 2003                    |                                                                                                        | $ | (26,664      | ) |               | $ | 229      |        |          | $ | 158,474       |   |  | $ | (48,691 | ) |  | $ | 330,338 |       
|                                                 |                                                                                                        |   |              |   |               |   |          |        |          |   |               |   |  |   |         |   |  |   |         |       

See Notes to Consolidated Financial Statements

6



---



##### Table of Contents






ADVANTA CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

|                                                                                  |                                                                             |      |                   |          |   |   |         |          |  
|--------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ---- | ----------------- | -------- | - | - | ------- | -------- | -
|                                                                                  |                                                                             |      | Nine Months Ended
|                                                                                  |                                                                             |      | September 30,    
|                                                                                  |                                                                             |      |                  
|($ in thousands)                                                                  |                                                                             | 2003 |                   | 2002    
|                                                                                  |                                                                             |      |                   |         
|OPERATING ACTIVITIES  CONTINUING OPERATIONS                                      |                                                                             |      |                   |          |   |   |         |         
|Net income                                                                        |                                                                             | $    | 17,069            |          |   | $ | 9,064   |         
|Adjustments to reconcile net income to net cash provided by
operating activities: |                                                                             |      |                   |          |   |   |         |         
|                                                                                  | Loss, net, on discontinuance of mortgage and leasing
businesses, net of tax |      |                   | 1,968    |   |   |         | 8,610    |  
|                                                                                  | Investment securities losses, net                                           |      |                   | 3,674    |   |   |         | 5,379    |  
|                                                                                  | Valuation adjustments on other receivables held for sale                    |      |                   | (50      | ) |   |         | 1,085    |  
|                                                                                  | Depreciation and amortization                                               |      |                   | 6,268    |   |   |         | 6,136    |  
|                                                                                  | Provision for credit losses                                                 |      |                   | 35,274   |   |   |         | 31,462   |  
|                                                                                  | Provision for interest and fee losses                                       |      |                   | 8,787    |   |   |         | 4,364    |  
|                                                                                  | Change in deferred origination costs, net of deferred fees                  |      |                   | 11,804   |   |   |         | (2,044   | )
|                                                                                  | Change in receivables held for sale                                         |      |                   | (921,245 | ) |   |         | (189,277 | )
|                                                                                  | Proceeds from sale of receivables held for sale                             |      |                   | 866,657  |   |   |         | 162,511  |  
|                                                                                  | Change in accounts receivable from securitizations                          |      |                   | (20,274  | ) |   |         | (19,629  | )
|                                                                                  | Change in other assets and other liabilities                                |      |                   | 56,321   |   |   |         | (6,735   | )
|                                                                                  |                                                                             |      |                   |          |   |   |         |         
|Net cash provided by operating activities                                         |                                                                             |      | 66,253            |          |   |   | 10,926  |         
|                                                                                  |                                                                             |      |                   |          |   |   |         |         
|INVESTING ACTIVITIES  CONTINUING OPERATIONS                                      |                                                                             |      |                   |          |   |   |         |         
|                                                                                  | Change in federal funds sold and restricted interest-bearing
deposits       |      |                   | (148,360 | ) |   |         | 38,949   |  
|                                                                                  | Purchase of investments available for sale                                  |      |                   | (585,483 | ) |   |         | (278,707 | )
|                                                                                  | Proceeds from sales of investments available for sale                       |      |                   | 353,800  |   |   |         | 260,752  |  
|                                                                                  | Proceeds from maturing investments available for sale                       |      |                   | 167,366  |   |   |         | 81,762   |  
|                                                                                  | Change in receivables not held for sale                                     |      |                   | (67,398  | ) |   |         | (34,756  | )
|                                                                                  | Sales (purchases) of premises and equipment, net                            |      |                   | 26       |   |   |         | (4,554   | )
|                                                                                  |                                                                             |      |                   |          |   |   |         |         
|Net cash (used in) provided by investing activities                               |                                                                             |      | (280,049          | )        |   |   | 63,446  |         
|                                                                                  |                                                                             |      |                   |          |   |   |         |         
|FINANCING ACTIVITIES  CONTINUING OPERATIONS                                      |                                                                             |      |                   |          |   |   |         |         
|                                                                                  | Change in demand and savings deposits                                       |      |                   | (3,786   | ) |   |         | (3,040   | )
|                                                                                  | Proceeds from issuance of time deposits                                     |      |                   | 568,538  |   |   |         | 304,365  |  
|                                                                                  | Payments for maturing time deposits                                         |      |                   | (366,542 | ) |   |         | (283,258 | )
|                                                                                  | Proceeds from issuance of debt                                              |      |                   | 72,251   |   |   |         | 83,261   |  
|                                                                                  | Payments on redemption of debt                                              |      |                   | (72,926  | ) |   |         | (115,361 | )
|                                                                                  | Change in other borrowings                                                  |      |                   | 0        |   |   |         | (32,317  | )
|                                                                                  | Proceeds from exercise of stock options                                     |      |                   | 1,833    |   |   |         | 351      |  
|                                                                                  | Cash dividends paid                                                         |      |                   | (5,800   | ) |   |         | (6,043   | )
|                                                                                  | Stock buyback                                                               |      |                   | (6,240   | ) |   |         | (8,909   | )
|                                                                                  |                                                                             |      |                   |          |   |   |         |         
|Net cash provided by (used in) financing activities                               |                                                                             |      | 187,328           |          |   |   | (60,951 | )       
|                                                                                  |                                                                             |      |                   |          |   |   |         |         
|DISCONTINUED OPERATIONS                                                           |                                                                             |      |                   |          |   |   |         |         
|                                                                                  | Net cash provided by operating activities                                   |      |                   | 11,765   |   |   |         | 7,412    |  
|                                                                                  | Net cash provided by investing activities                                   |      |                   | 26,559   |   |   |         | 0        |  
|                                                                                  |                                                                             |      |                   |          |   |   |         |         
|Net cash provided by discontinued operations                                      |                                                                             |      | 38,324            |          |   |   | 7,412   |         
|                                                                                  |                                                                             |      |                   |          |   |   |         |         
|Net increase in cash                                                              |                                                                             |      | 11,856            |          |   |   | 20,833  |         
|Cash at beginning of period                                                       |                                                                             |      | 14,834            |          |   |   | 20,952  |         
|                                                                                  |                                                                             |      |                   |          |   |   |         |         
|Cash at end of period                                                             |                                                                             | $    | 26,690            |          |   | $ | 41,785  |         
|                                                                                  |                                                                             |      |                   |          |   |   |         |         

See Notes to Consolidated Financial Statements

7



---



##### Table of Contents






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

September 30, 2003
(Unaudited)

In these notes to consolidated financial statements, we, us, and
our refer to Advanta Corp. and its subsidiaries, unless the context
otherwise requires.

Note 1) Basis of Presentation

Advanta Corp. (collectively with its subsidiaries, Advanta) has
prepared the consolidated financial statements included herein pursuant
to the rules and regulations of the Securities and Exchange Commission.
We have condensed or omitted certain information and footnote disclosures
normally included in consolidated financial statements prepared in
accordance with accounting principles generally accepted in the United
States pursuant to such rules and regulations. In the opinion of
management, the statements include all adjustments (which include normal
recurring adjustments) required for a fair statement of financial
position, results of operations and cash flows for the interim periods
presented. These financial statements should be read in conjunction with
the financial statements and notes thereto included in our latest annual
report on Form 10-K. The results of operations for the interim periods
are not necessarily indicative of the results for the full year.

The preparation of financial statements in accordance with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ
from those estimates. Material estimates that are particularly
susceptible to significant changes in the near term relate to the
accounting for the fair value of venture capital investments, allowance
for receivable losses, securitization income, business credit card
rewards programs, litigation contingencies, income taxes, and
discontinued operations.

Certain prior period balances have been reclassified to conform to the
current period presentation.

8



---



##### Table of Contents



Statement of Financial Accounting Standards (SFAS) No. 123, Accounting
for Stock Based Compensation, as amended by SFAS No. 148, Accounting
for Stock-Based Compensation  Transition and Disclosure, defines a fair
value based method of accounting for employee stock compensation plans,
whereby compensation cost is measured at the grant date based on the
value of the award and is recognized over the service period, which is
usually the vesting period. However, it permits entities to continue to
measure compensation cost for those plans using the intrinsic value based
method of accounting prescribed by Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees, whereby compensation
cost is the excess, if any, of the quoted market price of the stock at
the grant date or other measurement date over the amount an employee must
pay to acquire the stock. We have elected to continue with the
accounting methodology in Opinion No. 25 and, as a result, have provided
pro forma disclosures of compensation expense for stock option plans, net
of related tax effects, net income and earnings per share and other
disclosures, as if the fair value based method of accounting had been
applied. Had compensation cost for these plans been determined using the
fair value method, our compensation expense for stock option plans, net
of related tax effects, net income and net income per common share would
have changed to the following pro forma amounts:

|                                                                        |             |          |   |                    |      |                   |   |       |      |      |   |        |      |  |   |       |      | 
|----------------------------------------------------------------------- | ----------- | -------- | - | ------------------ | ---- | ----------------- | - | ----- | ---- | ---- | - | ------ | ---- |  | - | ----- | ---- | 
|                                                                        |             |          |   | Three Months Ended |      | Nine Months Ended
|                                                                        |             |          |   | September 30,      |      | September 30,    
|                                                                        |             |          |   |                    |      |                  
|                                                                        |             |          |   | 2003               |      | 2002              |   | 2003  |      | 2002
|                                                                        |             |          |   |                    |      |                   |   |       |      |     
|Compensation expense for stock
option plans, net of related tax
effects |             |          |   |                    |      |                   |   |       |      |      |   |        |      |  |   |      
|                                                                        | As reported |          | $ | 0                  |      |                   | $ | 0     |      |      | $ | 0      |      |  | $ | 0     |     
|                                                                        | Pro forma   |          |   | 576                |      |                   |   | 787   |      |      |   | 1,792  |      |  |   | 2,327 |     
|                                                                        |             |          |   |                    |      |                   |   |       |      |      |   |        |      |  |   |       |     
|Net income                                                              |             |          |   |                    |      |                   |   |       |      |      |   |        |      |  |   |      
|                                                                        | As reported |          | $ | 6,851              |      |                   | $ | 6,316 |      |      | $ | 17,069 |      |  | $ | 9,064 |     
|                                                                        | Pro forma   |          |   | 6,275              |      |                   |   | 5,529 |      |      |   | 15,277 |      |  |   | 6,737 |     
|                                                                        |             |          |   |                    |      |                   |   |       |      |      |   |        |      |  |   |       |     
|Basic net income per common share                                       |             |          |   |                    |      |                   |   |       |      |      |   |        |      |  |   |      
|                                                                        | As reported |          |   |                    |      |                   |   |       |      |      |   |        |      |  |   |       |     
|                                                                        |             | Class A  |   | $                  | 0.27 |                   |   | $     | 0.24 |      |   | $      | 0.66 |  |   | $     | 0.31 | 
|                                                                        |             | Class B  |   |                    | 0.29 |                   |   |       | 0.26 |      |   |        | 0.73 |  |   |       | 0.38 | 
|                                                                        |             | Combined |   |                    | 0.28 |                   |   |       | 0.25 |      |   |        | 0.70 |  |   |       | 0.35 | 
|                                                                        | Pro forma   |          |   |                    |      |                   |   |       |      |      |   |        |      |  |   |       |     
|                                                                        |             | Class A  |   | $                  | 0.24 |                   |   | $     | 0.20 |      |   | $      | 0.58 |  |   | $     | 0.22 | 
|                                                                        |             | Class B  |   |                    | 0.27 |                   |   |       | 0.23 |      |   |        | 0.66 |  |   |       | 0.29 | 
|                                                                        |             | Combined |   |                    | 0.26 |                   |   |       | 0.22 |      |   |        | 0.63 |  |   |       | 0.26 | 
|                                                                        |             |          |   |                    |      |                   |   |       |      |      |   |        |      |  |   |       |     
|Diluted net income per common share                                     |             |          |   |                    |      |                   |   |       |      |      |   |        |      |  |   |      
|                                                                        | As reported |          |   |                    |      |                   |   |       |      |      |   |        |      |  |   |       |     
|                                                                        |             | Class A  |   | $                  | 0.26 |                   |   | $     | 0.23 |      |   | $      | 0.64 |  |   | $     | 0.30 | 
|                                                                        |             | Class B  |   |                    | 0.28 |                   |   |       | 0.25 |      |   |        | 0.71 |  |   |       | 0.36 | 
|                                                                        |             | Combined |   |                    | 0.27 |                   |   |       | 0.25 |      |   |        | 0.68 |  |   |       | 0.34 | 
|                                                                        | Pro forma   |          |   |                    |      |                   |   |       |      |      |   |        |      |  |   |       |     
|                                                                        |             | Class A  |   | $                  | 0.24 |                   |   | $     | 0.20 |      |   | $      | 0.57 |  |   | $     | 0.22 | 
|                                                                        |             | Class B  |   |                    | 0.26 |                   |   |       | 0.22 |      |   |        | 0.64 |  |   |       | 0.27 | 
|                                                                        |             | Combined |   |                    | 0.25 |                   |   |       | 0.22 |      |   |        | 0.62 |  |   |       | 0.25 | 
|                                                                        |             |          |   |                    |      |                   |   |       |      |      |   |        |      |  |   |       |     

9



---



##### Table of Contents



Note 2) Recently Issued Accounting Standards

In November 2002, the Financial Accounting Standards Board (FASB)
issued Interpretation No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others, which modifies the recognition and disclosure
requirements of a companys guarantee arrangements. Effective January 1,
2003, we adopted this interpretation, which requires a company that
enters into or modifies existing guarantee arrangements to recognize a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The adoption of this interpretation did not have a material
impact on our financial position or results of operations.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities - An Interpretation of ARB No. 51. This
interpretation requires a company to consolidate a variable interest
entity if the company has variable interests that give it a majority of
the expected losses or a majority of the expected residual returns of the
entity. The consolidation requirements apply to all variable interest
entities created after January 31, 2003. In addition, the
interpretation, as originally issued, required public companies to apply
the consolidation requirements to variable interest entities that existed
prior to February 1, 2003 as of the beginning of annual or interim
periods beginning after June 15, 2003. However, in October 2003, the
FASB deferred the implementation date of this interpretation for variable
interest entities that existed prior to February 1, 2003 to annual or
interim periods beginning after December 15, 2003. This interpretation
does not have a material effect on our financial position or results of
operations since qualifying special-purpose entities, as defined in SFAS
No. 140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities - a Replacement of FASB Statement No. 125
(SFAS 140), are exempt from the consolidation requirements of this
interpretation.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity (SFAS 150). SFAS 150 establishes standards for how an issuer
classifies and measures in its statement of financial position certain
financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that
is within its scope as a liability (or an asset in some circumstances)
because that financial instrument embodies an obligation of the issuer.
This statement is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning
of the first interim period beginning after June 15, 2003, except for
mandatorily redeemable financial instruments of nonpublic entities. Our
adoption of this standard on July 1, 2003 resulted in a reclassification
of our company-obligated mandatorily redeemable preferred securities of
subsidiary trust holding solely subordinated debentures of Advanta Corp.
(the trust preferred securities) to liabilities. In addition, payments
on the trust preferred securities, previously classified as minority
interest in income of consolidated subsidiary, are now classified as
interest expense. The adoption of this standard had no impact on net
income.

In June 2003, the FASB issued an exposure draft, Qualifying
Special-Purpose Entities and Isolation of Transferred Assets - An
Amendment of FASB Statement No. 140. The changes and clarifications in
the proposed statement would prevent derecognition by transferors that
may continue to retain effective control of transferred assets by
providing financial support other than a subordinated retained interest
or making decisions about beneficial interests. They would also help to
ensure that special-purpose entities will not qualify for the exception
to FASB Interpretation No. 46 if any party involved is in a position to
enhance or

10



---



##### Table of Contents



protect the value of its own subordinated interest by providing financial
support for or making decisions about reissuing beneficial interests.
For public entities, this proposed statement would apply prospectively to
transfers of assets occurring after the beginning of the first interim
period after the issuance of the final statement. In October 2003, the
FASB announced plans to issue a revised exposure draft. Management will
evaluate any potential impact of this revised proposed statement when it
is available.

Note 3) Investments Available for Sale

Investments available for sale consisted of the following:

|                                                 |  |                    |         |                   |  |           |         |       |  |   |         |  |  |   |         | 
|------------------------------------------------ |  | ------------------ | ------- | ----------------- |  | --------- | ------- | ----- |  | - | ------- |  |  | - | ------- | 
|                                                 |  | September 30, 2003 |         | December 31, 2002
|                                                 |  |                    |         |                  
|                                                 |  | Amortized          |         | Fair              |  | Amortized |         | Fair 
|                                                 |  | Cost               |         | Value             |  | Cost      |         | Value
|                                                 |  |                    |         |                   |  |           |         |      
|U.S. Treasury & other U.S.
Government securities |  | $                  | 93,295  |                   |  | $         | 93,372  |       |  | $ | 29,212  |  |  | $ | 29,257  | 
|State and municipal securities                   |  |                    | 1,938   |                   |  |           | 2,006   |       |  |   | 2,218   |  |  |   | 2,302   | 
|Collateralized mortgage obligations              |  |                    | 396     |                   |  |           | 397     |       |  |   | 3,408   |  |  |   | 3,436   | 
|Mortgage-backed securities                       |  |                    | 5,261   |                   |  |           | 5,352   |       |  |   | 3,852   |  |  |   | 3,950   | 
|Equity securities(1)                             |  |                    | 17,547  |                   |  |           | 17,663  |       |  |   | 20,223  |  |  |   | 20,253  | 
|Money market funds                               |  |                    | 113,024 |                   |  |           | 113,024 |       |  |   | 111,903 |  |  |   | 111,903 | 
|Other                                            |  |                    | 117     |                   |  |           | 117     |       |  |   | 121     |  |  |   | 121     | 
|                                                 |  |                    |         |                   |  |           |         |       |  |   |         |  |  |   |         | 
|Total investments available for sale             |  | $                  | 231,578 |                   |  | $         | 231,931 |       |  | $ | 170,937 |  |  | $ | 171,222 | 
|                                                 |  |                    |         |                   |  |           |         |       |  |   |         |  |  |   |         | 



|(1) |  | Includes venture capital investments of $9.4 million at September
30, 2003 and $13.5 million at December 31, 2002. The amount shown
as amortized cost represents fair value for these investments.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note 4) Receivables

Receivables on the balance sheet, including those held for sale,
consisted of the following:

|                                                      |                       |                   |         |               |         |              |         |         |         |  
|----------------------------------------------------- | --------------------- | ----------------- | ------- | ------------- | ------- | ------------ | ------- | ------- | ------- | -
|                                                      |                       |                   |         | September 30, |         | December 31,
|                                                      |                       |                   |         | 2003          |         | 2002        
|                                                      |                       |                   |         |               |         |             
|Business credit card receivables                      |                       | $                 | 533,398 |               |         | $            | 445,083 |        
|Other receivables                                     |                       |                   | 17,286  |               |         |              | 25,589  |        
|                                                      |                       |                   |         |               |         |              |         |        
|                                                      |                       | Gross receivables |         |               | 550,684 |              |         |         | 470,672 |  
|                                                      |                       |                   |         |               |         |              |         |        
|Add: Deferred origination costs, net of deferred fees |                       |                   | 19,030  |               |         |              | 30,834  |        
|Less: Allowance for receivable losses                 |                       |                   |         |               |         |              |         |        
|                                                      | Business credit cards |                   |         | (46,764       | )       |              |         | (44,466 | )      
|                                                      | Other receivables     |                   |         | (1,432        | )       |              |         | (1,693  | )      
|                                                      |                       |                   |         |               |         |              |         |        
|                                                      |                       | Total allowance   |         |               | (48,196 | )            |         |         | (46,159 | )
|                                                      |                       |                   |         |               |         |              |         |        
|Receivables, net                                      |                       | $                 | 521,518 |               |         | $            | 455,347 |        
|                                                      |                       |                   |         |               |         |              |         |        

11



---



##### Table of Contents



Note 5) Allowance for Receivable Losses

The following table presents activity in the allowance for receivable
losses for the periods presented:

|                                      |                       |                                   |         |                   |         |      |         |         |         |  
|------------------------------------- | --------------------- | --------------------------------- | ------- | ----------------- | ------- | ---- | ------- | ------- | ------- | -
|                                      |                       |                                   |         | Nine Months Ended
|                                      |                       |                                   |         | September 30,    
|                                      |                       |                                   |         |                  
|                                      |                       |                                   |         | 2003              |         | 2002
|                                      |                       |                                   |         |                   |         |     
|Beginning balance                     |                       | $                                 | 46,159  |                   |         | $    | 41,971  |        
|Provision for credit losses           |                       |                                   | 35,274  |                   |         |      | 31,462  |        
|Provision for interest and fee losses |                       |                                   | 8,787   |                   |         |      | 4,364   |        
|Gross principal charge-offs:          |                       |                                   |         |                   |         |      |         |        
|                                      | Business credit cards |                                   |         | (35,952           | )       |      |         | (31,634 | )      
|                                      | Other receivables     |                                   |         | (28               | )       |      |         | (14     | )      
|                                      |                       |                                   |         |                   |         |      |         |        
|                                      |                       | Total gross principal charge-offs |         |                   | (35,980 | )    |         |         | (31,648 | )
|                                      |                       |                                   |         |                   |         |      |         |        
|Principal recoveries:                 |                       |                                   |         |                   |         |      |         |        
|                                      | Business credit cards |                                   |         | 2,445             |         |      |         | 3,462   |        
|                                      |                       |                                   |         |                   |         |      |         |        
|Net principal charge-offs             |                       |                                   | (33,535 | )                 |         |      | (28,186 | )      
|                                      |                       |                                   |         |                   |         |      |         |        
|Interest and fee charge-offs:         |                       |                                   |         |                   |         |      |         |        
|                                      | Business credit cards |                                   |         | (8,489            | )       |      |         | (4,364  | )      
|                                      |                       |                                   |         |                   |         |      |         |        
|Ending balance                        |                       | $                                 | 48,196  |                   |         | $    | 45,247  |        
|                                      |                       |                                   |         |                   |         |      |         |        

Prior to October 1, 2002, the billing and recognition of interest and
fees was discontinued when the related receivable became 90 days past due
or when the account was classified as fraudulent, bankrupt, deceased,
hardship or credit counseling. Effective October 1, 2002, we continue to
bill and recognize interest and fees on accounts when they become 90 days
past due, and an additional allowance for receivable losses is
established for the additional billings estimated to be uncollectible
through a provision for interest and fee losses. The billing and
recognition of interest and fees is still discontinued when the account
is classified as fraudulent, bankrupt, deceased, hardship or credit
counseling. Provisions for interest and fee losses are recorded as
direct reductions to interest and fee income.

12



---



##### Table of Contents



Note 6) Securitization Activities

Accounts receivable from securitizations consisted of the following:

|                                                          |  |               |         |              |  |   |         | 
|--------------------------------------------------------- |  | ------------- | ------- | ------------ |  | - | ------- | 
|                                                          |  | September 30, |         | December 31,
|                                                          |  | 2003          |         | 2002        
|                                                          |  |               |         |             
|Retained interests in securitizations                     |  | $             | 126,998 |              |  | $ | 113,422 | 
|Accrued interest and fees on securitized
receivables, net |  |               | 56,988  |              |  |   | 56,171  | 
|Amounts due from the trust                                |  |               | 34,526  |              |  |   | 28,645  | 
|                                                          |  |               |         |              |  |   |         | 
|Total accounts receivable from securitizations            |  | $             | 218,512 |              |  | $ | 198,238 | 
|                                                          |  |               |         |              |  |   |         | 

The following represents business credit card 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 |              | Nine Months Ended
|                                                                         |                                                            |   |                    |              |                  
|                                                                         |                                                            |   | Sept. 30,          |              | Sept. 30,         |   | Sept. 30, |              | Sept. 30,
|                                                                         |                                                            |   | 2003               |              | 2002              |   | 2003      |              | 2002     
|                                                                         |                                                            |   |                    |              |                   |   |           |              |          
|Average securitized
receivables                                          |                                                            | $ | 2,124,472          |              |                   | $ | 1,784,825 |              |           | $ | 2,195,479 |              |   | $ | 1,680,251 |             
|Securitization income                                                    |                                                            |   | 28,558             |              |                   |   | 29,168    |              |           |   | 89,920    |              |   |   | 88,838    |             
|Discount accretion                                                       |                                                            |   | 4,071              |              |                   |   | 2,629     |              |           |   | 12,036    |              |   |   | 7,941     |             
|Interchange income                                                       |                                                            |   | 22,511             |              |                   |   | 18,585    |              |           |   | 66,436    |              |   |   | 51,455    |             
|Servicing revenues                                                       |                                                            |   | 9,549              |              |                   |   | 8,334     |              |           |   | 29,449    |              |   |   | 24,419    |             
|Proceeds from new
securitizations                                        |                                                            |   | 562,347            |              |                   |   | 47,511    |              |           |   | 861,723   |              |   |   | 162,511   |             
|Proceeds from collections
reinvested in
revolving-period
securitizations |                                                            |   | 1,272,035          |              |                   |   | 1,044,178 |              |           |   | 3,040,980 |              |   |   | 2,863,617 |             
|Cash flows received on
retained interests                                |                                                            |   | 93,453             |              |                   |   | 54,021    |              |           |   | 226,455   |              |   |   | 154,026   |             
|Key assumptions:                                                         |                                                            |   |                    |              |                   |   |           |              |           |   |           |              |   |   |           |             
|                                                                         | Discount rate                                              |   |                    | 12.1% - 14.6 | %                 |   |           | 9.0% - 14.3  | %         |   |           | 11.4% - 14.6 | % |   |           | 9.0% - 15.0  | %
|                                                                         | Monthly payment rate                                       |   |                    | 18.8% - 21.0 | %                 |   |           | 18.2% - 21.0 | %         |   |           | 18.8% - 21.0 | % |   |           | 18.2% - 21.0 | %
|                                                                         | Loss rate                                                  |   |                    | 8.5% -   9.4 | %                 |   |           | 9.6% - 11.5  | %         |   |           | 8.5% - 10.3  | % |   |           | 9.6% - 12.8  | %
|                                                                         | Finance charge yield, net
of interest paid to
note holders |   |                    | 14.7% - 15.0 | %                 |   |           | 14.9% - 15.2 | %         |   |           | 14.3% - 15.0 | % |   |           | 14.9% - 15.9 | %

Beginning in the fourth quarter of 2002, our interest yield assumption includes
both finance charge and late fee yield. Previously, the interest yield
assumption included only finance charge yield.

There were no purchases of delinquent accounts during the three or nine
months ended September 30, 2003 or 2002.

13



---



##### Table of Contents



The following assumptions were used in estimating the fair value of
retained interests in business credit card securitizations at September
30, 2003 and December 31, 2002 if quoted market prices were not
available. The assumptions listed represent weighted averages of
assumptions used for each securitization.

|                                                       |  |               |              |              |  |  |              |  
|------------------------------------------------------ |  | ------------- | ------------ | ------------ |  |  | ------------ | -
|                                                       |  | September 30, |              | December 31,
|                                                       |  | 2003          |              | 2002        
|                                                       |  |               |              |             
|Discount rate                                          |  |               | 12.6% - 14.6 | %            |  |  | 11.4% - 14.0 | %
|Monthly payment rate                                   |  |               | 19.9% - 21.0 | %            |  |  | 19.3% - 21.0 | %
|Loss rate                                              |  |               | 8.5% -   9.3 | %            |  |  | 9.4% - 10.3  | %
|Interest yield, net of interest
earned by note holders |  |               | 14.7         | %            |  |  | 15.0         | %

In addition to the assumptions identified above, management also
considered qualitative factors such as the impact of the current economic
environment on the performance of the business credit card receivables
sold and the potential volatility of the current market for similar
instruments in assessing the fair value of retained interests in business
credit card securitizations.

We have prepared sensitivity analyses of the valuations of retained
interests in securitizations estimated using the assumptions identified
above. The sensitivity analyses show the hypothetical effect on the fair
value of those assets of two unfavorable variations from the expected
levels for each key assumption, independently from any change in another
key assumption. Set forth below are the results of those sensitivity
analyses on the valuation at September 30, 2003.

|                                                                               |                                                                         |  |   |         |  
|------------------------------------------------------------------------------ | ----------------------------------------------------------------------- |  | - | ------- | -
|Effect on fair value of the following
hypothetical changes in key assumptions: |                                                                         |  |   |        
|                                                                               | Discount rate increased by 2%                                           |  | $ | (2,236  | )
|                                                                               | Discount rate increased by 4%                                           |  |   | (4,391  | )
|                                                                               | Monthly payment rate at 110% of base assumption                         |  |   | (1,924  | )
|                                                                               | Monthly payment rate at 125% of base assumption                         |  |   | (3,624  | )
|                                                                               | Loss rate at 110% of base assumption                                    |  |   | (5,103  | )
|                                                                               | Loss rate at 125% of base assumption                                    |  |   | (12,757 | )
|                                                                               | Interest yield, net of interest earned by note
holders, decreased by 1% |  |   | (6,039  | )
|                                                                               | Interest yield, net of interest earned by note
holders, decreased by 2% |  |   | (12,077 | )

The objective of these hypothetical analyses is to measure the
sensitivity of the fair value of the retained interests to changes in
assumptions. The methodology used to calculate the fair value in the
analyses is a discounted cash flow analysis, the same methodology used to
estimate the fair value of the retained interests when quoted market
prices are not available at each reporting date. These estimates do not
factor in the impact of simultaneous changes in other key assumptions.
The above scenarios do not reflect managements expectation regarding the
future direction of these rates, and they depict only certain
possibilities out of a large set of possible scenarios.

14



---



##### Table of Contents



Managed receivable data

Our managed business credit card receivable portfolio is comprised of
both owned and securitized business credit card receivables. Performance
on a managed receivable portfolio basis is useful and relevant because we
retain interests in the securitized receivables and, therefore, we have a
financial interest in and exposure to the performance of the securitized
receivables. Credit quality data on the managed business credit card
receivable portfolio was as follows:

|                                                                                                      |               |   |               |         |              |   |               |         |  |   |           |         | 
|----------------------------------------------------------------------------------------------------- | ------------- | - | ------------- | ------- | ------------ | - | ------------- | ------- |  | - | --------- | ------- | 
|                                                                                                      |               |   | September 30, |         | December 31, |   | September 30,
|                                                                                                      |               |   | 2003 (1)      |         | 2002 (1)     |   | 2002         
|                                                                                                      |               |   |               |         |              |   |              
|Owned business credit card receivables                                                                |               | $ | 533,398       |         |              | $ | 445,083       |         |  | $ | 445,241   |        
|Securitized business credit card receivables                                                          |               |   | 2,343,221     |         |              |   | 2,149,147     |         |  |   | 1,808,272 |        
|                                                                                                      |               |   |               |         |              |   |               |         |  |   |           |        
|Total managed receivables                                                                             |               |   | 2,876,619     |         |              |   | 2,594,230     |         |  |   | 2,253,513 |        
|                                                                                                      |               |   |               |         |              |   |               |         |  |   |           |        
|Receivables 30 days or more delinquent:                                                               |               |   |               |         |              |   |               |         |  |   |           |        
|                                                                                                      | Owned         |   |               | 30,681  |              |   |               | 23,406  |  |   |           | 28,625  | 
|                                                                                                      | Securitized   |   |               | 146,206 |              |   |               | 136,128 |  |   |           | 121,512 | 
|                                                                                                      | Total managed |   |               | 176,887 |              |   |               | 159,534 |  |   |           | 150,137 | 
|Receivables 90 days or more delinquent:                                                               |               |   |               |         |              |   |               |         |  |   |           |        
|                                                                                                      | Owned         |   |               | 14,225  |              |   |               | 11,959  |  |   |           | 12,883  | 
|                                                                                                      | Securitized   |   |               | 67,795  |              |   |               | 69,335  |  |   |           | 54,389  | 
|                                                                                                      | Total managed |   |               | 82,020  |              |   |               | 81,294  |  |   |           | 67,272  | 
|Nonaccrual receivables:                                                                               |               |   |               |         |              |   |               |         |  |   |           |        
|                                                                                                      | Owned         |   |               | 9,167   |              |   |               | 4,729   |  |   |           | 21,178  | 
|                                                                                                      | Securitized   |   |               | 44,824  |              |   |               | 27,688  |  |   |           | 89,389  | 
|                                                                                                      | Total managed |   |               | 53,991  |              |   |               | 32,417  |  |   |           | 110,567 | 
|Accruing receivables past due 90 days or more:                                                        |               |   |               |         |              |   |               |         |  |   |           |        
|                                                                                                      | Owned         |   |               | 12,772  |              |   |               | 10,535  |  |   |           | 0       | 
|                                                                                                      | Securitized   |   |               | 60,755  |              |   |               | 61,045  |  |   |           | 0       | 
|                                                                                                      | Total managed |   |               | 73,527  |              |   |               | 71,580  |  |   |           | 0       | 
|Net principal charge-offs for the nine months
ended September 30 and twelve months ended
December 31: |               |   |               |         |              |   |               |         |  |   |           |        
|                                                                                                      | Owned         |   |               | 33,507  |              |   |               | 37,400  |  |   |           | 28,172  | 
|                                                                                                      | Securitized   |   |               | 135,648 |              |   |               | 156,282 |  |   |           | 117,345 | 
|                                                                                                      | Total managed |   |               | 169,155 |              |   |               | 193,682 |  |   |           | 145,517 | 



|(1) |  | See Note 5 for a discussion of the change in income billing
practice effective October 1, 2002.
|--- |  | -----------------------------------------------------------------------------------------------

Note 7) Selected Balance Sheet Information

Other assets consisted of the following:

|                                                           |  |               |         |              |  |   |         | 
|---------------------------------------------------------- |  | ------------- | ------- | ------------ |  | - | ------- | 
|                                                           |  | September 30, |         | December 31,
|                                                           |  | 2003          |         | 2002        
|                                                           |  |               |         |             
|Current and deferred income taxes, net                     |  | $             | 78,013  |              |  | $ | 84,684  | 
|Amounts due from transfer of consumer credit
card business |  |               | 70,545  |              |  |   | 70,545  | 
|Investment in Fleet Credit Card Services, L.P.             |  |               | 35,497  |              |  |   | 34,000  | 
|Cash surrender value of insurance contracts                |  |               | 23,625  |              |  |   | 24,437  | 
|Intangible assets                                          |  |               | 3,824   |              |  |   | 3,085   | 
|Other assets                                               |  |               | 71,424  |              |  |   | 60,907  | 
|                                                           |  |               |         |              |  |   |         | 
|Total other assets                                         |  | $             | 282,928 |              |  | $ | 277,658 | 
|                                                           |  |               |         |              |  |   |         | 

15



---



##### Table of Contents



Other liabilities consisted of the following:

|                                        |  |               |         |              |  |   |         | 
|--------------------------------------- |  | ------------- | ------- | ------------ |  | - | ------- | 
|                                        |  | September 30, |         | December 31,
|                                        |  | 2003          |         | 2002        
|                                        |  |               |         |             
|Accounts payable and accrued expenses   |  | $             | 29,574  |              |  | $ | 33,486  | 
|Business credit card rewards            |  |               | 23,103  |              |  |   | 16,416  | 
|Accrued interest payable                |  |               | 20,081  |              |  |   | 5,641   | 
|Amounts due to the securitization trust |  |               | 4,320   |              |  |   | 3,255   | 
|Other (1)                               |  |               | 203,847 |              |  |   | 171,588 | 
|                                        |  |               |         |              |  |   |         | 
|Total other liabilities                 |  | $             | 280,925 |              |  | $ | 230,386 | 
|                                        |  |               |         |              |  |   |         | 



|(1) |  | A substantial portion of other liabilities represents our litigation
reserves.
|--- |  | ------------------------------------------------------------------------------

Note 8) Deposits

Deposit accounts consisted of the following:

|                                    |  |               |         |              |  |   |         | 
|----------------------------------- |  | ------------- | ------- | ------------ |  | - | ------- | 
|                                    |  | September 30, |         | December 31,
|                                    |  | 2003          |         | 2002        
|                                    |  |               |         |             
|Demand deposits                     |  | $             | 3,964   |              |  | $ | 6,561   | 
|Money market savings                |  |               | 1,191   |              |  |   | 2,380   | 
|Time deposits of $100,000 or less   |  |               | 554,873 |              |  |   | 441,611 | 
|Time deposits of more than $100,000 |  |               | 358,928 |              |  |   | 263,476 | 
|                                    |  |               |         |              |  |   |         | 
|Total deposits                      |  | $             | 918,956 |              |  | $ | 714,028 | 
|                                    |  |               |         |              |  |   |         | 

Time deposit maturities were as follows at September 30, 2003:

|                        |  |   |         | 
|----------------------- |  | - | ------- | 
|Year Ended December 31, |  |   |         | 
|2003                    |  | $ | 285,631 | 
|2004                    |  |   | 552,430 | 
|2005                    |  |   | 65,291  | 
|2006                    |  |   | 9,839   | 
|2007                    |  |   | 610     | 

Note 9) Commitments and Contingencies

On January 22, 1999, Fleet Financial Group, Inc. (Fleet) and certain of
its affiliates filed a lawsuit against Advanta Corp. and certain of its
subsidiaries in Delaware Chancery Court. Fleets allegations, which we
deny, center around Fleets assertions that we failed to complete certain
post-closing adjustments to the value of the assets and liabilities we
contributed to Fleet Credit Card Services, L.P. in connection with the
transfer of our consumer credit card business to Fleet Credit Card
Services, L.P. (the Consumer Credit Card Transaction) in 1998. We
filed an answer to the complaint, and we also filed a countercomplaint
against Fleet for damages we believe have been caused by certain actions
of Fleet. As a result of related litigation with Fleet, $70.1 million of
our reserves in connection with this litigation were funded in an escrow
account in February 2001. On January 22, 2003, the trial court issued a
decision ruling on all but one of the remaining issues, and ordered
further briefing on the remaining outstanding issue. In the year ended
December 31, 2002, we recognized a $43.0 million pretax loss on the
transfer of our consumer credit card business, representing the estimated
impact of implementing the courts decisions. This amount represented
the amount in excess of the reserves we had been carrying for the
litigation, which was based on our expectations of the outcome of the
litigation. In 2003, we provided for interest on the liability at a rate
consistent with the estimation methodology used effective December 31,
2002. On November 7, 2003, the court ruled on the remaining
outstanding issue,
the method for calculating the interest to be awarded. The court has ordered the parties to submit revised calculations
in accordance with this ruling before it issues a judgment.
After considering the

16



---



##### Table of Contents



November 2003 ruling, we estimate that our reserves at September 30, 2003
were adequate. The ultimate resolution of any issues that may be
appealed could reduce or eliminate the December 2002 charge to our
earnings, although there can be no assurance as to the potential benefit,
if any, to earnings at this time.

In an ongoing element of Fleets disputes with us, Fleet has claimed $508
million of tax deductions from its partnership with us in connection with
the Consumer Credit Card Transaction, which are required under the law to
be allocated solely to Advanta. As required, we reported these
deductions on our 1998 corporate tax return. However, we have not used
or booked the benefit from most of these deductions because for tax
purposes we have a very substantial net operating loss carryforward. The
deductions are attributable to deductions for bad debt reserves that we
expensed in computing our book income or loss before the Consumer Credit
Card Transaction, but which were not deductible by Advanta for tax
purposes until after the closing of the transaction in 1998. The tax law
requires built in losses like these to be deducted by the party who
contributed the assets to the partnership, in this case, Advanta. The
Internal Revenue Service agents who have examined the returns at issue
have to ensure that both parties do not obtain the deductions and
therefore, following standard practice, proposed to disallow the
deductions to both parties until there is a final resolution. The
deductions, as well as the allocation of a gain from the sale of a
partnership asset of approximately $47 million, are now before the IRS
Regional Office of Appeals.

On January 15, 2003, Fleet filed a complaint in Rhode Island Superior
Court seeking a declaratory judgment that we indemnify Fleet under the
applicable partnership agreement for any damage Fleet incurs by not being
entitled to the $508 million of tax deductions. Fleet is also seeking a
declaratory judgment that it should not indemnify us for any damages that
we incur due to any allocation to Advanta of the $47 million gain on the
sale of a partnership asset. Fleets claim for indemnification appears
to be brought by Fleet in the hope that we will advise the IRS that we
will agree with a substantial part of Fleets tax position. On February
28, 2003, we filed a motion to dismiss the complaint. On August 13, 2003,
the court denied the motion to dismiss on procedural grounds. We
answered the complaint and filed a counterclaim against Fleet on
September 19, 2003. We believe that the indemnification provision in the
partnership agreement does not indemnify Fleet for damages incurred
related to the tax deductions and that the lawsuit is frivolous, having
no legal basis whatsoever. We do not expect this lawsuit or the tax
issues discussed above to have a material adverse effect on our financial
condition or results of operations.

On December 5, 2000, a former executive of Advanta obtained a jury
verdict against us in the United States District Court for the Eastern
District of Pennsylvania, in connection with various claims against
Advanta related to the executives termination of employment. In
September 2001, the District Court Judge issued orders denying both
parties post-trial motions and a judgment in the amount of approximately
$6 million was entered against Advanta. On July 8, 2002, the Court of
Appeals partially reversed the judgment. On May 6, 2003, the District
Court entered an amended judgment in the amount of approximately $4.7
million plus interest from December 7, 2000, and on May 12, 2003, we paid
the amended judgment in full. On May 29, 2003, the parties settled the
former executives claims for attorneys fees and costs, resulting in the
resolution of this litigation. The amended judgment and settlement
payments had no impact on our operating results, due to the reserves we
had established in connection with this litigation.

On July 26, 2001, Chase Manhattan Mortgage Corporation (Chase) filed a
complaint against Advanta Corp. and certain of its subsidiaries in the
United States District Court for the District of Delaware alleging, among
other things, that we breached

17



---



##### Table of Contents



our contract with Chase in connection with the Mortgage Transaction.
Chase claims that we misled Chase concerning the value of certain of the
assets sold to Chase. In September 2001, we filed an answer to the
complaint in which we denied all of the substantive allegations of the
complaint and asserted a counterclaim against Chase for breach of
contract relating to funds owed by Chase to us in connection with the
transaction. The trial was originally scheduled to begin in January
2004. The parties extended the discovery period and in the second
quarter of 2003, in addition to the parties further extending the
discovery period, the scheduled date for trial to begin was moved to
April 2004. The discovery period has ended. In September 2003, we filed
a motion for summary judgment with the court with respect to all claims
raised in Chases complaint and Chase filed a motion for partial summary
judgment with respect to certain of its claims. We believe that the
lawsuit is without merit and will vigorously defend Advanta in this
litigation. We do not expect this lawsuit to have any impact on our
continuing business and, based on the complete lack of merit, we do not
anticipate that the lawsuit will have a material adverse impact on our
financial position or future operating results.

In addition to the cases described above, Advanta Corp. and its
subsidiaries are involved in class action lawsuits, other litigation,
claims and legal proceedings arising in the ordinary course of business
or discontinued operations, including litigation arising from our
operation of the mortgage business prior to our exit from that business
in the first quarter of 2001.

Management believes that the aggregate loss, if any, resulting from these
actions will not have a material adverse effect on our financial position
or results of our operations based on the level of litigation reserves we
have established and our current expectations regarding the ultimate
resolutions of these existing actions. Our litigation reserves are
estimated based on the status of litigation and our assessment of the
ultimate resolution of each action after consultation with our attorneys.
However, due to the inherent uncertainty in litigation and since the
ultimate resolutions of our litigation, claims and other legal
proceedings are influenced by factors outside of our control, it is
reasonably possible that our estimated liability under these proceedings
may change or that actual results will differ from our estimates.

In February 2003, we entered into an operating lease agreement for
additional office space to be used for certain business card operations
and general business purposes. The minimum lease payments on the lease
are $243 thousand for the fourth quarter of 2003, $1.4 million in the
year 2004, $1.7 million in the year 2005, $1.8 million in each of the
years 2006 through 2008, $1.9 million in the year 2009 and $1.7 million
in the year 2010.

18



---



##### Table of Contents



Note 10) Regulatory Agreements

In 2000, Advanta Bank Corp. entered into agreements with its bank
regulatory agencies, primarily relating to the banks subprime lending
operations. These agreements imposed temporary deposit growth limits at
Advanta Bank Corp. and required prior regulatory approval of cash
dividends. In April 2002, the agreements were removed and, as a result,
the restrictions in the agreements on deposit growth and payment of cash
dividends were no longer applicable. In connection with removing the
agreements, Advanta Bank Corp. reached an understanding with its
regulators, reflecting continued progress in our ongoing efforts to
enhance Advanta Bank Corp.s practices and procedures. Effective October
2002, the understanding was revised. The revised understanding replaced
the provisions of the prior understanding and provided for the bank to
enhance certain of its internal planning and monitoring processes.
Effective October 2003, the regulatory understanding that Advanta Bank
Corp. reached with its regulators in October 2002 was removed by Advanta
Bank Corp.s state and federal bank regulators. This action brings to a
conclusion the agreements and understandings between Advanta Bank Corp.
and its regulators since 2000.

Note 11) Capital Stock

The Board of Directors of Advanta Corp. has authorized management to
purchase up to 3.0 million shares of Advanta Corp. common stock. We
repurchased 693,300 shares of our Class B Common Stock in the year ended
December 31, 2001 and 1,554,759 shares of our Class B Common Stock in the
year ended December 31, 2002. In the nine months ended September 30,
2003, we repurchased 354,132 shares of our Class A Common Stock and
315,250 shares of our Class B Common Stock.

Cash dividends per share of common stock declared during the three months
ended September 30, 2003 and 2002 were $0.063 for Class A Common Stock
and $0.076 for Class B Common Stock. Cash dividends per share of common
stock declared during the nine months ended September 30, 2003 and 2002
were $0.189 for Class A Common Stock and $0.227 for Class B Common Stock.

19



---



##### Table of Contents



Note 12) Segment Information

|                                                |  |          |         |         |  |           |        |       |  |   |           |   |  |   |           | 
|----------------------------------------------- |  | -------- | ------- | ------- |  | --------- | ------ | ----- |  | - | --------- | - |  | - | --------- | 
|                                                |  | Advanta  |         |         |  |           |        |       |  |   |           |   |  |  
|                                                |  | Business |         | Venture |  |           |        |       |  |   |           |  
|                                                |  | Cards    |         | Capital |  | Other (1) |        | Total
|                                                |  |          |         |         |  |           |        |      
|Three months ended September 30, 2003           |  |          |         |         |  |           |        |       |  |   |           |   |  |   |           | 
|Interest income                                 |  | $        | 31,597  |         |  | $         | 0      |       |  | $ | 1,969     |   |  | $ | 33,566    | 
|Interest expense                                |  |          | 12,339  |         |  |           | 117    |       |  |   | 2,729     |   |  |   | 15,185    | 
|Noninterest revenues (losses), net              |  |          | 65,054  |         |  |           | (1,985 | )     |  |   | 1,015     |   |  |   | 64,084    | 
|Pretax income (loss) from continuing
operations |  |          | 13,785  |         |  |           | (2,645 | )     |  |   | 0         |   |  |   | 11,140    | 
|Total assets                                    |  |          | 748,179 |         |  |           | 10,380 |       |  |   | 1,190,968 |   |  |   | 1,949,527 | 
|                                                |  |          |         |         |  |           |        |       |  |   |           |   |  |   |           | 
|Three months ended September 30, 2002           |  |          |         |         |  |           |        |       |  |   |           |   |  |   |           | 
|Interest income                                 |  | $        | 21,082  |         |  | $         | 0      |       |  | $ | 2,837     |   |  | $ | 23,919    | 
|Interest expense                                |  |          | 8,978   |         |  |           | 176    |       |  |   | 1,898     |   |  |   | 11,052    | 
|Noninterest revenues (losses), net              |  |          | 61,652  |         |  |           | (3,505 | )     |  |   | (126      | ) |  |   | 58,021    | 
|Pretax income (loss) from continuing
operations |  |          | 16,594  |         |  |           | (4,369 | )     |  |   | (1,955    | ) |  |   | 10,270    | 
|Total assets                                    |  |          | 690,216 |         |  |           | 14,779 |       |  |   | 907,831   |   |  |   | 1,612,826 | 
|                                                |  |          |         |         |  |           |        |       |  |   |           |   |  |   |           | 
|Nine months ended September 30, 2003            |  |          |         |         |  |           |        |       |  |   |           |   |  |   |           | 
|Interest income                                 |  | $        | 75,358  |         |  | $         | 1      |       |  | $ | 6,648     |   |  | $ | 82,007    | 
|Interest expense                                |  |          | 34,342  |         |  |           | 392    |       |  |   | 4,833     |   |  |   | 39,567    | 
|Noninterest revenues (losses), net              |  |          | 196,286 |         |  |           | (3,837 | )     |  |   | 3,258     |   |  |   | 195,707   | 
|Pretax income (loss) from continuing
operations |  |          | 37,409  |         |  |           | (6,455 | )     |  |   | 0         |   |  |   | 30,954    | 
|                                                |  |          |         |         |  |           |        |       |  |   |           |   |  |   |           | 
|Nine months ended September 30, 2002            |  |          |         |         |  |           |        |       |  |   |           |   |  |   |           | 
|Interest income                                 |  | $        | 67,218  |         |  | $         | 2      |       |  | $ | 9,340     |   |  | $ | 76,560    | 
|Interest expense                                |  |          | 26,524  |         |  |           | 562    |       |  |   | 9,445     |   |  |   | 36,531    | 
|Noninterest revenues (losses), net              |  |          | 180,878 |         |  |           | (6,115 | )     |  |   | (110      | ) |  |   | 174,653   | 
|Pretax income (loss) from continuing
operations |  |          | 44,900  |         |  |           | (8,583 | )     |  |   | (7,579    | ) |  |   | 28,738    | 
|                                                |  |          |         |         |  |           |        |       |  |   |           |   |  |   |           | 



|(1) |  | Other includes investment and other activities not attributable to reportable
segments. Total assets in the Other segment include assets of discontinued operations.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

20



---



##### Table of Contents



Note 13) Selected Income Statement Information

Other Revenues

|                                                         |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |        |  
|-------------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------- | - |  | - | ------ | -
|                                                         |  | Three Months Ended |        | Nine Months Ended
|                                                         |  | September 30,      |        | September 30,    
|                                                         |  |                    |        |                  
|                                                         |  | 2003               |        | 2002              |  | 2003 |        | 2002
|                                                         |  |                    |        |                   |  |      |        |     
|Interchange income                                       |  | $                  | 30,805 |                   |  | $    | 24,237 |      |  | $ | 86,232  |   |  | $ | 67,167 |  
|Business credit card rewards                             |  |                    | (7,756 | )                 |  |      | (2,837 | )    |  |   | (19,422 | ) |  |   | (7,864 | )
|Investment securities losses, net                        |  |                    | (1,908 | )                 |  |      | (3,286 | )    |  |   | (3,674  | ) |  |   | (5,379 | )
|Balance transfer fees                                    |  |                    | 1,279  |                   |  |      | 583    |      |  |   | 3,495   |   |  |   | 1,363  |  
|Cash advance fees                                        |  |                    | 878    |                   |  |      | 773    |      |  |   | 2,249   |   |  |   | 2,464  |  
|Other fee revenues                                       |  |                    | 1,892  |                   |  |      | 1,391  |      |  |   | 4,939   |   |  |   | 4,509  |  
|Valuation adjustments on other
receivables held for sale |  |                    | (400   | )                 |  |      | (485   | )    |  |   | 50      |   |  |   | (1,085 | )
|Other                                                    |  |                    | 1,187  |                   |  |      | 143    |      |  |   | 2,469   |   |  |   | 221    |  
|                                                         |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |        |  
|Total other revenues, net                                |  | $                  | 25,977 |                   |  | $    | 20,519 |      |  | $ | 76,338  |   |  | $ | 61,396 |  
|                                                         |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |        |  

We offer bonus mile and cash-back reward programs with certain of our business
credit cards. Eligible cardholders earn points for bonus mile rewards or
cash-back rewards based on net purchases charged on their business credit card
account. The cost of future reward redemptions are estimated and recorded at
the time bonus mile points or cash-back rewards are earned by the cardholder.
These costs of future reward redemptions are recorded as a reduction of other
revenues. The estimate of the percentage of cardholders that will ultimately
claim rewards varies depending on the structure of the rewards program.

Through the second quarter of 2002, we estimated that 80% to 100% of
cardholders for all programs would ultimately claim rewards. In the third
quarter of 2002, we revised our estimate of the percentage of cardholders that
will ultimately claim bonus mile rewards based on experience for that program
life-to-date. After this change in the third quarter of 2002, our estimated
range of cardholders that would ultimately claim rewards for all programs was
70% to 100%. In the third quarter of 2003, we again revised our estimate of
the percentage of cardholders that will ultimately claim rewards based on
experience for those programs life-to-date. This change in the third quarter
of 2003 resulted in an estimated range of cardholders that will ultimately
claim rewards for all programs of 61% to 97%. In addition, in the first
quarter of 2003, we changed the redemption terms of certain bonus mile reward
programs resulting in a decrease in the anticipated costs of future reward
redemptions. The approximate impacts of the changes in the estimated
percentage of cardholders that will ultimately claim rewards and other changes
in anticipated costs of future period reward redemptions for the bonus reward
liability in the three and nine months ended September 30, 2003 and 2002 were
as follows:

|                                  |  |                    |       |                   |  |      |      |      |  |   |       |  |  |   |       | 
|--------------------------------- |  | ------------------ | ----- | ----------------- |  | ---- | ---- | ---- |  | - | ----- |  |  | - | ----- | 
|                                  |  | Three Months Ended |       | Nine Months Ended
|                                  |  | September 30,      |       | September 30,    
|                                  |  |                    |       |                  
|                                  |  | 2003               |       | 2002              |  | 2003 |      | 2002
|                                  |  |                    |       |                   |  |      |      |     
|Increase in other revenues        |  | $                  | 1,600 |                   |  | $    | 700  |      |  | $ | 2,800 |  |  | $ | 1,300 | 
|Increase in net income            |  |                    | 980   |                   |  |      | 430  |      |  |   | 1,720 |  |  |   | 800   | 
|Amount per combined diluted share |  | $                  | 0.04  |                   |  | $    | 0.02 |      |  | $ | 0.07  |  |  | $ | 0.03  | 

21



---



##### Table of Contents



Operating Expenses

|                                                |  |                    |        |                   |  |      |        |      |  |   |         |  |  |   |         | 
|----------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------- |  |  | - | ------- | 
|                                                |  | Three Months Ended |        | Nine Months Ended
|                                                |  | September 30,      |        | September 30,    
|                                                |  |                    |        |                  
|                                                |  | 2003               |        | 2002              |  | 2003 |        | 2002
|                                                |  |                    |        |                   |  |      |        |     
|Salaries and employee benefits                  |  | $                  | 17,561 |                   |  | $    | 16,645 |      |  | $ | 54,443  |  |  | $ | 50,309  | 
|Amortization of deferred
origination costs, net |  |                    | 12,501 |                   |  |      | 11,845 |      |  |   | 39,658  |  |  |   | 36,277  | 
|External processing                             |  |                    | 4,951  |                   |  |      | 4,204  |      |  |   | 14,576  |  |  |   | 12,463  | 
|Marketing                                       |  |                    | 3,882  |                   |  |      | 2,730  |      |  |   | 11,253  |  |  |   | 8,294   | 
|Professional fees                               |  |                    | 3,227  |                   |  |      | 2,675  |      |  |   | 9,945   |  |  |   | 9,922   | 
|Equipment                                       |  |                    | 2,597  |                   |  |      | 2,683  |      |  |   | 8,524   |  |  |   | 7,750   | 
|Occupancy                                       |  |                    | 2,126  |                   |  |      | 1,647  |      |  |   | 6,388   |  |  |   | 4,945   | 
|Credit                                          |  |                    | 1,329  |                   |  |      | 1,308  |      |  |   | 3,511   |  |  |   | 4,603   | 
|Insurance                                       |  |                    | 1,293  |                   |  |      | 873    |      |  |   | 3,020   |  |  |   | 1,987   | 
|Fraud                                           |  |                    | 939    |                   |  |      | 807    |      |  |   | 2,890   |  |  |   | 2,242   | 
|Postage                                         |  |                    | 897    |                   |  |      | 840    |      |  |   | 2,701   |  |  |   | 2,462   | 
|Telephone                                       |  |                    | 846    |                   |  |      | 1,152  |      |  |   | 2,692   |  |  |   | 2,890   | 
|Other                                           |  |                    | 2,613  |                   |  |      | 1,568  |      |  |   | 7,878   |  |  |   | 3,678   | 
|                                                |  |                    |        |                   |  |      |        |      |  |   |         |  |  |   |         | 
|Total operating expenses                        |  | $                  | 54,762 |                   |  | $    | 48,977 |      |  | $ | 167,479 |  |  | $ | 147,822 | 
|                                                |  |                    |        |                   |  |      |        |      |  |   |         |  |  |   |         | 

We engage unrelated third parties to solicit and originate business credit card
account relationships. Amounts paid to third parties to acquire business
credit card accounts and certain other origination costs are deferred and
netted against any related business credit card origination fee, and the net
amount is amortized on a straight-line basis over the privilege period of one
year. These costs represent the cost of acquiring business credit card account
relationships, and the net amortization is included in operating expenses.
Effective July 1, 2002, we refined our estimate of the timing of when accounts
are acquired to better match the resulting estimated period of benefit to the
amortization of deferred acquisition costs. The impact of this change in
estimate in the three and nine months ended September 30, 2002 was a decrease
in operating expenses of $535 thousand resulting in an increase in net income
of $329 thousand or $0.01 per diluted share.

22



---



##### Table of Contents



Note 14) Discontinued Operations

The components of the gain (loss) on discontinuance of our mortgage and
leasing businesses for the nine months ended September 30, 2003 and 2002
were as follows:

|                                                                             |  |                    |        |                    |  |          |      |          |  |   |         |         |  |   |        |  
|---------------------------------------------------------------------------- |  | ------------------ | ------ | ------------------ |  | -------- | ---- | -------- |  | - | ------- | ------- |  | - | ------ | -
|                                                                             |  | Nine Months Ended 
|                                                                             |  |                   
|                                                                             |  | September 30, 2003 |        | September 30, 2002
|                                                                             |  |                    |        |                   
|                                                                             |  |                    |        |                    |  | Advanta  |      |          |  |   |         | Advanta
|                                                                             |  | Advanta            |        | Leasing            |  | Advanta  |      | Leasing 
|                                                                             |  | Mortgage           |        | Services           |  | Mortgage |      | Services
|                                                                             |  |                    |        |                    |  |          |      |         
|Pretax gain (loss) on
discontinuance of mortgage and leasing businesses      |  | $                  | (2,600 | )                  |  | $        | (600 | )        |  | $ | (25,300 | )       |  | $ | 11,300 |  
|Income tax (expense) benefit                                                 |  |                    | 1,001  |                    |  |          | 231  |          |  |   | 9,740   |         |  |   | (4,350 | )
|                                                                             |  |                    |        |                    |  |          |      |          |  |   |         |         |  |   |        |  
|Gain (loss) on
discontinuance of mortgage
and leasing businesses, net
of tax |  | $                  | (1,599 | )                  |  | $        | (369 | )        |  | $ | (15,560 | )       |  | $ | 6,950  |  
|                                                                             |  |                    |        |                    |  |          |      |          |  |   |         |         |  |   |        |  

In the nine months ended September 30, 2003, we recorded a $2.6 million
pretax loss on discontinuance of the mortgage business for an increase in
our estimated future costs of mortgage business-related contingent
liabilities, due primarily to a lengthening of the anticipated timeframe
of the resolution for those contingent liabilities, including an
extension of the discovery process and a delay in the scheduled trial
date in the litigation with Chase Manhattan Mortgage Corporation.

In the nine months ended September 30, 2002, we revised our estimate of
costs related to our exit from the mortgage business by $25.3 million,
comprised of $7.5 million for a litigation settlement related to a
mortgage loan servicing agreement termination fee collected in December
2000, and $17.8 million primarily related to an increase in our estimated
future costs of mortgage business-related contingent liabilities. The
$17.8 million charge related primarily to an increase in our estimated
2002 and future costs of mortgage business-related contingent liabilities
in connection with (1) contingent liabilities and litigation costs
arising from the operation of the mortgage business prior to the Mortgage
Transaction that were not assumed by the buyer, and (2) costs related to
Advantas litigation with Chase Manhattan Mortgage Corporation in
connection with the Mortgage Transaction. The change in estimate
reflected the legal and consulting fees and other costs that we expected
to incur based on the levels of contingent liabilities and expense rates,
and considered the status of the discovery process associated with the
Mortgage Transaction litigation.

In the nine months ended September 30, 2003, we adjusted our estimate of
operating results of the leasing segment over the remaining life of the
lease portfolio and recorded a $600 thousand pretax loss on leasing
discontinuance. The decrease in estimated operating results was
principally associated with an unfavorable sales tax assessment,
partially offset by favorable credit performance on the leasing
portfolio.

In the nine months ended September 30, 2002, we recorded an $11.3 million
pretax gain on leasing discontinuance representing a revision in the
estimated operating results of the leasing segment over the remaining
life of the lease portfolio due primarily to favorable credit
performance. The leasing portfolio performed favorably as compared to
the expectations and assumptions established in 2001. This improvement
was the result of successfully obtaining a replacement vendor to

23



---



##### Table of Contents



service leased equipment for a former leasing vendor that had filed for
bankruptcy protection, and operational improvements in the leasing
collections area.

Per share data was as follows:

|                                                                                                             |  |                                 |       |                 |  |      |       |      |  |   |       |   |  |   |      | 
|------------------------------------------------------------------------------------------------------------ |  | ------------------------------- | ----- | --------------- |  | ---- | ----- | ---- |  | - | ----- | - |  | - | ---- | 
|                                                                                                             |  | Nine Months Ended September 30,
|                                                                                                             |  |                                
|                                                                                                             |  | Advanta                         |       | Advanta Leasing
|                                                                                                             |  | Mortgage                        |       | Services       
|                                                                                                             |  |                                 |       |                
|                                                                                                             |  | 2003                            |       | 2002            |  | 2003 |       | 2002
|                                                                                                             |  |                                 |       |                 |  |      |       |     
|Basic gain (loss), net, on discontinuance of mortgage and leasing
businesses, net of tax, per common share   | 
|Class A                                                                                                      |  | $                               | (0.07 | )               |  | $    | (0.62 | )    |  | $ | (0.02 | ) |  | $ | 0.28 | 
|Class B                                                                                                      |  |                                 | (0.07 | )               |  |      | (0.62 | )    |  |   | (0.02 | ) |  |   | 0.28 | 
|Combined                                                                                                     |  |                                 | (0.07 | )               |  |      | (0.62 | )    |  |   | (0.02 | ) |  |   | 0.28 | 
|Diluted gain (loss), net, on discontinuance of mortgage and leasing
businesses, net of tax, per common share | 
|Class A                                                                                                      |  | $                               | (0.06 | )               |  | $    | (0.59 | )    |  | $ | (0.01 | ) |  | $ | 0.27 | 
|Class B                                                                                                      |  |                                 | (0.06 | )               |  |      | (0.59 | )    |  |   | (0.01 | ) |  |   | 0.27 | 
|Combined                                                                                                     |  |                                 | (0.06 | )               |  |      | (0.59 | )    |  |   | (0.01 | ) |  |   | 0.27 | 

The components of assets of discontinued operations, net, were as follows:

|                                       |  |               |        |              |  |   |         |  
|-------------------------------------- |  | ------------- | ------ | ------------ |  | - | ------- | -
|                                       |  | September 30, |        | December 31,
|                                       |  | 2003          |        | 2002        
|                                       |  |               |        |             
|Lease receivables, net                 |  | $             | 91,723 |              |  | $ | 40,064  |  
|Other assets                           |  |               | 1,464  |              |  |   | 91,686  |  
|Liabilities                            |  |               | (4,768 | )            |  |   | (4,638  | )
|                                       |  |               |        |              |  |   |         |  
|Assets of discontinued operations, net |  | $             | 88,419 |              |  | $ | 127,112 |  
|                                       |  |               |        |              |  |   |         |  

We are continuing to service the existing lease portfolio. Based on the
terms of the remaining leases, we expect assets of discontinued operations
to be less than $10 million by June 2005 and the winddown of the lease
portfolio to be complete by January 2007. In the nine months ended
September 30, 2003, we exercised clean-up call options on the remaining
leasing securitization transactions with $94 million of securitized leases
outstanding, resulting in an increase in on-balance sheet lease
receivables and a decrease in retained interests in leasing
securitizations. As a result of exercising these clean-up call options,
we have no outstanding securitized leases and no retained interests in
leasing securitizations at September 30, 2003. At December 31, 2002,
there were $152 million of securitized leases outstanding, and we had
retained interests in leasing securitizations of $57 million. The fair
value of the retained interests in leasing securitizations at December 31,
2002 was estimated using a 12% discount rate on future cash flows, loss
rates ranging from 5.0% to 5.4% and a weighted average life of 0.9 years.
Both on-balance sheet lease receivables and retained interests in leasing
securitizations are classified as assets of discontinued operations on the
consolidated balance sheets.

In the second quarter of 2003, we sold two buildings formerly used in our
mortgage business that were classified as assets from discontinued
operations on the consolidated balance sheets. Proceeds from the sale
were approximately $27 million.

24



---



##### Table of Contents



Note 15) Calculation of Earnings Per Share

The following table shows the calculation of basic earnings per common
share and diluted earnings per common share.

|                                                                            |                                  |                           |       |                    |        |                   |       |        |        |      |        |        |        |   |        |        |        | 
|--------------------------------------------------------------------------- | -------------------------------- | ------------------------- | ----- | ------------------ | ------ | ----------------- | ----- | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                                                            |                                  |                           |       | Three Months Ended |        | Nine Months Ended
|                                                                            |                                  |                           |       | September 30,      |        | September 30,    
|                                                                            |                                  |                           |       |                    |        |                  
|                                                                            |                                  |                           |       | 2003               |        | 2002              |       | 2003   |        | 2002
|                                                                            |                                  |                           |       |                    |        |                   |       |        |        |     
|Income from continuing operations                                           |                                  | $                         | 6,851 |                    |        | $                 | 6,316 |        |        | $    | 19,037 |        |        | $ | 17,674 |       
|                                                                            | Less: Preferred A dividends      |                           |       | 0                  |        |                   |       | 0      |        |      |        | (141   | )      |   |        | (141   | )     
|                                                                            |                                  |                           |       |                    |        |                   |       |        |        |      |        |        |        |   |        |       
|Income from continuing operations
available to common shareholders          |                                  |                           | 6,851 |                    |        |                   | 6,316 |        |        |      | 18,896 |        |        |   | 17,533 |       
|Loss, net, on discontinuance of mortgage
and leasing businesses, net of tax |                                  |                           | 0     |                    |        |                   | 0     |        |        |      | (1,968 | )      |        |   | (8,610 | )     
|                                                                            |                                  |                           |       |                    |        |                   |       |        |        |      |        |        |        |   |        |       
|Net income available to common
shareholders                                 |                                  |                           | 6,851 |                    |        |                   | 6,316 |        |        |      | 16,928 |        |        |   | 8,923  |       
|                                                                            | Less: Class A dividends declared |                           |       | (560               | )      |                   |       | (576   | )      |      |        | (1,715 | )      |   |        | (1,726 | )     
|                                                                            | Less: Class B dividends declared |                           |       | (1,321             | )      |                   |       | (1,401 | )      |      |        | (3,944 | )      |   |        | (4,176 | )     
|                                                                            |                                  |                           |       |                    |        |                   |       |        |        |      |        |        |        |   |        |       
|Undistributed net income                                                    |                                  | $                         | 4,970 |                    |        | $                 | 4,339 |        |        | $    | 11,269 |        |        | $ | 3,021  |       
|                                                                            |                                  |                           |       |                    |        |                   |       |        |        |      |        |        |        |   |        |       
|Basic income from continuing operations
per common share                    |                                  |                           |       |                    |        |                   |       |        |        |      |        |        |        |   |        |       
|                                                                            |                                  | Class A                   |       | $                  | 0.27   |                   |       | $      | 0.24   |      |        | $      | 0.74   |   |        | $      | 0.65   | 
|                                                                            |                                  | Class B                   |       |                    | 0.29   |                   |       |        | 0.26   |      |        |        | 0.81   |   |        |        | 0.72   | 
|                                                                            |                                  | Combined (1)              |       |                    | 0.28   |                   |       |        | 0.25   |      |        |        | 0.79   |   |        |        | 0.69   | 
|Diluted income from continuing operations
per common share                  |                                  |                           |       |                    |        |                   |       |        |        |      |        |        |        |   |        |       
|                                                                            |                                  | Class A                   |       | $                  | 0.26   |                   |       | $      | 0.23   |      |        | $      | 0.72   |   |        | $      | 0.63   | 
|                                                                            |                                  | Class B                   |       |                    | 0.28   |                   |       |        | 0.25   |      |        |        | 0.79   |   |        |        | 0.69   | 
|                                                                            |                                  | Combined (1)              |       |                    | 0.27   |                   |       |        | 0.25   |      |        |        | 0.76   |   |        |        | 0.67   | 
|Basic net income per common share                                           |                                  |                           |       |                    |        |                   |       |        |        |      |        |        |        |   |        |       
|                                                                            |                                  | Class A                   |       | $                  | 0.27   |                   |       | $      | 0.24   |      |        | $      | 0.66   |   |        | $      | 0.31   | 
|                                                                            |                                  | Class B                   |       |                    | 0.29   |                   |       |        | 0.26   |      |        |        | 0.73   |   |        |        | 0.38   | 
|                                                                            |                                  | Combined (1)              |       |                    | 0.28   |                   |       |        | 0.25   |      |        |        | 0.70   |   |        |        | 0.35   | 
|Diluted net income per common share                                         |                                  |                           |       |                    |        |                   |       |        |        |      |        |        |        |   |        |       
|                                                                            |                                  | Class A                   |       | $                  | 0.26   |                   |       | $      | 0.23   |      |        | $      | 0.64   |   |        | $      | 0.30   | 
|                                                                            |                                  | Class B                   |       |                    | 0.28   |                   |       |        | 0.25   |      |        |        | 0.71   |   |        |        | 0.36   | 
|                                                                            |                                  | Combined (1)              |       |                    | 0.27   |                   |       |        | 0.25   |      |        |        | 0.68   |   |        |        | 0.34   | 
|                                                                            |                                  |                           |       |                    |        |                   |       |        |        |      |        |        |        |   |        |       
|Basic weighted average common shares
outstanding                            |                                  |                           |       |                    |        |                   |       |        |        |      |        |        |        |   |        |       
|                                                                            |                                  | Class A                   |       |                    | 8,978  |                   |       |        | 9,162  |      |        |        | 9,104  |   |        |        | 9,146  | 
|                                                                            |                                  | Class B                   |       |                    | 15,100 |                   |       |        | 15,876 |      |        |        | 14,936 |   |        |        | 16,117 | 
|                                                                            |                                  | Combined                  |       |                    | 24,078 |                   |       |        | 25,038 |      |        |        | 24,040 |   |        |        | 25,263 | 
|Dilutive effect of:                                                         |                                  |                           |       |                    |        |                   |       |        |        |      |        |        |        |   |        |       
|                                                                            |                                  | Options Class B           |       |                    | 641    |                   |       |        | 289    |      |        |        | 328    |   |        |        | 487    | 
|                                                                            |                                  | Restricted shares Class A |       |                    | 0      |                   |       |        | 1      |      |        |        | 0      |   |        |        | 5      | 
|                                                                            |                                  | Restricted shares Class B |       |                    | 510    |                   |       |        | 336    |      |        |        | 375    |   |        |        | 434    | 
|Diluted weighted average common shares
outstanding                          |                                  |                           |       |                    |        |                   |       |        |        |      |        |        |        |   |        |       
|                                                                            |                                  | Class A                   |       |                    | 8,978  |                   |       |        | 9,163  |      |        |        | 9,104  |   |        |        | 9,151  | 
|                                                                            |                                  | Class B                   |       |                    | 16,251 |                   |       |        | 16,501 |      |        |        | 15,639 |   |        |        | 17,038 | 
|                                                                            |                                  | Combined                  |       |                    | 25,229 |                   |       |        | 25,664 |      |        |        | 24,743 |   |        |        | 26,189 | 
|Antidilutive shares                                                         |                                  |                           |       |                    |        |                   |       |        |        |      |        |        |        |   |        |       
|                                                                            |                                  | Options Class B           |       |                    | 1,349  |                   |       |        | 1,699  |      |        |        | 1,911  |   |        |        | 1,474  | 
|                                                                            |                                  | Restricted shares Class B |       |                    | 0      |                   |       |        | 2,175  |      |        |        | 84     |   |        |        | 1,955  | 
|                                                                            |                                  |                           |       |                    |        |                   |       |        |        |      |        |        |        |   |        |       



|(1) |  | Combined represents income available to common shareholders divided
by the combined total of Class A and Class B weighted average common
shares outstanding.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

25



---



##### Table of Contents






ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

In this Form 10-Q, Advanta, we, us, and our refer to Advanta
Corp. and its subsidiaries, unless the context otherwise requires.

OVERVIEW

Income from continuing operations included the following business segment
results ($ in thousands):

|                                  |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |         |  
|--------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                  |  | Three Months Ended |        | Nine Months Ended
|                                  |  | September 30,      |        | September 30,    
|                                  |  |                    |        |                  
|                                  |  | 2003               |        | 2002              |  | 2003 |        | 2002
|                                  |  |                    |        |                   |  |      |        |     
|Pretax income (loss):             |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |         |  
|Advanta Business Cards            |  | $                  | 13,785 |                   |  | $    | 16,594 |      |  | $ | 37,409  |   |  | $ | 44,900  |  
|Venture Capital                   |  |                    | (2,645 | )                 |  |      | (4,369 | )    |  |   | (6,455  | ) |  |   | (8,583  | )
|Other (1)                         |  |                    | 0      |                   |  |      | (1,955 | )    |  |   | 0       |   |  |   | (7,579  | )
|                                  |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |         |  
|Total pretax income               |  |                    | 11,140 |                   |  |      | 10,270 |      |  |   | 30,954  |   |  |   | 28,738  |  
|Income tax expense                |  |                    | (4,289 | )                 |  |      | (3,954 | )    |  |   | (11,917 | ) |  |   | (11,064 | )
|                                  |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |         |  
|Income from continuing operations |  | $                  | 6,851  |                   |  | $    | 6,316  |      |  | $ | 19,037  |   |  | $ | 17,674  |  
|                                  |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |         |  



|(1) |  | Other includes investment and other activities not attributable to
the Advanta Business Cards or Venture Capital segments.
|--- |  | --------------------------------------------------------------------------------------------------------------------------

For the three months ended September 30, 2003, we reported income from
continuing operations of $6.9 million or $0.27 per combined diluted
common share, compared to income from continuing operations of $6.3
million or $0.25 per combined diluted common share for the same period of
2002. For the nine months ended September 30, 2003, we reported income
from continuing operations of $19.0 million or $0.76 per combined diluted
common share, compared to income from continuing operations of $17.7
million or $0.67 per combined diluted share for the same period of 2002.
The increases in income from continuing operations for the three and nine
months ended September 30, 2003 as compared to the same periods of 2002
are the result of the reduction in net interest expense on excess
liquidity not attributable to the Advanta Business Cards or Venture
Capital segments and lower unrealized losses on our venture capital
investments. These favorable variances are partially offset by decreases
in Advanta Business Cards net income.

For the nine months ended September 30, 2003, we recorded an after-tax
loss on the discontinuance of our mortgage and leasing businesses of
$2.0 million, or $0.08 per combined diluted common share. For the nine
months ended September 30, 2002, we recorded an after-tax loss on the
discontinuance of our mortgage and leasing businesses of $8.6 million,
or $0.33 per combined diluted common share.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in accordance with accounting
principles generally accepted in the United States requires management
to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates. We have identified
accounting for the fair value of venture capital investments, allowance
for receivable losses, securitization income, business credit card
rewards programs, litigation contingencies, income taxes, and
discontinued operations as our most

26



---



##### Table of Contents



critical accounting policies and estimates in that they require
managements most difficult, subjective or complex judgments as a
result of the need to make estimates about the effect of matters that
are inherently uncertain. Changes in such estimates could have a
material impact on our financial condition or results of operations.
These accounting policies are described in our Annual Report on Form
10-K for the year ended December 31, 2002.

ADVANTA BUSINESS CARDS

Advanta Business Cards originated, directly and through the use of third
parties, new accounts as follows:

|                                |  |      |         |      |  |  |         | 
|------------------------------- |  | ---- | ------- | ---- |  |  | ------- | 
|                                |  | 2003 |         | 2002
|                                |  |      |         |     
|Three months ended September 30 |  |      | 38,368  |      |  |  | 53,784  | 
|Nine months ended September 30  |  |      | 128,461 |      |  |  | 158,333 | 
|                                |  |      |         |      |  |  |         | 

Our originations in 2002 and 2003 have included a broad array of
competitively-priced offerings and products, including promotional
pricing and rewards programs, designed to selectively attract and
retain more higher credit quality customers and to respond to the
competitive environment in the credit card industry. The decreases
in new account originations in the three and nine months ended
September 30, 2003 as compared to the same periods of 2002 reflect
the selectivity of our refined customer acquisition models. In the
second and third quarters of 2003, we utilized enhanced targeting and
decision models to assist us in identifying prospective customers
that are interested in an active relationship with Advanta, rather
than only a promotional balance transfer. We have also expanded
activities to identify alliances with organizations focused on
certain small business market segments. We expect our enhanced
targeting and decision models will result in acquiring a higher level
of active customers, but may result in somewhat lower growth rates.

Pretax income for Advanta Business Cards consisted of the following
components ($ in thousands):

|                                                     |  |                    |         |                   |  |      |         |      |  |   |          |   |  |   |          |  
|---------------------------------------------------- |  | ------------------ | ------- | ----------------- |  | ---- | ------- | ---- |  | - | -------- | - |  | - | -------- | -
|                                                     |  | Three Months Ended |         | Nine Months Ended
|                                                     |  | September 30,      |         | September 30,    
|                                                     |  |                    |         |                  
|                                                     |  | 2003               |         | 2002              |  | 2003 |         | 2002
|                                                     |  |                    |         |                   |  |      |         |     
|Net interest income on
owned interest-earning
assets |  | $                  | 19,258  |                   |  | $    | 12,104  |      |  | $ | 41,016   |   |  | $ | 40,694   |  
|Noninterest revenues                                 |  |                    | 65,054  |                   |  |      | 61,652  |      |  |   | 196,286  |   |  |   | 180,878  |  
|Provision for credit losses                          |  |                    | (16,544 | )                 |  |      | (9,179  | )    |  |   | (35,507  | ) |  |   | (30,779  | )
|Operating expenses                                   |  |                    | (53,983 | )                 |  |      | (47,983 | )    |  |   | (164,386 | ) |  |   | (145,893 | )
|                                                     |  |                    |         |                   |  |      |         |      |  |   |          |   |  |   |          |  
|Pretax income                                        |  | $                  | 13,785  |                   |  | $    | 16,594  |      |  | $ | 37,409   |   |  | $ | 44,900   |  
|                                                     |  |                    |         |                   |  |      |         |      |  |   |          |   |  |   |          |  

Net interest income on owned interest-earning assets increased by $7.2
million in the three months ended September 30, 2003 as compared to the
same period of 2002 and increased by $322 thousand for the nine months
ended September 30, 2003 as compared to the same period of 2002. The
increases were due primarily to increases in average owned business
credit card receivables of $289 million for the three months ended
September 30, 2003 and $148 million for the nine months ended September
30, 2003 as compared to the same periods of 2002, partially offset by
decreases in the average yield earned on our business credit card
receivables. The decreases in yields are a result of our
competitively-priced offerings and products. Average owned business
credit card receivables increased in the three and nine months ended
September 30, 2003 as compared to the same periods of 2002

27



---



##### Table of Contents



due to growth and the timing of securitization activity. See further
discussion in the Liquidity, Capital Resources and Analysis of Financial
Condition section of Managements Discussion and Analysis of Financial
Condition and Results of Operations.

Noninterest revenues include securitization income, interchange income,
business credit card rewards costs and other fee revenues. The increases
in noninterest revenues in the three and nine months ended September 30,
2003 are due primarily to higher transaction volume and growth in average
owned and securitized receivables. Noninterest revenues also include the
impact of changes in the estimated costs of future reward redemptions in
each period. See further discussion in the Other Revenues section of
Managements Discussion and Analysis of Financial Condition and Results
of Operations. Based on historical fourth quarter experience and
anticipated promotional activities, we expect transaction volume in the
fourth quarter of 2003 to increase as compared to the three months ended
September 30, 2003, resulting in higher transaction-based fee revenues.

The increases in provision for credit losses in the three and nine months
ended September 30, 2003 as compared to the same periods of 2002
primarily reflect the increases in average owned business credit card
receivables. For the nine months ended September 30, 2003, the impact of
the growth in owned receivables on provision for credit losses was
partially offset by a reduction in the estimate of losses inherent in the
portfolio based on the delinquency and principal charge-off trends and
the current composition of the portfolio as compared to the same period
in 2002. The increase in operating expenses in both periods resulted
from growth in owned and securitized receivables. In addition, operating
expenses reflect an increase in the amortization of deferred origination
costs in both periods. We originated a significant volume of new
accounts in the fourth quarter of 2002, resulting in increased
amortization of deferred origination costs over the subsequent one-year
amortization period.

VENTURE CAPITAL

The components of pretax loss for our venture capital segment for the
three and nine months ended September 30, 2003 and 2002 were as follows
($ in thousands):

|                               |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|------------------------------ |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                               |  | Three Months Ended |        | Nine Months Ended
|                               |  | September 30,      |        | September 30,    
|                               |  |                    |        |                  
|                               |  | 2003               |        | 2002              |  | 2003 |        | 2002
|                               |  |                    |        |                   |  |      |        |     
|Net interest expense           |  | $                  | (117   | )                 |  | $    | (176   | )    |  | $ | (391   | ) |  | $ | (560   | )
|Realized losses                |  |                    | (2,000 | )                 |  |      | 0      |      |  |   | (1,803 | ) |  |   | (47    | )
|Unrealized gains (losses), net |  |                    | 15     |                   |  |      | (3,505 | )    |  |   | (2,034 | ) |  |   | (6,068 | )
|Operating expenses             |  |                    | (543   | )                 |  |      | (688   | )    |  |   | (2,227 | ) |  |   | (1,908 | )
|                               |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|Pretax loss                    |  | $                  | (2,645 | )                 |  | $    | (4,369 | )    |  | $ | (6,455 | ) |  | $ | (8,583 | )
|                               |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  

As shown in the table above, pretax loss for our venture capital segment
is comprised primarily of net realized and unrealized gains (losses) on
our venture capital investments, which reflect the market conditions for
those investments in each respective period, and operating expenses. The
estimated fair value of our venture capital investments was $9.4 million
at September 30, 2003 and $13.5 million at December 31, 2002. Operating
expenses for the nine months ended September 30, 2003 include
approximately $410 thousand of lease termination costs relating to office
space formerly used in our venture capital operations.

28



---



##### Table of Contents



INTEREST INCOME AND EXPENSE

Interest income increased by $9.6 million to $33.6 million for the three
months ended September 30, 2003 as compared to the same period of 2002
and increased by $5.4 million to $82.0 million for the nine months ended
September 30, 2003 as compared to the same period of 2002. The increase
in interest income for both periods was due primarily to an increase in
average owned business credit card receivables and investments, partially
offset by a decrease in the average yield earned on our receivables and
investments as a result of the prevailing interest rate environment and
the competitively-priced offers described below. Average owned business
card receivables increased $289 million for the three months ended
September 30, 2003 and $148 million for the nine months ended September
30, 2003 as compared to the same periods of 2002. Average investments
increased $150 million for the three months ended September 30, 2003 and
$109 million for the nine months ended September 30, 2003 as compared to
the same periods of 2002.

Our marketing campaigns in 2002 and 2003 have included a broad array of
competitively-priced offerings and products, including promotional
pricing and rewards programs, designed to selectively attract and retain
more higher credit quality customers and to respond to the competitive
environment. These competitively-priced offers have resulted in a
decline in yields on our business credit card receivable portfolio and
are anticipated to result in lower credit losses on those originations in
future periods. We expect yields for the fourth quarter of 2003 to be
relatively consistent with those experienced in the three and nine months
ended September 30, 2003, due in part to the expiration of promotional
pricing periods on a portion of the business credit card portfolio that
we anticipate will offset the decline in yields created by new offers at
promotional rates.

For the three months ended September 30, 2003, interest expense increased
by $4.1 million to $15.2 million as compared to the same period of 2002
and increased by $3.0 million to $39.6 million for the nine months ended
September 30, 2003 as compared to the same period of 2002. The increase
in interest expense for both periods was due to an increase in average
interest-bearing liabilities, primarily our deposits and debt, partially
offset by a decrease in our average cost of funds. Average
interest-bearing liabilities increased by $580 million in the three
months ended September 30, 2003 and increased by $405 million in the nine
months ended September 30, 2003 as compared to the same periods of 2002.
These increases in average interest-bearing liabilities were due in part
to a reclassification. Trust preferred securities were reclassified to
interest-bearing liabilities and the related payments were reclassified
to interest expense in accordance with SFAS 150 effective July 1, 2003.
As a result of this reclassification, average interest-bearing
liabilities increased by $100 million and $33 million for the three and
nine months ended September 30, 2003. Also, interest expense for the
three and nine months ended September 30, 2003 increased by $2.2 million
as a result of the reclassification. Our average cost of funds decreased
to 3.93% for the three months ended September 30, 2003 from 4.94% in the
same period of 2002, and decreased to 3.93% for the nine months ended
September 30, 2003 from 5.36% in the same period of 2002. The decrease
in our average cost of funds in both periods is primarily a result of the
prevailing interest rate environment, partially offset by an increase in
the weighted average maturity of our debt securities at the time of
origination and our deposit origination strategy related to funding the
growth in average on-balance sheet assets during 2003. See further
discussion in the Liquidity, Capital Resources and Analysis of Financial
Condition section of Managements Discussion and Analysis of Financial
Condition and Results of Operations.

29



---



##### Table of Contents



The following tables provide an analysis of interest income and expense
data, average balance sheet data, net interest spread and net interest
margin for both continuing and discontinued operations. The net interest
spread represents the difference between the yield on interest-earning
assets and the average rate paid on interest-bearing liabilities. The
net interest margin represents the difference between the yield on
interest-earning assets and the average rate paid to fund
interest-earning assets. Interest income includes late fees on business
credit card receivables. Average receivables include deferred
origination costs, net of deferred fees.

30



---



##### Table of Contents



INTEREST RATE ANALYSIS AND AVERAGE BALANCES
($ in thousands)

|                                                                                                                                              |                           |   |                                  |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |       |  
|--------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | - | -------------------------------- | ------- | -------- | - | ------ | ------ | ------- |  | -------- | ----- | ---- | - | --------- | ------- | ------- | - | ------ | ------ |  |  | ----- | ----- | -
|                                                                                                                                              |                           |   | Three Months Ended September 30,
|                                                                                                                                              |                           |   |                                 
|                                                                                                                                              |                           |   | 2003                             |         | 2002    
|                                                                                                                                              |                           |   |                                  |         |         
|                                                                                                                                              |                           |   | Average                          |         |          |   |        |        | Average |  | Average  |       |      |   |           |         | Average
|                                                                                                                                              |                           |   | Balance                          |         | Interest |   | Rate   |        | Balance |  | Interest |       | Rate
|                                                                                                                                              |                           |   |                                  |         |          |   |        |        |         |  |          |       |     
|Owned receivables:                                                                                                                            |                           |   |                                  |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |      
|                                                                                                                                              | Business credit cards (1) |   | $                                | 734,715 |          |   | $      | 27,526 |         |  |          | 14.86 | %    |   | $         | 445,264 |         |   | $      | 18,453 |  |  |       | 16.44 | %
|                                                                                                                                              | Other receivables         |   |                                  | 18,062  |          |   |        | 175    |         |  |          | 3.82  |      |   |           | 27,655  |         |   |        | 308    |  |  |       | 4.42  |  
|                                                                                                                                              |                           |   |                                  |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |      
|Total owned receivables                                                                                                                       |                           |   | 752,777                          |         |          |   | 27,701 |        |         |  | 14.60    |       |      |   | 472,919   |         |         |   | 18,761 |        |  |  | 15.74 |      
|Investments (2)                                                                                                                               |                           |   | 635,312                          |         |          |   | 1,798  |        |         |  | 1.12     |       |      |   | 485,165   |         |         |   | 2,527  |        |  |  | 2.05  |      
|Retained interests in
securitizations                                                                                                         |                           |   | 134,762                          |         |          |   | 4,071  |        |         |  | 12.08    |       |      |   | 102,109   |         |         |   | 2,629  |        |  |  | 10.30 |      
|Interest-earning assets of
discontinued operations                                                                                            |                           |   | 84,178                           |         |          |   | 2,260  |        |         |  | 10.74    |       |      |   | 53,117    |         |         |   | 1,579  |        |  |  | 11.89 |      
|                                                                                                                                              |                           |   |                                  |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |      
|Total interest-earning
assets (3)                                                                                                             |                           |   | 1,607,029                        |         |          | $ | 35,830 |        |         |  | 8.86     | %     |      |   | 1,113,310 |         |         | $ | 25,496 |        |  |  | 9.09  | %    
|Noninterest-earning assets                                                                                                                    |                           |   | 511,809                          |         |          |   |        |        |         |  |          |       |      |   | 472,942   |         |         |   |        |        |  |  |       |      
|                                                                                                                                              |                           |   |                                  |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |      
|Total assets                                                                                                                                  |                           | $ | 2,118,838                        |         |          |   |        |        |         |  |          |       |      | $ | 1,586,252 |         |         |   |        |        |  |  |       |      
|                                                                                                                                              |                           |   |                                  |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |      
|Deposits                                                                                                                                      |                           | $ | 1,090,112                        |         |          | $ | 7,527  |        |         |  | 2.74     | %     |      | $ | 631,430   |         |         | $ | 6,133  |        |  |  | 3.85  | %    
|Debt                                                                                                                                          |                           |   | 322,069                          |         |          |   | 5,210  |        |         |  | 6.42     |       |      |   | 302,821   |         |         |   | 5,507  |        |  |  | 7.21  |      
|Trust preferred securities                                                                                                                    |                           |   | 100,000                          |         |          |   | 2,220  |        |         |  | 8.88     |       |      |   | 0         |         |         |   | 0      |        |  |  | 0.00  |      
|Other borrowings                                                                                                                              |                           |   | 1,957                            |         |          |   | 7      |        |         |  | 1.37     |       |      |   | 0         |         |         |   | 0      |        |  |  | 0.00  |      
|                                                                                                                                              |                           |   |                                  |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |      
|Total interest-bearing
liabilities (4)                                                                                                        |                           |   | 1,514,138                        |         |          | $ | 14,964 |        |         |  | 3.93     | %     |      |   | 934,251   |         |         | $ | 11,640 |        |  |  | 4.94  | %    
|Noninterest-bearing
liabilities                                                                                                               |                           |   | 275,737                          |         |          |   |        |        |         |  |          |       |      |   | 189,558   |         |         |   |        |        |  |  |       |      
|                                                                                                                                              |                           |   |                                  |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |      
|Total liabilities                                                                                                                             |                           |   | 1,789,875                        |         |          |   |        |        |         |  |          |       |      |   | 1,123,809 |         |         |   |        |        |  |  |       |      
|Company-obligated
mandatorily redeemable
preferred securities of
subsidiary trust holding
solely subordinated
debentures of Advanta
Corp. (5) |                           |   | 0                                |         |          |   |        |        |         |  |          |       |      |   | 100,000   |         |         |   |        |        |  |  |       |      
|Stockholders equity                                                                                                                          |                           |   | 328,963                          |         |          |   |        |        |         |  |          |       |      |   | 362,443   |         |         |   |        |        |  |  |       |      
|                                                                                                                                              |                           |   |                                  |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |      
|Total liabilities and
stockholders equity                                                                                                    |                           | $ | 2,118,838                        |         |          |   |        |        |         |  |          |       |      | $ | 1,586,252 |         |         |   |        |        |  |  |       |      
|                                                                                                                                              |                           |   |                                  |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |      
|Net interest spread                                                                                                                           |                           |   |                                  |         |          |   |        |        |         |  | 4.93     | %     |      |   |           |         |         |   |        |        |  |  | 4.15  | %    
|Net interest margin                                                                                                                           |                           |   |                                  |         |          |   |        |        |         |  | 5.15     | %     |      |   |           |         |         |   |        |        |  |  | 4.94  | %    
|                                                                                                                                              |                           |   |                                  |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |      



|(1) |  | Interest income includes late fees for owned business credit cards
receivables of $2.1 million for the three months ended September 30,
2003 and $1.6 million for the three months ended September 30, 2002.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(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.                                                                                                                                     
|   
|(4) |  | Includes funding of assets for both continuing and discontinued
operations.                                                                                                                                 
|   
|(5) |  | Represents trust preferred securities.                                                                                                                                                                      

31



---



##### Table of Contents



|                                                                                                                                              |                           |   |                                 |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |       |  
|--------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | - | ------------------------------- | ------- | -------- | - | ------ | ------ | ------- |  | -------- | ----- | ---- | - | --------- | ------- | ------- | - | ------ | ------ |  |  | ----- | ----- | -
|                                                                                                                                              |                           |   | Nine Months Ended September 30,
|                                                                                                                                              |                           |   |                                
|                                                                                                                                              |                           |   | 2003                            |         | 2002    
|                                                                                                                                              |                           |   |                                 |         |         
|                                                                                                                                              |                           |   | Average                         |         |          |   |        |        | Average |  | Average  |       |      |   |           |         | Average
|                                                                                                                                              |                           |   | Balance                         |         | Interest |   | Rate   |        | Balance |  | Interest |       | Rate
|                                                                                                                                              |                           |   |                                 |         |          |   |        |        |         |  |          |       |     
|Owned receivables:                                                                                                                            |                           |   |                                 |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |      
|                                                                                                                                              | Business credit cards (1) |   | $                               | 586,259 |          |   | $      | 63,322 |         |  |          | 14.44 | %    |   | $         | 438,415 |         |   | $      | 59,277 |  |  |       | 18.08 | %
|                                                                                                                                              | Other receivables         |   |                                 | 22,098  |          |   |        | 766    |         |  |          | 4.63  |      |   |           | 28,108  |         |   |        | 932    |  |  |       | 4.43  |  
|                                                                                                                                              |                           |   |                                 |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |      
|Total owned receivables                                                                                                                       |                           |   | 608,357                         |         |          |   | 64,088 |        |         |  | 14.08    |       |      |   | 466,523   |         |         |   | 60,209 |        |  |  | 17.26 |      
|Investments (2)                                                                                                                               |                           |   | 624,024                         |         |          |   | 5,900  |        |         |  | 1.25     |       |      |   | 514,655   |         |         |   | 8,394  |        |  |  | 2.17  |      
|Retained interests in
securitizations                                                                                                         |                           |   | 142,192                         |         |          |   | 12,036 |        |         |  | 11.16    |       |      |   | 93,103    |         |         |   | 7,941  |        |  |  | 11.25 |      
|Interest-earning assets of
discontinued operations                                                                                            |                           |   | 55,158                          |         |          |   | 4,949  |        |         |  | 11.96    |       |      |   | 52,543    |         |         |   | 3,812  |        |  |  | 9.67  |      
|                                                                                                                                              |                           |   |                                 |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |      
|Total interest-earning
assets (3)                                                                                                             |                           |   | 1,429,731                       |         |          | $ | 86,973 |        |         |  | 8.11     | %     |      |   | 1,126,824 |         |         | $ | 80,356 |        |  |  | 9.51  | %    
|Noninterest-earning assets                                                                                                                    |                           |   | 569,446                         |         |          |   |        |        |         |  |          |       |      |   | 467,558   |         |         |   |        |        |  |  |       |      
|                                                                                                                                              |                           |   |                                 |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |      
|Total assets                                                                                                                                  |                           | $ | 1,999,177                       |         |          |   |        |        |         |  |          |       |      | $ | 1,594,382 |         |         |   |        |        |  |  |       |      
|                                                                                                                                              |                           |   |                                 |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |      
|Deposits                                                                                                                                      |                           | $ | 992,334                         |         |          | $ | 21,971 |        |         |  | 2.96     | %     |      | $ | 632,290   |         |         | $ | 19,907 |        |  |  | 4.21  | %    
|Debt                                                                                                                                          |                           |   | 319,585                         |         |          |   | 15,334 |        |         |  | 6.42     |       |      |   | 304,178   |         |         |   | 17,767 |        |  |  | 7.81  |      
|Trust preferred securities                                                                                                                    |                           |   | 33,333                          |         |          |   | 2,220  |        |         |  | 8.88     |       |      |   | 0         |         |         |   | 0      |        |  |  | 0.00  |      
|Other borrowings                                                                                                                              |                           |   | 752                             |         |          |   | 8      |        |         |  | 1.41     |       |      |   | 4,716     |         |         |   | 67     |        |  |  | 1.87  |      
|                                                                                                                                              |                           |   |                                 |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |      
|Total interest-bearing
liabilities (4)                                                                                                        |                           |   | 1,346,004                       |         |          | $ | 39,533 |        |         |  | 3.93     | %     |      |   | 941,184   |         |         | $ | 37,741 |        |  |  | 5.36  | %    
|Noninterest-bearing
liabilities                                                                                                               |                           |   | 260,739                         |         |          |   |        |        |         |  |          |       |      |   | 187,440   |         |         |   |        |        |  |  |       |      
|                                                                                                                                              |                           |   |                                 |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |      
|Total liabilities                                                                                                                             |                           |   | 1,606,743                       |         |          |   |        |        |         |  |          |       |      |   | 1,128,624 |         |         |   |        |        |  |  |       |      
|Company-obligated
mandatorily redeemable
preferred securities of
subsidiary trust holding
solely subordinated
debentures of Advanta
Corp. (5) |                           |   | 66,667                          |         |          |   |        |        |         |  |          |       |      |   | 100,000   |         |         |   |        |        |  |  |       |      
|Stockholders equity                                                                                                                          |                           |   | 325,767                         |         |          |   |        |        |         |  |          |       |      |   | 365,758   |         |         |   |        |        |  |  |       |      
|                                                                                                                                              |                           |   |                                 |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |      
|Total liabilities and
stockholders equity                                                                                                    |                           | $ | 1,999,177                       |         |          |   |        |        |         |  |          |       |      | $ | 1,594,382 |         |         |   |        |        |  |  |       |      
|                                                                                                                                              |                           |   |                                 |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |      
|Net interest spread                                                                                                                           |                           |   |                                 |         |          |   |        |        |         |  | 4.18     | %     |      |   |           |         |         |   |        |        |  |  | 4.15  | %    
|Net interest margin                                                                                                                           |                           |   |                                 |         |          |   |        |        |         |  | 4.44     | %     |      |   |           |         |         |   |        |        |  |  | 5.06  | %    
|                                                                                                                                              |                           |   |                                 |         |          |   |        |        |         |  |          |       |      |   |           |         |         |   |        |        |  |  |       |      



|(1) |  | Interest income includes late fees for owned business credit card
receivables of $5.1 million for the nine months ended September 30,
2003 and $6.0 million for the nine months ended September 30, 2002.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(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.                                                                                                                                  
|   
|(4) |  | Includes funding of assets for both continuing and discontinued
operations.                                                                                                                              
|   
|(5) |  | Represents trust preferred securities.                                                                                                                                                                   

32



---



##### Table of Contents



PROVISION AND ALLOWANCE FOR RECEIVABLE LOSSES

For the three months ended September 30, 2003, provision for credit losses
increased by $7.1 million to $16.6 million as compared to the same period in
2002. For the nine months ended September 30, 2003, provision for credit
losses increased by $3.8 million to $35.3 million as compared to the same
period in 2002. The increase in provision for credit losses in both periods
primarily reflects an increase in our average owned business credit card
receivables of $289 million for the three months ended September 30, 2003 and
$148 million for the nine months ended September 30, 2003 as compared to the
same periods of 2002. For the nine months ended September 30, 2003, the impact
of the growth in owned receivables was partially offset by a reduction in the
estimate of losses inherent in the portfolio based on the delinquency and
principal charge-off trends and the current composition of the portfolio as
compared to the same period in 2002.

For the three months ended September 30, 2003, provisions for interest
and fee losses, which are recorded as direct reductions to interest and
fee income, increased by $2.4 million to $3.8 million as compared to the
same period in 2002. For the nine months ended September 30, 2003,
provisions for interest and fee losses increased by $4.4 million to $8.8
million as compared to the same period in 2002. The increases in both
periods were due to a change in income billing practice effective October
1, 2002 and the increases in average owned business credit card
receivables in those periods. Prior to October 1, 2002, the billing and
recognition of interest and fees was discontinued when the related
receivable became 90 days past due or when the account was classified as
fraudulent, bankrupt, deceased, hardship or credit counseling. Effective
October 1, 2002, we continue to bill and recognize interest and fees on
accounts when they become 90 days past due, and an additional allowance
for receivable losses is established for the additional billings
estimated to be uncollectible through a provision for interest and fee
losses. The billing and recognition of interest and fees is still
discontinued when the account is classified as fraudulent, bankrupt,
deceased, hardship or credit counseling.

The allowance for receivable losses on business credit card receivables
was $46.8 million at September 30, 2003, or 8.8% of owned receivables, as
compared to the allowance of $44.5 million, or 10.0% of owned receivables
at December 31, 2002. The decrease in the allowance for receivable
losses as a percentage of owned business credit card receivables reflects
our estimate of a lower level of inherent losses in the portfolio at
September 30, 2003 and that the composition of the portfolio at
September 30, 2003 consisted of more higher credit quality customers than
the portfolio at December 31, 2002.

As shown in the table below, the net principal charge-off rate for the
nine months ended September 30, 2003 has improved as compared to the rate
for the same period of 2002 due to the composition of the portfolio
during those periods and enhancements in the collections area of
operations. In June 2000, we ceased origination of business credit card
accounts with Fair, Isaac and Company (FICO) credit scores of less than
661. We estimate that principal charge-offs for accounts with FICO
credit scores of less than 661 at origination reached their peak in the
first quarter of 2002, based on the average age of that segment of the
portfolio. Although charge-off levels are not always predictable since
they are impacted by the economic environment and other factors beyond
our control, and there may be month-to-month or quarterly variations in
losses or delinquencies, we anticipate that the owned and managed net
principal charge-off rates for the fourth quarter of 2003 will be lower
than those experienced in the nine months ended September 30, 2003. This
expectation is based upon the level of receivables 90 days or more
delinquent at September 30, 2003 and the current composition of the

33



---



##### Table of Contents



portfolio that reflects our strategic initiative to selectively attract
and retain more higher credit quality customers.

In January 2003, the bank regulatory agencies issued guidance on account
management and loss allowance for credit card lending. The guidance
describes the agencies expectations for prudent risk management
practices for credit card activities, particularly with regard to credit
line management, over-limit accounts, and workouts. It also addresses
income recognition and loss allowance practices for credit card lending.
Based on our understanding of the guidance as currently implemented by
the regulatory agencies, we do not expect it to have a material adverse
effect on our financial condition or our results of operations. However,
similar to other regulatory guidance, this guidance provides wide
discretion to the bank regulatory agencies in how the guidance is applied
generally or with respect to any particular institution. Accordingly,
our account management or loss allowance practices could change in the
future.

The following table provides credit quality data as of and for the
year-to-date periods indicated for our on-balance sheet, or owned,
receivable portfolio including a summary of allowances for receivable
losses, delinquencies, nonaccrual receivables, accruing receivables past
due 90 days or more, and net principal charge-offs. Consolidated data
includes business credit cards and other receivables.

|                                                           |                                               |          |        |               |   |              |        |               |   |   |        |      |   | 
|---------------------------------------------------------- | --------------------------------------------- | -------- | ------ | ------------- | - | ------------ | ------ | ------------- | - | - | ------ | ---- | - | 
|                                                           |                                               |          |        | September 30, |   | December 31, |        | September 30,
|($ in thousands)                                           |                                               | 2003 (1) |        | 2002 (1)      |   | 2002        
|                                                           |                                               |          |        |               |   |             
|CONSOLIDATED - OWNED                                       |                                               |          |        |               |   |              |        |               |   |   |        |     
|Allowance for receivable losses                            |                                               | $        | 48,196 |               |   | $            | 46,159 |               |   | $ | 45,247 |     
|Receivables 30 days or more delinquent                     |                                               |          | 30,800 |               |   |              | 25,197 |               |   |   | 30,208 |     
|Receivables 90 days or more delinquent                     |                                               |          | 14,344 |               |   |              | 12,755 |               |   |   | 13,623 |     
|Nonaccrual receivables                                     |                                               |          | 9,286  |               |   |              | 5,525  |               |   |   | 21,918 |     
|Accruing receivables past due 90 days or more              |                                               |          | 12,772 |               |   |              | 10,535 |               |   |   | 0      |     
|As a percentage of gross receivables:                      |                                               |          |        |               |   |              |        |               |   |   |        |     
|                                                           | Allowance for receivable losses               |          |        | 8.75          | % |              |        | 9.81          | % |   |        | 9.58 | %
|                                                           | Receivables 30 days or more delinquent        |          |        | 5.59          |   |              |        | 5.35          |   |   |        | 6.40 |  
|                                                           | Receivables 90 days or more delinquent        |          |        | 2.60          |   |              |        | 2.71          |   |   |        | 2.88 |  
|                                                           | Nonaccrual receivables                        |          |        | 1.69          |   |              |        | 1.17          |   |   |        | 4.64 |  
|                                                           | Accruing receivables past due 90 days or more |          |        | 2.32          |   |              |        | 2.24          |   |   |        | 0.00 |  
|Net principal charge-offs                                  |                                               | $        | 33,535 |               |   | $            | 37,416 |               |   | $ | 28,186 |     
|As a percentage of average gross receivables
(annualized): |                                               |          |        |               |   |              |        |               |   |   |        |     
|                                                           | Net principal charge-offs                     |          |        | 7.35          | % |              |        | 7.49          | % |   |        | 8.06 | %
|BUSINESS
CREDIT CARDS - OWNED                              |                                               |          |        |               |   |              |        |               |   |   |        |     
|Allowance for receivable losses                            |                                               | $        | 46,764 |               |   | $            | 44,466 |               |   | $ | 43,776 |     
|Receivables 30 days or more delinquent                     |                                               |          | 30,681 |               |   |              | 23,406 |               |   |   | 28,625 |     
|Receivables 90 days or more delinquent                     |                                               |          | 14,225 |               |   |              | 11,959 |               |   |   | 12,883 |     
|Nonaccrual receivables                                     |                                               |          | 9,167  |               |   |              | 4,729  |               |   |   | 21,178 |     
|Accruing receivables past due 90 days or more              |                                               |          | 12,772 |               |   |              | 10,535 |               |   |   | 0      |     
|As a percentage of gross receivables:                      |                                               |          |        |               |   |              |        |               |   |   |        |     
|                                                           | Allowance for receivable losses               |          |        | 8.77          | % |              |        | 9.99          | % |   |        | 9.83 | %
|                                                           | Receivables 30 days or more delinquent        |          |        | 5.75          |   |              |        | 5.26          |   |   |        | 6.43 |  
|                                                           | Receivables 90 days or more delinquent        |          |        | 2.67          |   |              |        | 2.69          |   |   |        | 2.89 |  
|                                                           | Nonaccrual receivables                        |          |        | 1.72          |   |              |        | 1.06          |   |   |        | 4.76 |  
|                                                           | Accruing receivables past due 90 days or more |          |        | 2.39          |   |              |        | 2.37          |   |   |        | 0.00 |  
|Net principal charge-offs                                  |                                               | $        | 33,507 |               |   | $            | 37,400 |               |   | $ | 28,172 |     
|As a percentage of average gross receivables
(annualized): |                                               |          |        |               |   |              |        |               |   |   |        |     
|                                                           | Net principal charge-offs                     |          |        | 7.62          | % |              |        | 7.92          | % |   |        | 8.57 | %



|(1) |  | See Note 5 to the consolidated financial statements for a
discussion of the change in income billing practice effective
October 1, 2002.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------

34



---



##### Table of Contents



SECURITIZATION INCOME

Advanta Business Cards recognized securitization income as follows ($ in
thousands):

|                                |  |      |        |      |  |   |        | 
|------------------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                                |  | 2003 |        | 2002
|                                |  |      |        |     
|Three months ended September 30 |  | $    | 28,558 |      |  | $ | 29,168 | 
|Nine months ended September 30  |  |      | 89,920 |      |  |   | 88,838 | 
|                                |  |      |        |      |  |   |        | 

Securitization income for the three months ended September 30, 2003
decreased slightly as compared to the same period of 2002. For the three
month period, the positive impacts from increased volume of securitized
receivables, a decrease in the floating interest rates earned by note
holders and a decrease in the net principal charge-off rate on
securitized receivables were substantially offset by a decrease in yield
on securitized receivables. Securitization income for the nine months
ended September 30, 2003 increased as compared to the same period of
2002. For the nine month period, the positive impacts described above
more than offset the decrease in yields on securitized receivables.
These fluctuations in yields and rates are similar to those experienced
in owned business credit card receivables as discussed in the Interest
Income and Expense and Provision and Allowance for Receivable Losses
sections of Managements Discussion and Analysis of Financial Condition
and Results of Operations.

Managed Receivable Data

In addition to evaluating the financial performance of the Advanta
Business Cards segment under generally accepted accounting principles
(GAAP), we evaluate Advanta Business Cards performance on a managed
basis. Our managed receivable portfolio is comprised of both owned and
securitized business credit card receivables. We sell business credit
card receivables through securitizations accounted for as sales under
GAAP. We continue to own and service the accounts that generate the
securitized receivables. Managed data presents performance as if the
securitized receivables had not been sold. We believe that performance
on a managed basis provides useful supplemental information because we
retain interests in the securitized receivables and, therefore, we have a
financial interest in and exposure to the performance of the securitized
receivables. Revenue and credit data on the managed portfolio provides
additional information useful in understanding the performance of the
retained interests in securitizations. The following tables provide
managed data for Advanta Business Cards and a reconciliation of the
managed data to the most directly comparable GAAP financial measures ($
in thousands):

35



---



##### Table of Contents



INCOME STATEMENT MEASURES AND STATISTICS

|                                                     |  |            |         |           |  |                |       |         |  |           |           |          |  |         |           |  |  |  |       |  
|---------------------------------------------------- |  | ---------- | ------- | --------- |  | -------------- | ----- | ------- |  | --------- | --------- | -------- |  | ------- | --------- |  |  |  | ----- | -
|                                                     |  |            |         |           |  |                |       |         |  |           |           |          |  | Advanta |           |  |  | 
|                                                     |  | Advanta    |         |           |  |                |       |         |  |           |           | Business |  |         |           | 
|                                                     |  | Business   |         | GAAP      |  | Securitization |       | Cards   |  | Managed  
|                                                     |  | Cards GAAP |         | Ratio (3) |  | Adjustments    |       | Managed |  | Ratio (3)
|                                                     |  |            |         |           |  |                |       |         |  |          
|Three Months Ended September 30, 2003:               |  |            |         |           |  |                |       |         |  |           |           |          |  |         |           |  |  |  |       |  
|Interest income                                      |  | $          | 31,597  |           |  |                | 14.54 | %       |  | $         | 83,380    |          |  | $       | 114,977   |  |  |  | 16.09 | %
|Interest expense                                     |  |            | 12,339  |           |  |                | 5.68  |         |  |           | 9,357     |          |  |         | 21,696    |  |  |  | 3.04  |  
|Net interest income                                  |  |            | 19,258  |           |  |                | 8.86  |         |  |           | 74,023    |          |  |         | 93,281    |  |  |  | 13.05 |  
|Noninterest revenues                                 |  |            | 65,054  |           |  |                | 29.93 |         |  |           | (30,435   | )        |  |         | 34,619    |  |  |  | 4.84  |  
|Provision for credit losses                          |  |            | 16,544  |           |  |                | 7.61  |         |  |           | 43,588    | (2)      |  |         | 60,132    |  |  |  | 8.41  |  
|Risk-adjusted
revenues (1)                           |  |            | 67,768  |           |  |                | 31.18 |         |  |           | 0         |          |  |         | 67,768    |  |  |  | 9.48  |  
|Average business credit
card interest-earning
assets |  |            | 869,477 |           |  |                |       |         |  |           | 1,989,710 |          |  |         | 2,859,187 |  |  |  |       |  
|Net principal charge-offs                            |  |            | 15,544  |           |  |                | 7.15  |         |  |           | 43,588    |          |  |         | 59,132    |  |  |  | 8.27  |  
|                                                     |  |            |         |           |  |                |       |         |  |           |           |          |  |         |           |  |  |  |       |  
|Three Months Ended September 30, 2002:               |  |            |         |           |  |                |       |         |  |           |           |          |  |         |           |  |  |  |       |  
|Interest income                                      |  | $          | 21,082  |           |  |                | 15.41 | %       |  | $         | 81,637    |          |  | $       | 102,719   |  |  |  | 18.42 | %
|Interest expense                                     |  |            | 8,978   |           |  |                | 6.56  |         |  |           | 10,336    |          |  |         | 19,314    |  |  |  | 3.46  |  
|Net interest income                                  |  |            | 12,104  |           |  |                | 8.85  |         |  |           | 71,301    |          |  |         | 83,405    |  |  |  | 14.96 |  
|Noninterest revenues                                 |  |            | 61,652  |           |  |                | 45.05 |         |  |           | (30,718   | )        |  |         | 30,934    |  |  |  | 5.55  |  
|Provision for credit losses                          |  |            | 9,179   |           |  |                | 6.71  |         |  |           | 40,583    | (2)      |  |         | 49,762    |  |  |  | 8.93  |  
|Risk-adjusted revenues (1)                           |  |            | 64,577  |           |  |                | 47.19 |         |  |           | 0         |          |  |         | 64,577    |  |  |  | 11.58 |  
|Average business credit
card interest-earning
assets |  |            | 547,373 |           |  |                |       |         |  |           | 1,682,716 |          |  |         | 2,230,089 |  |  |  |       |  
|Net principal charge-offs                            |  |            | 9,179   |           |  |                | 6.71  |         |  |           | 40,583    |          |  |         | 49,762    |  |  |  | 8.93  |  
|                                                     |  |            |         |           |  |                |       |         |  |           |           |          |  |         |           |  |  |  |       |  
|Nine Months Ended September 30, 2003:                |  |            |         |           |  |                |       |         |  |           |           |          |  |         |           |  |  |  |       |  
|Interest income                                      |  | $          | 75,358  |           |  |                | 13.79 | %       |  | $         | 260,294   |          |  | $       | 335,652   |  |  |  | 16.09 | %
|Interest expense                                     |  |            | 34,342  |           |  |                | 6.28  |         |  |           | 28,562    |          |  |         | 62,904    |  |  |  | 3.02  |  
|Net interest income                                  |  |            | 41,016  |           |  |                | 7.51  |         |  |           | 231,732   |          |  |         | 272,748   |  |  |  | 13.07 |  
|Noninterest revenues                                 |  |            | 196,286 |           |  |                | 35.93 |         |  |           | (96,084   | )        |  |         | 100,202   |  |  |  | 4.80  |  
|Provision for credit losses                          |  |            | 35,507  |           |  |                | 6.50  |         |  |           | 135,648   | (2)      |  |         | 171,155   |  |  |  | 8.20  |  
|Risk-adjusted revenues (1)                           |  |            | 201,795 |           |  |                | 36.94 |         |  |           | 0         |          |  |         | 201,795   |  |  |  | 9.67  |  
|Average business credit
card interest-earning
assets |  |            | 728,451 |           |  |                |       |         |  |           | 2,053,287 |          |  |         | 2,781,738 |  |  |  |       |  
|Net principal charge-offs                            |  |            | 33,507  |           |  |                | 6.13  |         |  |           | 135,648   |          |  |         | 169,155   |  |  |  | 8.11  |  
|                                                     |  |            |         |           |  |                |       |         |  |           |           |          |  |         |           |  |  |  |       |  
|Nine Months Ended September 30, 2002:                |  |            |         |           |  |                |       |         |  |           |           |          |  |         |           |  |  |  |       |  
|Interest income                                      |  | $          | 67,218  |           |  |                | 16.86 | %       |  | $         | 238,606   |          |  | $       | 305,824   |  |  |  | 19.25 | %
|Interest expense                                     |  |            | 26,524  |           |  |                | 6.65  |         |  |           | 28,771    |          |  |         | 55,295    |  |  |  | 3.48  |  
|Net interest income                                  |  |            | 40,694  |           |  |                | 10.21 |         |  |           | 209,835   |          |  |         | 250,529   |  |  |  | 15.77 |  
|Noninterest revenues                                 |  |            | 180,878 |           |  |                | 45.37 |         |  |           | (92,490   | )        |  |         | 88,388    |  |  |  | 5.56  |  
|Provision for credit losses                          |  |            | 30,779  |           |  |                | 7.72  |         |  |           | 117,345   | (2)      |  |         | 148,124   |  |  |  | 9.32  |  
|Risk-adjusted revenues (1)                           |  |            | 190,793 |           |  |                | 47.86 |         |  |           | 0         |          |  |         | 190,793   |  |  |  | 12.01 |  
|Average business credit
card interest-earning
assets |  |            | 531,518 |           |  |                |       |         |  |           | 1,587,148 |          |  |         | 2,118,666 |  |  |  |       |  
|Net principal charge-offs                            |  |            | 28,172  |           |  |                | 7.07  |         |  |           | 117,345   |          |  |         | 145,517   |  |  |  | 9.16  |  
|                                                     |  |            |         |           |  |                |       |         |  |           |           |          |  |         |           |  |  |  |       |  



|(1) |  | Risk-adjusted revenues represent net interest income and noninterest
revenues, less provision for credit losses.                                                                                                                 
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(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.
|   
|(3) |  | Ratios are as a percentage of average business credit card
interest-earning assets.                                                                                                                                              

36



---



##### Table of Contents



BALANCE SHEET MEASURES AND STATISTICS

|                                              |  |            |         |          |  |                |      |               |  |          |           |         |  |   |           |  |  |  |      |  
|--------------------------------------------- |  | ---------- | ------- | -------- |  | -------------- | ---- | ------------- |  | -------- | --------- | ------- |  | - | --------- |  |  |  | ---- | -
|                                              |  | Advanta    |         |          |  |                |      |               |  |          |           | Advanta |  |   |           | 
|                                              |  | Business   |         | GAAP     |  | Securitization |      | Business      |  | Managed 
|                                              |  | Cards GAAP |         | Ratio(2) |  | Adjustments    |      | Cards Managed |  | Ratio(2)
|                                              |  |            |         |          |  |                |      |               |  |         
|As of September 30, 2003(1)                   |  |            |         |          |  |                |      |               |  |          |           |         |  |   |           |  |  |  |      |  
|Number of business credit
card accounts       |  |            | 783,811 |          |  |                |      |               |  |          | N/A       |         |  |   | 783,811   |  |  |  |      |  
|Ending business credit
card receivables       |  | $          | 533,398 |          |  |                |      |               |  | $        | 2,343,221 |         |  | $ | 2,876,619 |  |  |  |      |  
|Receivables 30 days or
more delinquent        |  |            | 30,681  |          |  |                | 5.75 | %             |  |          | 146,206   |         |  |   | 176,887   |  |  |  | 6.15 | %
|Receivables 90 days or
more delinquent        |  |            | 14,225  |          |  |                | 2.67 |               |  |          | 67,795    |         |  |   | 82,020    |  |  |  | 2.85 |  
|Nonaccrual receivables                        |  |            | 9,167   |          |  |                | 1.72 |               |  |          | 44,824    |         |  |   | 53,991    |  |  |  | 1.88 |  
|Accruing receivables past
due 90 days or more |  |            | 12,772  |          |  |                | 2.39 |               |  |          | 60,755    |         |  |   | 73,527    |  |  |  | 2.56 |  
|                                              |  |            |         |          |  |                |      |               |  |          |           |         |  |   |           |  |  |  |      |  
|As of December 31, 2002(1)                    |  |            |         |          |  |                |      |               |  |          |           |         |  |   |           |  |  |  |      |  
|Number of business credit
card accounts       |  |            | 780,326 |          |  |                |      |               |  |          | N/A       |         |  |   | 780,326   |  |  |  |      |  
|Ending business credit
card receivables       |  | $          | 445,083 |          |  |                |      |               |  | $        | 2,149,147 |         |  | $ | 2,594,230 |  |  |  |      |  
|Receivables 30 days or
more delinquent        |  |            | 23,406  |          |  |                | 5.26 | %             |  |          | 136,128   |         |  |   | 159,534   |  |  |  | 6.15 | %
|Receivables 90 days or
more delinquent        |  |            | 11,959  |          |  |                | 2.69 |               |  |          | 69,335    |         |  |   | 81,294    |  |  |  | 3.13 |  
|Nonaccrual receivables                        |  |            | 4,729   |          |  |                | 1.06 |               |  |          | 27,688    |         |  |   | 32,417    |  |  |  | 1.25 |  
|Accruing receivables past
due 90 days or more |  |            | 10,535  |          |  |                | 2.37 |               |  |          | 61,045    |         |  |   | 71,580    |  |  |  | 2.76 |  
|                                              |  |            |         |          |  |                |      |               |  |          |           |         |  |   |           |  |  |  |      |  
|As of September 30, 2002                      |  |            |         |          |  |                |      |               |  |          |           |         |  |   |           |  |  |  |      |  
|Number of business credit
card accounts       |  |            | 730,174 |          |  |                |      |               |  |          | N/A       |         |  |   | 730,174   |  |  |  |      |  
|Ending business credit
card receivables       |  | $          | 445,241 |          |  |                |      |               |  | $        | 1,808,272 |         |  | $ | 2,253,513 |  |  |  |      |  
|Receivables 30 days or
more delinquent        |  |            | 28,625  |          |  |                | 6.43 | %             |  |          | 121,512   |         |  |   | 150,137   |  |  |  | 6.66 | %
|Receivables 90 days or
more delinquent        |  |            | 12,883  |          |  |                | 2.89 |               |  |          | 54,389    |         |  |   | 67,272    |  |  |  | 2.99 |  
|Nonaccrual receivables                        |  |            | 21,178  |          |  |                | 4.76 |               |  |          | 89,389    |         |  |   | 110,567   |  |  |  | 4.91 |  
|Accruing receivables past
due 90 days or more |  |            | 0       |          |  |                | 0.00 |               |  |          | 0         |         |  |   | 0         |  |  |  | 0.00 |  
|                                              |  |            |         |          |  |                |      |               |  |          |           |         |  |   |           |  |  |  |      |  



|(1) |  | See Note 5 to the consolidated financial statements for a discussion of
the change in income billing practice effective October 1, 2002.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Ratios are as a percentage of ending business credit card
receivables.                                                                  

37



---



##### Table of Contents



SERVICING REVENUES

Advanta Business Cards recognized servicing revenue as follows ($ in
thousands):

|                                |  |      |        |      |  |   |        | 
|------------------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                                |  | 2003 |        | 2002
|                                |  |      |        |     
|Three months ended September 30 |  | $    | 9,549  |      |  | $ | 8,334  | 
|Nine months ended September 30  |  |      | 29,449 |      |  |   | 24,419 | 

The increase in servicing revenue in both the three and nine months ended
September 30, 2003 as compared to the same periods of 2002 was due to
increased volume of securitized business credit card receivables.

OTHER REVENUES

|                                                         |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |        |  
|-------------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------- | - |  | - | ------ | -
|                                                         |  | Three Months Ended |        | Nine Months Ended
|                                                         |  | September 30,      |        | September 30,    
|                                                         |  |                    |        |                  
|($ in thousands)                                         |  | 2003               |        | 2002              |  | 2003 |        | 2002
|                                                         |  |                    |        |                   |  |      |        |     
|Interchange income                                       |  | $                  | 30,805 |                   |  | $    | 24,237 |      |  | $ | 86,232  |   |  | $ | 67,167 |  
|Business credit card rewards                             |  |                    | (7,756 | )                 |  |      | (2,837 | )    |  |   | (19,422 | ) |  |   | (7,864 | )
|Investment securities losses, net                        |  |                    | (1,908 | )                 |  |      | (3,286 | )    |  |   | (3,674  | ) |  |   | (5,379 | )
|Balance transfer fees                                    |  |                    | 1,279  |                   |  |      | 583    |      |  |   | 3,495   |   |  |   | 1,363  |  
|Cash advance fees                                        |  |                    | 878    |                   |  |      | 773    |      |  |   | 2,249   |   |  |   | 2,464  |  
|Other fee revenues                                       |  |                    | 1,892  |                   |  |      | 1,391  |      |  |   | 4,939   |   |  |   | 4,509  |  
|Valuation adjustments on other
receivables held for sale |  |                    | (400   | )                 |  |      | (485   | )    |  |   | 50      |   |  |   | (1,085 | )
|Other                                                    |  |                    | 1,187  |                   |  |      | 143    |      |  |   | 2,469   |   |  |   | 221    |  
|                                                         |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |        |  
|Total other revenues, net                                |  | $                  | 25,977 |                   |  | $    | 20,519 |      |  | $ | 76,338  |   |  | $ | 61,396 |  
|                                                         |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |        |  

Interchange income includes interchange fees on both owned and
securitized business credit cards. The increases in interchange income
in the three and nine months ended September 30, 2003 as compared to the
same periods of 2002 were due primarily to higher transaction volume
related to the increase in average business credit card accounts and
receivables. The average interchange rate was 2.1% in each of the three
and nine months ended September 30, 2003 and 2002.

The increases in business credit card rewards in the three and nine
months ended September 30, 2003 as compared to the same periods of 2002
were due primarily to the increase in average owned and securitized
business credit card accounts in the cash-back rewards programs and the
corresponding transaction activity in those accounts. In addition,
business credit card rewards were impacted in each period by changes in
the estimated costs of future reward redemptions. The impacts of the
changes in estimate were increases in other revenues of approximately
$1.6 million in the three months ended September 30, 2003, $700 thousand
in the three months ended September 30, 2002, $2.8 million in the nine
months ended September 30, 2003 and $1.3 million in the nine months ended
September 30, 2002. See Note 13 to the consolidated financial statements
for further discussion. For a discussion of other changes in estimate
impacting the three and nine months ended September 30, 2002, see the
Operating Expenses section of Managements Discussion and Analysis of
Financial Condition and Results of Operations.

Investment securities losses, net, primarily represent decreases in
valuations of venture capital investments reflecting the market
conditions for the investments. Investment securities losses, net, also
include net realized gains on other investments of $78 thousand
for the three months ended September 30, 2003 and $163 thousand for the
nine months ended September 30, 2003. Investment securities losses, net,
include net realized gains of $219 thousand on other investments for

38



---



##### Table of Contents



the
three months ended September 30, 2002 and $738 thousand for the nine
months ended September 30, 2002.

The increases in balance transfer fees in the three and nine months ended
September 30, 2003 as compared to the same periods of 2002 were due
primarily to an increase in balance transfer promotional offers included
in our marketing campaigns that resulted in a higher volume of balance
transfers.

The increases in other fee revenues in the three and nine months ended
September 30, 2003 as compared to the same periods of 2002 were due
primarily to higher transaction volume and income from marketing
referrals, partially offset by a reduction in fee revenues related to
credit protection products that resulted from the shift in our business
credit card portfolio toward more higher credit quality customers.

Other revenues included an estimate of the earnings allocable to our
partnership interest in Fleet Credit Card Services, L.P. of $1.1 million
for the three months ended September 30, 2003 and $2.1 million for the
nine months ended September 30, 2003.

OPERATING EXPENSES

|                                                |  |                    |        |                   |  |      |        |      |  |   |         |  |  |   |         | 
|----------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------- |  |  | - | ------- | 
|                                                |  | Three Months Ended |        | Nine Months Ended
|                                                |  | September 30,      |        | September 30,    
|                                                |  |                    |        |                  
|($ in thousands)                                |  | 2003               |        | 2002              |  | 2003 |        | 2002
|                                                |  |                    |        |                   |  |      |        |     
|Salaries and employee benefits                  |  | $                  | 17,561 |                   |  | $    | 16,645 |      |  | $ | 54,443  |  |  | $ | 50,309  | 
|Amortization of deferred
origination costs, net |  |                    | 12,501 |                   |  |      | 11,845 |      |  |   | 39,658  |  |  |   | 36,277  | 
|External processing                             |  |                    | 4,951  |                   |  |      | 4,204  |      |  |   | 14,576  |  |  |   | 12,463  | 
|Marketing                                       |  |                    | 3,882  |                   |  |      | 2,730  |      |  |   | 11,253  |  |  |   | 8,294   | 
|Professional fees                               |  |                    | 3,227  |                   |  |      | 2,675  |      |  |   | 9,945   |  |  |   | 9,922   | 
|Equipment                                       |  |                    | 2,597  |                   |  |      | 2,683  |      |  |   | 8,524   |  |  |   | 7,750   | 
|Occupancy                                       |  |                    | 2,126  |                   |  |      | 1,647  |      |  |   | 6,388   |  |  |   | 4,945   | 
|Credit                                          |  |                    | 1,329  |                   |  |      | 1,308  |      |  |   | 3,511   |  |  |   | 4,603   | 
|Insurance                                       |  |                    | 1,293  |                   |  |      | 873    |      |  |   | 3,020   |  |  |   | 1,987   | 
|Fraud                                           |  |                    | 939    |                   |  |      | 807    |      |  |   | 2,890   |  |  |   | 2,242   | 
|Postage                                         |  |                    | 897    |                   |  |      | 840    |      |  |   | 2,701   |  |  |   | 2,462   | 
|Telephone                                       |  |                    | 846    |                   |  |      | 1,152  |      |  |   | 2,692   |  |  |   | 2,890   | 
|Other                                           |  |                    | 2,613  |                   |  |      | 1,568  |      |  |   | 7,878   |  |  |   | 3,678   | 
|                                                |  |                    |        |                   |  |      |        |      |  |   |         |  |  |   |         | 
|Total operating expenses                        |  | $                  | 54,762 |                   |  | $    | 48,977 |      |  | $ | 167,479 |  |  | $ | 147,822 | 
|                                                |  |                    |        |                   |  |      |        |      |  |   |         |  |  |   |         | 

Salaries and employee benefits, external processing, fraud, postage and
other expenses increased in the three and nine months ended September 30,
2003 as compared to the same periods of 2002 due primarily to growth in
owned and securitized business credit card receivables. In addition,
other expenses in the nine months ended September 30, 2002 included a
$1.1 million decrease in litigation reserves resulting from a reduction
of damages in a jury verdict. We expect total operating expenses to
increase in the fourth quarter of 2003 as compared to the three months
ended September 30, 2003 due to the anticipated timing of initiatives to
originate and retain relationships with high credit quality customers and
other expenses.

Amortization of deferred origination costs, net, increased in the three
and nine months ended September 30, 2003 as compared to the same periods
of 2002 due to an increase in the number and timing of new account
originations, partially offset by
a decrease in the average acquisition cost per account. We originated a
significant volume of new accounts in the fourth quarter of 2002, and
expect to

39



---



##### Table of Contents



have lower amortization expense in the fourth quarter of 2003
as compared to the three months ended September 30, 2003, as those costs
would be fully amortized after the amortization period of one year.
Effective July 1, 2002, we refined our estimate of the timing of when
accounts are acquired to better match the resulting estimated period of
benefit to the amortization of deferred acquisition costs. The impact of
this change in estimate in the three and nine months ended September 30,
2002 was a decrease in amortization of business credit card deferred
origination costs of $535 thousand. See Note 13 to the consolidated
financial statements for further discussion.

Professional fees increased in the three months ended September 30,
2003 as compared to the same period of 2002 due primarily to an
increase in the use of external consultants in certain initiatives to
originate and retain relationships with high credit quality customers.

Equipment expense increased in the nine months ended September 30, 2003
as compared to the same period of 2002 due to an increase in technology
costs, including a licensing fee.

Occupancy expense increased in both the three and nine months ended
September 30, 2003 as compared to the same periods of 2002 due to
additional office space that we began leasing in March 2003. Occupancy
expense on the new office space was $491 thousand in the three months
ended September 30, 2003 and $1.0 million in the nine months ended
September 30, 2003. In addition, occupancy expense in the nine months
ended September 30, 2003 included approximately $410 thousand of lease
termination costs paid relating to office space formerly used in our
venture capital operations.

Marketing expense increased in the three and nine months ended September
30, 2003 as compared to the same periods of 2002 due to Advantas
sponsorship and advertising costs associated with tennis events in 2003.
Marketing expense also increased due to our development of programs to
originate new customers and our customer relationship management
initiatives to enhance and maintain our relationships with existing high
credit quality business credit card customers, including marketing
programs to stimulate usage, enhance customer loyalty and retain existing
accounts.

Credit expense decreased in the nine months ended September 30, 2003 as
compared to the same period of 2002 due to a shift in the types of
recoveries. There was an increase in the proportion of total
recoveries collected through sales of pools of charged-off accounts and
a decrease in the proportion collected through outsourced individual
account recovery efforts. The impact of a similar shift in the types
of recoveries in the three months ended September 30, 2003 was
substantially offset by an increase in credit expense related to
additional services from credit information service providers.

Insurance expense increased in the three and nine months ended
September 30, 2003 as compared to the same periods of 2002 due to an
increase in directors and officers professional liability insurance
costs as a result of market rates for this type of insurance. In
addition, insurance expense in the nine months ended September 30, 2002
included a $382 thousand reduction of our estimated liability related
to workers compensation insurance.

Telephone expense decreased in the three and nine months ended
September 30, 2003 as compared to the same periods of 2002 due
primarily to a
reduction in contract rate charged by one of our service providers that
was effective February 2003.

40



---



##### Table of Contents



LITIGATION CONTINGENCIES

Advanta Corp. and its subsidiaries are involved in class action
lawsuits, other litigation, claims and legal proceedings arising in the
ordinary course of business or discontinued operations, including
litigation arising from our operation of the mortgage business prior to
our exit from that business in the first quarter of 2001. See
discussion in Note 9 to the consolidated financial statements.
Management believes that the aggregate loss, if any, resulting from
these actions will not have a material adverse effect on our financial
position or results of our operations based on the level of litigation
reserves we have established and our current expectations regarding the
ultimate resolutions of these existing actions. Our litigation
reserves are estimated based on the status of litigation and our
assessment of the ultimate resolution of each action after consultation
with our attorneys. However, due to the inherent uncertainty in
litigation and since the ultimate resolutions of these proceedings are
influenced by factors outside of our control, it is reasonably possible
that our estimated liability under these proceedings may change or that
actual results will differ from our estimates.

INCOME TAXES

Income tax expense on income from continuing operations was as follows
($ in thousands):

|                                |  |      |        |      |  |   |        | 
|------------------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                                |  | 2003 |        | 2002
|                                |  |      |        |     
|Three months ended September 30 |  | $    | 4,289  |      |  | $ | 3,954  | 
|Nine months ended September 30  |  |      | 11,917 |      |  |   | 11,064 | 

Our effective tax rate was 38.5% for both the three and nine months
ended September 30, 2003 and 2002. See Note 9 to the consolidated
financial statements for a discussion of tax matters currently before
the Internal Revenue Service Regional Office of Appeals.

41



---



##### Table of Contents



DISCONTINUED OPERATIONS

In the nine months ended September 30, 2003, we recorded an after-tax
loss on the discontinuance of our mortgage and leasing businesses of
$2.0 million. The components of this loss include a $2.6 million pretax
loss on mortgage discontinuance, a $600 thousand pretax loss on leasing
discontinuance, and a tax benefit of $1.2 million. The $2.6 million
pretax loss on mortgage discontinuance was the result of an increase in
our estimated future costs of mortgage business-related contingent
liabilities, due primarily to a lengthening of the anticipated timeframe
of the resolution for those contingent liabilities, including an
extension of the discovery process and a delay in the scheduled trial
date in the litigation with Chase Manhattan Mortgage Corporation. The
$600 thousand pretax loss on leasing discontinuance was principally
associated with an unfavorable sales tax assessment and represents a
decrease in our estimate of operating results of the leasing segment
over the remaining life of the lease portfolio. The impact of the
unfavorable sales tax assessment was partially offset by favorable
credit performance on the leasing portfolio.

In the nine months ended September 30, 2002, we recorded an after-tax
loss on the discontinuance of our mortgage and leasing businesses of
$8.6 million. The components of this loss include a pretax charge of
$7.5 million for a litigation settlement related to a mortgage loan
servicing agreement termination fee collected in December 2000, a $17.8
million pretax charge primarily related to an increase in our estimated
costs of mortgage business-related contingent liabilities, an $11.3
million pretax gain on leasing discontinuance, and a tax benefit of $5.4
million. The $17.8 million charge related primarily to an increase in
our estimated 2002 and future costs of mortgage business-related
contingent liabilities in connection with (1) contingent liabilities and
litigation costs arising from the operation of the mortgage business
prior to the Mortgage Transaction that were not assumed by the buyer,
and (2) costs related to Advantas litigation with Chase Manhattan
Mortgage Corporation in connection with the Mortgage Transaction. The
change in estimate reflected the legal and consulting fees and other
costs that we expected to incur based on the levels of contingent
liabilities and expense rates, and considered the status of the
discovery process associated with the Mortgage Transaction litigation.
The $11.3 million pretax gain on leasing discontinuance represented a
revision in the estimated operating results of the leasing segment over
the remaining life of the lease portfolio due primarily to favorable
credit performance. The leasing portfolio performed favorably as
compared to the expectations and assumptions established in 2001. This
improvement was the result of successfully obtaining a replacement
vendor to service leased equipment for a former leasing vendor that had
filed for bankruptcy protection, and operational improvements in the
leasing collections area.

MARKET RISK SENSITIVITY

We are exposed to equity price risk on the equity securities in our
investments available for sale portfolio. A significant portion of our
equity securities at September 30, 2003 represented venture capital
investments. We typically do not attempt to reduce or eliminate the
market exposure on equity investments. A 20% adverse change in equity
prices would have resulted in an approximate $3.5 million decrease in the
fair value of our equity investments at September 30, 2003. A 20%
adverse change would have resulted in an approximate $4.1 million
decrease in fair value at December 31, 2002.

42



---



##### Table of Contents



We measure our interest rate risk using a rising rate scenario and a
declining rate scenario. Net interest income is estimated using a third
party software model that uses standard income modeling techniques. We
also measure the effect of interest rate risk on our managed net interest
income, which includes net interest income on owned assets and net
interest income on securitized receivables. The measurement of managed
net interest income in addition to net interest income on owned assets is
meaningful because our securitization income fluctuates with yields on
securitized receivables and interest rates earned by note holders. Both
increasing and decreasing rate scenarios assume an instantaneous shift in
rates and measure the corresponding change in expected net interest
income as compared to a base case scenario. As of September 30, 2003 and
December 31, 2002, we estimated that our owned net interest income and
managed net interest income would change as follows over a twelve-month
period:

|                                                                         |                                                     |  |           |    |          |  |  |    |   
|------------------------------------------------------------------------ | --------------------------------------------------- |  | --------- | -- | -------- |  |  | -- | --
|                                                                         |                                                     |  | Sept. 30, |    | Dec. 31,
|                                                                         |                                                     |  | 2003      |    | 2002    
|                                                                         |                                                     |  |           |    |         
|Estimated percentage increase (decrease) in owned net
interest income:   |                                                     |  |           |    |          |  |  |   
|                                                                         | Assuming 200 basis point increase in interest rates |  |           | 13 | %        |  |  | 16 | % 
|                                                                         | Assuming 200 basis point decrease in interest rates |  |           | (2 | )%       |  |  | 3  | % 
|Estimated percentage increase (decrease) in managed
net interest income: |                                                     |  |           |    |          |  |  |   
|                                                                         | Assuming 200 basis point increase in interest rates |  |           | (5 | )%       |  |  | (4 | )%
|                                                                         | Assuming 200 basis point decrease in interest rates |  |           | 7  | %        |  |  | 9  | % 

Our business credit card receivables include interest rate floors that
cause our managed net interest income to rise in the declining rate
scenario. Our managed net interest income decreases in a rising rate
scenario due to the portion of the business credit card portfolio that is
effectively at a fixed rate because of the nature of the pricing of the
accounts. Changes in the composition of our balance sheet, the current
interest rate environment and the lower average interest rate on our
deposit portfolio have also impacted the results of the owned and managed
net interest income sensitivity analyses at September 30, 2003 as
compared to December 31, 2002.

The above estimates of net interest income sensitivity alone do not
provide a comprehensive view of our exposure to interest rate risk. The
quantitative risk information is limited by the parameters and
assumptions utilized in generating the results. These analyses are
useful only when viewed within the context of the parameters and
assumptions used. The above rate scenarios in no way reflect
managements expectation regarding the future direction of interest
rates, and they depict only two possibilities out of a large set of
possible scenarios.

43



---



##### Table of Contents



LIQUIDITY, CAPITAL RESOURCES AND ANALYSIS OF FINANCIAL CONDITION

Our goal is to maintain an adequate level of liquidity, for both
long-term and short-term needs, through active management of both assets
and liabilities. Since Advanta Corp.s debt rating is not investment
grade, our access to unsecured, institutional debt is limited. However,
we do have access to a variety of funding sources as described below, and
had a high level of liquidity at September 30, 2003. At September 30,
2003, we had $482 million of federal funds sold, $238 million of
receivables held for sale, and $207 million of investments, which could
be sold to generate additional liquidity. Components of funding were as
follows ($ in thousands):

|                                                      |  |                    |           |                   |  |        |     |   |  |   |           |  |  |  |     |  
|----------------------------------------------------- |  | ------------------ | --------- | ----------------- |  | ------ | --- | - |  | - | --------- |  |  |  | --- | -
|                                                      |  | September 30, 2003 |           | December 31, 2002
|                                                      |  |                    |           |                  
|                                                      |  | Amount             |           | %                 |  | Amount |     | %
|                                                      |  |                    |           |                   |  |        |     |  
|Off-balance sheet
securitized
receivables(1)          |  | $                  | 2,265,293 |                   |  |        | 58  | % |  | $ | 2,172,266 |  |  |  | 60  | %
|Deposits                                              |  |                    | 918,956   |                   |  |        | 23  |   |  |   | 714,028   |  |  |  | 19  |  
|Debt, other
borrowings and
trust preferred
securities |  |                    | 419,308   |                   |  |        | 11  |   |  |   | 415,886   |  |  |  | 12  |  
|Equity                                                |  |                    | 330,338   |                   |  |        | 8   |   |  |   | 321,313   |  |  |  | 9   |  
|                                                      |  |                    |           |                   |  |        |     |   |  |   |           |  |  |  |     |  
|Total                                                 |  | $                  | 3,933,895 |                   |  |        | 100 | % |  | $ | 3,623,493 |  |  |  | 100 | %
|                                                      |  |                    |           |                   |  |        |     |   |  |   |           |  |  |  |     |  



|(1) |  | Includes both off-balance sheet business credit card receivables
and off-balance sheet lease receivables related to discontinued
operations, if applicable. Excludes our ownership interest in the
investor principal balance of securitizations (subordinated trust
assets) that are held on-balance sheet and classified as retained
interests in securitizations or assets of discontinued operations.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We have a $280 million committed commercial paper conduit facility that
provides off-balance sheet funding, all of which was used at September
30, 2003. Upon the expiration of this facility in June 2004, management
expects to obtain the appropriate level of replacement funding under
similar terms and conditions. At December 31, 2002, $330 million of
business credit card receivables were securitized through a commercial
paper conduit facility.

In the nine months ended September 30, 2003, we completed three public
business credit card securitizations. The revolving periods for those
securitizations extend to the following dates:

|                 |  |                    |         |                  |  |                |  | 
|---------------- |  | ------------------ | ------- | ---------------- |  | -------------- |  | 
|                 |  | Investor Principal |         |                  |  |               
|                 |  | Balance at         |         | Scheduled End of
|                 |  | September 30, 2003 |         | Revolving Period
|($ in thousands) |  |                    |         |                 
|Series 2003-A    |  | $                  | 400,000 |                  |  | May 2005      
|Series 2003-B    |  |                    | 300,000 |                  |  | September 2005
|Series 2003-C    |  |                    | 300,000 |                  |  | November 2004 

When a business credit card securitization series is in its revolving
period, principal collections on securitized receivables allocated to
that series are used to purchase additional receivables to replenish
receivables that have been repaid. In contrast, when a series of our
securitization trust starts its amortization period, principal
collections are held in the trust until the payment date of the notes.
As principal is collected on securitized receivables in a series during
its amortization period, we need to replace that amount of funding. Our
$157 million Series 2000-A business credit card securitization started
its scheduled amortization period in February 2003 and the note holders
were paid in full in

44



---



##### Table of Contents



April 2003. Our $600 million Series 2000-B business credit card
securitization started its scheduled amortization period in April 2003
and the note holders were paid in full in July 2003. The increase in
on-balance sheet assets during the Series 2000-B amortization period was
primarily funded through an increase in deposits. We anticipate
completing a public business credit card securitization in the fourth
quarter of 2003 under similar terms and conditions as the public
securitizations completed in the nine months ended September 30, 2003.
Based on the planned level of securitizations and the maturities of
existing deposits, we expect on-balance sheet assets and deposits to be
lower at December 31, 2003 than September 30, 2003.

We continue to offer unsecured debt securities of Advanta Corp., in the
form of RediReserve Certificates and Investment Notes, to retail
investors through our retail note program. We change the interest rates
we offer frequently, depending on market conditions and our funding
needs. The rates also vary depending on the size of each investment. At
September 30, 2003, $319 million of RediReserve Certificates and
Investment Notes were outstanding with interest rates ranging from 1.24%
to 11.56%. In 2002, we began to lengthen the maturities of our unsecured
debt securities to enhance our liquidity management and to take advantage
of the lower interest rate environment. Debt maturing in one year or
less totaled $174 million at September 30, 2003, as compared to $207
million at December 31, 2002 and $219 million at September 30, 2002.

The Board of Directors of Advanta Corp. has authorized management to
purchase up to 3.0 million shares of Advanta Corp. common stock. As of
December 31, 2002, we had repurchased 2,248,059 shares of our Class B
Common Stock. In the nine months ended September 30, 2003, we
repurchased 354,132 shares of our Class A Common Stock and 315,250 shares
of our Class B Common Stock. We plan to complete our purchases under
this authorization in the fourth quarter of 2003.

Our bank subsidiaries are subject to regulatory capital requirements and
other regulatory provisions that restrict their ability to lend and/or
pay dividends to Advanta Corp. and its affiliates. Advanta Bank Corp.
issues and funds our business credit cards and is the servicer of our
discontinued leasing business. Prior to our exit from the mortgage
business in the first quarter of 2001, Advanta National Bank issued and
funded a large portion of our mortgage business. Advanta National Banks
operations are currently not material to our consolidated operating
results. Our insurance subsidiaries are also subject to certain capital
and dividend rules and regulations as prescribed by state jurisdictions
in which they are authorized to operate. Management believes that these
restrictions, for both bank and insurance subsidiaries, will not have an
adverse effect on Advanta Corp.s ability to meet its cash obligations
due to the current levels of liquidity and diversity of funding sources.
An insurance subsidiary paid $20 million to Advanta Corp. on September
30, 2003, representing an extraordinary dividend and return of capital
that was approved in advance by the applicable state regulator.

At September 30, 2003, Advanta Bank Corp.s combined total capital ratio
(combined Tier I and Tier II capital to risk-weighted assets) was 22.90% as
compared to 18.46% at December 31, 2002. At both dates, Advanta Bank Corp. had
capital in excess of levels a bank is required to maintain to be classified as
well-capitalized under the regulatory framework for prompt corrective action.
See Note 10 to the consolidated financial statements for a discussion of the
removal, effective October 2003, of Advanta Bank Corp.s revised understanding
with its regulators.

45



---



##### Table of Contents



In September 2003, the bank regulatory agencies issued a joint notice of
proposed rulemaking that would assess a risk-based capital charge against the
risks associated with early amortization, a common feature in securitizations
of revolving credit card facilities. Such a capital charge would be assessed
against only the off-balance sheet investors interest and only in the event
that the excess spread in the transaction has declined to a predetermined
level. The proposed capital requirement would assess increasing amounts of
risk-based capital as the level of excess spread approaches the early
amortization trigger. Therefore, as the probability of an early amortization
event increases, the capital charge against the off-balance sheet portion of
the securitization also would increase. Advanta Bank Corp.s business credit
card securitization trust includes early amortization provisions. However,
based on our current levels of excess spread, the issuance of a final rule and
adoption of the related guidance is not expected to have a material impact on
the regulatory capital requirements of Advanta Bank Corp. Comments on the
proposed rulemaking were due in late October 2003.

In February 2003, we entered into an operating lease agreement for
additional office space to be used for certain business card operations
and general business purposes. The minimum lease payments on the lease
are $243 thousand for the fourth quarter of 2003, $1.4 million in the
year 2004, $1.7 million in the year 2005, $1.8 million in each of the
years 2006 through 2008, $1.9 million in the year 2009 and $1.7 million
in the year 2010.

In May 2003, we sold two buildings formerly used in our mortgage business
that were classified as assets from discontinued operations on the
consolidated balance sheet. The proceeds of approximately $27 million
from the sale of the buildings increased our liquidity position. In
addition, we sold two lots of real estate for $4.6 million.

In the nine months ended September 30, 2003, we exercised clean-up call options
on our remaining leasing securitization transactions with $94 million of
securitized leases outstanding, resulting in net cash outflow of $28 million
and a corresponding increase in assets of discontinued operations on the call
dates. As a result of exercising these clean-up call options, we have no
outstanding securitized leases and no retained interests in leasing
securitizations at September 30, 2003.

Advanta Corp. and its subsidiaries are involved in class action lawsuits,
other litigation, claims and legal proceedings arising in the ordinary
course of business or discontinued operations, including litigation
arising from our operation of the mortgage business prior to our exit
from that business in the first quarter of 2001. Management believes
that the aggregate loss, if any, resulting from existing litigation,
claims and other legal proceedings will not have a material adverse
effect on our liquidity or capital resources based on our current
expectations regarding the ultimate resolutions of these actions and
amounts held in escrow in connection with certain litigation. However,
due to the inherent uncertainty in litigation and since the ultimate
resolutions of these proceedings are influenced by factors outside of our
control, it is reasonably possible that the estimated cash flow related
to these proceedings may change or that actual results will differ from
our estimates.

46



---



##### Table of Contents



FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that are subject to
certain risks and uncertainties that could cause actual results to
differ materially from those projected. These forward-looking
statements may be identified by the use of forward-looking phrases such
as will likely result, may, are expected to, is anticipated,
estimate, projected, intends to or other similar words or
phrases. The most significant among these risks and uncertainties are:



| | (1)  |  | our managed net interest income including changes
resulting from fluctuations in the volume of receivables and
the range and timing of pricing offers to cardholders;                      
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2)  |  | competitive pressures;                                                                                                                                                                     
|
| | (3)  |  | political, social and/or general economic 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 cardholders
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)  |  | factors affecting the value of investments that we hold;                                                                                                                                   
|
| | (9)  |  | the effects of government regulation, including
restrictions and limitations imposed by banking laws,
regulators, examinations, and Advanta National Banks
agreements with its regulators;
|
| | (10) |  | effect of, and changes in, tax laws, rates, regulations
and policies;                                                                                                                      
|
| | (11) |  | relationships with customers, significant vendors and
business partners;                                                                                                                   
|
| | (12) |  | difficulties or delays in the development, production,
testing and marketing of products or services;                                                                                      
|
| | (13) |  | the amount and cost of financing available to us;                                                                                                                                          
|
| | (14) |  | the ratings on our debt and the debt of our subsidiaries;                                                                                                                                  
|
| | (15) |  | revisions to estimates associated with the discontinuance
of our mortgage and leasing businesses;                                                                                          
|
| | (16) |  | the impact of litigation;                                                                                                                                                                  
|
| | (17) |  | the proper design and operation of our disclosure
controls and procedures; and                                                                                                             
|
| | (18) |  | the ability to attract and retain key personnel.                                                                                                                                           

Additional risks that may affect our future performance are set forth
elsewhere in this Quarterly Report on Form 10-Q, in our Annual Report on
Form 10-K for the year ended December 31, 2002 and in our other filings
with the Securities and Exchange Commission.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this item is set forth in Item
2-Managements Discussion and Analysis of Financial Condition and Results
of Operations in this Report on Form 10-Q. See Market Risk
Sensitivity.

47



---



##### Table of Contents






ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed in our Exchange Act
reports is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commissions rules and
forms, and that such information is accumulated and communicated to
management, including our Chief Executive Officer and Chief Financial
Officer as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and
procedures, management recognized that any disclosure controls and
procedures, no matter how well designed and operated, can provide only
reasonable, rather than absolute, assurance of achieving the desired
control objectives, and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls
and procedures.

An evaluation was performed by management with the participation of our
Chief Executive Officer and Chief Financial Officer, of the effectiveness
of the design and operation of our disclosure controls and procedures.
Based on this evaluation, the Chief Executive Officer and Chief Financial
Officer have concluded that, as of September 30, 2003, our disclosure
controls and procedures are effective to ensure that information required
to be disclosed in the reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commissions rules and
forms. There have been no changes in our internal controls over
financial reporting that occurred during the period covered by this
report that have materially affected, or are reasonably likely to
materially affect, these internal controls over financial reporting.




PART II  OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

The legal proceedings and claims described under the heading captioned
Commitments and Contingencies in Note 9 of the Notes to Consolidated
Financial Statements set forth in Part I, Item 1 of this Quarterly Report
are hereby incorporated by reference.

48



---



##### Table of Contents






ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits  The following exhibits are being filed with this report on
Form 10-Q.

|        |  |                                                                                                                                                  
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                  
|Number  |  | Description of Document                                                                                                                          
|        |  |                                                                                                                                                  
|10.1    |  | Letter Agreement, dated as of October 14, 2003, between Advanta
Corp. and Jeffrey D. Beck*                                                       
|        |  |                                                                                                                                                  
|12      |  | Consolidated 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

*     Management contract or compensatory plan or arrangement.

(b) Reports on Form 8-K



| | (b) (1) |  | A Current Report on Form 8-K, dated July 24, 2003, was filed by
Advanta setting forth the financial highlights of Advantas results of
operations for the three months ended June 30, 2003.
| | ------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

49



---



##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.



| |  |  | Advanta Corp.
(Registrant)
| |  |  | --------------------------

|                          |  | 
|------------------------- |  | 
|By /s/ Philip M. Browne   |  | 
|                          |  | 
|Senior Vice President and |  | 
|Chief Financial Officer   |  | 
|November 12, 2003         |  | 
|                          |  | 
|By /s/ David B. Weinstock |  | 
|                          |  | 
|Vice President and        |  | 
|Chief Accounting Officer  |  | 
|November 12, 2003         |  | 

50



---



##### Table of Contents








| |  | EXHIBIT INDEX
| |  | -------------

|        |  |                                                                                                                                                   |  |          
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------
|        |  |                                                                                                                                                   |  | Manner of
|Exhibit |  | Description                                                                                                                                       |  | Filing   
|        |  |                                                                                                                                                   |  |          
|10.1    |  | Letter Agreement, dated as of October 14, 2003, between
Advanta Corp. and Jeffrey D. Beck**                                                       |  | *        
|        |  |                                                                                                                                                   |  |          
|12      |  | Consolidated 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 Executive 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.                        
| |  | -----------------------------------------------------------
|
| |  | ** Management contract or compensatory plan or arrangement.

51