Advanta 10Q/A 2007 Q3 Quarterly report (amended)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q/A

Amendment No. 1


þ		Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended September 30, 2007


o		Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from to

Commission File Number 0-14120

Advanta Corp.

(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. Yesþ Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filerþ Accelerated filero Non-accelerated filero

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

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.

Yeso Noo

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		Outstanding at February 11, 2008
Common Stock, $.01 par value		14,410,133 shares
Class B		Outstanding at February 11, 2008
Common Stock, $.01 par value		28,722,013 shares

Explanatory Note

This Amendment No. 1 on Form 10-Q/A is being filed to amend Advanta Corp.’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007, which was originally filed with the United States Securities and Exchange Commission on November 8, 2007. As previously disclosed in our Current Report on Form 8-K filed with the United States Securities and Exchange Commission on December 10, 2007, the purpose of this amendment is to reflect the restatement of Advanta Corp.’s previously filed unaudited consolidated financial statements, notes thereto and related financial information for Visa Inc.’s settlement of an antitrust lawsuit with American Express on November 7, 2007. As a result, we have restated our earnings for the three and nine months ended September 30, 2007 to reflect a $4.2 million expense that is associated with our contingent obligation related to the Visa Inc. settlement. See Note 15 to the consolidated financial statements for further discussion of the impact of the restatement.

This Form 10-Q/A amends and restates the November 8, 2007 filing only to reflect the effects of the restatement discussed above and does not reflect other events occurring after the date of the original filing. This Form 10-Q/A also includes currently dated certifications of our Chief Executive Officer and Chief Financial Officer on Exhibits 31.1, 31.2, 32.1 and 32.2.

TABLE OF CONTENTS



	Page

PART I - FINANCIAL INFORMATION		3

Item 1. Financial Statements		3

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		25

Item 3. Quantitative and Qualitative Disclosures About Market Risk		47

Item 4. Controls and Procedures		47

PART II - OTHER INFORMATION		47

Item 1. Legal Proceedings		47

Item 1A. Risk Factors		48

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		49

Item 6. Exhibits		50

Exhibit Index		52

Computation of Ratio of Earnings to Fixed Charges
Certification of Chief Executive Officer
Certification of Chief Financial Officer
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ADVANTA CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)


	September 30,			December 31,
(In thousands, except share amounts)	2007			2006

ASSETS
Cash	$	59,966		$	35,055
Federal funds sold		793,024			547,631
Restricted interest-bearing deposits		368			1,211
Investments available for sale		218,182			197,477
Receivables, net:
Held for sale		502,435			568,456
Other		704,191			546,553

Total receivables, net		1,206,626			1,115,009
Accounts receivable from securitizations		352,368			334,486
Premises and equipment, net		17,325			16,715
Other assets		165,663			165,554

Total assets	$	2,813,522		$	2,413,138

LIABILITIES
Deposits	$	1,686,567		$	1,365,138
Debt		223,406			227,126
Subordinated debt payable to preferred securities trust		103,093			103,093
Other liabilities		211,206			150,620

Total liabilities		2,224,272			1,845,977


Commitments and contingencies

STOCKHOLDERS’ EQUITY
Class A preferred stock, $1,000 par value:
Authorized, issued and outstanding – 1,010 shares in 2007 and 2006		1,010			1,010
Class A voting common stock, $.01 par value:
Authorized – 200,000,000 shares; issued – 14,410,133 shares in 2007 and 15,061,525 in 2006		144			151
Class B non-voting common stock, $.01 par value:
Authorized – 200,000,000 shares; issued – 29,468,254 shares in 2007 and 35,138,413 shares in 2006		295			351
Additional paid-in capital		235,243			308,051
Unearned ESOP shares		(8,890	)		(9,204	)
Accumulated other comprehensive loss		(1,101	)		(288	)
Retained earnings		394,367			359,813
Treasury stock at cost, 651,232 Class A common shares in 2006; 1,172,136 Class B common shares in 2007 and 6,436,183 Class B common shares in 2006		(31,818	)		(92,723	)

Total stockholders’ equity		589,250			567,161

Total liabilities and stockholders’ equity	$	2,813,522		$	2,413,138

See accompanying notes to consolidated financial statements.

ADVANTA CORP. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS (Unaudited)


	Three Months Ended				Nine Months Ended
(In thousands, except per share amounts)	September 30,				September 30,
	2007		2006		2007		2006

Interest income:
Receivables	$	34,479	$	34,062	$	104,116	$	93,128
Investments		10,752		7,195		27,243		18,527
Other interest income		4,729		4,671		14,514		13,052

Total interest income		49,960		45,928		145,873		124,707
Interest expense:
Deposits		19,223		13,861		53,121		36,027
Debt and other borrowings		4,066		3,499		11,729		10,188
Subordinated debt payable to preferred securities trust		2,317		2,289		6,951		6,868

Total interest expense		25,606		19,649		71,801		53,083

Net interest income		24,354		26,279		74,072		71,624
Provision for credit losses		14,724		9,202		36,613		28,631

Net interest income after provision for credit losses		9,630		17,077		37,459		42,993
Noninterest revenues:
Securitization income		22,388		26,232		68,665		89,496
Servicing revenues		24,218		16,777		67,135		45,788
Other revenues, net		47,819		40,188		138,296		117,461

Total noninterest revenues		94,425		83,197		274,096		252,745
Operating expenses		72,325		65,932		207,904		188,307

Income before income taxes		31,730		34,342		103,651		107,431
Income tax expense		12,248		13,222		40,009		41,361

Income from continuing operations		19,482		21,120		63,642		66,070
Gain on discontinuance of mortgage and leasing businesses, net of tax		0		0		1,022		738

Net income	$	19,482	$	21,120	$	64,664	$	66,808

Basic income from continuing operations per common share
Class A	$	0.44	$	0.50	$	1.46	$	1.59
Class B		0.49		0.54		1.58		1.66
Combined		0.47		0.53		1.54		1.64

Diluted income from continuing operations per common share
Class A	$	0.43	$	0.47	$	1.39	$	1.48
Class B		0.45		0.49		1.45		1.50
Combined		0.44		0.49		1.43		1.50

Basic net income per common share
Class A	$	0.44	$	0.50	$	1.48	$	1.60
Class B		0.49		0.54		1.61		1.68
Combined		0.47		0.53		1.57		1.66

Diluted net income per common share
Class A	$	0.43	$	0.47	$	1.41	$	1.50
Class B		0.45		0.49		1.47		1.52
Combined		0.44		0.49		1.45		1.51

Basic weighted average common shares outstanding
Class A		13,343		13,293		13,331		13,281
Class B		27,800		26,831		27,858		26,969
Combined		41,143		40,124		41,189		40,250

Diluted weighted average common shares outstanding
Class A		13,343		13,293		13,331		13,281
Class B		30,762		30,251		31,091		30,747
Combined		44,105		43,544		44,422		44,028

See accompanying notes to consolidated financial statements.

ADVANTA CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)


				Class A		Class A			Class B			Additional
	Comprehensive			Preferred		Common			Common			Paid-In
($ in thousands)	Income (Loss)			Stock		Stock			Stock			Capital

Balance at December 31, 2005				$	1,010	$	151		$	329		$	276,070

Net income	$	84,986
Other comprehensive income:
Unrealized appreciation (depreciation) of investments, net of tax benefit (expense) of ($210)		390

Comprehensive income	$	85,376

Preferred and common cash dividends declared
Exercise of stock options										13			10,495
Stock-based employee compensation expense													3,842
Stock-based nonemployee compensation expense													238
Excess tax benefits from stock-based compensation													12,149
Issuance of nonvested shares										11			(11	)
Amortization of nonvested shares													5,953
Forfeitures of nonvested shares										(2	)		(358	)
Reclassification of nonvested shares													(1,148	)
Treasury stock acquired
ESOP shares committed to be released													821

Balance at December 31, 2006				$	1,010	$	151		$	351		$	308,051

Effect of applying the provisions of FIN No. 48 (See Note 2)
Net income	$	64,664
Other comprehensive income:
Unrealized appreciation (depreciation) of investments, net of tax benefit (expense) of $438		(813	)

Comprehensive income	$	63,851

Preferred and common cash dividends declared
Exercise of stock options										7			6,549
Stock-based employee compensation expense													4,007
Stock-based nonemployee compensation expense													54
Excess tax benefits from stock-based compensation													5,620
Issuance of nonvested shares										1			(1	)
Amortization of nonvested shares													3,279
Forfeitures of nonvested shares										(1	)		(43	)
Stock option exchange program stock distribution
Treasury stock acquired
Treasury stock retired							(7	)		(63	)		(93,101	)
ESOP shares committed to be released													828

Balance at September 30, 2007				$	1,010	$	144		$	295		$	235,243

See accompanying notes to consolidated financial statements.

ADVANTA CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited) – continued


	Unearned			Accumulated
	ESOP Shares			Other									Total
	& Nonvested			Comprehensive			Retained			Treasury			Stockholders’
($ in thousands)	Shares			Income (Loss)			Earnings			Stock			Equity

Balance at December 31, 2005	$	(10,770	)	$	(678	)	$	298,472		$	(49,147	)	$	515,437

Net income								84,986						84,986
Other comprehensive income:
Unrealized appreciation (depreciation) of investments, net of tax benefit (expense) of ($210)					390									390
Comprehensive income
Preferred and common cash dividends declared								(23,645	)					(23,645	)
Exercise of stock options														10,508
Stock-based employee compensation expense														3,842
Stock-based nonemployee compensation expense														238
Excess tax benefits from stock-based compensation														12,149
Issuance of nonvested shares														0
Amortization of nonvested shares														5,953
Forfeitures of nonvested shares														(360	)
Reclassification of nonvested shares		1,148												0
Treasury stock acquired											(43,576	)		(43,576	)
ESOP shares committed to be released		418												1,239

Balance at December 31, 2006	$	(9,204	)	$	(288	)	$	359,813		$	(92,723	)	$	567,161

Effect of applying the provisions of FIN No. 48 (See Note 2)								(6,103	)					(6,103	)
Net income								64,664						64,664
Other comprehensive income:
Unrealized appreciation (depreciation) of investments, net of tax benefit (expense) of $438					(813	)								(813	)
Comprehensive income
Preferred and common cash dividends declared								(24,007	)					(24,007	)
Exercise of stock options														6,556
Stock-based employee compensation expense														4,007
Stock-based nonemployee compensation expense														54
Excess tax benefits from stock-based compensation														5,620
Issuance of nonvested shares														0
Amortization of nonvested shares														3,279
Forfeitures of nonvested shares														(44	)
Stock option exchange program stock distribution											388			388
Treasury stock acquired											(32,654	)		(32,654	)
Treasury stock retired											93,171			0
ESOP shares committed to be released		314												1,142

Balance at September 30, 2007	$	(8,890	)	$	(1,101	)	$	394,367		$	(31,818	)	$	589,250

See accompanying notes to consolidated financial statements.

ADVANTA CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Nine Months Ended
($ in thousands)	September 30,
	2007			2006

OPERATING ACTIVITIES – CONTINUING OPERATIONS
Net income	$	64,664		$	66,808
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Gain on discontinuance of mortgage and leasing businesses, net of tax		(1,022	)		(738	)
Investment securities gains, net		(5,666	)		(4,623	)
Depreciation and amortization		4,526			4,443
Stock-based compensation expense		7,296			7,131
Provision for credit losses		36,613			28,631
Provision for interest and fee losses		7,921			6,551
Change in deferred origination costs, net of deferred fees		1,179			(3,405	)
Change in receivables held for sale		(803,352	)		(1,436,404	)
Proceeds from sale of receivables held for sale		869,373			1,191,855
Change in accounts receivable from securitizations		(17,882	)		(40,631	)
Excess tax benefits from stock-based compensation		(5,620	)		(10,161	)
Change in other assets and other liabilities		79,643			96,654

Net cash provided by (used in) operating activities		237,673			(93,889	)

INVESTING ACTIVITIES – CONTINUING OPERATIONS
Change in federal funds sold and restricted interest-bearing deposits		(244,550	)		23,210
Purchase of investments available for sale		(831,179	)		(497,787	)
Proceeds from sales of investments available for sale		721,743			492,335
Proceeds from sale of other investments		0			2,440
Proceeds from maturing investments available for sale		90,277			67,839
Change in receivables not held for sale		(203,351	)		(105,045	)
Purchases of premises and equipment, net		(5,125	)		(2,634	)

Net cash used in investing activities		(472,185	)		(19,642	)

FINANCING ACTIVITIES – CONTINUING OPERATIONS
Change in demand and savings deposits		24,181			41,644
Proceeds from issuance of time deposits		662,889			495,428
Payments for maturing time deposits		(392,600	)		(405,231	)
Proceeds from issuance of debt		21,148			20,971
Payments on redemption of debt		(26,224	)		(32,612	)
Change in cash overdraft and other borrowings		10,814			83,125
Proceeds from exercise of stock options		6,556			8,286
Cash dividends paid		(24,007	)		(16,874	)
Excess tax benefits from stock-based compensation		5,620			10,161
Treasury stock acquired		(32,654	)		(43,576	)

Net cash provided by financing activities		255,723			161,322

DISCONTINUED OPERATIONS
Net cash provided by operating activities of discontinued operations		3,700			2,951

Net increase in cash		24,911			50,742
Cash at beginning of period		35,055			34,109

Cash at end of period	$	59,966		$	84,851

See accompanying notes to consolidated financial statements.

ADVANTA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

September 30, 2007
(Unaudited)

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

Note 1) Basis of Presentation

We have 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 U.S. generally accepted accounting principles (“GAAP”) 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.

In April 2007, the Board of Directors of Advanta Corp. approved a three-for-two stock split, in the form of a 50% stock dividend payable June 15, 2007, on both Class A and Class B Common Stock. We have adjusted all share amounts, per share data and common stock equity balances in the consolidated financial statements and related notes to reflect the stock split for all periods presented.

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

Note 2) Recently Issued Accounting Standards

In August 2005, the Financial Accounting Standards Board (“FASB”) issued a revised exposure draft,Accounting for Transfers of Financial Assets – An Amendment of FASB Statement No. 140. The statement provides guidance for determining whether financial assets must first be transferred to a qualifying special-purpose entity (“QSPE”) to be derecognized, determining additional permitted activities for QSPEs, eliminating prohibitions on QSPEs’ ability to hold passive derivative financial instruments, and requires that interests related to transferred financial assets held by a transferor be initially recorded at fair value. In October 2007, the FASB reported that it expects to issue a revised exposure draft in the second quarter of 2008. Management will evaluate any potential impact of the final statement when it is available.

In February 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 155,Accounting for Certain Hybrid Financial Instruments. The statement amends SFAS No. 133,Accounting for Derivative Instruments and Hedging Activities, and SFAS No. 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities – a replacement of FASB Statement No. 125(“SFAS No. 140”),and eliminates the guidance in SFAS No. 133 Implementation Issue No. D1,Application of Statement 133 to Beneficial Interests in Securitized Financial Assets, which provided that beneficial interests in securitized financial assets are not subject to SFAS No. 133. Under the new statement, an entity may irrevocably elect to measure a hybrid financial instrument that would otherwise require bifurcation at fair value in its entirety on an instrument-by-instrument basis. The statement clarifies which interest-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, and amends SFAS No. 140 to eliminate the prohibition on a qualifying special purpose entity from holding certain derivative financial instruments. The statement is effective for all financial instruments that we acquire or issue after January 1, 2007. The adoption of this statement did not have a material impact on our financial position or results of operations.

In March 2006, the FASB issued SFAS No. 156,Accounting for Servicing of Financial Assets, that amends SFAS No. 140. The statement clarifies when an obligation to service financial assets should be separately recognized as a servicing asset or a servicing liability, requires that a separately recognized servicing asset or servicing liability be initially measured at fair value, if practicable, and permits an entity with a separately recognized servicing asset or servicing liability to choose either the amortization method or fair value method for subsequent measurement. The adoption of this statement effective January 1, 2007 did not have a material impact on our financial position or results of operations.

In July 2006, the FASB issued Interpretation No. 48,Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109,(“FIN No. 48”). The statement provides a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In accordance with the statement, before a tax benefit can be recognized, a tax position is evaluated using a threshold that it is more likely than not that the tax position will be sustained upon examination. When evaluating the more-likely-than-not recognition threshold, the interpretation provides that a company should presume the tax position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. If the tax position meets the more-likely-than-not recognition threshold, it is initially and subsequently measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. We adopted this statement effective January 1, 2007, and as a result, recorded a $2.1 million reduction to the opening balance of retained earnings in the first quarter of 2007. In the third quarter of 2007, we determined that the FIN No. 48 adoption impact was understated by $4.0 million. Since the understatement was immaterial, the correction was reflected in the third quarter of 2007 as a reduction to the opening balance of retained earnings, which increased the adoption impact to $6.1 million. The adoption did not have a material impact on our effective tax rate for the three and nine months ended September 30, 2007.

In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements.The statement defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The statement also establishes a framework for measuring fair value by creating a three-level fair value hierarchy that ranks

the quality and reliability of information used to determine fair value, and requires new disclosures of assets and liabilities measured at fair value based on their level in the hierarchy. We do not expect the adoption of this statement effective January 1, 2008 to have a material impact on our financial position or results of operations.

In February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities. The statement provides entities with an irrevocable option to report most financial assets and liabilities at fair value, with subsequent changes in fair value reported in earnings. The election can be applied on an instrument-by-instrument basis. The statement establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. The statement is effective for Advanta on January 1, 2008. Management is currently evaluating the impact that this statement may have on our financial position or results of operations.

In March 2007, the FASB ratified the consensus reached by the Emerging Issues Task Force (“EITF”) on EITF Issue No. 06-10,Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements.The consensus provides guidance on whether an entity should recognize a liability for the postretirement benefit and how to recognize and measure the asset associated with a collateral assignment split-dollar life insurance arrangement. The consensus is effective for Advanta on January 1, 2008. Management is currently evaluating the impact that this EITF consensus may have on our financial position or results of operations.

Note 3) Receivables

Owned receivables, including those held for sale, consisted of the following:


	September 30,			December 31,
	2007			2006

Business credit card receivables	$	1,233,233		$	1,133,132
Other receivables		7,288			7,673

Gross receivables		1,240,521			1,140,805

Add: Deferred origination costs, net of deferred fees		23,951			25,130
Less: Allowance for receivable losses
Business credit cards		(56,636	)		(49,715	)
Other receivables		(1,210	)		(1,211	)

Total allowance for receivable losses		(57,846	)		(50,926	)

Receivables, net	$	1,206,626		$	1,115,009

Note 4) Allowance for Receivable Losses

The following table presents activity in the allowance for receivable losses for the nine months ended September 30:


	2007			2006

Balance at January 1	$	50,926		$	45,589
Provision for credit losses		36,613			28,631
Provision for interest and fee losses		7,921			6,551
Gross principal charge-offs:
Business credit cards		(33,055	)		(27,298	)
Other receivables		(1	)		(4	)

Total gross principal charge-offs		(33,056	)		(27,302	)

Principal recoveries:
Business credit cards		3,008			2,692

Net principal charge-offs		(30,048	)		(24,610	)

Interest and fee charge-offs:
Business credit cards		(7,566	)		(6,209	)

Balance at September 30	$	57,846		$	49,952

Note 5) Securitization Activities

Accounts receivable from securitizations consisted of the following:


	September 30,		December 31,
	2007		2006

Retained interests in securitizations	$	226,894	$	234,054
Accrued interest and fees on securitized receivables, net⁽¹⁾		81,663		64,713
Amounts due from the securitization trust		43,811		35,719

Total accounts receivable from securitizations	$	352,368	$	334,486


(1)		Reduced by an estimate for uncollectible interest and fees of $12.6 million at September 30, 2007 and $8.7 million at December 31, 2006.

The following represents securitization data and the key assumptions used in estimating the fair value of retained interests in securitizations at the time of each new securitization or replenishment if quoted market prices were not available.


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006

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

There were no purchases of delinquent accounts from the securitization trust during the three or nine months ended September 30, 2007 or 2006.

We used the following assumptions in measuring the fair value of retained interests in securitizations at September 30, 2007 and December 31, 2006. The assumptions listed represent weighted averages of assumptions used for each securitization. The monthly payment rate assumptions used at both September 30, 2007 and December 31, 2006 result in cash flow projections over a three-month weighted average life of existing receivables for the retained interest-only strip valuation.


	September 30,			December 31,
	2007			2006

Discount rate		10.51% - 11.95	%		8.82% - 9.84	%
Monthly payment rate		19.28% - 22.00	%		21.29% - 23.10	%
Loss rate		4.55% - 5.23	%		3.70% - 4.07	%
Interest yield, net of interest earned by noteholders		8.42	%		7.30	%

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

We have prepared sensitivity analyses of the valuations of retained interests in securitizations that were estimated using the assumptions identified above. The sensitivity analyses show the hypothetical effect on the estimated fair value of those assets of two unfavorable variations from the expected levels for each key assumption, independently from any change in another key assumption. Set forth below are the results of those sensitivity analyses on the valuation at September 30, 2007.



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

The objective of these hypothetical analyses is to measure the sensitivity of the estimated fair value of the retained interests in securitizations to changes in assumptions. The methodology used to calculate the estimated fair value in the analyses is a discounted cash flow analysis, which is the same methodology used to calculate the estimated fair value of the retained interests if 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 business credit card receivable data

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


	September 30,		December 31,		September 30,
	2007		2006		2006

Owned business credit card receivables	$	1,233,233	$	1,133,132	$	1,198,550
Securitized business credit card receivables		4,980,737		4,073,128		3,449,366

Total managed receivables	$	6,213,970	$	5,206,260	$	4,647,916

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

Note 6) Selected Balance Sheet Information

Other assets consisted of the following:


	September 30,		December 31,
	2007		2006

Net deferred tax asset	$	35,476	$	39,166
Investment in Fleet Credit Card Services, L.P.		32,095		32,095
Investment in preferred securities trust		3,163		3,093
Other		94,929		91,200

Total other assets	$	165,663	$	165,554

Other liabilities consisted of the following:


	September 30,		December 31,
	2007		2006

Cash overdraft	$	52,002	$	41,188
Unrecognized tax benefits		38,641		0
Business rewards liability		29,536		25,467
Cash back rewards liability		8,734		7,366
Accounts payable and accrued expenses		25,346		31,628
Amounts due to the securitization trust		9,972		7,287
Current income taxes payable		6,002		21,473
Other		40,973		16,211

Total other liabilities	$	211,206	$	150,620

Note 7) Deposits

Deposit accounts consisted of the following:


	September 30,		December 31,
	2007		2006

Demand deposits	$	6,392	$	4,889
Money market savings		95,203		72,525
Time deposits of $100,000 or less		829,320		668,398
Time deposits of more than $100,000		755,652		619,326

Total deposits	$	1,686,567	$	1,365,138

Time deposit maturities were as follows at September 30, 2007:


Year Ended December 31,

2007	$	258,872
2008		902,059
2009		327,848
2010		61,612
2011 and thereafter		34,581

Note 8) Commitments and Contingencies

We recorded a $4.2 million reserve effective September 30, 2007 related to a litigation settlement between Visa Inc. and American Express. See further discussion of Visa Inc.’s settlement of the American Express litigation and contingencies related to Advanta Corp’s membership in Visa U.S.A. Inc. in Note 15.

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. 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 financial position or results of operations based on our current expectations regarding the ultimate resolutions of these existing actions 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 actual results will differ from our estimates.

Note 9) Capital Stock

Cash dividends per share of common stock declared were as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2007		2006		2007		2006

Class A Common Stock	$	0.1771	$	0.1417	$	0.4959	$	0.3589
Class B Common Stock		0.2125		0.1700		0.5950		0.4307

In April 2007, the Board of Directors of Advanta Corp. approved a three-for-two stock split, in the form of a 50% stock dividend payable June 15, 2007, on both Class A and Class B Common Stock. In addition, the Board of Directors of Advanta Corp. approved a 25% increase in the regular quarterly cash dividends on Class A and Class B Common Stock beginning with the dividend paid in the second quarter of 2007. The Board of Directors of Advanta Corp. also authorized the repurchase of up to 1.5 million shares of Advanta Corp.’s Class B Common Stock. As of September 30, 2007, we had repurchased 1.1 million shares for $31.3 million in connection with this authorization.

In January 2007, in connection with the exercise of stock options by an officer, we withheld 20 thousand shares of Class B Common Stock with a market value of $592 thousand to meet our minimum statutory tax withholding requirements. In April 2007, in connection with the vesting of shares related to the 2006 performance year for our management incentive program, we withheld 24 thousand vested shares with a market value of $757 thousand from certain employees (including officers) to meet our minimum statutory tax withholding requirements.

In the nine months ended September 30, 2007, we retired 651 thousand treasury shares of Class A Common Stock and 6.3 million treasury shares of Class B Common Stock.

Note 10) Stock-Based Compensation

All nonvested shares and stock options outstanding in the reported periods were for Class B Common Stock.

Nonvested shares activity was as follows for the nine months ended September 30, 2007:


				Weighted
				Average Price
	Number of			at Date of
	Shares			Issuance

Outstanding at January 1		1,238		$	20.88
Granted		89			29.84
Vested		(239	)		24.22
Forfeited		(130	)		22.68


Outstanding at September 30		958		$	20.65

Nonvested shares that vested during the nine months ended September 30, 2007 had a total fair value of $7.5 million on the vesting date. Nonvested shares that vested during the same period of 2006 had a total fair value of $22.8 million on the vesting date.

Stock option activity was as follows for the nine months ended September 30, 2007:


								Weighted
				Weighted				Average
				Average		Aggregate		Remaining
	Number of			Exercise		Intrinsic		Contractual
	Options			Price		Value		Life

Outstanding at January 1		7,419		$	10.88
Granted		1,532			30.47
Exercised		(800	)		10.25
Forfeited		(328	)		24.79

Outstanding at September 30		7,823		$	14.20	$	107,895	5.2 years

Options exercisable at September 30		5,073		$	7.78	$	99,615	3.2 years

The aggregate intrinsic value of stock options exercised was $16.4 million in the nine months ended September 30, 2007 and $15.8 million in the same period of 2006. As of September 30, 2007, there was $13.1 million of total unrecognized compensation expense related to outstanding stock options and we expect to recognize the expense over a weighted average period of 2.3 years.

Compensation expense, net of forfeitures, and related tax effects recognized in connection with employee stock options and the weighted average fair value of options granted were as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2007		2006		2007		2006

Compensation expense	$	1,426	$	1,045	$	4,007	$	2,747
Income tax benefit		550		402		1,546		1,057
Weighted average fair value of options granted	$	4.71	$	4.72	$	6.54	$	6.70

The assumptions listed in the table below represent weighted averages of the assumptions used to estimate the fair value for each option grant using the Black-Scholes-Merton option-pricing model. The expected dividend yield is based on current dividend rates as well as announced and anticipated changes in dividend rates based upon management’s expectations of future performance. The expected life of the option is estimated by reviewing historical data and considering the contractual life of the options and the vesting periods. Expected volatility is based on the historical volatility of Class B Common Stock. The risk-free interest rate is based on the discount rate on a U.S. Treasury note of a similar duration to the expected life of the option.


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006

Expected life (in years)		4.0			4.0			5.7			5.3
Expected volatility		29.26	%		29.50	%		33.50	%		38.76	%
Risk-free interest rate		4.28	%		4.90	%		4.57	%		4.98	%
Expected dividend yield		5.34	%		4.43	%		4.87	%		4.26	%
Range of expected dividend yield over expected life		3.13%-7.57	%		2.89%-6.24	%		2.79%-6.75	%		2.73%-5.91	%

Note 11) Segment Information

The following table reconciles information about the Advanta Business Cards segment to the consolidated financial statements:


	Advanta
	Business
	Cards		Other⁽¹⁾			Total

Three months ended September 30, 2007
Interest income	$	39,106	$	10,854		$	49,960
Interest expense		13,484		12,122			25,606
Noninterest revenues		93,095		1,330			94,425
Pretax income (loss) from continuing operations		35,982		(4,252	)		31,730

Three months ended September 30, 2006
Interest income	$	38,639	$	7,289		$	45,928
Interest expense		11,743		7,906			19,649
Noninterest revenues		81,832		1,365			83,197
Pretax income from continuing operations		33,737		605			34,342

Nine months ended September 30, 2007
Interest income	$	118,310	$	27,563		$	145,873
Interest expense		39,939		31,862			71,801
Noninterest revenues		268,158		5,938			274,096
Pretax income (loss) from continuing operations		106,617		(2,966	)		103,651

Nine months ended September 30, 2006
Interest income	$	105,899	$	18,808		$	124,707
Interest expense		32,167		20,916			53,083
Noninterest revenues		249,274		3,471			252,745
Pretax income from continuing operations		106,494		937			107,431


(1)		Other includes venture capital operations as well as investment and other activities not attributable to the Advanta Business Cards segment.

Note 12) Income Taxes

Income tax expense was as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2007		2006		2007		2006

Income tax expense attributable to:
Continuing operations	$	12,248	$	13,222	$	40,009	$	41,361
Discontinued operations		0		0		643		462

Total income tax expense	$	12,248	$	13,222	$	40,652	$	41,823

Income tax expense attributable to continuing operations consisted of the following components:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007		2006

Current:
Federal	$	10,254		$	(5,189	)	$	26,268	$	12,341
State		2,001			1,611			4,348		4,552

Total current		12,255			(3,578	)		30,616		16,893

Deferred:
Federal		(41	)		16,824			9,320		24,580
State		34			(24	)		73		(112	)

Total deferred		(7	)		16,800			9,393		24,468

Income tax expense attributable to continuing operations	$	12,248		$	13,222		$	40,009	$	41,361

The reconciliation of the statutory federal income tax to income tax expense attributable to continuing operations is as follows:


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2007		2006			2007		2006

Statutory federal income tax	$	11,106	$	12,020		$	36,278	$	37,601
State income taxes, net of federal income tax benefit		853		1,031			2,834		2,886
Compensation limitation		99		85			298		151
Nondeductible expenses		51		137			488		459
Other		139		(51	)		111		264

Income tax expense	$	12,248	$	13,222		$	40,009	$	41,361

Our effective tax rate was 38.6% for the three and nine months ended September 30, 2007 as compared to 38.5% for the same periods of 2006.

We provide deferred taxes to reflect the estimated future tax effects of the differences between the financial statement and tax bases of assets and liabilities and currently enacted tax laws. The net deferred tax asset is comprised of the following:


	September 30,			December 31,
	2007			2006

Deferred tax assets	$	62,563		$	66,059
Deferred tax liabilities		(27,087	)		(26,893	)

Net deferred tax asset	$	35,476		$	39,166

The components of the net deferred tax asset were as follows:


	September 30,			December 31,
	2007			2006

Rewards programs	$	13,395		$	11,492
Deferred revenue		(13,074	)		(10,435	)
Federal tax benefit of state tax positions		10,811			4,004
Receivable losses		10,062			8,864
Deferred origination costs, net of deferred fees		(8,480	)		(8,910	)
Capital loss carryforwards		5,860			6,653
Incentive and deferred compensation		5,362			6,065
Alternative minimum tax credit carryforwards		3,112			17,249
Securitization income		(2,624	)		(2,624	)
Unrealized venture capital investment (gains) losses		(167	)		1,352
Other		11,219			5,456

Net deferred tax asset	$	35,476		$	39,166

We adopted the provisions of FIN No. 48 effective January 1, 2007, and as a result, recorded a $6.1 million reduction to the January 1, 2007 balance of retained earnings. The total amount of unrecognized tax benefits as of January 1, 2007 was $35.5 million, of which $25.6 million, if recognized, would favorably affect our effective tax rate. The remaining $9.9 million represents the federal tax benefit of state tax items that was recognized as a deferred tax asset. The liability for unrecognized tax benefits is included in other liabilities on the consolidated balance sheet. At January 1, 2007, the liability for unrecognized tax benefits included $11.9 million accrued for the potential payment of interest and $7.2 million accrued for the potential payment of penalties. We classify interest and penalties related to unrecognized tax benefits as income tax expense.

We file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. As of January 1, 2007, we are subject to U.S. federal income tax examinations for the tax years 2005 and 2006, and, with few exceptions, subject to state income tax examinations for the tax years 1992 through 2006. The liability for unrecognized tax benefits at January 1, 2007 included approximately $2 million related to tax positions for which it is reasonably possible that the total amounts could significantly change in the twelve months ending September 30, 2008. This amount represents a potential decrease in unrecognized tax benefits related to the resolution of state income tax audits that may conclude in that period.

We have an ownership interest in Fleet Credit Card Services, L.P. related to our exit from the consumer card business in 1998. The gain associated with the original transfer of assets to Fleet Credit Card Services, L.P. was not subject to income tax. As of September 30, 2007, the cumulative gain on transfer of consumer credit card business and our deficit capital account in Fleet Credit Card Services, L.P. on a tax basis for which no deferred taxes have been provided is approximately $650 million, as the transaction structure remains nontaxable under current tax law.

At September 30, 2007, we had $511 thousand of capital loss carryforwards that are scheduled to expire in 2009, $7.4 million that are scheduled to expire in 2010, and $8.8 million that are scheduled to expire in 2011. Alternative minimum tax credit carryforwards do not expire.

Note 13) Discontinued Operations

There was no gain or loss on discontinuance of our mortgage and leasing businesses in the three months ended September 30, 2007 or 2006. The components of the gain on discontinuance of our mortgage and leasing businesses for the nine months ended September 30, 2007 and 2006 were as follows:


	Nine Months Ended
	September 30, 2007						September 30, 2006
				Advanta						Advanta
	Advanta			Leasing			Advanta			Leasing
	Mortgage			Services			Mortgage			Services

Pretax gain on discontinuance of mortgage and leasing businesses	$	800		$	865		$	500		$	700
Income tax expense		(309	)		(334	)		(193	)		(269	)

Gain on discontinuance of mortgage and leasing businesses, net of tax	$	491		$	531		$	307		$	431

The gain on discontinuance of the mortgage business in each of the reported periods represents a change in our estimates of the future costs of mortgage business-related contingent liabilities based on developments in litigation or disputes related to our former mortgage programs, insurance reimbursements related to past or future costs, or cash flows related to a former mortgage insurance product. The gain on discontinuance of the leasing business in each of the reported periods represents changes in estimated operating results of the leasing segment over the wind down period, including credit and residual realization performance, sales tax assessments or refunds, insurance reimbursements and operating expenses. We had no lease receivables outstanding in the nine months ended September 30, 2007.

Per share data was as follows for the nine months ended September 30:


	Advanta				Advanta Leasing
	Mortgage				Services
	2007		2006		2007		2006

Basic gain on discontinuance of mortgage and leasing businesses, net of tax, per common share
Class A	$	0.01	$	0.01	$	0.01	$	0.01
Class B		0.01		0.01		0.01		0.01
Combined		0.01		0.01		0.01		0.01
Diluted gain on discontinuance of mortgage and leasing businesses, net of tax, per common share
Class A	$	0.01	$	0.01	$	0.01	$	0.01
Class B		0.01		0.01		0.01		0.01
Combined		0.01		0.01		0.01		0.01

Note 14) Calculation of Earnings Per Share

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


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006

Income from continuing operations	$	19,482		$	21,120		$	63,642		$	66,070
Less: Preferred A dividends		0			0			(141	)		(141	)

Income from continuing operations available to common stockholders		19,482			21,120			63,501			65,929
Gain on discontinuance of mortgage and leasing businesses, net of tax		0			0			1,022			738

Net income available to common stockholders		19,482			21,120			64,523			66,667
Less: Class A dividends declared		(2,358	)		(1,879	)		(6,634	)		(4,833	)
Less: Class B dividends declared		(6,124	)		(4,759	)		(17,232	)		(11,900	)

Undistributed net income	$	11,000		$	14,482		$	40,657		$	49,934

Basic income from continuing operations per common share
Class A	$	0.44		$	0.50		$	1.46		$	1.59
Class B		0.49			0.54			1.58			1.66
Combined⁽¹⁾		0.47			0.53			1.54			1.64

Diluted income from continuing operations per common share
Class A	$	0.43		$	0.47		$	1.39		$	1.48
Class B		0.45			0.49			1.45			1.50
Combined⁽¹⁾		0.44			0.49			1.43			1.50

Basic net income per common share
Class A	$	0.44		$	0.50		$	1.48		$	1.60
Class B		0.49			0.54			1.61			1.68
Combined⁽¹⁾		0.47			0.53			1.57			1.66

Diluted net income per common share
Class A	$	0.43		$	0.47		$	1.41		$	1.50
Class B		0.45			0.49			1.47			1.52
Combined⁽¹⁾		0.44			0.49			1.45			1.51

Basic weighted average common shares outstanding
Class A		13,343			13,293			13,331			13,281
Class B		27,800			26,831			27,858			26,969
Combined		41,143			40,124			41,189			40,250

Dilutive effect of
Options Class B		2,664			3,192			2,843			3,294
Nonvested shares Class B		298			228			390			484

Diluted weighted average common shares outstanding
Class A		13,343			13,293			13,331			13,281
Class B		30,762			30,251			31,091			30,747
Combined		44,105			43,544			44,422			44,028

Antidilutive shares
Options Class B		2,610			1,378			1,590			948
Nonvested shares Class B		3			0			1			0


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

Note 15) Subsequent Event

Advanta Corp. has a membership interest in Visa U.S.A. Inc. (“Visa USA”) related primarily to our former consumer credit card business, which we exited in 1998. On October 3, 2007, Visa Inc. (“Visa”) announced that it had completed restructuring transactions in preparation for its initial public offering (“IPO”) expected to occur in 2008. As part of this restructuring, Advanta Corp. received its proportionate number of Class USA shares of Visa common stock (“Visa Class USA Shares”) based on our cumulative transaction volume, which related primarily to our former consumer credit card business.

On November 7, 2007, Visa reached a settlement with American Express related to an antitrust lawsuit (the “Am Ex Litigation”). Visa’s settlement of the Am Ex Litigation was subject to the requisite approval of certain specified members of Visa USA. On November 9, 2007, the settlement became effective upon Visa’s receipt of the requisite approval of the specified Visa USA members. If the IPO is consummated, Visa is expected to set aside a portion of the proceeds from its IPO in an escrow account to fund litigation judgments or settlements that have occurred or may occur related to specified litigation matters including the Am Ex Litigation (the “Litigation Escrow”). Advanta Corp. and its subsidiaries were not named as defendants in the Am Ex Litigation or the other specified litigation matters. However, if Visa’s IPO is not consummated or the Litigation Escrow is not sufficient to satisfy the settlement of the Am Ex Litigation and the other specified litigation matters, the members of Visa USA to varying extents may be required to fund certain losses incurred by Visa in connection with those matters due to member indemnification provisions within Visa USA’s bylaws. As a result, we have restated our earnings for the three and nine months ended September 30, 2007 to reflect a $4.2 million reserve effective September 30, 2007 that is associated with our contingent obligation to Visa USA related to Visa’s settlement of the Am Ex Litigation. While the estimation of any potential losses related to Visa’s other specified litigation matters is highly judgmental, we expect to record an additional $7.8 million liability in the fourth quarter of 2007 for the estimated fair value of our contingent indemnification obligation with respect to the other specified Visa litigation matters. We anticipate that Visa’s settlement of the Am Ex Litigation and other specified litigation matters will be satisfied with the Litigation Escrow, at which time we will be able to reduce the liability we established by our proportionate share of the amounts funded in the Litigation Escrow. We also anticipate that a portion of our Visa Class USA Shares will be redeemed by Visa in connection with the IPO and we will record a gain equal to any cash proceeds received for our shares.

The following tables summarize the impact of the restatement on the affected line items on the consolidated financial statements. For segment reporting purposes, the expense was reflected in “Other” rather than the Advanta Business Card segment since our membership interest in Visa USA relates primarily to transaction volume from our former consumer credit card business.



	As Previously					As
	Reported		Adjustment			Restated

As of September 30, 2007
Other assets	$	164,048	$	1,615		$	165,663
Total assets		2,811,907		1,615			2,813,522
Other liabilities		207,022		4,184			211,206
Total liabilities		2,220,088		4,184			2,224,272
Retained earnings		396,936		(2,569	)		394,367
Total stockholders’ equity		591,819		(2,569	)		589,250
Total liabilities and stockholders’ equity		2,811,907		1,615			2,813,522



	As Previously					As
	Reported		Adjustment			Restated

For the three months ended September 30, 2007
Operating expenses	$	68,141	$	4,184		$	72,325
Income before income taxes		35,914		(4,184	)		31,730
Income tax expense		13,863		(1,615	)		12,248
Income from continuing operations		22,051		(2,569	)		19,482
Net income		22,051		(2,569	)		19,482
Basic income from continuing operations per common share
Class A	$	0.51	$	(0.07	)	$	0.44
Class B		0.55		(0.06	)		0.49
Combined		0.54		(0.07	)		0.47
Diluted income from continuing operations per common share
Class A	$	0.48	$	(0.05	)	$	0.43
Class B		0.51		(0.06	)		0.45
Combined		0.50		(0.06	)		0.44
Basic net income per common share
Class A	$	0.51	$	(0.07	)	$	0.44
Class B		0.55		(0.06	)		0.49
Combined		0.54		(0.07	)		0.47
Diluted net income per common share
Class A	$	0.48	$	(0.05	)	$	0.43
Class B		0.51		(0.06	)		0.45
Combined		0.50		(0.06	)		0.44

For the nine months ended September 30, 2007
Operating expenses	$	203,720	$	4,184		$	207,904
Income before income taxes		107,835		(4,184	)		103,651
Income tax expense		41,624		(1,615	)		40,009
Income from continuing operations		66,211		(2,569	)		63,642
Net income		67,233		(2,569	)		64,664
Comprehensive income		66,420		(2,569	)		63,851
Basic income from continuing operations per common share
Class A	$	1.52	$	(0.06	)	$	1.46
Class B		1.64		(0.06	)		1.58
Combined		1.60		(0.06	)		1.54
Diluted income from continuing operations per common share
Class A	$	1.45	$	(0.06	)	$	1.39
Class B		1.50		(0.05	)		1.45
Combined		1.49		(0.06	)		1.43
Basic net income per common share
Class A	$	1.55	$	(0.07	)	$	1.48
Class B		1.67		(0.06	)		1.61
Combined		1.63		(0.06	)		1.57
Diluted net income per common share
Class A	$	1.47	$	(0.06	)	$	1.41
Class B		1.53		(0.06	)		1.47
Combined		1.51		(0.06	)		1.45
Change in other assets and other liabilities	$	77,074	$	2,569		$	79,643

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

“Advanta”, “we”, “us”, and “our” refer to Advanta Corp. and its subsidiaries, unless the context otherwise requires.

In April 2007, the Board of Directors of Advanta Corp. approved a three-for-two stock split, in the form of a 50% stock dividend payable June 15, 2007, on both Class A and Class B Common Stock. We have adjusted all share amounts and per share data in Management’s Discussion and Analysis of Financial Condition and Results of Operations to reflect the stock split for all periods presented.

OVERVIEW

Income from continuing operations includes the following business segment results:


	Three Months Ended					Nine Months Ended
($ in thousands, except per share data)	September 30,					September 30,
	2007			2006		2007			2006

Pretax income (loss):
Advanta Business Cards	$	35,982		$	33,737	$	106,617		$	106,494
Other⁽¹⁾		(4,252	)		605		(2,966	)		937

Total pretax income		31,730			34,342		103,651			107,431
Income tax expense		12,248			13,222		40,009			41,361

Income from continuing operations	$	19,482		$	21,120	$	63,642		$	66,070
Per combined common share, assuming dilution	$	0.44		$	0.49	$	1.43		$	1.50


(1)		The three and nine months ended September 30, 2007 include $4.2 million of expense related to a litigation settlement between Visa Inc. and American Express. See “Contingencies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion.

Our Advanta Business Cards segment offers business purpose credit cards that are competitively priced and typically include promotional pricing and rewards. We design our product offerings to selectively attract and retain high credit quality customers and to respond to the competitive environment. Promotional pricing reduces the interest yield on new accounts during the initial promotional periods. We have experienced the benefits of high credit quality customers through favorable delinquency and credit loss rates and increases in transaction volume. The increases in Advanta Business Cards pretax income for the three and nine months ended September 30, 2007 as compared to the same periods of 2006 reflect growth in average owned and securitized receivables, higher transaction volume and decreases in operating expenses as a percentage of owned and securitized receivables, partially offset by lower interest yields. The rate of new customer and receivables growth and our competitive product offerings have increased the percentage of customers in the receivable portfolio with promotional or competitive pricing, and therefore reduced average interest yields in the three and nine months ended September 30, 2007 as compared to the same periods of 2006. Our average interest yield on business credit card receivables for the third quarter of 2007 was higher than the average interest yield for the second quarter of 2007. We expect our average interest yield to continue to increase in the fourth quarter of 2007 as introductory pricing periods expire on many of the accounts originated in prior periods and based on our expected levels of receivables growth and planned marketing strategies. Pretax income in the three months ended September 30, 2007 also reflects modestly higher credit loss rates as compared to the same period of 2006 due primarily to changes in the economic environment and seasoning of accounts within the receivable portfolio that were acquired in 2005 and 2006. Additional deterioration in the U.S. economy could further affect our credit loss rates and results of operations.

For the nine months ended September 30, 2007, we recorded an after-tax gain on the discontinuance of our mortgage and leasing businesses of $1.0 million, or $0.02 per

combined diluted common share. For the nine months ended September 30, 2006, we recorded an after-tax gain on the discontinuance of our mortgage and leasing businesses of $738 thousand, or $0.02 per combined diluted common share. See “Discontinued Operations” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. We have identified accounting for allowance for receivable losses, securitization income, rewards programs and income taxes as our most critical accounting policies and estimates because 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. Estimates are inherently subjective and are susceptible to significant revision as more information becomes available. Changes in estimates could have a material impact on our financial position or results of operations. These accounting policies and estimates are described in our Annual Report on Form 10-K for the year ended December 31, 2006.

ADVANTA BUSINESS CARDS

Advanta Business Cards originates new accounts directly and through the use of third parties. The following table provides key statistical information on our business credit card portfolio. Credit quality statistics for the business credit card portfolio are included in the “Provision and Allowance for Receivable Losses” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.


	Three Months Ended				Nine Months Ended
($ in thousands)	September 30,				September 30,
	2007		2006		2007		2006

Average owned receivables	$	1,215,485	$	1,114,122	$	1,249,286	$	1,014,566
Average securitized receivables	$	4,889,381	$	3,388,784	$	4,543,999	$	3,191,071
Customer transaction volume	$	3,606,907	$	3,094,702	$	10,688,752	$	8,860,117
New account originations		74,195		85,392		273,913		254,407
Average number of active accounts⁽¹⁾		930,102		724,705		890,454		687,159
Ending number of accounts at September 30		1,294,273		1,037,161		1,294,273		1,037,161


(1)		Active accounts are defined as accounts with a balance at month-end. Active account statistics do not include charged-off accounts. The statistics reported above are the average number of active accounts for the three and nine months ended September 30.

The fluctuations in the number of new account originations for the three and nine months ended September 30, 2007 as compared to the same periods of 2006 are due primarily to the size of account acquisition campaigns in each respective period. We expect managed business credit card receivables to grow between 20% and 25% in 2007, while the level of owned business credit card receivables at December 31, 2007 is expected to be near the level at December 31, 2006. See “Securitization Income” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion of why management believes managed data is useful to investors. The following is a reconciliation of projected estimated owned business credit card receivables to managed business credit card receivables:


			Projected Estimate at December 31, 2007
					Percentage
	Actual at		Low End		Increase			High End		Percentage
($ in thousands)	December 31, 2006		of Range		(Decrease)			of Range		Increase

Owned receivables	$	1,133,132	$	1,125,000		(1.0	%)	$	1,171,000		3.0	%
Securitized receivables		4,073,128		5,123,000		26.0	%		5,337,000		31.0	%

Managed receivables	$	5,206,260	$	6,248,000		20.0	%	$	6,508,000		25.0	%

The components of pretax income for Advanta Business Cards are as follows:


	Three Months Ended						Nine Months Ended
($ in thousands)	September 30,						September 30,
	2007			2006			2007			2006

Net interest income on owned interest-earning assets	$	25,622		$	26,896		$	78,371		$	73,732
Noninterest revenues		93,095			81,832			268,158			249,274
Provision for credit losses		(14,724	)		(9,202	)		(36,613	)		(28,681	)
Operating expenses		(68,011	)		(65,789	)		(203,299	)		(187,831	)

Pretax income	$	35,982		$	33,737		$	106,617		$	106,494

Net interest income on owned interest-earning assets decreased $1.3 million for the three months ended September 30, 2007 as compared to the same period of 2006 and increased $4.6 million for the nine months ended September 30, 2007 as compared to the same period of 2006. The decrease in net interest income in the three month period is due primarily to the decrease in the average yield earned on our business credit card receivables as a result of the increase in the percentage of customers in the receivable portfolio with promotional or competitive pricing as compared to the same period of 2006, partially offset by an increase in average owned business credit card receivables. The increase in net interest income in the nine months ended September 30, 2007 as compared to the same period of 2006 reflects the same trend of lower average yield, but the impact was more than offset by the increase in average owned receivables. Net interest income in the nine months ended September 30, 2007 also includes the benefit of deposit insurance credit sale gains of $1.9 million. For segment reporting purposes, these gains are included in the allocation of interest expense to Advanta Business Cards. Average owned business credit card receivables increased $101 million for the three months ended September 30, 2007 and increased $235 million for the nine months ended September 30, 2007, both as compared to the same periods of 2006.

Noninterest revenues include securitization income, servicing revenues, interchange income and other revenues, and are reduced by rewards costs. Noninterest revenues increased $11.3 million for the three months ended September 30, 2007 and increased $18.9 million for the nine months ended September 30, 2007 each as compared to the same periods of 2006 due primarily to higher merchandise sales transaction volume that resulted in higher interchange income and increased volume of securitized receivables that resulted in higher servicing fees, partially offset by higher rewards costs and lower securitization income. Securitization income decreased for

the three and nine months ended September 30, 2007 as compared to the same periods of 2006 due primarily to decreases in the average yields on securitized receivables, partially offset by growth in average securitized receivables. Securitization income for the three months ended September 30, 2007 also reflects a modest increase in credit loss rates on securitized receivables as compared to the same period of 2006. Noninterest revenues for the three and nine months ended September 30, 2007 also included a $2.9 million investment gain on MasterCard Incorporated shares. Noninterest revenues for the nine months ended September 30, 2006 included a $2.4 million investment gain on MasterCard Incorporated shares.

The increase in provision for credit losses for the three and nine months ended September 30, 2007 as compared to the same periods of 2006 was due primarily to the increase in average owned business credit card receivables. The increase in the three months ended September 30, 2007 as compared to the same period of 2006 also reflects an increase in the estimate of losses inherent in the portfolio based on delinquency and charge-off trends. See “Provision and Allowance for Receivable Losses” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations for more detailed discussion and a table of credit quality data.

Operating expenses for the three and nine months ended September 30, 2007 increased as compared to the same periods of 2006 due primarily to costs related to growth in accounts and owned and securitized receivables, profitability initiatives and higher fraud losses, partially offset by lower marketing costs. The decreases in marketing costs in the three and nine months ended September 30, 2007 as compared to the same periods of 2006 were due primarily to incremental customer acquisition costs largely associated with new prospect lists incurred in the third quarter of 2006.

INTEREST INCOME AND EXPENSE


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
($ in thousands)	2007		2006		2007		2006

Interest income	$	49,960	$	45,928	$	145,873	$	124,707
Interest expense		25,606		19,649		71,801		53,083

Total interest income increased $4.0 million for the three months ended September 30, 2007 as compared to the same period of 2006 and $21.2 million for the nine months ended September 30, 2007 as compared to the same period of 2006. The increases in total interest income were due primarily to increases in average balances of owned business credit card receivables and investments, partially offset by decreases in the average yields earned on our business credit card receivables. Yields on business credit card receivables decreased for the three and nine months ended September 30, 2007 as compared to the same periods of 2006 as a result of an increase in the percentage of customers in the receivable portfolio with promotional or competitive pricing as compared to the same periods of 2006. We expect the average yield earned on business credit card receivables to increase in the fourth quarter of 2007 as compared to yields in the three and nine months ended September 30, 2007 as introductory pricing periods expire on many of the accounts originated in prior periods and based on our expected levels of receivables growth and planned marketing strategies.

Total interest expense increased $6.0 million for the three months ended September 30, 2007 as compared to the same period of 2006 and increased $18.7 million for the nine months ended September 30, 2007 as compared to the same period of 2006. The increases in total interest expense were due primarily to increases in our average

deposits outstanding and increases in the average cost of funds on deposits resulting from the interest rate environment. Average deposits increased $282 million for the three months ended September 30, 2007 as compared to the same period of 2006 and $266 million for the nine months ended September 30, 2007 as compared to the same period of 2006.

The following table provides an analysis of interest income and expense data, average balance sheet data, net interest spread and net interest margin. 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 net interest earnings divided by total interest-earning assets. Interest income includes late fees on business credit card receivables.

INTEREST RATE ANALYSIS AND AVERAGE BALANCES


	Three Months Ended September 30,
	2007							2006
	Average				Average			Average				Average
($ in thousands)	Balance		Interest		Rate			Balance		Interest		Rate
Interest-earning assets:
Owned receivables:
Business credit cards⁽¹⁾	$	1,215,485	$	34,377		11.22	%	$	1,114,122	$	33,968		12.10	%
Other receivables		7,594		102		5.32			7,732		94		4.82

Total receivables		1,223,079		34,479		11.18			1,121,854		34,062		12.05
Investments⁽²⁾		814,185		10,755		5.18			543,148		7,198		5.19
Retained interests in securitizations		226,405		4,729		8.35			207,912		4,671		8.99

Total interest-earning assets⁽³⁾		2,263,669	$	49,963		8.74	%		1,872,914	$	45,931		9.72	%
Noninterest-earning assets		337,451							369,859

Total assets	$	2,601,120						$	2,242,773


Interest-bearing liabilities:
Deposits	$	1,483,344	$	19,223		5.14	%	$	1,201,061	$	13,861		4.58	%
Debt		224,771		4,064		7.17			213,312		3,483		6.48
Subordinated debt payable to preferred securities trust		103,093		2,317		8.99			103,093		2,289		8.88
Other borrowings		109		2		6.47			1,171		16		5.52

Total interest-bearing liabilities		1,811,317	$	25,606		5.61	%		1,518,637	$	19,649		5.14	%
Noninterest-bearing liabilities		193,501							190,079

Total liabilities		2,004,818							1,708,716

Stockholders’ equity		596,302							534,057


Total liabilities and stockholders’ equity	$	2,601,120						$	2,242,773


Net interest spread						3.13	%						4.58	%
Net interest margin						4.27	%						5.57	%


(1)		Interest income includes late fees for owned business credit card receivables of $2.3 million for both the three months ended September 30, 2007 and 2006.

(2)		Interest and average rate for tax-free securities are computed on a tax equivalent basis using a statutory rate of 35%.

(3)		Includes assets held and available for sale and nonaccrual receivables.


	Nine Months Ended September 30,
	2007							2006
	Average				Average			Average				Average
($ in thousands)	Balance		Interest		Rate			Balance		Interest		Rate
Interest-earning assets:
Owned receivables:
Business credit cards⁽¹⁾	$	1,249,286	$	103,796		11.11	%	$	1,014,566	$	92,847		12.24	%
Other receivables		7,611		320		5.63			7,638		281		4.92

Total receivables		1,256,897		104,116		11.08			1,022,204		93,128		12.18
Investments⁽²⁾		692,406		27,249		5.20			514,692		18,536		4.75
Retained interests in securitizations		228,468		14,514		8.47			194,721		13,052		8.94

Total interest-earning assets⁽³⁾		2,177,771	$	145,879		8.94	%		1,731,617	$	124,716		9.61	%
Noninterest-earning assets		319,926							448,217

Total assets	$	2,497,697						$	2,179,834


Interest-bearing liabilities:
Deposits	$	1,398,289	$	53,121		5.08	%	$	1,132,588	$	36,027		4.25	%
Debt		226,024		11,724		6.94			215,469		10,160		6.30
Subordinated debt payable to preferred securities trust		103,093		6,951		8.99			103,093		6,868		8.88
Other borrowings		110		5		5.67			701		28		5.30

Total interest-bearing liabilities		1,727,516	$	71,801		5.56	%		1,451,851	$	53,083		4.89	%
Noninterest-bearing liabilities		184,010							197,413

Total liabilities		1,911,526							1,649,264

Stockholders’ equity		586,171							530,570


Total liabilities and stockholders’ equity	$	2,497,697						$	2,179,834


Net interest spread						3.38	%						4.72	%
Net interest margin						4.55	%						5.53	%


(1)		Interest income includes late fees for owned business credit card receivables of $7.1 million for the nine months ended September 30, 2007 and $6.2 million for the same period of 2006.

(2)		Interest and average rate for tax-free securities are computed on a tax equivalent basis using a statutory rate of 35%.

(3)		Includes assets held and available for sale and nonaccrual receivables.

PROVISION AND ALLOWANCE FOR RECEIVABLE LOSSES


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
($ in thousands)	2007		2006		2007		2006

Provision for credit losses	$	14,724	$	9,202	$	36,613	$	28,631
Provision for interest and fee losses		2,894		2,350		7,921		6,551

Provision for credit losses and provision for interest and fee losses on a consolidated basis increased for the three and nine months ended September 30, 2007 as compared to the same periods of 2006. Increases in average owned business credit card receivables of $101 million for the three months ended September 30, 2007 as compared to the same period of 2006, and $235 million for the nine months ended September 30, 2007 as compared to the same period of 2006, resulted in increases in loss provisions. In addition, in the three months ended September 30, 2007 as compared to the same period of 2006, our estimate of losses inherent in the portfolio increased based on modest increases in delinquency and net principal charge-off rates, which reflect the current economic environment and seasoning of accounts within the receivable portfolio that were acquired in 2005 and 2006. The comparison of charge-off rates for the nine months ended September 30, 2007 as compared to the same period of 2006 is impacted by the change in bankruptcy law on October 17, 2005 that benefited charge-off rates in the first half of 2006 because it resulted in a surge in bankruptcy petition filings and charge-offs in 2005 that we otherwise would have expected to occur in later periods, including the first half of 2006.

The allowance for receivable losses on business credit card receivables was $56.6 million as of September 30, 2007, or 4.59% of owned receivables, which was higher as a percentage of owned receivables than the allowance of $49.7 million, or 4.39% of owned receivables, as of December 31, 2006. Owned business credit card receivables were $1.2 billion at September 30, 2007 and $1.1 billion at December 31, 2006. The increase in the allowance for receivable losses as a percentage of owned receivables reflects an increase in the estimate of losses inherent in the portfolio based on trends in delinquency rates as compared to December 31, 2006 and the current composition of the portfolio.

In December 2006, the federal financial institutions regulatory agencies issued theInteragency Policy Statement on the Allowance for Loan and Lease Lossesthat replaced the banking agencies’ previous policy statement on allowance for loan and lease losses. The policy statement was revised to ensure consistency with GAAP and describes the responsibilities of the board of directors, management and bank examiners regarding the allowance for loan and lease losses. In accordance with the guidance in the policy statement, management implemented enhancements to the allowance process and documentation in 2006 and 2007 that had no material impact on our financial position or results of operations.

The following table provides credit quality data as of and for the periods indicated for our 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 card and other receivables.


	September 30,			December 31,			September 30,
($ in thousands)	2007			2006			2006

Consolidated – Owned
Allowance for receivable losses	$	57,846		$	50,926		$	49,952
Receivables 30 days or more delinquent		35,276			26,053			29,156
Receivables 90 days or more delinquent		15,693			12,632			13,182
Nonaccrual receivables		10,847			10,524			12,492
Accruing receivables past due 90 days or more		13,838			11,302			11,870
As a percentage of gross receivables:
Allowance for receivable losses		4.66	%		4.46	%		4.14	%
Receivables 30 days or more delinquent		2.84			2.28			2.42
Receivables 90 days or more delinquent		1.27			1.11			1.09
Nonaccrual receivables		0.87			0.92			1.04
Accruing receivables past due 90 days or more		1.12			0.99			0.98
Net principal charge-offs for the year-to-date period ended September 30 and December 31	$	30,048		$	33,780		$	24,610
Net principal charge-offs for the three months ended September 30 and December 31		10,708			9,170			9,002
As a percentage of average gross receivables (annualized):
Net principal charge-offs for the year-to-date period ended September 30 and December 31		3.19	%		3.17	%		3.21	%
Net principal charge-offs for the three months ended September 30 and December 31		3.50			3.05			3.21

Business Credit Cards – Owned
Allowance for receivable losses	$	56,636		$	49,715		$	48,740
Receivables 30 days or more delinquent		35,276			26,053			29,081
Receivables 90 days or more delinquent		15,693			12,632			13,182
Nonaccrual receivables		10,847			10,524			12,492
Accruing receivables past due 90 days or more		13,838			11,302			11,870
As a percentage of gross receivables:
Allowance for receivable losses		4.59	%		4.39	%		4.07	%
Receivables 30 days or more delinquent		2.86			2.30			2.43
Receivables 90 days or more delinquent		1.27			1.11			1.10
Nonaccrual receivables		0.88			0.93			1.04
Accruing receivables past due 90 days or more		1.12			1.00			0.99
Net principal charge-offs for the year-to-date period ended September 30 and December 31	$	30,047		$	33,775		$	24,606
Net principal charge-offs for the three months ended September 30 and December 31		10,708			9,169			9,002
As a percentage of average gross receivables (annualized):
Net principal charge-offs for the year-to-date period ended September 30 and December 31		3.21	%		3.19	%		3.23	%
Net principal charge-offs for the three months ended September 30 and December 31		3.52			3.07			3.23

SECURITIZATION INCOME

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. Securitizations impacted the following line items on the consolidated income statements:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
($ in thousands)	2007		2006		2007		2006

Securitization income	$	22,388	$	26,232	$	68,665	$	89,496
Interest income (discount accretion)		4,729		4,671		14,514		13,052
Interchange income		50,800		40,038		142,421		112,879
Servicing revenues		24,218		16,777		67,135		45,788

Total	$	102,135	$	87,718	$	292,735	$	261,215

Our retained interests in securitizations entitle us to the excess spread on the securitized receivables. Excess spread represents income-related cash flows on securitized receivables net of noteholders’ interest, servicing fees, and credit losses. Fair value estimates used in the recognition of securitization income include cash flow estimates of interest income on securitized receivables in excess of interest expense (interest earned by noteholders), servicing fees and credit losses on securitized receivables.

Securitization income decreased $3.8 million for the three months ended September 30, 2007 as compared to the same period of 2006, and decreased $20.8 million for the nine months ended September 30, 2007 as compared to the same period of 2006. The decreases in securitization income were due primarily to decreases in average yields on securitized receivables, partially offset by growth in average securitized receivables. For the three months ended September 30, 2007 as compared to the same period of 2006, securitization income was also impacted by a modest increase in credit loss rates on securitized receivables, which reflect the current economic environment and seasoning of accounts within the securitized receivable portfolio that were acquired in 2005 and 2006. The trends and future expectations for yields on securitized receivables are similar to those described in the “Interest Income and Expense” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations. Securitization income includes an unfavorable valuation adjustment to the retained interest-only strip of $3.5 million for the nine months ended September 30, 2006. The change in bankruptcy law on October 17, 2005 benefited charge-off rates in the first half of 2006 because it resulted in a surge in bankruptcy petition filings and charge-offs in 2005 that we otherwise would have expected to occur in later periods, including the first half of 2006. As a result of lower yields, higher floating interest rates earned by noteholders, the impact of the timing of bankruptcy charge-offs and our expectations regarding future charge-off rates, our estimate of future cash flows over the three-month weighted average life of the existing securitized receivables decreased at September 30, 2006 as compared to the estimates at December 31, 2005, which resulted in the unfavorable valuation adjustment in 2006.

Managed Receivable Data

In addition to evaluating the financial performance of the Advanta Business Cards segment under GAAP, we evaluate Advanta Business Cards’ performance on a managed basis. Our managed business credit card receivable portfolio is comprised of both owned and securitized business credit card receivables. We believe that performance on a managed basis provides useful supplemental information to investors 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:


Managed Financial Measures and Statistics
	Advanta								Advanta
	Business		GAAP			Securitization			Business Cards		Managed
($ in thousands)	Cards GAAP		Ratio⁽¹⁾			Adjustments			Managed		Ratio⁽¹⁾

Three months ended September 30, 2007
Net interest income	$	25,622		7.11	%	$	82,362		$	107,984		7.08	%
Provision for credit losses		14,724		4.08			48,404	⁽²⁾		63,128		4.14
Noninterest revenues		93,095		25.83			(33,958	)		59,137		3.87
Average business credit card interest-earning assets		1,441,890					4,662,976			6,104,866
Three months ended September 30, 2006
Net interest income	$	26,896		8.14	%	$	63,784		$	90,680		8.06	%
Provision for credit losses		9,202		2.78			29,399	⁽²⁾		38,601		3.43
Noninterest revenues		81,832		24.76			(34,385	)		47,447		4.21
Average business credit card interest-earning assets		1,322,034					3,180,872			4,502,906
Nine months ended September 30, 2007
Net interest income	$	78,371		7.07	%	$	225,557		$	303,928		6.99	%
Provision for credit losses		36,613		3.30			124,601	⁽²⁾		161,214		3.71
Noninterest revenues		268,158		24.20			(100,956	)		167,202		3.85
Average business credit card interest-earning assets		1,477,754					4,315,531			5,793,285
Nine months ended September 30, 2006
Net interest income	$	73,732		8.13	%	$	194,680		$	268,412		8.51	%
Provision for credit losses		28,681		3.16			86,627	⁽²⁾		115,308		3.66
Noninterest revenues		249,274		27.48			(108,053	)		141,221		4.48
Average business credit card interest-earning assets		1,209,287					2,996,350			4,205,637

As of September 30, 2007
Ending business credit card receivables	$	1,233,233				$	4,980,737		$	6,213,970
Receivables 30 days or more delinquent		35,276		2.86	%		160,375			195,651		3.15	%
Receivables 90 days or more delinquent		15,693		1.27			71,951			87,644		1.41
As of December 31, 2006
Ending business credit card receivables	$	1,133,132				$	4,073,128		$	5,206,260
Receivables 30 days or more delinquent		26,053		2.30	%		108,159			134,212		2.58	%
Receivables 90 days or more delinquent		12,632		1.11			52,279			64,911		1.25
As of September 30, 2006
Ending business credit card receivables	$	1,198,550				$	3,449,366		$	4,647,916
Receivables 30 days or more delinquent		29,081		2.43	%		96,240			125,321		2.70	%
Receivables 90 days or more delinquent		13,182		1.10			43,911			57,093		1.23


(1)		Ratios are as a percentage of average business credit card interest-earning assets except delinquency ratios which are as a percentage of ending business credit card receivables.

(2)		Includes the amount by which the credit losses would have been higher had the securitized receivables remained as owned and the provision for credit losses on securitized receivables been equal to actual reported charge-offs. In addition, unfavorable valuation adjustments to retained interests in securitizations of $3.5 million in the nine months ended September 30, 2006 are included as increases to provision for credit losses.

SERVICING REVENUES

Advanta Business Cards recognized servicing revenue as follows:


($ in thousands)	2007		2006

Three months ended September 30	$	24,218	$	16,777
Nine months ended September 30		67,135		45,788

The increases in servicing revenues for the three and nine months ended September 30, 2007 as compared to the same periods of 2006 were due to increased volume of securitized business credit receivables.

OTHER REVENUES


	Three Months Ended						Nine Months Ended
($ in thousands)	September 30,						September 30,
	2007			2006			2007			2006

Interchange income	$	62,771		$	52,835		$	180,135		$	148,445
Cash back rewards		(16,867	)		(12,244	)		(45,613	)		(32,609	)
Business rewards		(6,658	)		(5,394	)		(18,597	)		(15,442	)
Investment securities gains, net		3,321			1,091			5,666			4,623
Balance transfer fees		1,812			1,639			5,803			4,972
Cash usage fees		973			732			3,126			2,409
Earnings on investment in Fleet Credit Card Services, L.P.		842			0			1,218			819
Other business credit card fees		1,236			912			3,588			2,517
Other, net		389			617			2,970			1,727

Total other revenues, net	$	47,819		$	40,188		$	138,296		$	117,461

Interchange income includes interchange fees on both owned and securitized business credit cards. The increases in interchange income for the three and nine months ended September 30, 2007 as compared to the same periods of 2006 were due primarily to higher merchandise sales transaction volume. The average interchange rate was 2.2% in each of the three-month and nine-month periods ended September 30, 2007 and 2006. We expect the average interchange rate to increase in the fourth quarter of 2007 due to an increase in certain interchange fees established by MasterCard Incorporated in October 2007.

The increases in cash back rewards and business rewards for the three and nine months ended September 30, 2007 as compared to the same periods of 2006 were due primarily to higher merchandise sales transaction volume and higher average number of business credit card accounts in the rewards programs. Both periods included changes in estimates of costs of future reward redemptions based on changes in experience in redemption rates and the costs of business rewards redeemed, and/or changes in the rewards programs. Changes in estimates increased other revenues $500 thousand for each of the three months ended September 30, 2007 and 2006. Changes in estimates increased other revenues $2.0 million for the nine months ended September 30, 2007 as compared to an increase of $1.2 million for the nine months ended September 30, 2006.

Investment securities gains, net, include realized and unrealized gains and losses on venture capital investments reflecting the market conditions for those investments in each respective period, as well as realized gains and losses on the sale of other investments. We had a loss of $69 thousand on venture capital investments for the three months ended September 30, 2007 as compared to gains of $607 thousand for the same period of 2006. We had a net gain on venture capital investments of $1.2 million for the nine months ended September 30, 2007 as compared to gains of $938 thousand for the nine months ended September 30, 2006. The nine months ended September 30, 2006 included a $2.4 million realized gain on MasterCard Incorporated’s redemption of a portion of our shares related to their

initial public offering. The three and nine months ended September 30, 2007 included a $2.9 million realized gain on the sale of 15% of our MasterCard Incorporated shares. In the fourth quarter of 2007, we will have the opportunity to convert additional MasterCard Incorporated Class B common shares into MasterCard Incorporated Class A common shares and to sell them. We also own Class USA common shares of Visa Inc. Our remaining MasterCard Incorporated Class B common shares and Visa Inc. Class USA common shares have zero cost basis and no book value.

We account for our investment in Fleet Credit Card Services, L.P. using the cost method and recognize dividend distributions from net accumulated earning as income. Our earnings from this investment were higher in the three months ended September 30, 2007 as compared to the same period of 2006 because the partnership did not distribute dividends in the three months ended September 30, 2006.

In 2007, our bank subsidiaries sold Federal Deposit Insurance Corporation deposit insurance assessment credits to third-party banks. Other revenues included gains of $1.9 million in the nine months ended September 30, 2007 related to these sales.

OPERATING EXPENSES


	Three Months Ended				Nine Months Ended
($ in thousands)	September 30,				September 30,
	2007		2006		2007		2006

Salaries and employee benefits	$	25,029	$	23,869	$	77,373	$	71,172
Amortization of deferred origination costs, net		12,592		11,984		38,311		35,643
External processing		7,049		6,077		20,756		18,200
Professional fees		4,055		3,216		10,938		8,711
Marketing		3,806		7,895		11,116		15,652
Equipment		3,197		2,351		8,522		7,339
Occupancy		2,465		2,340		7,110		6,811
Fraud		2,251		734		5,936		2,317
Postage		1,521		1,148		4,446		3,481
Other		10,360		6,318		23,396		18,981

Total operating expenses	$	72,325	$	65,932	$	207,904	$	188,307

Salaries and employee benefits increased for the three and nine months ended September 30, 2007 as compared to the same periods of 2006 due primarily to personnel hired to support growth in accounts and owned and securitized receivables, increases in executive compensation and higher employee stock option expense, partially offset by lower incentive compensation expense.

Amounts paid to third parties to acquire business credit card accounts and certain other origination costs are deferred and netted against any related business credit card origination fee, and the net amount is amortized on a straight-line basis over a privilege period of one year. Amortization of deferred origination costs, net, increased for the nine months ended September 30, 2007 as compared to the same period of 2006 due primarily to an increase in the number of new account originations, partially offset by a decrease in our average acquisition cost per account.

External processing expense increased for the three and nine months ended September 30, 2007 as compared to the same periods of 2006 due primarily to an increase in the number of accounts, higher transaction volume and higher processing costs associated with the pilot of new outsourcing initiatives.

Professional fees increased for the three and nine months ended September 30, 2007 as compared to the same periods of 2006 due primarily to the use of external consultants for marketing and profitability initiatives. The increase in the three months ended September 30, 2007 as compared to the same period of 2006 also reflected consulting costs related to collections initiatives.

Marketing expenses decreased for the three and nine months ended September 30, 2007 as compared to the same periods of 2006 due primarily to incremental customer acquisition costs largely associated with new prospect lists which were incurred in the third quarter of 2006.

Fraud expense increased for the three and nine months ended September 30, 2007 as compared to the same periods of 2006 due to lower fraud recoveries associated with certain types of credit card fraud and growth in owned and securitized receivables.

Other expenses increased for the three and nine months ended September 30, 2007 as compared to the same periods of 2006 due to a $4.2 million reserve established effective September 30, 2007 related to a litigation settlement between Visa Inc. and American Express. See “Contingencies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion.

CONTINGENCIES

On November 7, 2007, Visa reached a settlement with American Express related to an antitrust lawsuit (the “Am Ex Litigation”). Visa’s settlement of the Am Ex Litigation was subject to the requisite approval of certain specified members of Visa USA. On November 9, 2007, the settlement became effective upon Visa’s receipt of the requisite approval of the specified Visa USA members. If the IPO is consummated, Visa is expected to set aside a portion of the proceeds from its IPO in an escrow account to fund litigation judgments or settlements that have occurred or may occur related to specified litigation matters including the Am Ex Litigation (the “Litigation Escrow”). Advanta Corp. and its subsidiaries were not named as defendants in the Am Ex Litigation or the other specified litigation matters. However, if Visa’s IPO is not consummated or the Litigation Escrow is not sufficient to satisfy the settlement of the Am Ex Litigation and the other specified litigation matters, the members of Visa USA to varying extents may be required to fund certain losses incurred by Visa in connection with those matters due to member indemnification provisions within Visa USA’s bylaws. We recorded a $4.2 million reserve effective September 30, 2007 that is associated with our contingent obligation to Visa USA related to Visa’s settlement of the Am Ex Litigation. While the estimation of any potential losses related to Visa’s other specified litigation matters is highly judgmental, we expect to record an additional $7.8 million liability in the fourth quarter of 2007 for the estimated fair value of our contingent indemnification obligation with respect to the other specified Visa litigation matters. We anticipate that Visa’s settlement of the Am Ex Litigation and other specified litigation matters will be satisfied with the Litigation Escrow, at which time we will be able to reduce the liability we established by our proportionate share of the amounts funded in the Litigation Escrow. We also anticipate that a portion of our Visa Class USA Shares will be redeemed by Visa in connection with the IPO and we will record a gain equal to any cash proceeds received for our shares.

INCOME TAXES

Income tax expense attributable to continuing operations was as follows:


	Three Months Ended						Nine Months Ended
($ in thousands)	September 30,						September 30,
	2007			2006			2007			2006

Income tax expense	$	12,248		$	13,222		$	40,009		$	41,361
Effective tax rate		38.6	%		38.5	%		38.6	%		38.5	%

In July 2006, the FASB issued FIN No. 48 that provides a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In accordance with the statement, before a tax benefit can be recognized, a tax position is evaluated using a threshold that it is more likely than not that the tax position will be sustained upon examination. When evaluating the more-likely-than-not recognition threshold, a company should presume the tax position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. If the tax position meets the more-likely-than-not recognition threshold, it is initially and subsequently measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. We adopted the provisions of FIN No. 48 effective January 1, 2007, and as a result, recorded a $2.1 million reduction to the January 1, 2007 balance of retained earnings in the first quarter of 2007. In the third quarter of 2007, we determined that the FIN No. 48 adoption impact was understated by $4.0 million. Since the understatement was immaterial, the correction was reflected in the third quarter of 2007 as a reduction to the opening balance of retained earnings, which increased the adoption impact to $6.1 million. The adoption did not have a material impact on our effective tax rate for the three and nine months ended September 30, 2007.

We have an ownership interest in Fleet Credit Card Services, L.P. related to our exit from the consumer credit card business in 1998. The gain associated with the original transfer of assets to Fleet Credit Card Services, L.P. was not subject to income tax. As of September 30, 2007, the cumulative gain on transfer of consumer credit card business and our deficit capital account in Fleet Credit Card Services, L.P. on a tax basis for which no deferred taxes have been provided is approximately $650 million, as the transaction structure remains nontaxable under current tax law.

DISCONTINUED OPERATIONS

There was no gain or loss on discontinuance of our mortgage business for the three months ended September 30, 2007 or 2006. For the nine months ended September 30, 2007, we recorded an $800 thousand pretax gain on discontinuance of our mortgage business representing a favorable change in estimate in an experience refund related to a former mortgage insurance product, partially offset by an increase in estimates of legal expenses on mortgage business-related contingent liabilities. For the nine months ended September 30, 2006, we recorded a $500 thousand pretax gain on discontinuance of our mortgage business representing changes in estimates of legal expenses and related insurance reimbursements and other favorable changes in estimate related to a former mortgage insurance product.

There was no gain or loss on discontinuance of our leasing business for the three months ended September 30, 2007 or 2006. We recorded a pretax gain on discontinuance of our leasing business of $865 thousand for the nine months ended September 30, 2007 and $700 thousand for the same period of 2006, both representing changes in estimated leasing operating results of the leasing segment over the wind down period. The largest components of the change in estimate in 2007 were favorable results relating to insurance reimbursements, sales tax assessments, credit recoveries and operating expenses. The largest components of the change in estimate in 2006 were favorable credit recoveries and equipment realization rates based on performance trends.

OFF-BALANCE SHEET ARRANGEMENTS

Off-balance sheet business credit card securitizations provide a significant portion of our funding and they are one of our primary sources of liquidity. At September 30, 2007, off-balance sheet securitized receivables represented 65% of our funding. Our credit risk in the securitized receivables is limited to the amount of our retained interests in securitizations. We had securitized business credit card receivables of $5.0 billion at September 30, 2007 and $4.1 billion at December 31, 2006.

The following table summarizes securitization data including income and cash flows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
($ in thousands)	2007		2006		2007		2006

Average securitized receivables	$	4,889,381	$	3,388,784	$	4,543,999	$	3,191,071
Securitization income		22,388		26,232		68,665		89,496
Discount accretion		4,729		4,671		14,514		13,052
Interchange income		50,800		40,038		142,421		112,879
Servicing revenues		24,218		16,777		67,135		45,788
Proceeds from new securitizations		113,033		121,591		869,373		1,191,855
Proceeds from collections reinvested in revolving-period securitizations		2,801,202		2,003,338		7,866,934		5,466,735
Cash flows received on retained interests		77,377		66,270		241,864		236,480

See “Securitization Income” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations for discussion of income related to securitizations. See Note 5 to the consolidated financial statements for the key assumptions used in estimating the fair value of retained interests in securitizations as of September 30, 2007 and December 31, 2006 and for the three and nine months ended September 30, 2007 and 2006.

In the nine months ended September 30, 2007, we completed additional business credit card securitizations. The revolving periods for those AdvantaSeries securitizations extend to the following dates:

Noteholder

Principal

Coupon

Scheduled End of

($ in thousands)

Balance

Type

Revolving Period

AdvantaSeries:

2007-D1

25,000

Floating

May 31, 2009

2007-A2

225,000

Fixed

July 31, 2009

2007-A4

200,000

Floating

August 31, 2009

2007-B2

100,000

Fixed

October 31, 2009

2007-B1

100,000

Floating

April 30, 2011

2007-A1

200,000

Floating

May 31, 2011

2007-A3

200,000

Floating

August 31, 2011

When a securitization is in its revolving period, principal collections on securitized receivables allocated to that securitization are used to purchase additional receivables to replenish receivables that have been repaid. In contrast, when a securitization starts its accumulation period, principal collections are held in the trust until the payment date of the notes. As principal is collected on securitized receivables during an accumulation period of a securitization, we need to replace that amount of funding. Our $200 million AdvantaSeries 2006-A1 securitization ended its revolving period in September 2007 and noteholders are expected to be paid in November 2007. Our $150 million AdvantaSeries 2005-A4 securitization is scheduled to end its revolving period in December 2007 and noteholders are expected to be paid in February 2008.

We expect to replace the funding of the accumulating securitizations through additional securitizations. Based on current market conditions, we expect that notes issued in connection with new securitizations will have interest rate spreads to index rates less favorable to us than our securitizations in the nine months ended September 30, 2007. However, we expect a decrease in index rates based on the current market expectations for interest rates, which will offset the impact of higher interest rate spreads. The level of investment-grade notes outstanding at

September 30, 2007 issued as part of the AdvantaSeries de-linked securitization structure, and our ability to issue and hold additional AdvantaSeries non-investment grade notes, provides additional capacity for future securitization issuances in excess of our expected securitization funding needs through the first half of 2008. The de-linked structure provides flexibility to issue different classes of asset-backed securities with varying maturities, sizes, and terms based on our funding needs and prevailing market conditions.

Our Series 1997-A securitization represents a $200 million committed commercial paper conduit facility available through June 2008 that provides off-balance sheet funding, of which $25 million was used at September 30, 2007. Our Series 2007-A securitization represents a $150 million committed commercial paper conduit facility available through January 2008 that provides off-balance sheet funding, of which $10 million was used at September 30, 2007. Upon the expiration of these facilities, management expects to obtain the appropriate level of replacement funding under similar conditions, but expects that interest rate spreads to index rates would be less favorable to us than those in our existing facilities based on current market conditions.

In August 2005, the FASB issued a revised exposure draft,Accounting for Transfers of Financial Assets – An Amendment of FASB Statement No. 140. The statement provides guidance for determining whether financial assets must first be transferred to a QSPE to be derecognized, determining additional permitted activities for QSPEs, eliminating prohibitions on QSPEs’ ability to hold passive derivative financial instruments, and requires that interests related to transferred financial assets held by a transferor be initially recorded at fair value. In October 2007, the FASB reported that it expects to issue a revised exposure draft in the second quarter of 2008. Management will evaluate any potential impact of the final statement when it is available.

See “Contingencies” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of our contingent indemnification obligation related to Advanta Corp’s membership in Visa USA.

MARKET RISK SENSITIVITY

We measure our interest rate risk using a rising rate scenario and a declining rate scenario. We estimate net interest income using a third party software model that uses standard income modeling techniques. We 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 securitization noteholders. Both increasing and decreasing rate scenarios assume an instantaneous shift in interest rates and measure the corresponding change in expected net interest income as compared to a base case scenario that includes management’s current expectations of future interest rate movements. We estimated that our net interest income would change as follows over a twelve-month period:


	September 30,			December 31,
	2007			2006

Estimated percentage increase (decrease) in net interest income on owned assets:
Assuming 200 basis point increase		16	%		12	%
Assuming 200 basis point decrease		(7	)%		(6	)%

Estimated percentage increase (decrease) in net interest income on securitized receivables:
Assuming 200 basis point increase		(8	)%		(8	)%
Assuming 200 basis point decrease		18	%		15	%

Estimated percentage increase (decrease) in net interest income on managed assets:
Assuming 200 basis point increase		(3	)%		(3	)%
Assuming 200 basis point decrease		13	%		10	%

Our managed net interest income decreases in a rising rate scenario due to the variable rate funding of the majority of our off-balance sheet securitized receivables and 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 or because the customer pays their balance in full each month. Our business credit card receivables include interest rate floors that cause our managed net interest income to increase in the declining rate scenario. Changes in the composition of our balance sheet, the interest rate environment, business credit card pricing terms and securitization funding strategies have also impacted the results of the net interest income sensitivity analyses as of September 30, 2007 as compared to the results as of December 31, 2006.

The above estimates of net interest income sensitivity alone do not provide a comprehensive view of our exposure to interest rate risk and are not necessarily indicative of potential changes in our owned, securitized and managed net interest income. Additional factors such as changes in the portfolio, customer behavior, marketing strategies and funding strategies also affect owned, securitized and managed net interest income and accordingly, actual results may differ from these estimates. 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 do not 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

At September 30, 2007, we had a high level of liquidity including $60.0 million of cash and $793.0 million of federal funds sold. At September 30, 2007, we also had receivables held for sale and investments available for sale that could be sold to generate additional liquidity.

At September 30, 2007, we had $133.7 million of subordinated trust assets held at non-bank subsidiaries that were rated BB by Standard & Poor’s and Ba2 by Moody’s Investor Service that could be sold or borrowed against to generate additional liquidity. In July 2007, we established a master repurchase agreement using these subordinated trust assets as collateral to facilitate future borrowings. There were no borrowings in connection with this agreement as of September 30, 2007.

Investments available for sale at fair value totaled $218.2 million at September 30, 2007 and $197.5 million at December 31, 2006. The investment portfolio includes asset-backed securities with an amortized cost of $42.4 million and gross unrealized losses of $1.4 million at September 30, 2007 as compared to amortized cost of $46.2 million and gross unrealized losses of $100 thousand at December 31, 2006. The asset-backed securities represent a small portion of our overall liquidity position described above. Our asset-backed securities are primarily backed by subprime mortgage loans and home equity loans, and they are exclusively floating rate, AAA and AA rated securities as of September 30, 2007. The fair values of these securities declined in the third quarter of 2007 due to recent difficulties in the sub-prime mortgage industry that created turmoil in the capital markets. The decline in the fair values were not deemed to be other than temporary at September 30, 2007 based upon the length of time and extent to which the fair value has been less than cost, the underlying credit rating of the securities, and our intent and ability to retain the investments for a period of time sufficient to allow for recovery in fair value, which may be maturity.

As shown on the statements of cash flows, our operating activities generated $237.7 million of cash in the nine months ended September 30, 2007 due primarily to excess spread and servicing revenues related to securitized receivables, interchange income, and interest and fee income on owned receivables, partially offset by operating expenses, interest expense and costs of rewards programs. In addition, cash generated in the nine months ended September 30, 2007 was benefited by proceeds from receivables sold in the period in excess of the increase in receivables held for sale due to the timing of securitization transactions. For the nine months ended September 30, 2006, our operating activities used $93.9 million of cash due primarily to the increase in receivables held for sale in excess of proceeds from receivables sold in the period and due to the timing of securitization transactions. We expect to fund future growth and continuing operations with off-balance sheet securitizations, deposits, other borrowings, and sources of operating cash flow, including excess spread and servicing revenues related to securitized receivables, interchange income, and interest and fee income on owned receivables.

Our access to unsecured, institutional debt is limited since Advanta Corp.’s debt rating is not investment grade. However, we do have access to a diversity of funding sources. Our components of funding were as follows:


	September 30, 2007					December 31, 2006
($ in thousands)	Amount		%			Amount		%

Off-balance sheet securitized receivables⁽¹⁾	$	4,836,888		65	%	$	3,932,732		63	%
Deposits		1,686,567		23			1,365,138		22
Debt		223,406		3			227,126		4
Subordinated debt payable to preferred securities trust		103,093		1			103,093		2
Equity		589,250		8			567,161		9

Total	$	7,439,204		100	%	$	6,195,250		100	%


(1)		Excludes our ownership interest in the noteholder principal balance of securitizations (subordinated trust assets) that are held on-balance sheet and classified as retained interests in securitizations.

As shown above in the components of funding table, off-balance sheet securitizations provide a significant portion of our funding and are one of our primary sources of liquidity. See “Off-Balance Sheet Arrangements” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion of off-balance sheet securitizations and their impact on our liquidity, capital resources and financial condition.

We increased our level of deposit funding in the third quarter of 2007 to generate additional liquidity in response to recent turmoil in the capital markets. In addition, we anticipate higher levels of assets resulting from securitizations in their accumulation periods in the fourth quarter of 2007.

We had $110.7 million of owned business credit card receivables at a nonbank subsidiary at September 30, 2007. In April 2007, we entered into a secured borrowing agreement using these business credit card receivables as collateral up to a maximum of $100 million. This borrowing agreement is committed through April 2008, and we intend to use borrowings from the agreement to fund receivables growth at nonbank subsidiaries. There were no borrowings in connection with this agreement as of September 30, 2007.

In April 2007, the Board of Directors of Advanta Corp. approved a three-for-two stock split, in the form of a 50% stock dividend payable June 15, 2007, on both Class A and Class B Common Stock. In addition, the Board of Directors of Advanta Corp. approved a 25% increase in the regular quarterly cash dividends on Class A and Class B Common Stock beginning with the dividend paid in the second quarter of 2007. We are funding the increase in cash dividends with sources of operating cash flows. The Board of Directors of Advanta Corp. also authorized the repurchase of up to 1.5 million shares of Advanta Corp.’s Class B Common Stock. As of September 30, 2007, we have repurchased 1.1 million shares for $31.3 million in connection with this authorization. We expect to complete repurchases in connection with this authorization in the fourth quarter of 2007 and to fund the remaining repurchases with existing liquidity.

Advanta Corp. and its subsidiaries are involved in litigation, class action lawsuits, claims and legal proceedings arising in the ordinary course of business or discontinued operations. 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. 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.

We adopted the provisions of FIN No. 48 effective January 1, 2007, and as a result, recorded a $6.1 million reduction to the January 1, 2007 balance of retained earnings. The liability for unrecognized tax benefits as of January 1, 2007 was $35.5 million. We estimate that approximately $2 million of this liability may be payable in the twelve months ending September 30, 2008. We are unable to reasonably estimate the amount or timing of payments for the remainder of the liability. Other than the liability for unrecognized tax benefits, there have been no significant changes to the amounts that were disclosed in the contractual obligations table included in the “Liquidity, Capital Resources and Analysis of Financial Condition” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2006.

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 primarily funds our business purpose credit cards. Advanta Bank Corp. paid $60 million of dividends to Advanta Corp. in the nine months ended September 30, 2007. At September 30, 2007, Advanta Bank Corp.’s combined total capital ratio (combined Tier I and Tier II capital to risk-weighted assets) was 21.03% as compared to 21.37% at December 31, 2006. At both dates, Advanta Bank Corp. had capital in excess of levels a bank is required to maintain to be classified as well capitalized under the regulatory framework for prompt corrective action. 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 paid a dividend of $39.1 million and return of capital of $28 million to Advanta Corp. in the three months ended March 31, 2007, after having received prior approval from the Office of the Comptroller of the Currency. In April 2007, we received approval for the conversion of Advanta National Bank from a national bank to a Delaware state chartered bank that is named Advanta Bank. The conversion to a Delaware state bank was effective May 3, 2007. This bank subsidiary’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.

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

This Quarterly Report on Form 10-Q/A contains statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the “Act”). In addition, other written or oral communications provided by Advanta from time to time may contain “forward-looking statements.” Forward-looking statements are not historical facts but instead are based on certain assumptions by management and represent only our belief regarding future events, many of which, by their nature, are inherently uncertain and outside our control. Forward-looking statements may include, among others: statements about anticipated growth in credit card accounts and receivables; interest yields; expected cost of funds; charge-off rates; estimated values of and anticipated cash flows from our retained interests in securitizations; our ability to replace existing credit facilities and securitization financing when they expire or terminate; income tax uncertainties; realizability of net deferred tax asset; expected levels of liquidity and capital; anticipated outcome and effects of litigation and other future expectations of Advanta.

Forward-looking statements are subject to various assumptions, risks and uncertainties which change over time, and speak only as of the date they are made. Forward-looking statements are often identified by words or phrases such as “is anticipated,” “are expected to,” “are estimated to be,” “intend to,” “believe,” “will likely result,” “projected,” “may,” or other similar words or phrases. We undertake no obligation to update any forward-looking information except as required by law. However, any further disclosures made on related subjects in our subsequent reports filed with the SEC, including our Reports on Forms 10-K, 10-Q and 8-K, should be consulted. We caution readers that actual results may be materially different from those in the forward-looking information. Factors that may cause actual results to differ materially from current expectations include, but are not limited to:

	(1)		factors affecting our net interest income on owned and securitized receivables, including fluctuations in the volume of receivables and the range and timing of pricing offers to customers;

	(2)		competitive pressures, including product development and pricing, among financial institutions;

	(3)		political conditions, social conditions, monetary and fiscal policies and general economic and other environmental conditions, including the impact of the recent disruption in the capital markets, the deterioration of the U.S. economy and potential for further deterioration and disruption, that affect the level of new account originations, customer spending, delinquencies, charge-offs, and other results of operations;

	(4)		factors affecting fluctuations in the number of accounts or receivable balances, including the retention of customers after promotional pricing periods have expired;

	(5)		interest rate fluctuations;

	(6)		the level of expenses;

	(7)		the timing of the securitizations of our receivables;

	(8)		the effects of government regulation, including restrictions and limitations imposed by banking laws, regulators, and examinations;

	(9)		effect of, and changes in, tax laws, rates, regulations and policies;

	(10)		effect of legal and regulatory developments, including changes in bankruptcy laws and regulations and the ultimate resolution of industry-related judicial proceedings relating to the legality of certain interchange rates;

	(11)		relationships with customers, significant vendors and business partners;

	(12)		difficulties or delays in the development, acquisition, production, testing and marketing of products or services, including the ability and cost to obtain intellectual property rights or a failure to implement new products or services when anticipated;

	(13)		the amount and cost of financing available to us;

	(14)		the ratings on the debt of Advanta Corp. and its subsidiaries;

	(15)		the effects of changes in accounting policies or practices as may be required by changes in U.S. generally accepted accounting principles;

	(16)		the impact of litigation, including judgments, settlements and actual or anticipated insurance recoveries for costs or judgments;

	(17)		the proper design and operation of our disclosure controls and procedures; and

	(18)		the ability to attract and retain key personnel.

The cautionary statements provided above are being made pursuant to the provisions of the Act and with the intention of obtaining the benefits of the “safe harbor” provisions of the Act for any such forward-looking information. Also see, “Item 1A. Risk Factors” in Part II of this report for further discussion of important factors that could cause actual results to differ from those in the forward-looking statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this item is incorporated herein by reference to “Item 2-Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Report on Form 10-Q/A under the heading “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 reports filed or submitted pursuant to the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) 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 concluded that, as of September 30, 2007, 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 control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Subsequent to the date of our original evaluation, management, with the participation of our Chief Executive Officer and Chief Financial Officer, considered the restatement included in this Form 10-Q/A of our previously filed unaudited consolidated financial statements for the quarterly period ending September 30, 2007, the notes thereto and related financial information. Management evaluated the circumstances surrounding the adjustment related to Visa Inc.’s settlement of litigation with American Express and our Chief Executive Officer and Chief Financial Officer concluded that the restatement was not the result of a material weakness in internal control over financial reporting and there was no effect on our assessment of our disclosure controls and procedures as of September 30, 2007.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in class action lawsuits, other litigation, claims and legal proceedings arising in the ordinary course of business or discontinued operations. See Note 8 of the Notes to Consolidated Financial Statements set forth in Part I, Item 1 of this Quarterly Report which is incorporated herein by reference. For a discussion of previously reported legal proceedings, see Part I, Item 3, Legal Proceedings of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

ITEM 1A. RISK FACTORS

Information regarding risks that may affect our future performance are discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operation – CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995” and in our other filings with the Securities and Exchange Commission. Except for the risk factor set forth below, there have been no material changes in our risk factors from those disclosed in Item 1A of Part I in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

Our strategic, contractual and other relationships with third parties expose us to risks that may disrupt our business operations and adversely affect our results of operations and financial condition.We rely on third parties to provide services that are critically important to our business credit card business. For example, we rely on third parties to perform certain administrative functions associated with servicing our business credit card accounts, and to supply credit scores and other credit-related data and information about our potential and existing customers. In addition, from time to time we partner or contract with, invest in or enter into other relationships with third parties to establish relationships that are necessary for us to conduct our business or are intended to benefit our business operations and financial condition, including outsourcing and other initiatives to enhance our productivity and operational efficiency.

These arrangements with third parties expose us to a number of risks, such as the following:


	•		If any third party providing services critical to our business were to fail or become insolvent, or if we were unable to renew expiring agreements with such parties on mutually acceptable terms, our business operations, results of operations and financial condition could be adversely impacted.


	•		To the extent these third party relationships involve or depend on the transfer of knowledge related to our business for their success, we may be exposed to risks associated with misappropriation or misuse of intellectual property or confidential information, including information that is proprietary to us or to our customers.


	•		If the third parties do not perform as anticipated or if they default on their obligations, we may not realize the intended benefits of these relationships, including the expected productivity, cost or expense improvements.


	•		In the event of a default or termination, our agreements with third parties may take an extended period of time to unwind or resolve and, under certain circumstances such as early termination, may require us to pay substantial termination fees, which could adversely affect our business operations, results of operations and financial condition.


	•		If our relationships with third parties include indemnification provisions or obligations, we may be required, under specified circumstances, to indemnify the other parties for certain losses they incur in connection with the products or services they provide to us. In the event we are obligated to make payments to third parties under indemnification or other obligations for losses of third parties, it could adversely affect our results of operation and financial condition. For instance, we may be required to fund certain losses incurred by Visa in connection with specified litigation matters due to member indemnification provisions within Visa USA’s bylaws. See “Contingencies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of Part I of this report for further discussion.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)		None.

(b)		None.

(c)		The table below provides information with respect to all purchases of equity securities by us during the period from July 1, 2007 through September 30, 2007. Shares are in thousands.

ISSUER PURCHASES OF EQUITY SECURITIES

(d)Maximum

(c)Total

Number (or

Number of

Approximate

Shares

Dollar Value

Purchased as

of Shares)

Part of

That May Yet

(a)Total

Publicly

Be Purchased

Number of

(b)Average

Announced

Under the

Shares

Price Paid

Plans or

Period

Purchased

per Share

Programs (A)

Class A:

7/1/07-7/31/07

0.0

N/A

0.0

8/1/07-8/31/07

0.0

N/A

0.0

9/1/07-9/30/07

0.0

N/A

0.0

Subtotal Class A

0.0

N/A

0.0

Class B:

7/1/07-7/31/07

0.0

N/A

0.0

1,093.6

8/1/07-8/31/07

482.8

25.93

482.8

610.8

9/1/07-9/30/07

219.3

25.96

219.3

391.5

Subtotal Class B

702.1

25.94

702.1

391.5

Total

702.1

25.94

702.1

391.5


(A)		In April 2007, the Board of Directors of Advanta Corp. authorized the repurchase of up to 1.5 million shares of Advanta Corp.’s Class B Common Stock.

*		N/A – Not Applicable

ITEM 6. EXHIBITS

Exhibits – The following exhibits are being filed with this report on Form 10-Q/A.


Exhibit
Number		Description of Document

12		Computation of Ratio of Earnings to Fixed Charges

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

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



		Advanta Corp. (Registrant)

By		/s/ Philip M. Browne
Senior Vice President and
Chief Financial Officer
February 13, 2008



By		/s/ David B. Weinstock

Vice President and
Chief Accounting Officer
February 13, 2008

EXHIBIT INDEX


			Manner of
Exhibit		Description	Filing

	12	Computation of Ratio of Earnings to Fixed Charges	*

	31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	*

	31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	*

	32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	*

	32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	*


*		Filed electronically herewith.

Advanta (ADVNQ) Inactive 10-Q/A2007 Q3 Quarterly report (amended)