Advanta 10Q 2003 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


[X]		Quarterly report under section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 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 August 4, 2003 9,864,385 shares


Class B Common Stock, $.01 par value		Outstanding at August 4, 2003 17,389,454 shares

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
		CONSOLIDATED BALANCE SHEETS (Unaudited)
		CONSOLIDATED INCOME STATEMENTS (Unaudited)
		CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)
		CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
	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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Ex. 10 - Lease Agreement
Ratio of Earnings to Fixed Charges
302 Certification (CEO)
302 Certification (CFO)
906 Certification (CEO)
906 Certification (CFO)

TABLE OF CONTENTS


		Page

PART I – FINANCIAL INFORMATION
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			23
Item 3. Quantitative and Qualitative Disclosures About Market Risk			42
Item 4. Controls and Procedures			43
PART II – OTHER INFORMATION
Item 1. Legal Proceedings			43
Item 4. Submission of Matters to a Vote of Security Holders			43
Item 6. Exhibits and Reports on Form 8-K			44

ITEM 1. FINANCIAL STATEMENTS

ADVANTA CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)


			June 30,			December 31,
(In thousands, except share data)			2003			2002

ASSETS
Cash			$	44,919		$	14,834
Federal funds sold				280,902			332,257
Restricted interest-bearing deposits				77,880			79,449
Investments available for sale				201,049			171,222
Receivables, net:
		Held for sale		158,557			177,065
		Other		282,483			278,282

Total receivables, net				441,040			455,347
Accounts receivable from securitizations				831,191			198,238
Premises and equipment, net				18,592			25,496
Other assets				294,828			277,658
Assets of discontinued operations, net				90,075			127,112

Total assets			$	2,280,476		$	1,681,613

LIABILITIES
Deposits			$	1,205,001		$	714,028
Debt				319,428			315,886
Other liabilities				329,188			230,386

Total liabilities				1,853,617			1,260,300

Commitments and contingencies
Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debentures of Advanta Corp.				100,000			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 – 20,471,162 shares in 2003 and 20,326,289 shares in 2002			205			204
Additional paid-in capital				245,071			243,910
Deferred compensation				(16,235	)		(17,837	)
Unearned ESOP shares				(10,606	)		(10,831	)
Accumulated other comprehensive income				328			186
Retained earnings				153,504			147,205
Less: Treasury stock at cost, 154,632 Class A common shares and 3,197,614 Class B common shares in 2003; 2,896,112 Class B common shares in 2002				(46,518	)		(42,634	)

Total stockholders’ equity				326,859			321,313

Total liabilities and stockholders’ equity			$	2,280,476		$	1,681,613

See Notes to Consolidated Financial Statements

ADVANTA CORP. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS (Unaudited)


			Three Months Ended						Six Months Ended
			June 30,						June 30,

(In thousands, except per share data)			2003			2002			2003			2002

Interest income:
	Receivables		$	18,914		$	21,007		$	36,387		$	41,483
	Investments			2,163			2,576			4,089			5,846
	Other interest income			4,373			2,652			7,965			5,312

Total interest income				25,450			26,235			48,441			52,641
Interest expense:
	Deposits			7,419			6,023			13,640			12,288
	Debt			5,692			6,346			10,741			13,132
	Other borrowings			0			0			1			59

Total interest expense				13,111			12,369			24,382			25,479

Net interest income				12,339			13,866			24,059			27,162
Provision for credit losses				9,265			11,341			18,711			22,041

Net interest income after provision for credit losses				3,074			2,525			5,348			5,121
Noninterest revenues:
	Securitization income			31,752			30,023			61,362			59,670
	Servicing revenues			9,873			8,143			19,900			16,085
	Other revenues, net			24,929			22,999			50,361			40,877

Total noninterest revenues				66,554			61,165			131,623			116,632

Expenses:
	Operating expenses			57,195			49,887			112,717			98,845
	Minority interest in income of consolidated subsidiary			2,220			2,220			4,440			4,440

Total expenses				59,415			52,107			117,157			103,285

Income before income taxes				10,213			11,583			19,814			18,468
Income tax expense				3,932			4,459			7,628			7,110

Income from continuing operations				6,281			7,124			12,186			11,358
Loss, net, on discontinuance of mortgage and leasing businesses, net of tax				(1,968	)		(8,610	)		(1,968	)		(8,610	)

Net income (loss)			$	4,313		$	(1,486	)	$	10,218		$	2,748

Basic income from continuing operations per common share
		Class A	$	0.25		$	0.27		$	0.47		$	0.41
		Class B		0.27			0.29			0.52			0.46
		Combined		0.26			0.28			0.50			0.44

Diluted income from continuing operations per common share
		Class A	$	0.24		$	0.26		$	0.46		$	0.40
		Class B		0.26			0.27			0.51			0.44
		Combined		0.26			0.27			0.49			0.42

Basic net income (loss) per common share
		Class A	$	0.16		$	(0.07	)	$	0.39		$	0.07
		Class B		0.19			(0.05	)		0.44			0.12
		Combined		0.18			(0.06	)		0.42			0.10

Diluted net income (loss) per common share
		Class A	$	0.16		$	(0.06	)	$	0.38		$	0.08
		Class B		0.18			(0.05	)		0.43			0.11
		Combined		0.18			(0.06	)		0.41			0.10

Basic weighted average common shares outstanding
		Class A		9,151			9,144			9,168			9,138
		Class B		14,893			16,176			14,854			16,239
		Combined		24,044			25,320			24,022			25,377

Diluted weighted average common shares outstanding
		Class A		9,151			9,150			9,168			9,144
		Class B		15,445			17,640			15,329			17,312
		Combined		24,596			26,790			24,497			26,456

See Notes to Consolidated Financial Statements

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)		$	10,218
Other comprehensive income (loss):
	Change in unrealized appreciation (depreciation) of investments, net of tax benefit (expense) of $(76)		142

Comprehensive income (loss)		$	10,360

Preferred and common cash dividends declared
Exercise of stock options										1			849
Stock option exchange program stock distribution
Issuance of restricted stock										1			1,538
Amortization of deferred compensation
Forfeitures of restricted stock										(1	)		(1,149	)
Stock buyback
ESOP shares committed to be released													(77	)

Balance at June 30, 2003					$	1,010	$	100	$	205		$	245,071

See Notes to Consolidated Financial Statements

($ 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)									10,218						10,218
Other comprehensive income (loss):
	Change in unrealized appreciation (depreciation) of investments, net of tax benefit (expense) of $(76)					142									142
Comprehensive income (loss)
Preferred and common cash dividends declared									(3,919	)					(3,919	)
Exercise of stock options															850
Stock option exchange program stock distribution												183			183
Issuance of restricted stock			(1,539	)											0
Amortization of deferred compensation			2,152												2,152
Forfeitures of restricted stock			989												(161	)
Stock buyback												(4,067	)		(4,067	)
ESOP shares committed to be released			225												148

Balance at June 30, 2003		$	(26,841	)	$	328		$	153,504		$	(46,518	)	$	326,859

See Notes to Consolidated Financial Statements

ADVANTA CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


			Six Months Ended
			June 30,

($ in thousands)			2003			2002

OPERATING ACTIVITIES – CONTINUING OPERATIONS
Net income			$	10,218		$	2,748
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
		Loss, net, on discontinuance of mortgage and leasing businesses, net of tax		1,968			8,610
		Investment securities losses		1,766			2,093
		Depreciation and amortization		4,217			4,026
		Provision for credit losses		18,711			22,041
		Provision for interest and fee losses		5,013			2,945
		Change in deferred origination costs, net of deferred fees		8,546			(1,435	)
		Change in receivables held for sale		(279,261	)		(130,991	)
		Proceeds from sale of receivables held for sale		299,376			115,000
		Change in accounts receivable from securitizations		(632,953	)		(1,688	)
		Change in other assets and other liabilities		89,753			17,951

	Net cash provided by (used in) operating activities			(472,646	)		41,300

INVESTING ACTIVITIES – CONTINUING OPERATIONS
	Change in federal funds sold and restricted interest-bearing deposits			52,924			43,024
	Purchase of investments available for sale			(314,625	)		(191,490	)
	Proceeds from sales of investments available for sale			246,686			162,337
	Proceeds from maturing investments available for sale			36,564			69,226
	Change in receivables not held for sale			(38,078	)		(32,636	)
	Sales (purchases) of premises and equipment, net			2,820			(3,526	)

Net cash provided by (used in) investing activities				(13,709	)		46,935

FINANCING ACTIVITIES – CONTINUING OPERATIONS
	Change in demand and savings deposits			(3,519	)		(3,434	)
	Proceeds from issuance of time deposits			561,659			153,936
	Payments for maturing time deposits			(71,629	)		(178,723	)
	Proceeds from issuance of debt			50,621			55,955
	Payments on redemption of debt			(50,224	)		(88,010	)
	Change in other borrowings			0			(32,317	)
	Proceeds from exercise of stock options			850			351
	Cash dividends paid			(3,919	)		(4,067	)
	Stock buyback			(4,067	)		(4,297	)

Net cash provided by (used in) financing activities				479,772			(100,606	)

DISCONTINUED OPERATIONS
	Net cash provided by operating activities			10,109			2,169
	Net cash provided by investing activities			26,559			0

Net cash provided by discontinued operations				36,668			2,169

Net increase (decrease) in cash				30,085			(10,202	)
Cash at beginning of period				14,834			20,952

Cash at end of period			$	44,919		$	10,750

See Notes to Consolidated Financial Statements

ADVANTA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)

June 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.

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 (loss) and net income (loss) per common share would have changed to the following pro forma amounts:


			Three Months Ended					Six Months Ended
			June 30,					June 30,

			2003		2002			2003		2002

Compensation expense for stock option plans, net of related tax effects
	As reported		$	0	$	0		$	0	$	0
	Pro forma			603		787			1,216		1,540

Net income (loss)
	As reported		$	4,313	$	(1,486	)	$	10,218	$	2,748
	Pro forma			3,710		(2,273	)		9,002		1,208

Basic net income (loss) per common share
	As reported
		Class A	$	0.16	$	(0.07	)	$	0.39	$	0.07
		Class B		0.19		(0.05	)		0.44		0.12
		Combined		0.18		(0.06	)		0.42		0.10
	Pro forma
		Class A	$	0.14	$	(0.10	)	$	0.34	$	0.01
		Class B		0.16		(0.08	)		0.39		0.06
		Combined		0.15		(0.09	)		0.37		0.04

Diluted net income (loss) per common share
	As reported
		Class A	$	0.16	$	(0.06	)	$	0.38	$	0.08
		Class B		0.18		(0.05	)		0.43		0.11
		Combined		0.18		(0.06	)		0.41		0.10
	Pro forma
		Class A	$	0.14	$	(0.09	)	$	0.33	$	0.02
		Class B		0.16		(0.08	)		0.38		0.05
		Combined		0.15		(0.08	)		0.36		0.04

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, 2002. In addition, public companies must apply the consolidation requirements to variable interest entities that existed prior to February 1, 2003 and remain in existence as of the beginning of annual or interim periods beginning after June 15, 2003. The adoption of this interpretation did 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 will result in a reclassification of our company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debentures of Advanta Corp. (the “capital securities”) to liabilities, and payments on the capital securities, currently classified as minority interest in income of consolidated subsidiary, to be reclassified to interest expense. We do not expect the adoption of this standard to impact net income.

In June 2003, the FASB issued an exposure draft that would amend SFAS 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 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. Management is

still evaluating any potential impact this proposed statement, if finalized in its current form, may have on our financial position or results of operations.

Note 3) Receivables

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


			June 30,			December 31,
			2003			2002

Business credit card receivables			$	442,769		$	445,083
Other receivables				23,309			25,589

		Gross receivables		466,078			470,672

Add: Deferred origination costs, net of deferred fees				22,288			30,834
Less: Allowance for receivable losses
	Business credit cards			(45,914	)		(44,466	)
	Other receivables			(1,412	)		(1,693	)

		Total allowance		(47,326	)		(46,159	)

Receivables, net			$	441,040		$	455,347

Note 4) Allowance for Receivable Losses

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


			Six Months Ended
			June 30,

			2003			2002

Beginning balance			$	46,159		$	41,971
Provision for credit losses				18,711			22,041
Provision for interest and fee losses				5,013			2,945
Gross principal charge-offs:
	Business credit cards			(19,442	)		(21,188	)
	Other receivables			(28	)		(13	)

		Total gross principal charge-offs		(19,470	)		(21,201	)

Principal recoveries:
	Business credit cards			1,479			2,195

Net principal charge-offs				(17,991	)		(19,006	)

Interest and fee charge-offs:
	Business credit cards			(4,566	)		(2,945	)

Ending balance			$	47,326		$	45,006

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. Provision for interest and fee losses are recorded as direct reductions to interest and fee income.

Note 5) Securitization Activities

Accounts receivable from securitizations consisted of the following:


	June 30,		December 31,
	2003		2002

Retained interests in securitizations	$	156,373	$	113,422
Accrued interest and fees on securitized receivables, net		58,926		56,171
Amounts due from the trust		615,892		28,645

Total accounts receivable from securitizations	$	831,191	$	198,238

On July 21, 2003, we received $600 million of receivables from the securitization trust after the note holders in the Series 2000-B business credit card securitization had been paid in full with accumulated principal collections on the securitized receivables and the noteholders’ claim on the receivables had been released.

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						Six Months Ended

		June 30,			June 30,			June 30,			June 30,
		2003			2002			2003			2002

Average securitized receivables			$2,290,671			$1,638,410			$2,231,572			$1,627,096
Securitization income			31,752			30,023			61,362			59,670
Discount accretion			4,373			2,652			7,965			5,312
Interchange income			23,521			17,215			43,925			32,870
Servicing revenues			9,873			8,143			19,900			16,085
Proceeds from new securitizations			226,851			110,000			299,376			115,000
Proceeds from collections reinvested in revolving-period securitizations			710,553			915,671			1,768,945			1,819,439
Cash flows received on retained interests			84,702			48,611			133,002			100,005
Key assumptions:
	Discount rate		12.1% - 14.6	%		9.0% - 15.0	%		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		8.6% - 9.7	%		9.6% - 12.8	%		8.6% - 10.3	%		9.6% - 12.8	%
	Finance charge yield, net of interest paid to note holders		14.3% - 15.0	%		14.9% - 15.9	%		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 six months ended June 30, 2003 or 2002.

The following assumptions were used in estimating the fair value of retained interests in business credit card securitizations at June 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.


	June 30,			December 31,
	2003			2002

Discount rate		12.1% - 13.8	%		11.4% - 14.0	%
Monthly payment rate		18.8% - 21.0	%		19.3% - 21.0	%
Loss rate		8.6% - 9.4	%		9.4% - 10.3	%
Interest yield, net of interest earned by note holders		15.0	%		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. The following are the results of those sensitivity analyses on the valuation at June 30, 2003.


Effect on fair value of the following hypothetical changes in key assumptions:
	Discount rate increased by 2%	$	(2,055	)
	Discount rate increased by 4%		(4,027	)
	Monthly payment rate at 110% of base assumption		(1,465	)
	Monthly payment rate at 125% of base assumption		(2,786	)
	Loss rate at 110% of base assumption		(4,278	)
	Loss rate at 125% of base assumption		(10,695	)
	Interest yield, net of interest earned by note holders, decreased by 1%		(5,004	)
	Interest yield, net of interest earned by note holders, decreased by 2%		(10,007	)

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.

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 is as follows:


		June 30,		December 31,		June 30,
		2003⁽¹⁾		2002⁽¹⁾		2002

Owned business credit card receivables		$	442,769	$	445,083	$	443,377
Securitized business credit card receivables			2,365,176		2,149,147		1,744,669

Total managed receivables			2,807,945		2,594,230		2,188,046

Receivables 30 days or more delinquent:
	Owned		25,839		23,406		28,739
	Securitized		150,380		136,128		115,500
	Total managed		176,219		159,534		144,239
Receivables 90 days or more delinquent:
	Owned		13,184		11,959		14,703
	Securitized		76,459		69,335		58,836
	Total managed		89,643		81,294		73,539
Nonaccrual receivables:
	Owned		7,091		4,729		21,111
	Securitized		42,162		27,688		83,313
	Total managed		49,253		32,417		104,424
Accruing receivables past due 90 days or more:
	Owned		11,741		10,535		0
	Securitized		67,804		61,045		0
	Total managed		79,545		71,580		0
Net principal charge-offs for the six months ended June 30 and twelve months ended December 31:
	Owned		17,963		37,400		18,993
	Securitized		92,060		156,282		76,762
	Total managed		110,023		193,682		95,755

(1)

See Note 4 for a discussion of the change in income billing practice effective October 1, 2002.

Note 6) Selected Balance Sheet Information

Other assets consisted of the following:


	June 30,		December 31,
	2003		2002

Current and deferred income taxes, net	$	79,752	$	84,684
Amounts due from transfer of consumer credit card business		70,545		70,545
Investment in Fleet Credit Card Services, L.P.		34,642		34,000
Cash surrender value of insurance contracts		22,824		24,437
Intangible assets		3,953		3,085
Other assets		83,112		60,907

Total other assets	$	294,828	$	277,658

Other liabilities consisted of the following:


	June 30,		December 31,
	2003		2002

Amounts due to the securitization trust	$	91,244	$	3,255
Accounts payable and accrued expenses		29,225		33,486
Business credit card rewards		20,454		16,416
Accrued interest payable		15,245		5,641
Other⁽¹⁾		173,020		171,588

Total other liabilities	$	329,188	$	230,386

(1)

A substantial portion of other liabilities represents our litigation reserves.

Note 7) Deposits

Deposit accounts consist of the following:


	June 30,		December 31,
	2003		2002

Demand deposits	$	3,792	$	6,561
Money market savings		1,631		2,380
Time deposits of $100,000 or less		624,417		441,611
Time deposits of more than $100,000		575,161		263,476

Total deposits	$	1,205,001	$	714,028

Time deposit maturities are as follows:


Year Ended December 31,
2003	$	593,876
2004		534,612
2005		61,823
2006		9,068
2007		199

Note 8) 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. We estimate that the court’s decisions will have a favorable impact to our liquidity since we would recoup approximately $8 million in cash from the escrow account funded in February 2001, after payment of amounts due to Fleet. The court’s ruling on the remaining outstanding issue and/or the ultimate resolution of any issues that may be appealed could reduce or eliminate the 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. 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 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 matter is in discovery and the parties extended the discovery period. The trial was originally scheduled to begin in January 2004. In the second quarter of 2003, the parties further extended the discovery period and the scheduled date for trial to begin was moved to April 2004. 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 $566 thousand in 2003, $1.4 million in 2004, $1.7 million in 2005, $1.8 million in each of the years 2006 through 2008 and $3.6 million thereafter.

Note 9) 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 six months ended June 30, 2003, we repurchased 154,632 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 June 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 six months ended June 30, 2003 and 2002 were $0.126 for Class A Common Stock and $0.151 for Class B Common Stock.

Note 10) Segment Information


	Advanta
	Business		Venture
	Cards		Capital			Other⁽¹⁾			Total

Three months ended June 30, 2003
Interest income	$	23,007	$	1		$	2,442		$	25,450
Interest expense		11,269		135			1,707			13,111
Noninterest revenues (losses), net		66,283		(1,242	)		1,513			66,554
Pretax income (loss) from continuing operations		12,647		(2,434	)		0			10,213
Total assets		1,329,072		12,695			938,709			2,280,476

Three months ended June 30, 2002
Interest income	$	23,358	$	0		$	2,877		$	26,235
Interest expense		8,775		181			3,413			12,369
Noninterest revenues (losses), net		61,087		(31	)		109			61,165
Pretax income (loss) from continuing operations		14,562		(779	)		(2,200	)		11,583
Total assets		625,633		18,129			921,061			1,564,823

Six months ended June 30, 2003
Interest income	$	43,761	$	1		$	4,679		$	48,441
Interest expense		22,003		275			2,104			24,382
Noninterest revenues (losses), net		131,232		(1,852	)		2,243			131,623
Pretax income (loss) from continuing operations		23,624		(3,810	)		0			19,814

Six months ended June 30, 2002
Interest income	$	46,136	$	2		$	6,503		$	52,641
Interest expense		17,546		386			7,547			25,479
Noninterest revenues (losses), net		119,226		(2,610	)		16			116,632
Pretax income (loss) from continuing operations		28,306		(4,214	)		(5,624	)		18,468

(1)

Other includes investment and other activities not attributable to reportable segments. Total assets in the “Other” segment include assets of discontinued operations.

Note 11) Selected Income Statement Information


	Three Months Ended						Six Months Ended
	June 30,						June 30,

Other Revenues	2003			2002			2003			2002

Interchange income	$	29,289		$	22,737		$	55,427		$	42,930
Business credit card rewards		(7,534	)		(3,023	)		(11,666	)		(5,027	)
Investment securities gains (losses), net		(1,158	)		534			(1,766	)		(2,093	)
Balance transfer fees		865			486			2,216			780
Cash advance fees		616			883			1,371			1,691
Other fee revenues		1,644			1,854			3,047			3,118
Other		1,207			(472	)		1,732			(522	)

Total other revenues, net	$	24,929		$	22,999		$	50,361		$	40,877


	Three Months Ended				Six Months Ended
	June 30,				June 30,

Operating Expenses	2003		2002		2003		2002

Salaries and employee benefits	$	18,891	$	16,533	$	36,882	$	33,664
Amortization of deferred origination costs, net		12,973		12,410		27,157		24,432
External processing		5,005		4,082		9,625		8,259
Marketing		4,444		3,653		7,371		5,564
Professional fees		3,284		3,412		6,718		7,247
Equipment		2,533		2,466		5,927		5,067
Occupancy		2,473		1,687		4,262		3,298
Fraud		1,036		694		1,951		1,435
Credit		997		1,622		2,182		3,295
Insurance		976		297		1,727		1,114
Postage		902		831		1,804		1,622
Telephone		772		1,111		1,846		1,738
Other		2,909		1,089		5,265		2,110

Total operating expenses	$	57,195	$	49,887	$	112,717	$	98,845

Note 12) Discontinued Operations

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


	Three and Six Months Ended

	June 30, 2003						June 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 three months ended June 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, primarily due 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 three months ended June 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 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

changes in estimates 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 three months ended June 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 three months ended June 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 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:


		Three Months Ended June 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	)	$	(0.61	)	$	(0.02	)	$	0.27
	Class B		(0.07	)		(0.61	)		(0.02	)		0.27
	Combined		(0.07	)		(0.61	)		(0.02	)		0.27
Diluted gain (loss), net, on discontinuance of mortgage and leasing businesses, net of tax, per common share
	Class A	$	(0.07	)	$	(0.58	)	$	(0.02	)	$	0.26
	Class B		(0.07	)		(0.58	)		(0.02	)		0.26
	Combined		(0.07	)		(0.58	)		(0.02	)		0.26


		Six Months Ended June 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	)	$	(0.61	)	$	(0.02	)	$	0.27
	Class B		(0.07	)		(0.61	)		(0.02	)		0.27
	Combined		(0.07	)		(0.61	)		(0.02	)		0.27
Diluted gain (loss), net, on discontinuance of mortgage and leasing businesses, net of tax, per common share
	Class A	$	(0.07	)	$	(0.59	)	$	(0.02	)	$	0.26
	Class B		(0.07	)		(0.59	)		(0.02	)		0.26
	Combined		(0.07	)		(0.59	)		(0.02	)		0.26

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


	June 30,			December 31,
	2003			2002

Lease receivables, net	$	66,348		$	40,064
Other assets		29,049			91,686
Liabilities		(5,322	)		(4,638	)

Assets of discontinued operations, net	$	90,075		$	127,112

We are continuing to service the existing lease portfolio. At June 30, 2003, there were $53 million of securitized leases outstanding, and we had retained interests in leasing securitizations of $27 million. At December 31, 2002, there were $152 million of securitized leases outstanding, and we had retained interests in leasing securitizations of $57 million. At June 30, 2003, the fair value of the retained interests in leasing securitizations was estimated using a 12% discount rate on future cash flows, a loss rate of 3.7% and a weighted average life of 0.9 years. At December 31, 2002, the fair value of the retained interests in leasing securitizations 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.

In June 2003, we exercised a clean-up call option on a leasing securitization transaction with $46 million of securitized leases outstanding, resulting in an increase in on-balance sheet lease receivables and a decrease in retained interests in leasing securitizations. Both on-balance sheet lease receivables and retained interests in leasing securitizations are classified as assets of discontinued operations in the consolidated balance sheets. In addition, 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. Proceeds from the sale were approximately $27 million.

Note 13) 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						Six Months Ended
			June 30,						June 30,

			2003			2002			2003			2002

Income from continuing operations			$	6,281		$	7,124		$	12,186		$	11,358
	Less: Preferred A dividends			0			0			(141	)		(141	)

Income from continuing operations available to common shareholders				6,281			7,124			12,045			11,217
Loss, net, on discontinuance of mortgage and leasing businesses, net of tax				(1,968	)		(8,610	)		(1,968	)		(8,610	)

Net income (loss) available to common shareholders				4,313			(1,486	)		10,077			2,607
	Less: Class A dividends declared			(579	)		(576	)		(1,155	)		(1,150	)
	Less: Class B dividends declared			(1,303	)		(1,295	)		(2,623	)		(2,775	)

Undistributed net income (loss)			$	2,431		$	(3,357	)	$	6,299		$	(1,318	)

Basic income from continuing operations per common share
		Class A	$	0.25		$	0.27		$	0.47		$	0.41
		Class B		0.27			0.29			0.52			0.46
		Combined⁽¹⁾		0.26			0.28			0.50			0.44
Diluted income from continuing operations per common share
		Class A	$	0.24		$	0.26		$	0.46		$	0.40
		Class B		0.26			0.27			0.51			0.44
		Combined⁽¹⁾		0.26			0.27			0.49			0.42
Basic net income (loss) per common share
		Class A	$	0.16		$	(0.07	)	$	0.39		$	0.07
		Class B		0.19			(0.05	)		0.44			0.12
		Combined⁽¹⁾		0.18			(0.06	)		0.42			0.10
Diluted net income (loss) per common share
		Class A	$	0.16		$	(0.06	)	$	0.38		$	0.08
		Class B		0.18			(0.05	)		0.43			0.11
		Combined⁽¹⁾		0.18			(0.06	)		0.41			0.10

Basic weighted average common shares outstanding
		Class A		9,151			9,144			9,168			9,138
		Class B		14,893			16,176			14,854			16,239
		Combined		24,044			25,320			24,022			25,377
Dilutive effect of:
		Options Class B		218			828			168			588
		Restricted shares Class A		0			6			0			6
		Restricted shares Class B		334			636			307			485
Diluted weighted average common shares outstanding
		Class A		9,151			9,150			9,168			9,144
		Class B		15,445			17,640			15,329			17,312
		Combined		24,596			26,790			24,497			26,456
Antidilutive shares
		Options Class B		1,663			1,133			2,197			1,360
		Restricted shares Class B		113			1,708			127			1,843

(1)

Combined represents net income available to common shareholders divided by the combined total of Class A and Class B weighted average common shares outstanding.


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						Six Months Ended
	June 30,						June 30,

	2003			2002			2003			2002

Pretax income (loss):
Advanta Business Cards	$	12,647		$	14,562		$	23,624		$	28,306
Venture Capital		(2,434	)		(779	)		(3,810	)		(4,214	)
Other⁽¹⁾		0			(2,200	)		0			(5,624	)

Total pretax income		10,213			11,583			19,814			18,468
Income tax expense		(3,932	)		(4,459	)		(7,628	)		(7,110	)

Income from continuing operations	$	6,281		$	7,124		$	12,186		$	11,358

(1)

Other includes investment and other activities not attributable to the Advanta Business Cards or Venture Capital segments.

For the three months ended June 30, 2003, we reported income from continuing operations of $6.3 million or $0.26 per combined diluted common share, compared to income from continuing operations of $7.1 million or $0.27 per combined diluted common share for the same period of 2002. The decrease in income from continuing operations for the three months ended June 30, 2003 as compared to the same period of 2002 is the result of a decrease in Advanta Business Cards net income and higher unrealized losses on our venture capital investments, partially offset by the reduction in net interest expense on excess liquidity not attributable to the Advanta Business Cards or Venture Capital segments. For the six months ended June 30, 2003, we reported income from continuing operations of $12.2 million or $0.49 per combined diluted common share, compared to income from continuing operations of $11.4 million or $0.42 per combined diluted share for the same period of 2002. The increase in income from continuing operations for the six months ended June 30, 2003 as compared to the same period of 2002 is 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 a decrease in Advanta Business Cards net income.

For the three months ended June 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 three months ended June 30, 2002, we recorded an after-tax loss on the discontinuance of our mortgage and leasing businesses of $8.6 million, or $0.32 per combined diluted common share.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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 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 June 30		36,162		62,258
Six months ended June 30		90,093		104,549

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. In the second quarter of 2003, we enhanced our 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 expect this will result in acquiring a higher level of active customers, but may result in somewhat lower growth in the second half of 2003 as compared to the growth rate experienced in the six months ended June 30, 2003.

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


	Three Months Ended						Six Months Ended
	June 30,						June 30,

	2003			2002			2003			2002

Net interest income on owned interest-earning assets	$	11,738		$	14,583		$	21,758		$	28,590
Noninterest revenues		66,283			61,087			131,232			119,226
Provision for credit losses		(9,555	)		(11,100	)		(18,963	)		(21,600	)
Operating expenses		(55,819	)		(50,008	)		(110,403	)		(97,910	)

Pretax income	$	12,647		$	14,562		$	23,624		$	28,306

Net interest income on owned interest-earning assets decreased by $2.8 million in the three months ended June 30, 2003 as compared to the same period of 2002 and decreased by $6.8 million for the six months ended June 30, 2003 as compared to the same period of 2002. The decreases were due primarily to decreases in the average yield earned on our business credit card receivables, partially offset by increases in average owned business credit card receivables of $34 million for the three months ended June 30, 2003 and $76 million for the six months ended June 30, 2003 as compared to the same periods of 2002. The decreases in yields are a result of the competitively-priced offerings and products.

The increases in noninterest revenues in both periods are comprised of increased interchange income, servicing revenues and other fee revenues due to higher transaction volume and growth in average owned and securitized receivables, and increased securitization income. An increased volume of securitized receivables, a decrease in the floating interest rates earned by note holders and a decreased net principal charge-off rate on securitized receivables more than offset a decrease in yield on securitized receivables, resulting in increases in securitization income in both the three and six months ended June 30, 2003 as compared to the same periods of 2002.

The decreases in provision for credit losses in the three and six months ended June 30, 2003 as compared to the same periods of 2002 reflect estimates of a lower level of inherent losses in the portfolio, based on delinquency and net principal charge-off trends and the current composition of the portfolio as compared to estimates as of June 30, 2002, partially offset by the increases in average owned business credit card receivables. 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 due to the number and timing of new account originations.

VENTURE CAPITAL

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


	Three Months Ended						Six Months Ended
	June 30,						June 30,

	2003			2002			2003			2002

Net interest expense	$	(134	)	$	(181	)	$	(274	)	$	(384	)
Realized gains (losses), net		197			0			197			(47	)
Unrealized losses		(1,439	)		(31	)		(2,049	)		(2,563	)
Operating expenses		(1,058	)		(567	)		(1,684	)		(1,220	)

Pretax loss	$	(2,434	)	$	(779	)	$	(3,810	)	$	(4,214	)

As shown in the table above, pretax loss of our venture capital segment is comprised primarily of net realized and unrealized 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 $11.3 million at June 30, 2003 and $13.5 million at December 31, 2002. Operating expenses for the three and six months ended June 30, 2003 include approximately $410 thousand of lease termination costs paid in June 2003 relating to office space formerly used in our venture capital operations.

INTEREST INCOME AND EXPENSE

Interest income decreased by $785 thousand to $25.5 million for the three months ended June 30, 2003 as compared to the same period of 2002 and decreased by $4.2 million to $48.4 million for the six months ended June 30, 2003 as compared to the same period of 2002. The decrease in interest income for both periods was due primarily to a decrease in the average yield earned on our investments and receivables as a result of the prevailing interest rate environment and the competitively-priced offers described below. Partially offsetting these decreases were increases in average owned business credit card receivables and investments. The average owned business card receivables increased $34 million for the three months ended June 30, 2003 and $76 million for the six months ended June 30, 2003 as compared to the same periods of 2002. Average investments increased $170

million for the three months ended June 30, 2003 and $89 million for the six months ended June 30, 2003 as compared to the same periods of 2002.

In 2002 and 2003, our marketing campaigns 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 in future periods. We expect yields for the remaining two quarters of 2003 to be relatively consistent with or higher than those experienced in the six months ended June 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 or exceed the decline in yields created by new offers at promotional rates.

For the three months ended June 30, 2003, interest expense increased by $742 thousand to $13.1 million as compared to the same period of 2002. The increase in interest expense for the three months ended June 30, 2003 was due primarily to an increase of $457 million in our average deposits and debt, partially offset by a decrease in our average cost of funds. Interest expense decreased by $1.1 million for the six months ended June 30, 2003 to $24.4 million as compared to the same period of 2002. The decrease in interest expense for the six months ended June 30, 2003 was due primarily to a decrease in our average cost of funds, partially offset by an increase of $316 million in average deposits and debt. Our average cost of funds decreased to 3.71% for the three months ended June 30, 2003 from 5.29% in the same period of 2002, and decreased to 3.93% for the six months ended June 30, 2003 from 5.57% 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.

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.

INTEREST RATE ANALYSIS AND AVERAGE BALANCES
($ in thousands)


		Three Months Ended June 30,

		2003							2002

		Average				Average			Average				Average
		Balance		Interest		Rate			Balance		Interest		Rate

Owned receivables:
	Business credit cards⁽¹⁾	$	506,200	$	18,634		14.76	%	$	472,010	$	20,706		17.60	%
	Other receivables		23,448		281		4.81			28,483		288		4.06

Total owned receivables			529,648		18,915		14.32			500,493		20,994		16.82
Investments⁽²⁾			660,999		2,170		1.31			491,060		2,573		2.10
Retained interests in securitizations			157,801		4,373		11.08			88,403		2,652		12.00
Interest-earning assets of discontinued operations			39,043		1,412		14.47			49,991		1,074		8.59

Total interest-earning assets⁽³⁾			1,387,491	$	26,870		7.76	%		1,129,947	$	27,293		9.69	%
Noninterest-earning assets			739,807							445,984

Total assets		$	2,127,298						$	1,575,931

Deposits		$	1,076,572	$	7,836		2.92	%	$	640,219	$	6,733		4.22	%
Debt			318,368		5,059		6.37			298,187		5,652		7.60
Other borrowings			55		0		1.62			0		0		0.00

Total interest-bearing liabilities⁽⁴⁾			1,394,995	$	12,895		3.71	%		938,406	$	12,385		5.29	%
Noninterest-bearing liabilities			306,032							170,542

Total liabilities			1,701,027							1,108,948
Company-obligated mandatorily preferred securities of subsidiary trust holding solely subordinate debentures of Advanta Corp.			100,000							100,000
Stockholders’ equity			326,271							366,983

Total liabilities and stockholders’ equity		$	2,127,298						$	1,575,931

Net interest spread							4.05	%						4.40	%
Net interest margin							4.04	%						5.29	%

(1)		Interest income includes late fees for owned business credit cards receivables of $1.5 million for the three months ended June 30, 2003 and $1.6 million for the three months ended June 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 non-accrual receivables.

(4)		Includes funding of assets for both continuing and discontinued operations.


		Six Months Ended June 30,

		2003							2002

		Average				Average			Average				Average
		Balance		Interest		Rate			Balance		Interest		Rate

Owned receivables:
	Business credit cards⁽¹⁾	$	510,800	$	35,796		14.13	%	$	434,934	$	40,824		18.93	%
	Other receivables		24,150		592		4.94			28,338		624		4.44

Total owned receivables			534,950		36,388		13.72			463,272		41,448		18.04
Investments⁽²⁾			618,286		4,102		1.33			529,644		5,867		2.22
Retained interests in securitizations			145,969		7,965		10.91			88,525		5,312		12.00
Interest-earning assets of discontinued operations			40,407		2,689		13.31			52,251		2,233		8.55

Total interest-earning assets⁽³⁾			1,339,612	$	51,144		7.68	%		1,133,692	$	54,860		9.74	%
Noninterest-earning assets			631,373							461,113

Total assets		$	1,970,985						$	1,594,805

Deposits		$	942,634	$	14,444		3.09	%	$	632,724	$	13,774		4.39	%
Debt			318,322		10,124		6.41			304,867		12,261		8.11
Other borrowings			139		1		1.67			7,113		66		1.86

Total interest-bearing liabilities⁽⁴⁾			1,261,095	$	24,569		3.93	%		944,704	$	26,101		5.57	%
Noninterest-bearing liabilities			285,793							182,871

Total liabilities			1,546,888							1,127,575
Company-obligated mandatorily preferred securities of subsidiary trust holding solely subordinate debentures of Advanta Corp.			100,000							100,000
Stockholders’ equity			324,097							367,230

Total liabilities and stockholders’ equity		$	1,970,985						$	1,594,805

Net interest spread							3.75	%						4.17	%
Net interest margin							4.00	%						5.12	%

(1)		Interest income includes late fees for owned business credit card receivables of $3.0 million for the six months ended June 30, 2003 and $4.4 million for the six months ended June 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 non-accrual receivables.

(4)		Includes funding of assets for both continuing and discontinued operations.

PROVISION AND ALLOWANCE FOR RECEIVABLE LOSSES

For the three months ended June 30, 2003, provision for credit losses decreased by $2.1 million to $9.3 million as compared to the same period in 2002. For the six months ended June 30, 2003, provision for credit losses decreased by $3.3 million to $18.7 million as compared to the same period in 2002. The decrease in provision for credit losses in both periods reflects a reduction in our estimate of losses inherent in the portfolio as of June 30, 2003, based on the improvement of delinquency and principal charge-off trends and the current composition of the portfolio as compared to our estimate as of June 30, 2002. This favorable impact was partially offset by increases in average owned business credit card receivables of $34 million for the three months ended June 30, 2003 and $76 million for the six months ended June 30, 2003 as compared to the same periods of 2002.

For the three months ended June 30, 2003, provisions for interest and fee losses, which are recorded as direct reductions to interest and fee income, increased by $911 thousand to $2.4 million as compared to the same period in 2002. For the six months ended June 30, 2003, provisions for interest and fee losses increased by $2.1 million to $5.0 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 $45.9 million at June 30, 2003, or 10.4% of owned receivables, which was relatively consistent with the allowance of $44.5 million, or 10.0% of owned receivables at December 31, 2002.

The improvement in the net principal charge-off rate for the six months ended June 30, 2003 as compared to the same period of 2002 is the result of 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 owned and managed principal charge-off rates for the period from July 1, 2003 to December 31, 2003 will be approximately the same or slightly higher than those experienced in the six months ended June 30, 2003, but lower than rates experienced in the period from July 1, 2002 to December 31, 2002. This expectation is based on the current composition of the portfolio that reflects our strategic initiative to selectively attract and retain more higher credit quality customers, enhancements in the collections area of operations made in 2002, and the current level of delinquencies.

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 examination 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.


		June 30,			December 31,			June 30,
	($ in thousands)	2003⁽¹⁾			2002⁽¹⁾			2002

CONSOLIDATED – OWNED
Allowance for receivable losses		$	47,326		$	46,159		$	45,006
Receivables 30 days or more delinquent			27,228			25,197			30,211
Receivables 90 days or more delinquent			13,953			12,755			15,367
Nonaccrual receivables			7,860			5,525			21,775
Accruing receivables past due 90 days or more			11,741			10,535			0
As a percentage of gross receivables:
	Allowance for receivable losses		10.2	%		9.8	%		9.6	%
	Receivables 30 days or more delinquent		5.8			5.4			6.4
	Receivables 90 days or more delinquent		3.0			2.7			3.3
	Nonaccrual receivables		1.7			1.2			4.6
	Accruing receivables past due 90 days or more		2.5			2.2			0.0
Net principal charge-offs		$	17,991		$	37,416		$	19,006
As a percentage of average gross receivables (annualized):
	Net principal charge-offs		6.7	%		7.5	%		8.2	%
BUSINESS CREDIT CARDS – OWNED
Allowance for receivable losses		$	45,914		$	44,466		$	43,777
Receivables 30 days or more delinquent			25,839			23,406			28,739
Receivables 90 days or more delinquent			13,184			11,959			14,703
Nonaccrual receivables			7,091			4,729			21,111
Accruing receivables past due 90 days or more			11,741			10,535			0
As a percentage of gross receivables:
	Allowance for receivable losses		10.4	%		10.0	%		9.9	%
	Receivables 30 days or more delinquent		5.8			5.3			6.5
	Receivables 90 days or more delinquent		3.0			2.7			3.3
	Nonaccrual receivables		1.6			1.1			4.8
	Accruing receivables past due 90 days or more		2.7			2.4			0.0
Net principal charge-offs		$	17,963		$	37,400		$	18,993
As a percentage of average gross receivables (annualized):
	Net principal charge-offs		7.0	%		7.9	%		8.7	%

(1)

See Note 4 to the consolidated financial statements for a discussion of the change in income billing practice effective October 1, 2002.

SECURITIZATION INCOME

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


	2003		2002

Three months ended June 30	$	31,752	$	30,023
Six months ended June 30		61,362		59,670

An increased volume of securitized receivables, a decrease in the floating interest rates earned by note holders and a decreased net principal charge-off rate on securitized receivables more than offset a decrease in yield on securitized receivables, resulting in increases in securitization income in both the three and six months ended June 30, 2003 as compared to the same periods of 2002. 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):

INCOME STATEMENT MEASURES AND STATISTICS


									Advanta
	Advanta								Business
	Business		GAAP			Securitization			Cards		Managed
	Cards GAAP		Ratio⁽³⁾			Adjustments			Managed		Ratio⁽³⁾

Three Months Ended June 30, 2003:
Interest income	$	23,007		13.86	%	$	89,819		$	112,826		16.14	%
Interest expense		11,269		6.79			9,684			20,953		3.00
Net interest income		11,738		7.07			80,135			91,873		13.14
Noninterest revenues		66,283		39.93			(33,550	)		32,733		4.68
Provision for credit losses		9,555		5.76			46,585	⁽²⁾		56,140		8.03
Risk-adjusted revenues⁽¹⁾		68,466		41.24			0			68,466		9.79
Average business credit card interest-earning assets		664,001					2,132,870			2,796,871
Net principal charge-offs		9,555		5.76			46,585			56,140		8.03

Three Months Ended June 30, 2002:
Interest income	$	23,358		16.67	%	$	77,326		$	100,684		19.08	%
Interest expense		8,775		6.26			9,376			18,151		3.44
Net interest income		14,583		10.41			67,950			82,533		15.64
Noninterest revenues		61,087		43.60			(30,174	)		30,913		5.86
Provision for credit losses		11,100		7.92			37,776	⁽²⁾		48,876		9.26
Risk-adjusted revenues⁽¹⁾		64,570		46.09			0			64,570		12.24
Average business credit card interest-earning assets		560,413					1,550,007			2,110,420
Net principal charge-offs		9,694		6.92			37,776			47,470		9.00

Six Months Ended June 30, 2003:
Interest income	$	43,761		13.33	%	$	176,914		$	220,675		16.09	%
Interest expense		22,003		6.70			19,205			41,208		3.01
Net interest income		21,758		6.63			157,709			179,467		13.09
Noninterest revenues		131,232		39.96			(65,649	)		65,583		4.78
Provision for credit losses		18,963		5.77			92,060	⁽²⁾		111,023		8.10
Risk-adjusted revenues⁽¹⁾		134,027		40.81			0			134,027		9.77
Average business credit card interest-earning assets		656,769					2,085,603			2,742,372
Net principal charge-offs		17,963		5.47			92,060			110,023		8.02

Six Months Ended June 30, 2002:
Interest income	$	46,136		17.63	%	$	156,969		$	203,105		19.70	%
Interest expense		17,546		6.70			18,435			35,981		3.49
Net interest income		28,590		10.92			138,534			167,124		16.21
Noninterest revenues		119,226		45.55			(61,772	)		57,454		5.57
Provision for credit losses		21,600		8.25			76,762	⁽²⁾		98,362		9.54
Risk-adjusted revenues⁽¹⁾		126,216		48.22			0			126,216		12.24
Average business credit card interest-earning assets		523,459					1,538,571			2,062,030
Net principal charge-offs		18,993		7.26			76,762			95,755		9.29

	(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.

BALANCE SHEET MEASURES AND STATISTICS


	Advanta							Advanta
	Business		GAAP			Securitization		Business		Managed
	Cards GAAP		Ratio⁽²⁾			Adjustments		Cards Managed		Ratio⁽²⁾

As of June 30, 2003⁽¹⁾
Number of business credit card accounts		788,470					N/A		788,470
Ending business credit card receivables	$	442,769				$	2,365,176	$	2,807,945
Receivables 90 days or more delinquent		13,184		2.98	%		76,459		89,643		3.19	%
Receivables 30 days or more delinquent		25,839		5.84			150,380		176,219		6.28
Nonaccrual receivables		7,091		1.60			42,162		49,253		1.75
Accruing receivables past due 90 days or more		11,741		2.65			67,804		79,545		2.83

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 90 days or more delinquent		11,959		2.69	%		69,335		81,294		3.13	%
Receivables 30 days or more delinquent		23,406		5.26			136,128		159,534		6.15
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 June 30, 2002
Number of business credit card accounts		710,071					N/A		710,071
Ending business credit card receivables	$	443,377				$	1,744,669	$	2,188,046
Receivables 90 days or more delinquent		14,703		3.32	%		58,836		73,539		3.36	%
Receivables 30 days or more delinquent		28,739		6.48			115,500		144,239		6.59
Nonaccrual receivables		21,111		4.76			83,313		104,424		4.77
Accruing receivables past due 90 days or more		0		0.00			0		0		0.00

	(1)		See Note 4 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.

SERVICING REVENUES

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


	2003		2002

Three months ended June 30	$	9,873	$	8,143
Six months ended June 30		19,900		16,085

The increase in servicing revenue in both the three and six months ended June 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						Six Months Ended
	June 30,						June 30,

($ in thousands)	2003			2002			2003			2002

Interchange income	$	29,289		$	22,737		$	55,427		$	42,930
Business credit card rewards		(7,534	)		(3,023	)		(11,666	)		(5,027	)
Investment securities gains (losses), net		(1,158	)		534			(1,766	)		(2,093	)
Balance transfer fees		865			486			2,216			780
Cash advance fees		616			883			1,371			1,691
Other fee revenues		1,644			1,854			3,047			3,118
Other		1,207			(472	)		1,732			(522	)

Total other revenues, net	$	24,929		$	22,999		$	50,361		$	40,877

Interchange income includes interchange fees on both owned and securitized business credit cards. The increase in interchange income in the three and six months ended June 30, 2003 as compared to the same periods of 2002 was primarily due 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 six months ended June 30, 2003 and 2002.

The increases in business credit card rewards in the three and six months ended June 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, partially offset by a change in redemption terms of certain bonus mile reward programs in the first quarter of 2003 that decreased the anticipated costs of future reward redemptions in those bonus mile reward programs by approximately $867 thousand.

Investment securities gains (losses), net, primarily represent decreases in valuations of venture capital investments reflecting the market conditions for the investments. Investment securities gains for the three and six months ended June 30, 2002 also include $0.5 million of realized gains on other investments.

An increase in the volume of balance transfer promotional offers included in our marketing campaigns has resulted in a higher volume of balance transfers and therefore, balance transfer fees have increased in the three and six months ended June 30, 2003 as compared to the same periods of 2002.

Other revenues for the three months ended June 30, 2002 included charges of $600 thousand related to valuation adjustments on other receivables held for sale. The

same period of 2003 included the benefit of a reversal of a lower of cost or market valuation adjustment on other receivables held for sale of $550 thousand, based on the valuation in an agreement of sale dated July 2003. Other revenues also included an estimate of the earnings allocable to our partnership interest in Fleet Credit Card Services, L.P. of $500 thousand for the three months ended June 30, 2003 and $1.0 million for the six months ended June 30, 2003.

OPERATING EXPENSES


	Three Months Ended				Six Months Ended
	June 30,				June 30,

($ in thousands)	2003		2002		2003		2002

Salaries and employee benefits	$	18,891	$	16,533	$	36,882	$	33,664
Amortization of deferred origination costs, net		12,973		12,410		27,157		24,432
External processing		5,005		4,082		9,625		8,259
Marketing		4,444		3,653		7,371		5,564
Professional fees		3,284		3,412		6,718		7,247
Equipment		2,533		2,466		5,927		5,067
Occupancy		2,473		1,687		4,262		3,298
Fraud		1,036		694		1,951		1,435
Credit		997		1,622		2,182		3,295
Insurance		976		297		1,727		1,114
Postage		902		831		1,804		1,622
Telephone		772		1,111		1,846		1,738
Other		2,909		1,089		5,265		2,110

Total operating expenses	$	57,195	$	49,887	$	112,717	$	98,845

Salaries and employee benefits, external processing, fraud, postage and other expenses have increased in the three and six months ended June 30, 2003 as compared to the same periods of 2002 due primarily to growth in owned and securitized business credit card receivables. We expect salaries and employee benefits to continue to increase in the remainder of 2003 as we make investments in initiatives to acquire and retain relationships with high credit quality customers.

Amortization of deferred origination costs, net, increased in the three and six months ended June 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 have increased amortization expense through the third quarter of 2003 as those costs amortize over the privilege period of one year.

Professional fees decreased in the three and six months ended June 30, 2003 as compared to the same periods of 2002 primarily due to a decrease in the use of external consultants. We expect professional fees to increase in the remaining quarters of 2003 as compared to the three months ended June 30, 2003, due to the expected use of consultants in certain initiatives to acquire and retain relationships with high credit quality customers.

Equipment expense increased in the six months ended June 30, 2003 as compared to the same period of 2002 due to an increase in technology costs, including a licensing fee, and the growth in owned and securitized business credit card receivables.

Occupancy expense increased in both the three and six months ended June 30, 2003 as compared to the same periods of 2002 due to additional office space that we began

leasing in March 2003. Rental expense on the new office space was $413 thousand in the three months ended June 30, 2003 and $550 thousand in the six months ended June 20, 2003. In addition, occupancy expense in 2003 included approximately $410 thousand of lease termination costs paid in June 2003 relating to office space formerly used in our venture capital operations.

Marketing expense increased in the three and six months ended June 30, 2003 as compared to the same periods of 2002 due to Advanta’s sponsorship and advertising costs associated with tennis events in 2003 and increased origination activities in new markets for our retail note program. Marketing expense has also increased in the six months ended June 30, 2003 as compared to the same period of 2002 due to our 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, and the development of programs to acquire new customers.

Credit expense decreased in the three and six months ended June 30, 2003 as compared to the same periods 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.

Insurance expense increased in the three and six months ended June 30, 2003 as compared to the same periods of 2002 due to an increase in directors’ and officers’ professional liability insurance costs. In addition, insurance expense in the three and six months ended June 30, 2002 included a $382 thousand reduction of our estimated liability related to worker’s compensation insurance.

The decrease in telephone expense in the three months ended June 30, 2003 as compared to the same period of 2002 was caused by a reduction in contract rate charged by one of our service providers that was effective February 2003.

Other operating expenses in the three and six months ended June 30, 2002 included a $1.1 million decrease in litigation reserves resulting from a reduction of damages in a jury verdict.

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 8 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 June 30	$	3,932	$	4,459
Six months ended June 30		7,628		7,110

Our effective tax rate was 38.5% for both the three and six months ended June 30, 2003 and 2002. See Note 8 to the consolidated financial statements for a discussion of tax matters currently before the Internal Revenue Service Regional Office of Appeals.

DISCONTINUED OPERATIONS

In the three months ended June 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, primarily due 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 three months ended June 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 June 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 result in an approximate $3.6 million decrease in the fair value of our equity investments as of June 30, 2003. A 20% adverse change would have resulted in an approximate $4.1 million decrease in fair value as of December 31, 2002.

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 June 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:


		June 30,			Dec. 31,
		2003			2002

Estimated percentage increase (decrease) in owned net interest income:
	Assuming 200 basis point increase in interest rates		16	%		16	%
	Assuming 200 basis point decrease in interest rates		(4	)%		3	%
Estimated percentage increase (decrease) in managed net interest income:
	Assuming 200 basis point increase in interest rates		(2	)%		(4	)%
	Assuming 200 basis point decrease in interest rates		5	%		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 June 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.

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 diversity of funding sources as described below, and had a high level of liquidity at June 30, 2003. At June 30, 2003, we had $281 million of federal funds sold, $159 million of receivables held for sale, and $157 million of investments, which could be sold to generate additional liquidity. Components of funding were as follows ($ in thousands):


	June 30, 2003					December 31, 2002

	Amount		%			Amount		%

Off-balance sheet securitized receivables⁽¹⁾	$	2,291,372		54	%	$	2,172,266		60	%
Deposits		1,205,001		28			714,028		19
Debt and other borrowings		319,428		8			315,886		9
Capital securities		100,000		2			100,000		3
Equity		326,859		8			321,313		9

Total	$	4,242,660		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. 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.

At June 30, 2003, we had a $280 million committed commercial paper conduit facility that provides off-balance sheet funding, all of which was unused at June 30, 2003. At December 31, 2002, $330 million of business credit card receivables were securitized through this facility. In June 2003, this facility was renewed through June 14, 2004.

In the six months ended June 30, 2003, we completed two public business credit card securitizations. The revolving period for those securitizations extend to the following dates:


	Investor Principal
	Balance at		Scheduled End of
($ in thousands)	June 30, 2003		Revolving Period

Series 2003-A	$	400,000	May 2005
Series 2003-B		300,000	September 2005

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

April 2003. Our $600 million Series 2000-B business credit card securitization started its scheduled amortization period in April 2003 and completed amortization in June 2003. Note holders in the Series 2000-B securitization were paid in full in July 2003. Balances of accounts receivable from securitizations and amounts due to the securitization trust at June 30, 2003 have increased as compared to December 31, 2002, primarily as a result of principal collections of receivables allocated to Series 2000-B during its amortization period. The increases in these assets were primarily funded through an increase in deposits. We anticipate completing one or more public business credit card securitizations in the remainder of 2003 under similar terms and conditions as the public securitizations completed in the six months ended June 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 June 30, 2003, $319 million of RediReserve Certificates and Investment Notes were outstanding with interest rates ranging from 1.49% 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 $176 million at June 30, 2003, as compared to $207 million at December 31, 2002 and $228 million at June 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 six months ended June 30, 2003, we repurchased 154,632 shares of our Class A Common Stock and 315,250 shares of our Class B Common Stock. We intend to continue to make purchases under the remaining unused authorization when we believe it is prudent to do so while we analyze evolving capital requirements.

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.

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 are 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 replaces the provisions of the prior understanding and provides for the bank to enhance

certain of its internal planning and monitoring processes. The revised understanding is consistent with the manner in which Advanta Bank Corp. is currently operating its business and includes no restrictions expected to have any impact on our financial results.

At June 30, 2003, Advanta Bank Corp.’s combined total capital ratio (combined Tier I and Tier II capital to risk-weighted assets) was 12.68% as compared to 18.46% at December 31, 2002. In each case, 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. Advanta Bank Corp.’s combined total capital ratio at June 30, 2003 was lower than the ratio at December 31, 2002 due to the amortization of the 2000-B securitization discussed above and the corresponding increase in on-balance sheet assets. Based on the planned level of securitizations, we expect on-balance sheet assets and deposits to be lower at September 30, 2003 and December 31, 2003 than on-balance sheet assets at June 30, 2003. We expect Advanta Bank Corp’s capital ratios at September 30, 2003 and December 31, 2003 to be higher than the ratio at June 30, 2003, due to the expected decrease in on-balance sheet assets.

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 book value of $4.6 million.

In June 2003, we exercised a clean-up call option on a leasing securitization transaction with $46 million of securitized leases outstanding, resulting in an increase in on-balance sheet lease receivables and a decrease in retained interests in leasing securitizations. Both on-balance sheet lease receivables and retained interests in leasing securitizations are classified as assets of discontinued operations in the consolidated balance sheets. The net impact on liquidity and assets of discontinued operations from the exercise of the clean-up call option was not material.

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.

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;

	(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 agreements between our bank subsidiaries and their 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.”

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 June 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 8 of the Notes to Consolidated Financial Statements set forth in Part I, Item 1 of this Quarterly Report are hereby incorporated by reference.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a)		Advanta Corp. held its Annual Meeting of Stockholders on June 5, 2003.

(b)		Not required.

(c)		The following proposal was submitted to a vote of stockholders.


	The election of four directors to hold office until the 2006 Annual Meeting of Stockholders.


NOMINEES	VOTES FOR		VOTES WITHHELD

Robert H. Rock		8,046,267		622,769
Olaf Olafsson		8,368,630		300,406
William A Rosoff		8,365,143		303,893
Michael Stolper		8,087,093		581,943

(d)

Not required.

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		Agreement of Lease, dated February 27, 2003, between Advanta Shared Services Corp. and Liberty Property Limited Partnership (without exhibits) and Guaranty of Advanta Corp.

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

(b)

Reports on Form 8-K

	(b) (1)		A Current Report on Form 8-K, dated April 24, 2003, was filed by Advanta setting forth the financial highlights of Advanta’s results of operations for the three months ended March 31, 2003.

	(b) (2)		A Current Report on Form 8-K, dated June 5, 2003, was filed by Advanta announcing the results of its Annual Stockholders’ Meeting including the re-election of four incumbent directors.

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)

August 13, 2003	By	/s/ Philip M. Browne
	Senior Vice President and
	Chief Financial Officer

August 13, 2003	By	/s/ David B. Weinstock
	Vice President and
	Chief Accounting Officer


	EXHIBIT INDEX
		Manner of
Exhibit	Description	Filing

10	Agreement of Lease, dated February 27, 2003, between Advanta Shared Services Corp. and Liberty Property Limited Partnership (without exhibits) and Guaranty of Advanta Corp.	*

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	*

* Filed electronically herewith.

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Advanta (ADVNQ) Inactive 10-Q2003 Q2 Quarterly report

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