ADVNA Advanta Corp Class A (MM)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, 2009

or

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

For the transition period from                      to                     

Commission File Number 0-14120

Advanta Corp.

(Exact name of registrant as specified in its charter)

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

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

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

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

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

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

Yes o No þ

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

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

Yes o No o

     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		Outstanding at November 2, 2009
Class A Common Stock, $.01 par value per share Class B Common Stock, $.01 par value per share		14,410,133 shares 29,756,469 shares

 

 

TABLE OF CONTENTS

		Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements			3
Consolidated Balance Sheets (Unaudited)			3
Consolidated Income Statements (Unaudited)			4
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)			5
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			29
Item 3. Quantitative and Qualitative Disclosures About Market Risk			51
Item 4. Controls and Procedures			51
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			52
Item 1A. Risk Factors			52
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			58
Item 6. Exhibits			59
Exhibit Index			61
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
CERTIFICATION OF CEO, SECTION 302
CERTIFICATION OF CFO, SECTION 302
CERTIFICATION OF CEO, SECTION 906
CERTIFICATION OF CFO, SECTION 906

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)		2009				2008
ASSETS
Cash		$	29,555			$	31,716
Federal funds sold			208				32,277
Interest-bearing deposits			1,172,179				1,595,138
Investments available for sale			242,841				977,245
Receivables, net:
Held for sale			0				0
Other			734,133				414,844
Total receivables, net			734,133				414,844
Accounts receivable from securitizations			168,467				301,118
Premises and equipment, net			11,481				16,762
Other assets			139,033				215,945
Total assets		$	2,497,897			$	3,585,045
LIABILITIES
Deposits		$	2,082,899			$	2,541,406
Debt			141,478				206,598
Other borrowings			0				50,000
Subordinated debt payable to preferred securities trust			92,290				103,093
Other liabilities			149,269				176,587
Total liabilities			2,465,936				3,077,684
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Class A preferred stock, $1,000 par value:
Authorized, issued and outstanding — 1,010 shares in 2009 and 2008			1,010				1,010
Class A voting common stock, $.01 par value:
Authorized — 200,000,000 shares; issued — 14,410,133 shares in 2009 and 2008			144				144
Class B non-voting common stock, $.01 par value:
Authorized — 200,000,000 shares; issued — 31,390,494 shares in 2009 and 32,776,722 shares in 2008			314				328
Additional paid-in capital			248,939				250,042
Unearned ESOP shares			(8,091	)			(8,367	)
Accumulated other comprehensive loss			(4,344	)			(13,447	)
(Accumulated deficit) retained earnings			(168,525	)			315,072
Treasury stock at cost, 1,679,008 Class B common shares in 2009 and 1,563,736 Class B common shares in 2008			(37,486	)			(37,421	)
Total stockholders’ equity			31,961				507,361
Total liabilities and stockholders’ equity		$	2,497,897			$	3,585,045

See accompanying notes to consolidated financial statements.

ADVANTA CORP. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS (Unaudited)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(In thousands, except per share amounts)		2009				2008				2009				2008
Interest income:
Receivables		$	28,248			$	31,031			$	63,208			$	97,911
Investments			2,035				10,556				11,585				28,442
Other interest income			110				9,422				23,394				25,972
Total interest income			30,393				51,009				98,187				152,325
Interest expense:
Deposits			21,321				22,227				70,370				67,746
Debt and other borrowings			2,390				4,197				7,870				12,225
Subordinated debt payable to preferred securities trust			2,181				2,317				6,780				6,951
Total interest expense			25,892				28,741				85,020				86,922
Net interest income			4,501				22,268				13,167				65,403
Provision for credit losses			56,993				28,994				133,605				87,703
Net interest income after provision for credit losses			(52,492	)			(6,726	)			(120,438	)			(22,300	)
Noninterest revenues (losses):
Securitization income (loss)			3,490				(8,673	)			(235,434	)			12,932
Servicing revenues			11,688				24,483				50,588				74,940
Gain on extinguishment of debt			0				0				8,557				0
Other revenues, net			3,767				37,226				53,117				169,144
Total noninterest revenues (losses)			18,945				53,036				(123,172	)			257,016
Operating expenses			45,826				81,937				204,049				233,177
Income (loss) before income taxes			(79,373	)			(35,627	)			(447,659	)			1,539
Income tax expense (benefit)			(2,888	)			(16,369	)			34,800				(1,580	)
Net income (loss)		$	(76,485	)		$	(19,258	)		$	(482,459	)		$	3,119
Basic net income (loss) per common share
Class A		$	(1.89	)		$	(0.51	)		$	(11.90	)		$	(0.04	)
Class B			(1.89	)			(0.48	)			(11.89	)			0.07
Diluted net income (loss) per common share
Class A		$	(1.89	)		$	(0.51	)		$	(11.90	)		$	(0.02	)
Class B			(1.89	)			(0.48	)			(11.89	)			0.06
Basic weighted average common shares outstanding
Class A			13,443				13,393				13,430				13,380
Class B			27,117				27,217				27,145				27,127
Nonvested Class B			2,891				4,030				3,447				3,061
Diluted weighted average common shares outstanding
Class A			13,443				13,393				13,430				13,380
Class B			27,117				27,217				27,145				28,205
Nonvested Class B			2,891				4,030				3,447				3,061

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, 2007						$	1,010			$	144			$	296			$	238,416
Net loss		$	(43,823	)
Other comprehensive income (loss):
Unrealized appreciation (depreciation) of investments, net of tax benefit (expense) of $6,172			(11,462	)
Actuarial gain (loss), net of tax benefit (expense) of $161			(299	)
Currency translation adjustment			(12	)
Comprehensive loss		$	(55,596	)
Preferred and common cash dividends declared
Exercise of stock options																			85
Employee stock option expense																			5,437
Nonemployee stock option expense																			(4	)
Excess tax benefits from ESOP																			341
Issuance of nonvested shares															34				(34	)
Amortization of nonvested shares																			5,729
Forfeitures of nonvested shares															(2	)			(27	)
ESOP shares committed to be released																			99
Balance at December 31, 2008						$	1,010			$	144			$	328			$	250,042
Net loss		$	(482,459	)
Other comprehensive income (loss):
Unrealized appreciation (depreciation) of investments:
Other-than-temporary impairment losses for which a portion has been recorded in earnings, net of tax benefit (expense) of $1,119			(2,077	)
Other investments, net of tax benefit (expense) $(6,020)			11,180
Comprehensive loss		$	(473,356	)
Preferred and common cash dividends declared
Employee stock option expense																			2,406
Excess tax benefits from ESOP																			298
Issuance of nonvested shares															5				(5	)
Amortization of nonvested shares																			(3,342	)
Forfeitures of nonvested shares															(19	)			(232	)
Treasury stock acquired
ESOP shares committed to be released																			(228	)
Balance at September 30, 2009						$	1,010			$	144			$	314			$	248,939

See accompanying notes to consolidated financial statements.

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

						Accumulated				(Accumulated
						Other				Deficit)								Total
		Unearned				Comprehensive				Retained				Treasury				Stockholders’
($ in thousands)		ESOP Shares				Income (Loss)				Earnings				Stock				Equity
Balance at December 31, 2007		$	(8,785	)		$	(1,674	)		$	393,795			$	(37,421	)		$	585,781
Net loss											(43,823	)							(43,823	)
Other comprehensive income (loss):
Unrealized appreciation (depreciation) of investments, net of tax benefit (expense) of $6,172							(11,462	)											(11,462	)
Actuarial gain (loss), net of tax benefit (expense) of $161							(299	)											(299	)
Currency translation adjustment							(12	)											(12	)
Comprehensive loss
Preferred and common cash dividends declared											(34,900	)							(34,900	)
Exercise of stock options																			85
Employee stock option expense																			5,437
Nonemployee stock option expense																			(4	)
Excess tax benefits from ESOP																			341
Issuance of nonvested shares																			0
Amortization of nonvested shares																			5,729
Forfeitures of nonvested shares																			(29	)
ESOP shares committed to be released			418																517
Balance at December 31, 2008		$	(8,367	)		$	(13,447	)		$	315,072			$	(37,421	)		$	507,361
Net loss											(482,459	)							(482,459	)
Other comprehensive income (loss):
Unrealized appreciation (depreciation) of investments:
Other-than-temporary impairment losses for which a portion has been recorded in earnings, net of tax benefit (expense) of $1,119							(2,077	)											(2,077	)
Other investments, net of tax benefit (expense) $(6,020)							11,180												11,180
Comprehensive loss
Preferred and common cash dividends declared											(1,138	)							(1,138	)
Employee stock option expense																			2,406
Excess tax benefits from ESOP																			298
Issuance of nonvested shares																			0
Amortization of nonvested shares																			(3,342	)
Forfeitures of nonvested shares																			(251	)
Treasury stock acquired															(65	)			(65	)
ESOP shares committed to be released			276																48
Balance at September 30, 2009		$	(8,091	)		$	(4,344	)		$	(168,525	)		$	(37,486	)		$	31,961

See accompanying notes to consolidated financial statements.

ADVANTA CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

		Nine Months Ended
		September 30,
($ in thousands)		2009				2008
OPERATING ACTIVITIES — CONTINUING OPERATIONS
Net (loss) income		$	(482,459	)		$	3,119
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Investment securities gains, net			(1,138	)			(36,714	)
Gain on extinguishment of debt			(8,557	)			0
Amortization of discount on investment securities			(2,041	)			(684	)
Depreciation and amortization			5,130				5,261
Impairment of assets			5,328				0
Other-than-temporary impairment losses on investment securities			7,011				0
Stock-based compensation (benefit) expense			(1,187	)			7,826
Provision for credit losses			133,605				87,703
Provision for interest and fee losses			27,173				15,422
Change in deferred origination costs, net of deferred fees			4,586				12,198
Change in receivables held for sale			(125,000	)			(356,679	)
Proceeds from sale of receivables held for sale			125,000				318,025
Change in accounts receivable from securitizations			132,651				(67,531	)
Change in amounts due to the securitization trust			3,924				63,745
Change in other assets and other liabilities			53,259				122,120
Net cash (used in) provided by operating activities			(122,715	)			173,811
INVESTING ACTIVITIES — CONTINUING OPERATIONS
Change in federal funds sold and interest-bearing deposits			455,028				(147,142	)
Purchase of investments available for sale			(1,076,638	)			(1,414,221	)
Proceeds from sales of investments available for sale			1,214,618				655,633
Proceeds from sales of other investments			0				37,659
Proceeds from maturities and paydowns of investments available for sale			634,872				543,179
Change in receivables not held for sale			(484,653	)			13,371
Purchases of premises and equipment, net			(885	)			(6,373	)
Net cash provided by (used in) investing activities			742,342				(317,894	)
FINANCING ACTIVITIES — CONTINUING OPERATIONS
Change in demand and savings deposits			(38,327	)			3,358
Proceeds from issuance of time deposits			503,599				916,828
Payments for maturing time deposits			(956,732	)			(610,258	)
Proceeds from issuance of debt			22,717				49,710
Payments on redemption of debt			(89,426	)			(51,360	)
Change in cash overdraft and other borrowings			(62,284	)			(11,830	)
Proceeds from exercise of stock options			0				85
Cash dividends paid			(1,138	)			(26,107	)
Excess tax benefit from stock-based compensation			0				804
Treasury stock acquired			(65	)			0
Net cash (used in) provided by financing activities			(621,656	)			271,230
Effect of foreign exchange rates on cash			0				(8	)
DISCONTINUED OPERATIONS
Net cash used in operating activities of discontinued operations			(132	)			(1,252	)
Net (decrease) increase in cash			(2,161	)			125,887
Cash at beginning of period			31,716				90,228
Cash at end of period		$	29,555			$	216,115
SUPPLEMENTAL DISCLOSURES
Income tax (refunds) payments, net		$	(7,209	)		$	8,646
Interest paid			27,635				32,583

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, 2009
(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 and Current Operating Environment

We have prepared the consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). 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.

Advanta was founded in 1951 and has long been an innovator in the financial services industry. Most recently, we were one of the nation’s largest credit card issuers (through Advanta Bank Corp.) in the small business market. At this time we are not originating new business credit card accounts or funding new business credit card receivables. Today, we are the servicer for the business credit card receivables that we own on our balance sheet and also the business credit card receivables that are owned by the Advanta Business Card Master Trust. As servicer, we will continue to service and collect the amounts owed on these receivables. In the future, we may pursue other business ventures in the small business market, financial services industry or in other markets or industries.

Deterioration of the U.S. economy beginning in the latter half of 2007 and the negative trends in economic conditions and disruption in the capital markets that have continued into 2009 have adversely affected our business. Although the effects of the economic recession have been widespread and significant, the impact has been more severe throughout the small business sector. We, like many small business credit card issuers and other small business lenders, have experienced deterioration in the credit performance of our customers due to the impact of the general economic downturn on small businesses. As a result of the economic downturn, the ability and willingness of our small business customers to pay amounts owed to us has been adversely affected, resulting in increases in delinquencies and charge-offs. This trend has continued along with the economic downturn into 2009. In addition, the disruption in the credit and financial markets has negatively impacted the value of certain of our investments and the securitization markets, which historically provided a significant source of funding for our business. In turn, this has impacted our funding decisions and contributed to our reported losses.

In response to the current economic environment and its negative impact on our business, results of operations and financial condition, in May 2009 we developed a plan that was designed to limit our credit loss exposure and maximize our capital and our liquidity measures. The plan we designed involved the following components: early amortization of our securitization transactions and closing all of our customers’ business credit card accounts to future use; and the execution of tender offers for the outstanding trust preferred securities issued by Advanta Capital Trust I and a portion of the Class A senior securitization notes issued by the Advanta Business Card Master Trust at prices below their par value. As discussed below, we moved forward with all aspects of our plan with the exception of the tender offer for the Class A senior securitization notes.

Early amortization of the securitization transactions began in June 2009 and effective May 30, 2009, we closed all of our customers’ business credit card accounts to future use. The combination of these events has allowed us to realize our plan objective of limiting our credit loss exposure. We also purchased approximately 10.8% of the $100 million outstanding trust preferred securities through our tender offer for the outstanding trust preferred securities. However, on June 8, 2009, Advanta Bank Corp. terminated its tender offer for the Class A senior securitization notes because it was determined that a regulatory condition to the tender offer would not be satisfied. As a result of terminating the tender offer for the Class A senior securitization notes, we will not be able to fully realize the plan objectives of maximizing both our capital and our liquidity measures and, as a result, we are now reducing our liquidity levels at Advanta Bank Corp. and implementing strategies to reduce levels of deposit liabilities, which we expect will favorably impact the capital ratios at Advanta Bank Corp. We are currently focused on collecting the receivables on our balance sheet and those that are owned by the Advanta Business Card Master Trust. We also continue to take steps to reduce and manage our expenses in this environment and to develop alternative plans and strategies that we believe would, if implemented, achieve our objectives for strengthening our capital and our liquidity measures and might allow us to continue our operations and pursue new business opportunities in the future. If we are unable to develop and implement a new business opportunity that will generate revenues and profits or to access sufficient funding for our business or a new business opportunity, or if we are unable to comply with the capital requirements of the regulatory agreements and orders described below, we may not be able to continue operations. Consequently, there is substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the realizability of assets or the amounts of liabilities that might result from the outcome of this uncertainty.

Effective June 30, 2009, our wholly owned bank subsidiary, Advanta Bank Corp., entered into two regulatory agreements with the Federal Deposit Insurance Corporation (“FDIC”) consenting to the requirements of two cease and desist orders issued by the FDIC. Advanta Bank Corp. did not admit any wrongdoing in entering into the agreements and entered into the agreements in the interest of expediency and to avoid litigation and the costs associated therewith. The first FDIC cease and desist order places significant restrictions on Advanta Bank Corp.’s activities and operations, including its deposit-taking operations, and requires Advanta Bank Corp. to maintain a total risk-based capital ratio of at least 10% and a tier I leverage capital ratio of at least 5%. At September 30, 2009, Advanta Bank Corp.’s total risk-based capital ratio was 10.62% and its tier I leverage capital ratio was 3.73%, resulting in a tier 1 leverage capital ratio that is not in compliance with the first FDIC cease and desist order. See discussion of subsequent events in Note 2. We believe we are in compliance with all other requirements in the first order. The first FDIC order also has the impact of requiring us to obtain the FDIC’s approval before we would be able to pursue new business opportunities through Advanta Bank Corp., however it does not limit our ability to pursue future business opportunities outside of the bank. In October 2009, Advanta Bank Corp. entered into an additional regulatory agreement with the Utah Department of Financial Institutions (“UDFI”) consenting to a cease and desist order issued by the UDFI that contains provisions consistent with the first FDIC order, except that the UDFI’s order does not include the specific capital requirements that are contained in the FDIC’s first order. The second FDIC cease and desist order requires Advanta Bank Corp. to make certain restitution payments to eligible customers and pay a civil money penalty of $150 thousand. We previously took a $14 million pretax charge related to our estimate of cash back rewards program restitution in the third quarter of 2008. We recorded an additional $19 million pretax charge, classified in operating expenses, in the second quarter of 2009 related to our estimate of pricing strategies restitution under the agreement. We began making restitution payments in September 2009 and the payments were completed in October 2009. See further discussion of the regulatory agreements and orders in Note 14.

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. Material estimates as of September 30, 2009 that are particularly susceptible to significant changes in the near term relate to the accounting for the allowance for receivable losses and income taxes.

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

We have evaluated subsequent events through November 9, 2009, which is the date these financial statements were issued and filed with the SEC.

Note 2) Subsequent Event

On November 8, 2009, Advanta Corp. and certain of its subsidiaries (the “Filing Subsidiaries”) filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code (the “Bankruptcy Filing”) in the United States Bankruptcy Court for the State of Delaware. Our two bank subsidiaries, Advanta Bank Corp. and Advanta Bank, and certain other non-filing subsidiaries were not part of the Bankruptcy Filing. These subsidiaries continue to operate outside of the Bankruptcy Filing. Advanta Corp. is reviewing both existing and potential business opportunities in connection with the reorganization. For financial reporting after the Bankruptcy Filing, Advanta Corp. will adopt Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 852, Reorganizations. ASC 852 does not change the application of GAAP with respect to the preparation of our consolidated financial statements. However, it requires financial statements, for periods including and subsequent to a Chapter 11 filing, to distinguish between transactions and events that are directly associated with the reorganization and the ongoing operations of the business, as well as additional disclosures.

Advanta Corp. intends to use the reorganization process to maximize value to Advanta Corp.’s stakeholders. As of November 8, 2009, Advanta Corp. and its Filing Subsidiaries had close to $100 million of cash and cash equivalents. This represents an amount that we expect will be adequate to meet Advanta Corp.’s current obligations associated with its ongoing operations as they come due during the Chapter 11 case, including payment of employee salaries and benefits in the ordinary course of business. Over time, however, Advanta Corp. will be unable to meet all of its existing obligations without the protection of the Bankruptcy Filing. As a result of the Bankruptcy Filing, certain liabilities incurred by Advanta Corp. and its Filing Subsidiaries prior to the Bankruptcy Filing are subject to compromise. The timing of payments and the settlement amounts of liabilities subject to compromise will be determined as part of the bankruptcy process.

The Bankruptcy Filing constitutes an event of default with respect to the following debt securities: (i) Advanta Corp.’s outstanding senior unsecured debt securities in the form of RediReserve Variable Rate Certificates and Investment Notes (the “Debt Securities”); and (ii) the outstanding trust preferred securities issued to third party investors by Advanta Capital Trust I (the “Capital Securities”) which are guaranteed by Advanta Corp. Subject to certain notice and other requirements particular to the documents governing the Debt Securities and the Capital Securities, upon the occurrence of this event of default, the trustee or holders of not less than 25% in principal of the applicable securities outstanding may declare the entire unpaid principal amount immediately due and payable.

As discussed in Note 1, Advanta Bank Corp. is subject to the requirements of regulatory agreements and cease and desist orders issued by the FDIC. The first FDIC order includes specific capital requirements that must be maintained by Advanta Bank Corp. and, as discussed in Note 1, Advanta Bank Corp. was unable to comply with one of those capital requirements at September 30, 2009. Advanta Bank Corp.’s capital position is now categorized as “undercapitalized” under the applicable bank regulatory framework. As a result of being in the “undercapitalized” capital category, Advanta Bank Corp. is subject to significant restrictions on its activities and operations, many of which are consistent with the restrictions set forth in the FDIC’s first cease and desist order. In addition, Advanta Bank Corp. is required to submit a capital restoration plan to the FDIC. If the capital restoration plan is not submitted and approved or if Advanta Bank Corp. is unable to comply with the capital requirements of the FDIC’s first cease and desist order, the FDIC may take further regulatory and enforcement actions and may ultimately place Advanta Bank Corp. into FDIC receivership. If a receivership were to occur, Advanta Bank Corp.’s assets would likely be liquidated and it is unlikely that any assets or the proceeds thereof would be distributed to Advanta Corp.’s stakeholders, including the common stockholders or creditors. Advanta Corp. has determined not to make future capital contributions to Advanta Bank Corp. in order to preserve value for Advanta Corp.’s stakeholders. As a result, Advanta Bank Corp. may not be able to comply with the capital requirements of the FDIC’s first cease and desist order.

Note 3) Recently Issued Accounting Standards

Effective January 1, 2009, we adopted FASB guidance regarding determining whether instruments granted in share-based payment transactions are participating securities. The guidance concludes that unvested share-based payment awards that contain nonforfeitable rights to dividends are participating securities should be included in the computation of earnings per share under the two-class method. The two-class method is an earnings allocation formula to determine earnings per share for multiple classes of stock according to dividends declared and participation rights in undistributed earnings. The nonvested shares of Class B Common Stock issued under our stock-based incentive plan are participating securities with nonforfeitable rights to dividends. Therefore, upon the adoption of this guidance, our nonvested Class B Common Stock was included as a third class of stock for purposes of earnings per share computations. This impacted our reported earnings per Class A and Class B share. We adjusted all prior period earnings per share data presented to conform to the provisions of this guidance. The adoption of this guidance did not impact our financial position or net income.

In April 2009, the FASB issued guidance for determining fair value when the volume and level of activity for the asset or liability have significantly decreased and for identifying transactions that are not orderly . The guidance concerns how to determine the fair value of assets and liabilities when the volume and level of activity for the asset/liability has significantly decreased. The guidance also provides identifying circumstances that indicate a transaction is not orderly. In addition, the guidance requires disclosure in interim and annual periods of the inputs and valuation techniques used to measure fair value and a discussion of changes in valuation techniques. The adoption of this guidance was effective for Advanta for the quarter ending June 30, 2009 and did not have a significant impact on our financial position or results of operations.

In April 2009, the FASB issued guidance regarding recognition and presentation of other-than-temporary impairments. This guidance amended the requirements for the recognition and measurement of other-than-temporary impairments for debt securities by modifying the pre-existing intent and ability indicator. Under the guidance, an other-than-temporary impairment is triggered when there is an intent to sell the security, it is more likely than not that the security will be required to be sold before recovery, or the entity is not expected to recover the entire amortized cost basis of the security. Additionally, the guidance changes the presentation of an other-than-temporary impairment in the income statement for those impairments. The credit loss component will be recognized in earnings and the remainder of the impairment will be recorded in other comprehensive income. This guidance was effective for Advanta for the quarter ended June 30, 2009 and as discussed further in Note 4, we recognized other-than-temporary impairment losses as of June 30, 2009 and September 30, 2009.

In April 2009, the FASB issued guidance regarding interim disclosure about fair value of financial instruments. The guidance requires disclosure of fair values and the methods and significant assumptions used to estimate the fair value of financial instruments on an interim basis as well as changes of the methods and significant assumptions from prior periods. Our adoption of this guidance effective for the quarter ending June 30, 2009 resulted in additional disclosures but did not impact our financial position or results of operations. See Note 19 for the applicable disclosures.

In June 2009, the FASB amended its guidance regarding accounting for transfers of financial assets and consolidation of variable interest entities. The amended guidance eliminates the concept of qualifying special-purpose entities, so all special-purpose entities must be analyzed for consolidation. It requires consolidation if an entity has both power to direct the activities of the special-purpose entity that most significantly impact its economic performance and receives benefits or absorbs losses that are potentially significant to the special-purpose entity. We expect that the implementation of this guidance effective January 1, 2010 will result in the consolidation of our securitization trust and consequently, our off-balance sheet receivables and the related liability to securitization noteholders would be reported on our balance sheet. As of September 30, 2009, we had $2.1 billion of securitized receivables, $2.0 billion of which were off-balance sheet. We are currently evaluating what impact that consolidation will have on our financial position and results of operations. The adoption could have a significant detrimental impact on the regulatory capital levels of Advanta Bank Corp.

In August 2009, the FASB issued guidance that clarified existing guidance on measuring liabilities at fair value. Among other things, the guidance clarifies how the price of a traded debt security should be considered in estimating the fair value on the issuer’s liability. We do not expect the adoption of this guidance effective October 1, 2009 to have a material impact on our financial position or results of operations.

Note 4) Investments Available for Sale

Investments available for sale consisted of the following:

		September 30, 2009								December 31, 2008
		Amortized				Fair				Amortized				Fair
		Cost				Value				Cost				Value
U.S. Treasury and government agency securities		$	8,910			$	8,932			$	312,112			$	313,209
State and municipal securities			15,461				15,421				18,015				17,064
Corporate bonds (1)			9,991				10,031				0				0
Commercial paper			0				0				8,796				8,799
Asset-backed securities:
Credit card asset-backed securities (2)			72,392				70,221				291,919				281,601
Mortgage and home equity line of credit-backed securities			22,293				17,875				32,692				22,467
Equity securities			8,073				8,197				8,245				8,191
Money market funds (3)			111,797				111,797				325,548				325,548
Other			367				367				367				366
Total investments available for sale		$	249,284			$	242,841			$	997,694			$	977,245

We evaluate the decline in the fair value of our investment securities to determine whether the decline in value is other than temporary. For securities that we intend to sell or that it is more likely than not that we will be required to sell before recovery of their amortized cost basis, an other-than-temporary impairment is considered to have occurred and the difference between the security’s fair value and amortized cost is recognized in earnings. At September 30, 2009, we determined there were no securities in a loss position that we intended to sell or would be required to sell. For securities that we do not intend to sell and for which it is more likely than not that we will not be required to sell, we separate the amount of the impairment into the amount that is credit related and the amount due to all other factors. The credit component is recognized in earnings and is the difference between the security’s amortized cost basis and the present value of its expected future cash flows. The remainder of the impairment is recorded in other comprehensive income. In assessing these securities, we consider the length of time and extent to which the market value has been less than cost, and the financial condition and near-term prospects of the issuer. In assessing the financial condition and near-term prospects of the issuer, we review the issuer’s ratings and any changes in its ratings and recent performance. For securities that are rated below AA by Standard & Poor’s or Aa2 by Moody’s Investor Service or the equivalent from other rating agencies or that have demonstrated deteriorating performance in the form of ratings downgrades since the date the security was acquired, we project expected future cash flows to assess whether we expect to recover the amortized cost of the security. We estimate the credit component of the expected future cash flow based on projections of future credit defaults of the underlying collateral. The significant inputs we use to project the expected future collateral defaults for mortgage or home equity line of credit-backed securities include published rating agency projections of lifetime default percentages and loss severities for the collateral type and the year of origination. The projections of future collateral defaults are then compared to the level of credit enhancement available, including available overcollateralization, subordination and insurance. If the level of credit enhancement available was sufficient to absorb the projected collateral defaults, no credit impairment was deemed to have occurred and the decline in fair value was not deemed to be other-than-temporary. If the level of credit enhancement available was not sufficient to absorb the projected collateral defaults, we recorded other-than-temporary impairment losses for our proportionate interest in the projected defaults in excess of projected available credit enhancement that would be allocated to our tranche. A similar methodology was used to assess our credit card asset-backed securities that uses internal expectations of future collateral defaults based on our experience with the underlying collateral, which is the pool of securitized receivables in the Advanta Business Card Master Trust.

Our one credit card asset-backed security was in a loss position at September 30, 2009 and has been in a loss position since the third quarter of 2008. The $72.4 million par value of the AdvantaSeries 2008-A3 note had an unrealized loss of $2.2 million. The unrealized loss was due to the ongoing difficulties in the asset-backed securities market that created turmoil in the capital markets, negative performance trends of receivables in the Advanta Business Card Master Trust and the early amortization of our securitization transactions in June 2009. In May 2009, the ratings on this security were downgraded by Standard & Poor’s from AA to BBB- and by Moody’s Investor Service from Baa2 to Ba2. The unrealized loss on this credit card asset-backed security was not deemed to be an other-than-temporary impairment loss at September 30, 2009 based on results using the methodology described above.

We own seventeen floating rate mortgage and home equity line of credit-backed securities in our investment portfolio that are backed by subprime residential mortgage loans or subprime home equity loans. The fair values of these investments declined in the second half of 2007, in 2008 and again in 2009 due to the difficulties in the subprime mortgage industry that created turmoil in the capital markets.

Through September 2009, we recognized $7.0 million of other-than-temporary impairment losses on seven of the seventeen mortgage or home equity line of credit-backed securities due to the expectation that we will not recover the total amount of amortized cost based on results using the methodology described above. The securities had significant unrealized losses for approximately 29 months associated with the disruption in the market for these types of securities. The other-than-temporary impairment losses are classified in other revenues on the consolidated income statements. At September 30, 2009, these securities represent 41% of the fair value of our mortgage and home equity line of credit-backed securities backed by subprime residential mortgage loans or subprime home equity loans. These securities were rated from AAA to CCC by Standard & Poor’s, from Ba1 to Caa2 by Moody’s Investor Service, or the equivalent from other rating agencies, after taking into account the downgrade of four of these investments by at least one rating agency in the third quarter of 2009.

Based on the methodology described above, the unrealized losses of the remaining ten of the seventeen mortgage or home equity line of credit-backed securities were not deemed to be other-than-temporary impairment losses. The amounts of unrealized losses per individual mortgage or home equity line of credit-backed security at September 30, 2009 were as follows: one security with a loss of $1.5 million, five securities with a loss between $100 thousand and $499 thousand and four securities with losses less than $100 thousand. At September 30, 2009, these securities represent 59% of the fair value of our mortgage and home equity line of credit-backed securities backed by subprime residential mortgage loans or subprime home equity loans. Seven of these securities were rated from AAA to AA by Standard & Poor’s, from Aaa to Aa2 by Moody’s Investor Service, or the equivalent from other rating agencies, and their ratings are unchanged since they were acquired, and three were rated from AAA to BB- by Standard & Poor’s, from Aa2 to B3 by Moody’s Investor Service, or the equivalent from other rating agencies, after taking into account the downgrade of one of these investments by at least one rating agency in the third quarter of 2009.

The following table represents other-than-temporary impairment losses on available for sale debt securities:

		Three Months Ended				Nine Months Ended
		September 30, 2009				September 30, 2009
Total other-than-temporary impairment losses (unrealized and realized)		$	(2,244	)		$	(10,207	)
Portion of pretax (gain) loss recognized in other comprehensive income (1)			1,826				3,196
Net impairment losses recognized in income (2)		$	(418	)		$	(7,011	)

The following table presents a rollforward of the credit component of other-than-temporary impairments on available for sale debt securities held as of September 30, 2009:

		Three Months				Nine Months
		Ended				Ended
		September 30, 2009				September 30, 2009
Beginning Balance		$	(6,593	)		$	0
Additions for credit impairments recognized on securities not previously impaired			(103	)			(7,011	)
Additions for credit impairments recognized on securities previously impaired			(315	)			0
Ending Balance		$	(7,011	)		$	(7,011	)

There were no other declines in the fair value of investments available for sale below their cost that were deemed to be other-than-temporary at September 30, 2009 or December 31, 2008.

The fair value of investments available for sale in an unrealized loss position and the related unrealized losses at September 30, 2009 were as follows:

		Less Than 12 Months in								12 Months or Longer in
		an Unrealized Loss								an Unrealized Loss
		Position								Position								Total
		Gross								Gross								Gross
		Unrealized				Fair				Unrealized				Fair				Unrealized				Fair
		Amount				Value				Amount				Value				Amount				Value
State and municipal securities		$	0			$	0			$	(191	)		$	6,284			$	(191	)		$	6,284
Credit card asset-backed security			0				0				(2,172	)			70,221				(2,172	)			70,221
Mortgage and home equity line of credit-backed securities			0				0				(6,298	)			10,285				(6,298	)			10,285
Other securities			(1	)			34				0				0				(1	)			34
Total		$	(1	)		$	34			$	(8,661	)		$	86,790			$	(8,662	)		$	86,824

Note 5) Receivables

Receivables on the consolidated balance sheets consisted of the following:

		September 30,				December 31,
		2009				2008
Business credit card receivables		$	833,050			$	505,578
Other receivables			8,097				8,583
Gross receivables			841,147				514,161
Add: Deferred origination costs, net of deferred fees			0				4,586
Less: Allowance for receivable losses
Business credit cards			(105,829	)			(102,700	)
Other receivables			(1,185	)			(1,203	)
Total allowance for receivable losses			(107,014	)			(103,903	)
Receivables, net		$	734,133			$	414,844

At September 30, 2009, approximately 16% of our owned business credit card receivables were concentrated in the state of California and approximately 9% were concentrated in the state of Florida. This compares to U.S. Census population estimates of the U.S. population residing in these states of 12% for California and 6% for Florida. Approximately 15% of U.S. small businesses are domiciled in California and approximately 7% of U.S. small businesses are domiciled in Florida based on a 2008 Small Business Administration report of 2007 data. We had no other concentrations in a single state of 9% or more of total owned business credit card receivables.

See Note 7 for statistical information on owned receivables 30 days or more delinquent, 90 days or more delinquent, on nonaccrual status, accruing receivables past due 90 days or more, and net principal charge-offs.

Note 6) Allowance for Receivable Losses

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

		2009				2008
Balance at January 1		$	103,903			$	68,540
Provision for credit losses			133,605				87,703
Provision for interest and fee losses			27,173				15,422
Gross principal charge-offs:
Business credit cards			(133,152	)			(66,836	)
Other receivables			(7	)			(2	)
Total gross principal charge-offs			(133,159	)			(66,838	)
Principal recoveries:
Business credit cards			3,527				1,872
Net principal charge-offs			(129,632	)			(64,966	)
Interest and fee charge-offs:
Business credit cards			(28,035	)			(14,847	)
Balance at September 30		$	107,014			$	91,852

Effective June 2009, due to the closure of our customers’ accounts to future use, our charge-off policy for contractually delinquent business credit card accounts changed to charge-off an unpaid receivable no later than the end of the month in which it becomes and remains past due 120 cumulative days from the contractual due date. Our previous policy was to charge-off an unpaid receivable no

later than the end of the month in which it became and remained past due 180 cumulative days from the contractual due date. There was no change to our charge-off policy for bankrupt business credit card accounts, which is to charge-off an unpaid receivable within 60 days of receipt of notification of filing from the bankruptcy court or within the timeframes adopted in the Uniform Retail Credit Classification and Account Management Policy , whichever is shorter. We had $25.1 million of additional net principal charge-offs in June 2009 associated with the change in charge-off policy.

Note 7) Securitization Activities

We sold business credit card receivables through securitizations accounted for as sales under GAAP. We continue to own and service the accounts that generated the securitized receivables. We used one securitization trust for all of our securitizations. The securitization trust was created to hold the collateral (the business credit card receivables) and issue notes primarily to institutional investors. The securitization trust, Advanta Business Card Master Trust, is a qualified special purpose entity, has no equity and is financed through notes issued primarily to institutional investors, our subordinated trust assets and our seller’s interest. Only principal receivables were sold to securitization noteholders. Accrued interest and fees on securitized receivables remain on-balance sheet and are classified as accounts receivable from securitizations on the consolidated balance sheets. Our seller’s interest is an undivided interest in the principal receivables in the trust and represents the amount of receivables in the trust not allocated to investors. The seller’s interest does not meet the GAAP criteria for sale accounting and is classified as receivables on the consolidated balance sheets. The seller’s interest does not provide credit enhancement to the securitized receivables.

As of September 30, 2009, we had $2.1 billion of securitized receivables, $2.0 billion of which were off-balance sheet. As of December 31, 2008, we had $4.5 billion of securitized receivables, $4.1 billion of which were off-balance sheet. We hold certain securitized receivables on-balance sheet in the form of subordinated trust assets that are a component of retained interests in securitizations and certain AdvantaSeries Class A notes issued in our 2008 securitizations that were purchased by one of our bank subsidiaries and are classified as investments available for sale. Our investments available for sale included AdvantaSeries Class A notes with a fair value of $70.2 million as of September 30, 2009 and $281.6 million as of December 31, 2008. We had $168.5 million of accounts receivable from securitizations on our balance sheet as of September 30, 2009 and $301.1 million as of December 31, 2008. Accounts receivable from securitizations include amounts due from the securitization trust, accrued interest and fees on securitized receivables and retained interests in securitizations. Our business credit card receivables on the consolidated balance sheet include our undivided interest in the principal receivables in the trust (seller’s interest) of $730 million as of September 30, 2009 and $377 million as of December 31, 2008.

Our recourse or credit risk in off-balance sheet securitized receivables is limited to the amount of our retained interests in securitizations, which serve as credit enhancement to the noteholders’ interests in the securitized receivables. We have no liquidity arrangements, guarantees and/or other arrangements that could require us to provide financial support to the securitization trust. However, we voluntarily chose to provide financial support to the securitization trust in April 2009 by buying charged-off receivables that were previously part of the trust portfolio for $7.6 million, which increased the trust’s excess spread. We chose to voluntarily provide support at that time to prevent an early amortization. The amount of support provided was based on a determination of the amount that would maintain the trust’s three-month average excess spread at a level greater than zero for the April 2009 monthly period. The securitization transactions began early amortization in June 2009, as discussed below, and we do not intend to voluntarily provide financial support to the trust in the future. There are no liquidity arrangements, guarantees and/or other commitments by third parties that would provide financial support to the trust.

Early amortization for our securitization transactions began in June 2009 after the AdvantaSeries three-month average excess spread amount was not maintained at a level greater than $0, which was a trigger for early amortization. The early amortization resulted in the end of the revolving periods prior to the expected dates. In an early amortization, the securitization noteholders are paid as payments on the securitized receivables are received from customers. In order to eliminate the potential negative liquidity impact of early amortization, we closed our customers’ accounts to future use effective May 30, 2009. The early amortization of our securitization transactions and closing our customers’ accounts had a negative impact on the value of our retained interests in securitizations and accrued interest and fees on securitized receivables.

At the time of securitization, we retained an interest in securitized receivables in the form of subordinated trust assets, cash collateral accounts and retained interest-only strips, each of which served as credit enhancement to the noteholders’ interests in the securitized receivables. The fair values of retained interests in securitizations are dependent upon the performance of the underlying securitized receivables, market-driven interest rates and market credit spreads. Our retained interests in securitizations entitle us to the excess spread on the receivables, if any. Excess spread represents income-related cash flows on securitized receivables (interest, interchange, recoveries and fees) net of noteholders’ interest, servicing fees and credit losses. Due to the closure of our customers’ accounts to future use effective May 30, 2009, there will be no future cash flows or income from interchange in future periods. Income-related cash flows on securitized receivables did not exceed the other components of the excess spread in recent months, and we expect the negative spread levels to continue. Due to the negative spread levels, our par values of cash collateral and subordinated trust assets

were reduced by an aggregate of $147.7 million in the nine months ended September 30, 2009 as the balances were used as credit enhancement for securitization noteholders. At September 30, 2009, the cash collateral account had no balance and no fair value. The subordinated trust assets also had no par value at September 30, 2009, but had an estimated fair value of $5.6 million representing the present value of future interest cash flows on the assets, discounted using a risk-adjusted discount rate. The retained interest-only strip’s fair value was estimated as zero at both December 31, 2008 and September 30, 2009. The aggregate reduction in estimated fair value of retained interests in securitizations, including both realized losses and changes in unrealized losses, was $103.2 million for the nine months ended September 30, 2009. Securitization loss for the nine months ended September 30, 2009 also includes a $69.9 million unfavorable change in estimate of amounts of accrued interest and fees on securitized receivables that are realizable, which was needed as a result of the early amortization of our securitization transactions and closure of our customers’ accounts to future use. Securitization loss for the nine months ended September 30, 2009 includes $78.6 million of loss related to interchange cash flows used as credit enhancement. However, this has no net impact on pretax loss since interchange income on the consolidated income statements includes interchange fees on both owned and securitized business credit cards.

The following disclosures represent the aggregate data for our business credit card securitizations.

Accounts receivable from securitizations consisted of the following:

		September 30,				December 31,
		2009				2008
Amounts due from the securitization trust		$	158,417			$	65,041
Accrued interest and fees on securitized receivables, net (1)			4,448				110,476
Retained interests in securitizations			5,602				125,601
Total accounts receivable from securitizations		$	168,467			$	301,118

Quoted market prices were not available for our retained interests in securitizations for the three and nine months ended September 30, 2009 or for the same period of 2008. 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 sale. There were no new securitizations or replenishment sales after May 2009.

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Average securitized receivables		$	2,615,209			$	5,030,299			$	3,600,505			$	5,147,465
Securitization income (loss)			3,490				(8,673	)			(235,434	)			12,932
Discount accretion			110				9,422				23,394				25,972
Interchange income			(80	)			58,267				78,602				171,511
Servicing revenues			11,688				24,483				50,588				74,940
Proceeds from new securitizations			0				0				125,000				318,025
Proceeds from collections reinvested in revolving- period securitizations			0				2,860,791				2,867,245				7,994,045
Cash flows received on retained interests (1)			570				64,637				113,066				257,223
Key assumptions:
Discount rate			N/A				17.68% – 27.36	%			39.33% – 66.60	%			12.21% – 27.36	%
Monthly payment rate			N/A				18.99% – 22.50	%			19.17% – 22.20	%			18.79% – 22.50	%
Loss rate			N/A				8.60% – 12.37	%			14.54% – 21.96	%			6.20% – 12.37	%
Interest yield, net of interest earned by securitization noteholders			N/A				12.29% – 13.73	%			13.62% – 15.06	%			8.79% – 13.73	%

There were no purchases of delinquent accounts from the securitization trust during the three and nine months ended September 30, 2009 or 2008.

Managed business credit card receivable data

We service both the receivables owned on our balance sheet and the securitized receivables in the Advanta Business Card Master Trust, collectively referred to as “managed receivables.” Credit quality data on managed receivables was as follows:

		September 30,				December 31,				September 30,
		2009				2008				2008
Owned business credit card receivables		$	833,050			$	505,578			$	726,652
Securitized business credit card receivables			2,128,247				4,511,650				4,863,634
Total managed receivables		$	2,961,297			$	5,017,228			$	5,590,286
Receivables 30 days or more delinquent (1) :
Owned		$	107,333			$	52,997			$	51,661
Securitized			268,490				425,271				314,740
Total managed			375,823				478,268				366,401
Receivables 90 days or more delinquent (1) :
Owned			26,512				24,132				24,531
Securitized			65,368				188,424				148,182
Total managed			91,880				212,556				172,713
Nonaccrual receivables (1) :
Owned			26,974				9,688				11,194
Securitized			70,151				85,277				72,398
Total managed			97,125				94,965				83,592
Accruing receivables past due 90 days or more (1) :
Owned			24,075				22,166				22,203
Securitized			58,996				170,876				133,710
Total managed			83,071				193,042				155,913
Net principal charge-offs for the year-to-date period ended September 30 and December 31 (1) :
Owned			129,625				89,056				64,964
Securitized			630,847				449,964				314,694
Total managed			760,472				539,020				379,658
Net principal charge-offs for the three months ended September 30 and December 31 (1) :
Owned			34,094				24,092				22,839
Securitized			152,951				135,270				124,303
Total managed			187,045				159,362				147,142

Note 8) Other Assets and Liabilities

Other assets consisted of the following:

		September 30,				December 31,
		2009				2008
Investment in Fleet Credit Card Services, L.P.		$	32,095			$	32,095
Receivable from third party (see Note 11)			28,155				0
Current income taxes receivable			26,097				4,962
Cash surrender value of insurance contracts			17,838				17,264
Prepaid assets			12,530				23,279
Securities sold receivable			3,789				33,620
Investment in preferred securities trust			3,302				3,093
Net deferred tax asset			2,255				71,219
Other			12,972				30,413
Total other assets		$	139,033			$	215,945

At September 30, 2009, we had a $3.6 million receivable in other assets related to September 2008 redemption orders submitted to The Reserve Primary Fund, a money market fund investment. The net asset value of The Reserve Primary Fund declined below $1.00 per share on September 16, 2008, the day following our redemption request. Due to a large number of redemption requests, the fund received an SEC order suspending redemptions and postponing payment for shares that had already been submitted for redemption. The fund made partial distributions to shareholders in 2008 and 2009. We received $37.3 million of our redemption proceeds through September 30, 2009, and received an additional $809 thousand in October 2009. The timing of the receipt of the remaining $2.8 million of estimated proceeds from the Reserve Primary Fund is uncertain and is subject to the orderly disposition of the fund’s securities and the resolution of pending and threatened claims that may affect the fund’s assets. There is uncertainty as to whether the fund’s loss will be allocated to shareholders that redeemed on September 15, 2008 and there is also uncertainty as to the level of fund assets that will be used to satisfy ongoing costs and expenses, legal fees, and pending or threatened claims against the fund or the fund’s assets. Since our proceeds from the redemption may be less than the redemption price of $1.00 per share, we recorded an estimated loss on the redemption of $1.0 million in 2008. We update our estimate each time additional disclosures are made by the fund’s management. We reduced the receivable and recorded an additional $860 thousand loss on the redemption in the first quarter of 2009. In the three months ended September 30, 2009, we increased our estimate of proceeds and the related receivable by $1.4 million, for a net increase in the receivable of $524 thousand for the nine months ended September 30, 2009.

We had a $5.4 million realized gain on the sale of MasterCard Incorporated shares in the three months ended September 30, 2008. For the nine months ended September 30, 2008, we had $24.3 million of realized gains on sales of MasterCard Incorporated shares and a $13.4 million realized gain on the redemption of Visa Inc. shares. The gain on Visa Inc. shares was related to Visa’s initial public offering and share redemption in March 2008. As of September 30, 2009, we own 497 thousand Visa Inc. Class B common shares that have zero cost basis and no book value. We have no remaining MasterCard Incorporated shares as of September 30, 2009.

Other liabilities consisted of the following:

		September 30,				December 31,
		2009				2008
Liability for unrecognized tax benefits		$	37,400			$	38,659
Accrued interest payable			36,593				15,472
Accounts payable and accrued expenses			33,308				31,781
Cash back rewards liability			14,036				23,174
Amounts due to the securitization trust			9,367				5,443
Liabilities of discontinued operations			1,503				1,635
Current income taxes payable			726				681
Business rewards liability			276				30,563
Cash overdraft			0				12,284
Other			16,060				16,895
Total other liabilities		$	149,269			$	176,587

In July 2008, we commenced a reduction of workforce in connection with initiatives to outsource business processes within the areas of information technology, customer service, collections, and accounting and finance. In the first quarter of 2009, we reduced our workforce by approximately 300 employees, or 35%, and in the third quarter of 2009, we further reduced our workforce by approximately 200 employees, or 50%, each in order to reduce staffing to levels more commensurate with our current activities and receivable portfolio size. These workforce reductions were substantially complete as of September 30, 2009. We expect to pay the severance and related costs within twelve months of the severance dates. The severance and related costs were included in salaries and employee benefits expense. The accrued severance and costs related to these initiatives were included in other liabilities on the consolidated balance sheets. A rollforward of the liabilities associated with these workforce reductions and the cumulative costs incurred are as follows:

																		Cumulative
		December 31,				Nine Months Ended								September 30,				Costs
		2008				September 30, 2009								2009				Incurred
		Accrual				Costs								Accrual				as of September
		Balance				Incurred				Payments				Balance				30, 2009
Outsourcing of business processes		$	418			$	2,307			$	2,319			$	406			$	3,220
Reduction in workforce- first quarter of 2009			0				9,780				9,372				408				9,780
Reduction in workforce- third quarter of 2009			0				8,135				4,628				3,507				8,135
Total		$	418			$	20,222			$	16,319			$	4,321			$	21,135

Note 9) Deposits

Deposit accounts consisted of the following:

		September 30,				December 31,
		2009				2008
Demand deposits		$	17,946			$	6,832
Money market savings			29,105				78,546
Time deposits of $100,000 or less			824,030				1,101,002
Time deposits of more than $100,000			1,211,818				1,355,026
Total deposits		$	2,082,899			$	2,541,406

All deposits are interest bearing except demand deposits. Time deposit maturities were as follows at September 30, 2009:

Year Ending December 31,
2009		$	577,429
2010			873,558
2011			265,455
2012			36,025
2013			283,381

Advanta Bank Corp.’s regulatory agreement places significant restrictions on Advanta Bank Corp.’s deposit-taking operations. See further description of the regulatory agreements and orders in Note 14.

Note 10) Debt and Other Borrowings

The composition of debt was as follows at:

		September 30,				December 31,
		2009				2008
RediReserve variable rate demand certificates (4.50%-4.65%)		$	5,403			$	10,769
91 day retail notes, fixed (7.23%-7.70%)			134				1,862
6 month retail notes, fixed (7.70%-8.62%)			1,670				4,479
12 month retail notes, fixed (6.06%-10.44%)			21,350				40,117
14 month retail notes, fixed (10.44%-11.56%)			1,976				0
18 month retail notes, fixed (5.97%-8.39%)			2,810				6,620
24 month retail notes, fixed (5.45%-11.38%)			18,851				19,000
30 month retail notes, fixed (5.50%-9.53%)			3,574				4,929
36 month retail notes, fixed (5.59%-9.99%)			8,029				11,257
48 month retail notes, fixed (5.12%-9.35%)			5,931				8,558
60 month retail notes, fixed (5.59%-10.89%)			41,442				63,902
84 month retail notes, fixed (6.30%-9.99%)			4,573				6,167
120 month retail notes, fixed (6.77%-10.44%)			24,748				27,075
Other retail notes, fixed (0.00%-9.53%)			987				1,863
Total debt		$	141,478			$	206,598