Advanta Reports Second Quarter 2008 Earnings

Advanta Corp. (NASDAQ:ADVNB; ADVNA) today reported second quarter 2008 net income of $4.0 million or $0.10 per diluted share for Class A and Class B shares combined. These results include an $0.18 per share after-tax gain associated with the sale of a portion of the Company’s MasterCard shares and a $0.06 per share after-tax charge to increase credit reserves for owned receivables. At the end of the quarter, managed and owned receivables totaled $6.1 billion and $851 million, respectively. Consistent with the Company’s prior comments about new customer expectations, the Company added about 26,000 new customers in the quarter. Customer transaction volume totaled $3.5 billion of which almost 90% related to merchandise sales activity. Managed and owned net credit loss rates for the quarter were 8.38% and 8.87%, respectively. "The quarter’s results are obviously not what we would like to see. All of us at the company are focused on returning to robust earnings and returns for our shareholders,” said Dennis Alter, Chairman and CEO. Conference Call Details Advanta management will hold a conference call with analysts and institutional investors today, July 29, at 9:00 a.m. Eastern Time, to review the second quarter results for 2008. The call can be accessed by dialing 877-874-1570 and referring to confirmation code 8417100. 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 8417100. 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 differentiates 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 June 30, 2008       Advanta Business Cards Other (A) Total Interest income $ 47,227 $ 8,042 $ 55,269 Interest expense 21,828   8,209   30,037   Net interest income 25,399 (167 ) 25,232 Provision for credit losses 30,295   32   30,327   Net interest income after provision for credit losses (4,896 ) (199 ) (5,095 ) Noninterest revenues: Interchange income 70,627 0 70,627 Securitization income 4,608 0 4,608 Servicing revenues 24,365 0 24,365 Business credit card rewards (23,026 ) 0 (23,026 ) Other revenues, net 17,409   340   17,749   Total noninterest revenues 93,983 340 94,323 Operating expenses 81,613   139   81,752   Income before income taxes 7,474 2 7,476 Income tax expense 3,151   310   3,461   Net income (loss) $ 4,323   $ (308 ) $ 4,015       Three Months Ended June 30, 2007   Advanta Business Cards Other (A) Total Interest income $ 38,655 $ 8,903 $ 47,558 Interest expense 13,149   10,484   23,633   Net interest income 25,506 (1,581 ) 23,925 Provision for credit losses 11,806   0   11,806   Net interest income after provision for credit losses 13,700 (1,581 ) 12,119 Noninterest revenues: Interchange income 62,130 0 62,130 Securitization income 22,766 0 22,766 Servicing revenues 22,541 0 22,541 Business credit card rewards (21,353 ) 0 (21,353 ) Other revenues, net 4,653   2,566   7,219   Total noninterest revenues 90,737 2,566 93,303 Operating expenses 68,613   164   68,777   Income before income taxes 35,824 821 36,645 Income tax expense 13,619   314   13,933   Income from continuing operations 22,205 507 22,712 Gain on discontinuance of mortgage and leasing businesses, net of tax 0   1,022   1,022   Net income $ 22,205   $ 1,529   $ 23,734   ____________________ (A) Other includes investment and other activities not attributable to the Advanta Business Cards segment.   ADVANTA EARNINGS AND COMMON STOCK DATA (in thousands, except per share data)     Three Months Ended   Percent Change From June 30,   Mar. 31,   June 30, Prior   Prior       2008       2008       2007     Quarter     Year   Basic income from continuing operations per common share: Class A $ 0.06 $ 0.42 $ 0.52 (85.7 ) % (88.5 ) % Class B 0.12 0.47 0.56 (74.5 ) (78.6 ) Combined (A) 0.10 0.45 0.55 (77.8 ) (81.8 ) Diluted income from continuing operations per common share: Class A $ 0.06 $ 0.41 $ 0.50 (85.4 ) % (88.0 ) % Class B 0.11 0.45 0.51 (75.6 ) (78.4 ) Combined (A) 0.10 0.44 0.51 (77.3 ) (80.4 ) Basic net income per common share: Class A $ 0.06 $ 0.42 $ 0.55 (85.7 ) % (89.1 ) % Class B 0.12 0.47 0.59 (74.5 ) (79.7 ) Combined (A) 0.10 0.45 0.57 (77.8 ) (82.5 ) Diluted net income per common share: Class A $ 0.06 $ 0.41 $ 0.52 (85.4 ) % (88.5 ) % Class B 0.11 0.45 0.54 (75.6 ) (79.6 ) Combined (A) 0.10 0.44 0.53 (77.3 ) (81.1 )   Return on average common equity (annualized) 2.68 % 12.34 % 16.01 % (78.3 ) % (83.3 ) %   Weighted average common shares used to compute: Basic earnings per common share Class A 13,380 13,368 13,331 0.1 % 0.4 % Class B 27,142 27,022 28,039 0.4 (3.2 ) Total 40,522 40,390 41,370 0.3 (2.0 ) Diluted earnings per common share Class A 13,380 13,368 13,331 0.1 % 0.4 % Class B 28,629 28,243 31,343 1.4 (8.7 ) Total 42,009 41,611 44,674 1.0 (6.0 )   Ending shares outstanding: Class A 14,410 14,410 14,410 0.0 % 0.0 % Class B 31,236 28,748 29,014 8.7 7.7 Total 45,646 43,158 43,424 5.8 5.1   Stock price: Class A High $ 9.36 $ 9.22 $ 31.47 1.5 % (70.3 ) % Low 5.43 5.31 26.09 2.3 (79.2 ) Closing 5.49 5.98 28.40 (8.2 ) (80.7 ) Class B High $ 10.63 $ 10.52 $ 34.51 1.0 % (69.2 ) % Low 6.25 6.10 28.57 2.5 (78.1 ) Closing 6.29 7.03 31.14 (10.5 ) (79.8 )   Cash dividends declared: Class A $ 0.1771 $ 0.1771 $ 0.1771 0.0 % 0.0 % Class B 0.2125 0.2125 0.2125 0.0 0.0   Book value per common share $ 14.48 $ 14.66 $ 14.30 (1.2 ) % 1.3 % ____________________ (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 June 30,   Mar. 31,   June 30, Prior   Prior       2008         2008         2007     Quarter     Year   New account originations 26,269 67,094 102,937 (60.8 ) % (74.5 ) % Average number of active accounts (A) 939,700 956,100 894,610 (1.7 ) 5.0 Ending number of accounts 1,305,288 1,331,496 1,255,557 (2.0 ) 4.0 Customer transaction volume: Merchandise sales $ 3,055,484 $ 2,839,494 $ 2,862,965 7.6 6.7 Balance transfers 121,752 238,337 495,108 (48.9 ) (75.4 ) Cash usage   294,475     360,282     334,707 (18.3 ) (12.0 ) Total customer transaction volume 3,471,711 3,438,113 3,692,780 1.0 (6.0 ) Securitization volume increase (decrease) excluding replenishment sales $ (83,687 ) $ (13,787 ) $ 405,000 507.0 N/M Average receivables: Owned $ 1,164,748 $ 999,130 $ 1,248,235 16.6 (6.7 ) Securitized   5,063,349     5,350,034     4,581,666 (5.4 ) 10.5 Managed (B) 6,228,097 6,349,164 5,829,901 (1.9 ) 6.8 Ending receivables: Owned $ 850,925 $ 966,145 $ 1,133,198 (11.9 ) (24.9 ) Securitized   5,225,773     5,303,936     4,856,001 (1.5 ) 7.6 Managed (B) 6,076,698 6,270,081 5,989,199 (3.1 ) 1.5 Operating expense ratio (C) 5.24 % 4.72 % 4.71 % 11.0 11.3   CREDIT QUALITY - OWNED Receivables 30 days or more delinquent $ 49,894 $ 51,900 $ 27,115 Receivables 90 days or more delinquent 25,001 24,028 13,466 As a percentage of receivables: Receivables 30 days or more delinquent 5.86 % 5.37 % 2.39 % 9.1 % 145.2 % Receivables 90 days or more delinquent 2.94 2.49 1.19 18.1 147.1 Net principal charge-offs: Amount $ 25,819 $ 16,306 $ 9,556 As a percentage of average receivables (annualized) 8.87 % 6.53 % 3.06 % 35.8 189.9   CREDIT QUALITY - SECURITIZED Receivables 30 days or more delinquent $ 294,432 $ 280,208 $ 136,468 Receivables 90 days or more delinquent 145,715 130,436 68,424 As a percentage of receivables: Receivables 30 days or more delinquent 5.63 % 5.28 % 2.81 % 6.6 % 100.4 % Receivables 90 days or more delinquent 2.79 2.46 1.41 13.4 97.9 Net principal charge-offs: Amount $ 104,638 $ 85,753 $ 41,115 As a percentage of average receivables (annualized) 8.27 % 6.41 % 3.59 % 29.0 130.4   CREDIT QUALITY - MANAGED (B) Receivables 30 days or more delinquent $ 344,326 $ 332,108 $ 163,583 Receivables 90 days or more delinquent 170,716 154,464 81,890 As a percentage of receivables: Receivables 30 days or more delinquent 5.67 % 5.30 % 2.73 % 7.0 % 107.7 % Receivables 90 days or more delinquent 2.81 2.46 1.37 14.2 105.1 Net principal charge-offs: Amount $ 130,457 $ 102,059 $ 50,671 As a percentage of average receivables (annualized) 8.38 % 6.43 % 3.48 % 30.3 140.8 ____________________ (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. N/M - Not Meaningful