Advanta Reports Earnings for 2007

Advanta Corp. (NASDAQ: ADVNB; ADVNA) today reported full year 2007 net income from continuing operations of $71 million or $1.61 per diluted share for Class A and Class B shares combined, including an after-tax charge of $0.17 per share relating to contingency reserves associated with Visa’s litigation with third parties. Fourth quarter earnings of $0.17 per share include an $0.11 per share after-tax charge also associated with Visa litigation matters. In addition, the fourth quarter earnings incorporate $0.39 per share of after-tax balance sheet charges and reserve build resulting primarily from recent credit trends, and a $0.05 per share after-tax gain on the sale of a portion of the Company’s MasterCard shares. During the year, the Company acquired approximately 335,000 new customers. Managed receivables grew approximately 22% to $6.3 billion in 2007. Owned receivables were $1.0 billion at year end, approximately 9% lower than December 31, 2006. Transaction volume of $14.4 billion for 2007 increased 17% from the prior year. For the full year, the managed net credit loss rate was 3.71% and the owned net credit loss rate was 3.39%. These net credit loss rates compare to the 2006 rates of 3.41% and 3.19%, respectively. "Our decision to focus exclusively on the small business market almost 7 years ago has enabled us to build a profitable, sustainable business over the long haul. Although we’re disappointed with the impact of the current economy on our recent results, we believe the small business market will continue to provide opportunities for us going forward,” said Dennis Alter, Chairman and CEO. Conference Call Details Advanta management will hold a conference call with analysts and institutional investors today, January 30, at 9:00 a.m. Eastern Time, to review the fourth quarter and full year results for 2007. The call can be accessed by dialing 877-879-6209 and referring to confirmation code 5054657. The call will also be webcast simultaneously via a Vcall link on the Company’s website, www.advanta.com, or at www.investorcalendar.com. Those interested in listening to the webcast should go to the website at least 10 minutes before the call to register and download any necessary software. Replays of the call will be available beginning at noon today on the Internet at www.advanta.com or www.investorcalendar.com or by dialing 888-203-1112 and referring to pass code 5054657. The conference call may include a discussion of non-GAAP financial measures, which are reconciled to the most directly comparable GAAP financial measures in the Company’s press releases or the statistical supplements available at www.advanta.com in the "Corporate Info” section. About Advanta Advanta is one of the nation’s largest credit card issuers (through Advanta Bank Corp.) in the small business market today. Advanta’s exclusive focus on this market, as well as its size, experience and commitment to developing meaningful product offerings and a high level of service tailored to the needs of small businesses, differentiate the company from other issuers. Founded in 1951, Advanta has long been an innovator in developing and introducing many of the marketing techniques that are common in the financial services industry today. Learn more about Advanta at www.advanta.com. This Press Release contains forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ from those projected. Risks that may affect the Company’s future performance are detailed in the Company’s filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. In addition to the GAAP results provided throughout this document, the Company has provided managed receivable data and other non-GAAP financial measurements. Management believes that the non-GAAP financial measures used to manage the business may provide users additional useful information. The tables attached to this press release include a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures and a description of why the non-GAAP financial measures are useful to investors.   ADVANTA SEGMENT INCOME STATEMENT - QUARTER (in thousands)       Three Months Ended December 31, 2007   Advanta Business Cards Other (A) Total Interest income $ 38,945 $ 10,829 $ 49,774 Interest expense 14,983   12,547   27,530   Net interest income 23,962 (1,718 ) 22,244 Provision for credit losses 21,587   (35 ) 21,552   Net interest income after provision for credit losses 2,375 (1,683 ) 692 Noninterest revenues: Interchange income 69,346 0 69,346 Securitization income 10,375 0 10,375 Servicing revenues 25,258 0 25,258 Business credit card rewards (22,495 ) 0 (22,495 ) Other revenues, net 8,149   1,768   9,917   Total noninterest revenues 90,633 1,768 92,401 Operating expenses 73,140   7,924   81,064   Income (loss) before income taxes 19,868 (7,839 ) 12,029 Income tax expense (benefit) 7,669   (3,026 ) 4,643   Net income (loss) $ 12,199   $ (4,813 ) $ 7,386       Three Months Ended December 31, 2006   Advanta Business Cards Other (A) Total Interest income $ 37,839 $ 7,209 $ 45,048 Interest expense 14,066   8,161   22,227   Net interest income 23,773 (952 ) 22,821 Provision for credit losses 9,969   0   9,969   Net interest income after provision for credit losses 13,804 (952 ) 12,852 Noninterest revenues: Interchange income 54,925 0 54,925 Securitization income 25,442 0 25,442 Servicing revenues 17,938 0 17,938 Business credit card rewards (20,011 ) 0 (20,011 ) Other revenues, net 5,356   1,560   6,916   Total noninterest revenues 83,650 1,560 85,210 Operating expenses 68,361   144   68,505   Income before income taxes 29,093 464 29,557 Income tax expense 11,201   178   11,379   Net income $ 17,892   $ 286   $ 18,178     (A)   Other includes venture capital operations as well as investment and other activities not attributable to the Advanta Business Cards segment. In addition, operating expenses in the three months ended December 31, 2007 include $7.8 million of charges associated with a contingent obligation to indemnify Visa Inc. for certain litigation matters.   ADVANTA YEAR-TO-DATE SEGMENT INCOME STATEMENT (in thousands)       Twelve Months Ended December 31, 2007   Advanta Business Cards Other (A) Total Interest income $ 157,255 $ 38,392 $ 195,647 Interest expense 54,922   44,409   99,331   Net interest income 102,333 (6,017 ) 96,316 Provision for credit losses 58,200   (35 ) 58,165   Net interest income after provision for credit losses 44,133 (5,982 ) 38,151 Noninterest revenues: Interchange income 249,481 0 249,481 Securitization income 79,040 0 79,040 Servicing revenues 92,393 0 92,393 Business credit card rewards (86,705 ) 0 (86,705 ) Other revenues, net 24,582   7,706   32,288   Total noninterest revenues 358,791 7,706 366,497 Operating expenses 276,439   12,529   288,968   Income (loss) before income taxes 126,485 (10,805 ) 115,680 Income tax expense (benefit) 48,823   (4,171 ) 44,652   Income (loss) from continuing operations 77,662 (6,634 ) 71,028 Gain on discontinuance of mortgage and leasing businesses, net of tax 0   1,022   1,022   Net income (loss) $ 77,662   $ (5,612 ) $ 72,050       Twelve Months Ended December 31, 2006   Advanta Business Cards Other (A) Total Interest income $ 143,738 $ 26,017 $ 169,755 Interest expense 46,233   29,077   75,310   Net interest income 97,505 (3,060 ) 94,445 Provision for credit losses 38,650   (50 ) 38,600   Net interest income after provision for credit losses 58,855 (3,010 ) 55,845 Noninterest revenues: Interchange income 203,370 0 203,370 Securitization income 114,938 0 114,938 Servicing revenues 63,726 0 63,726 Business credit card rewards (68,062 ) 0 (68,062 ) Other revenues, net 18,952   5,031   23,983   Total noninterest revenues 332,924 5,031 337,955 Operating expenses 256,192   620   256,812   Income before income taxes 135,587 1,401 136,988 Income tax expense 52,201   539   52,740   Income from continuing operations 83,386 862 84,248 Gain on discontinuance of mortgage and leasing businesses, net of tax 0   738   738   Net income $ 83,386   $ 1,600   $ 84,986     (A)   Other includes venture capital operations as well as investment and other activities not attributable to the Advanta Business Cards segment. In addition, operating expenses in the twelve months ended December 31, 2007 include $12.0 million of charges associated with a contingent obligation to indemnify Visa Inc. for certain litigation matters.   ADVANTA EARNINGS AND COMMON STOCK DATA (in thousands, except per share data)             Three Months Ended Percent Change From Twelve Months Ended Dec. 31, Sept. 30, Dec. 31, Prior Prior Dec. 31, Dec. 31, Percent       2007   2007   2006   Quarter   Year     2007 2006   Change Basic income from continuing operations per common share: Class A $ 0.15 $ 0.44 $ 0.42 (65.9 ) % (64.3 ) % $ 1.61 $ 2.01 (19.9 ) % Class B 0.20 0.49 0.46 (59.2 ) (56.5 ) 1.78 2.12 (16.0 ) Combined (A) 0.18 0.47 0.45 (61.7 ) (60.0 ) 1.73 2.08 (16.8 ) Diluted income from continuing operations per common share:     Class A $ 0.15 $ 0.43 $ 0.40 (65.1 ) % (62.5 ) % $ 1.55 $ 1.88 (17.6 ) % Class B 0.18 0.45 0.42 (60.0 ) (57.1 ) 1.64 1.92 (14.6 ) Combined (A) 0.17 0.44 0.41 (61.4 ) (58.5 ) 1.61 1.91 (15.7 ) Basic net income per common share: Class A $ 0.15 $ 0.44 $ 0.42 (65.9 ) % (64.3 ) % $ 1.64 $ 2.02 (18.8 ) % Class B 0.20 0.49 0.46 (59.2 ) (56.5 ) 1.81 2.14 (15.4 ) Combined (A) 0.18 0.47 0.45 (61.7 ) (60.0 ) 1.75 2.10 (16.7 ) Diluted net income per common share: Class A $ 0.15 $ 0.43 $ 0.40 (65.1 ) % (62.5 ) % $ 1.57 $ 1.90 (17.4 ) % Class B 0.18 0.45 0.42 (60.0 ) (57.1 ) 1.66 1.94 (14.4 ) Combined (A) 0.17 0.44 0.41 (61.4 ) (58.5 ) 1.63 1.92 (15.1 )   Return on average common equity (annualized) 4.98 % 13.09 % 13.03 % (62.0 ) % (61.8 ) % 12.24 %   15.80 % (22.5 ) %     Weighted average common shares used to compute: Basic earnings per common share Class A 13,356 13,343 13,306 0.1 % 0.4 % 13,337 13,287 0.4 % Class B 27,149 27,800 27,472 (2.3 ) (1.2 ) 27,679 27,096 2.2 Total 40,505 41,143 40,778 (1.6 ) (0.7 ) 41,016 40,383 1.6 Diluted earnings per common share Class A 13,356 13,343 13,306 0.1 % 0.4 % 13,337 13,287 0.4 % Class B 29,396 30,762 30,938 (4.4 ) (5.0 ) 30,664 30,795 (0.4 ) Total 42,752 44,105 44,244 (3.1 ) (3.4 ) 44,001 44,082 (0.2 )   Ending shares outstanding: Class A 14,410 14,410 14,410 0.0 % 0.0 % Class B 28,055 28,296 28,702 (0.9 ) (2.3 ) Total 42,465 42,706 43,112 (0.6 ) (1.5 )   Stock price: Class A High $ 26.45 $ 30.65 $ 28.42 (13.7 ) % (6.9 ) % $ 31.47 $ 28.42 10.7 % Low 6.93 20.46 22.35 (66.1 ) (69.0 ) 6.93 19.21 (63.9 ) Closing 7.30 24.31 26.54 (70.0 ) (72.5 ) 7.30 26.54 (72.5 ) Class B High $ 29.95 $ 33.74 $ 31.14 (11.2 ) % (3.8 ) % $ 34.51 $ 31.14 10.8 % Low 7.84 23.32 24.34 (66.4 ) (67.8 ) 7.84 20.56 (61.9 ) Closing 8.07 27.42 29.09 (70.6 ) (72.3 ) 8.07 29.09 (72.3 )   Cash dividends declared: Class A $ 0.1771 $ 0.1771 $ 0.1417 0.0 % 25.0 % $ 0.6730 $ 0.5006 34.4 % Class B 0.2125 0.2125 0.1700 0.0 25.0 0.8075 0.6007 34.4   Book value per combined common share $ 14.40 $ 14.37 $ 13.77 0.2 % 4.6 % All share and per share amounts have been adjusted to reflect the three-for-two stock split effective June 15, 2007. (A)   Combined represents income available to common stockholders divided by the combined total of Class A and Class B weighted average common shares outstanding. ADVANTA ADVANTA BUSINESS CARDS STATISTICS ($ in thousands)     Three Months Ended   Percent Change From   Twelve Months Ended Dec. 31,   Sept. 30,   Dec. 31, Prior   Prior Dec. 31,   Dec. 31,   Percent     2007   2007   2006   Quarter   Year   2007   2006   Change New account originations 61,234 74,195 116,157 (17.5 ) % (47.3 ) % 335,147 370,564 (9.6 ) % Average number of active accounts (A) 952,557 930,102 786,224 2.4 21.2 905,497 713,302 26.9 Ending number of accounts 1,316,523 1,294,273 1,126,083 1.7 16.9 Customer transaction volume $ 3,755,320 $ 3,606,907 $ 3,482,032 4.1 7.8 $ 14,444,072 $ 12,342,149 17.0 Securitization volume increase excluding replenishment sales $ 330,000 $ 115,000 $ 620,000 187.0 (46.8 ) $ 1,218,453 $ 1,185,000 2.8 Average receivables: Owned $ 1,164,704 $ 1,215,485 $ 1,193,101 (4.2 ) (2.4 ) $ 1,227,967 $ 1,059,566 15.9 Securitized   5,148,195   4,889,381   3,773,549 5.3 36.4   4,696,289   3,337,888 40.7 Managed (B) 6,312,899 6,104,866 4,966,650 3.4 27.1 5,924,256 4,397,454 34.7 Ending receivables: Owned $ 1,031,607 $ 1,233,233 $ 1,133,132 (16.3 ) (9.0 ) Securitized   5,315,421   4,980,737   4,073,128 6.7 30.5 Managed (B) 6,347,028 6,213,970 5,206,260 2.1 21.9 Operating expense ratio (C) 4.63 % 4.46 % 5.51 % 3.8 (16.0 ) 4.67 % 5.83 % (19.9 )   CREDIT QUALITY - OWNED Receivables 30 days or more delinquent $ 42,424 $ 35,276 $ 26,053 Receivables 90 days or more delinquent 19,204 15,693 12,632 As a percentage of receivables: Receivables 30 days or more delinquent 4.11 % 2.86 % 2.30 % 43.7 % 78.7 % Receivables 90 days or more delinquent 1.86 1.27 1.11 46.5 67.6 Net principal charge-offs: Amount $ 11,542 $ 10,708 $ 9,169 $ 41,589 $ 33,775 As a percentage of average receivables (annualized) 3.96 % 3.52 % 3.07 % 12.5 29.0 3.39 % 3.19 % 6.3 %   CREDIT QUALITY - SECURITIZED Receivables 30 days or more delinquent $ 229,808 $ 160,375 $ 108,159 Receivables 90 days or more delinquent 105,577 71,951 52,279 As a percentage of receivables: Receivables 30 days or more delinquent 4.32 % 3.22 % 2.66 % 34.2 % 62.4 % Receivables 90 days or more delinquent 1.99 1.44 1.28 38.2 55.5 Net principal charge-offs: Amount $ 53,572 $ 48,404 $ 33,100 $ 178,173 $ 116,227 As a percentage of average receivables (annualized) 4.16 % 3.96 % 3.51 % 5.1 18.5 3.79 % 3.48 % 8.9 %   CREDIT QUALITY - MANAGED (B) Receivables 30 days or more delinquent $ 272,232 $ 195,651 $ 134,212 Receivables 90 days or more delinquent 124,781 87,644 64,911 As a percentage of receivables: Receivables 30 days or more delinquent 4.29 % 3.15 % 2.58 % 36.2 % 66.3 % Receivables 90 days or more delinquent 1.97 1.41 1.25 39.7 57.6 Net principal charge-offs: Amount $ 65,114 $ 59,112 $ 42,269 $ 219,762 $ 150,002 As a percentage of average receivables (annualized) 4.13 % 3.87 % 3.40 % 6.7 21.5 3.71 % 3.41 % 8.8 % (A)   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 periods presented. (B) Managed statistics are non-GAAP financial measures and represent the sum of owned (GAAP) business credit card statistics and securitized business credit card statistics. 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. (C) Operating expense ratio is annualized and calculated as a percentage of average owned and securitized receivables.