-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, CtjEYPsJHuJklU7mSgLacNCuDTUZYTsgr7Ex1cFd8T2lxsg/VqE1Pxc3O7dD0tpG Ryh/U72AUw+evqd6ThYofQ== 0000096638-95-000015.txt : 19950814 0000096638-95-000015.hdr.sgml : 19950814 ACCESSION NUMBER: 0000096638-95-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANTA CORP CENTRAL INDEX KEY: 0000096638 STANDARD INDUSTRIAL CLASSIFICATION: PERSONAL CREDIT INSTITUTIONS [6141] IRS NUMBER: 231462070 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14120 FILM NUMBER: 95561199 BUSINESS ADDRESS: STREET 1: 650 NAAMANS RD STREET 2: BRANDYWINE CORP CTR CITY: CLAYMONT STATE: DE ZIP: 19703 BUSINESS PHONE: 2156574000 MAIL ADDRESS: STREET 1: BRANDYWINE CORPORATE CENTER STREET 2: 650 NAAMANS ROAD CITY: CLAYMONT STATE: DE ZIP: 19703 FORMER COMPANY: FORMER CONFORMED NAME: TSO FINANCIAL CORP DATE OF NAME CHANGE: 19880306 FORMER COMPANY: FORMER CONFORMED NAME: TEACHERS SERVICE ORGANIZATION INC DATE OF NAME CHANGE: 19850812 10-Q 1 Form 10Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 1995 or [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ______ to _______ Commission File Number 0-14120 Advanta Corp. (Exact name of registrant as specified in its charter) Delaware 23-1462070 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Brandywine Corporate Center, 650 Naamans Rd., Claymont, DE 19703 (Address of Principal Executive Offices) (Zip Code) (302) 791-4400 (Registrant's telephone number, including area code) ____________________________________________________________________ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ * Applicable only to issuers involved in bankruptcy proceedings during the preceding five years: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No ____ * Applicable only to corporate issuers: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class A Outstanding at August 1, 1995 Common Stock, $.01 par value 17,441,114 shares Class B Outstanding at August 1, 1995 Common Stock, $.01 par value 23,816,584 shares Table of Contents Page Part I - Financial Information Item 1. Financial Statements Consolidated Condensed Balance Sheets 3 Consolidated Condensed Income Statements 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Condensed Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Part II - Other Information 27 ADVANTA CORP. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in thousands) June 30, December 31, 1995 1994 ASSETS (Unaudited) Cash $ 43,953 $ 43,706 Federal funds sold and interest-bearing deposits with banks 366,185 352,902 Investments available for sale 302,977 318,759 Loan and lease receivables, net: Available for sale 660,974 573,076 Other loan and lease receivables, net 1,229,554 1,406,378 Total loan and lease receivables, net 1,890,528 1,979,454 Premises and equipment, net 34,516 33,219 Amounts due from credit card securitizations 164,947 144,483 Other assets 254,992 240,525 Total assets $3,058,098 $3,113,048 LIABILITIES Deposits $1,097,581 $1,159,358 Debt and other borrowings 1,335,397 1,403,128 Other liabilities 114,272 108,872 Total liabilities 2,547,250 2,671,358 STOCKHOLDERS' EQUITY Class A preferred stock, $1,000 par value: authorized, issued and outstanding -- 1,010 shares in 1995 and 1994 1,010 1,010 Class B preferred stock, $.01 par value: authorized -- 1,000,000 shares in 1995 and 1994; none issued Class A common stock, $.01 par value: authorized -- 200,000,000 shares; issued -- 17,441,924 shares in 1995 and 17,347,468 in 1994 174 173 Class B common stock, $.01 par value: authorized -- 200,000,000 shares; issued -- 23,805,822 in 1995 and 23,131,498 in 1994 238 231 Additional paid in capital, net 182,966 176,465 Retained earnings, net 326,712 263,811 Less: Treasury stock at cost, 10,431 Class B common shares in 1995 (252) 0 Total stockholders' equity 510,848 441,690 Total liabilities and stockholders' equity $3,058,098 $3,113,048 See Notes to Consolidated Condensed Financial Statements ADVANTA CORP. AND SUBSIDIARIES CONSOLIDATED CONDENSED INCOME STATEMENTS (In thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, 1995 1994 1995 1994 (Unaudited) (Unaudited) Interest income: Loans and leases $ 38,044 $ 32,325 $ 86,569 $ 66,979 Investments 10,513 7,020 21,394 13,046 Total interest income 48,557 39,345 107,963 80,025 Interest expense: Deposits 14,650 11,485 29,306 23,920 Other debt 20,921 10,095 44,375 18,415 Total interest expense 35,571 21,580 73,681 42,335 Net interest income 12,986 17,765 34,282 37,690 Provision for credit losses 8,583 15,434 17,508 22,263 Net interest income after provision for credit losses 4,403 2,331 16,774 15,427 Noninterest revenues: Gain on sale of credit cards 0 18,352 0 18,352 Other noninterest revenues 130,849 89,154 245,072 168,934 Total noninterest revenues 130,849 107,506 245,072 187,286 Operating expenses: Amortization of credit card deferred origination costs, net 16,717 9,202 32,118 14,647 Other operating expenses 67,154 60,022 129,894 108,387 Total operating expenses 83,871 69,224 162,012 123,034 Income before income taxes 51,381 40,613 99,834 79,679 Provision for income taxes 17,981 14,856 35,651 28,998 Net income $ 33,400 $ 25,757 $ 64,183 $ 50,681 Earnings per common share $ .80 $ .63 $ 1.54 $ 1.23 Weighted average common shares outstanding 41,772 41,173 41,594 40,957 See Notes to Consolidated Condensed Financial Statements ADVANTA CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) Six Months Ended June 30, 1995 1994 OPERATING ACTIVITIES (Unaudited) Net income $ 64,183 $ 50,681 Adjustments to reconcile net income to net cash provided by operating activities: Proceeds from sales/securitizations of receivables 1,767,791 865,458 Equity securities gain (3,469) 0 Purchase of mortgage/lease portfolios (149,166) (57,294) Principal collected on mortgages 12,794 11,206 Mortgages made to customers (203,574) (246,489) Depreciation and amortization of intangibles 4,955 3,605 Provision for credit losses 17,508 22,263 Change in other assets and amounts due from credit card securitizations (46,479) 4,772 Change in other liabilities 18,379 27,039 Gain on securitization of mortgages and leases (15,550) (14,046) Net cash provided by operating activities 1,467,372 667,195 INVESTING ACTIVITIES Purchase of investments available for sale (257,393) (1,168,013) Proceeds from sales of investments available for sale 251,096 503,866 Proceeds from maturing investments available for sale 36,709 667,516 Change in fed funds sold and interest-bearing deposits 1,984 13,968 Change in credit card receivables, excluding sales (1,274,811) (597,337) Change in premises and equipment (6,047) (7,563) Excess of cash collections over income recognized on direct financing leases 9,397 9,271 Equipment purchased for direct financing lease contracts (107,732) (70,606) Net change in other loans 135 (108) Net cash used by investing activities (1,346,662) (649,006) FINANCING ACTIVITIES Change in demand and savings deposits (9,597) 113,617 Proceeds from deposits sold 30,018 0 Proceeds from sales of time deposits 256,655 139,533 Payments for maturing time deposits (338,853) (467,026) Change in repurchase agreements/other borrowings (118,374) 140,000 Proceeds from issuance of subordinated debt 23,224 15,919 Payments on redemption of subordinated debt (25,354) (26,565) Proceeds from issuance of medium-term notes 185,026 75,026 Proceeds from issuance of notes payable 263,022 2,300 Repayment of notes payable (383,000) (9,787) Proceeds from issuance of stock 3,023 3,051 Cash dividends paid (6,253) (4,616) Net cash used by financing activities (120,463) (18,548) Net increase/(decrease) in cash 247 (359) Cash at beginning of period 43,706 31,162 Cash at end of period $ 43,953 $ 30,803 See Notes to Consolidated Condensed Financial Statements ADVANTA CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Dollars in thousands) June 30, 1995 1) In the opinion of management, the accompanying audited and unaudited consolidated condensed financial statements contain all adjustments necessary to present fairly the financial position of Advanta Corp. and Subsidiaries as of June 30, 1995 and December 31, 1994, the results of their operations for the three and six month periods ended June 30, 1995 and 1994, and their cash flows for the three and six month periods ended June 30, 1995 and 1994. The results of operations for the three and six month periods ended June 30, 1995 are not necessarily indicative of the results to be expected for the full year. Certain prior period amounts have been reclassified to conform with current year classifications. With respect to operating expenses, the Company is including the amortization of credit card deferred origination costs, net of deferred fees, in operating expenses rather than as a component of interest income as these net costs are linked to the privilege period of the cards and not to the credit card receivables. 2) Investments available for sale include securities that the Company sells from time to time to provide liquidity and in response to changes in the market. Debt and equity securities classified as available for sale are reported at market value. Unrealized gains and losses on these securities (except those held by the Company's venture capital unit, Advanta Partners LP) are reported as a separate component of stockholders' equity and included in retained earnings. Changes in the fair value of Advanta Partners LP investments are reported in noninterest revenues as equity securities gains under fair value accounting. 3) Loan and lease receivables available for sale represent receivables currently on the balance sheet that the Company generally intends to sell or securitize within the next six months. These receivables are reported at the lower of book or fair market value. 4) Loan and lease receivables on the balance sheet, including those available for sale, consisted of the following: June 30, December 31, 1995 1994 Gross loan and lease receivables $1,867,799 $1,964,444 Add: Deferred origination costs, net of deferred fees 62,504 56,627 Less: Reserve for credit losses (39,775) (41,617) Loan and lease receivables, net $1,890,528 $1,979,454 Number of Accounts: Credit cards 549,980 337,662 Other loans and leases 9,763 14,034 Total 559,743 351,696 Receivables and accounts serviced for others consisted of the following: June 30, December 31, 1995 1994 Receivables: Credit cards $5,915,084 $4,808,257 Mortgage loans 1,348,134 1,203,226 Leases 239,608 179,310 Total $7,502,826 $6,190,793 Number of Accounts: Credit cards 3,657,952 3,490,354 Mortgage loans 26,311 24,668 Leases 49,745 35,537 Total 3,734,008 3,550,559 5) The Company accounts for credit card origination costs under Statement of Financial Accounting Standards No. 91, "Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases" ("SFAS 91"). This accounting standard requires certain loan and lease origination fees and costs to be deferred and amortized over the life of a loan or lease as an adjustment to interest income. Origination costs are defined under this standard to include costs of loan origination associated with transactions with independent third parties and certain costs relating to underwriting activities and preparing and processing loan documents. The Company engages third parties to solicit and originate credit card account relationships. Amounts deferred under these arrangements were $36.3 million and $25.4 million in the first six months of 1995 and 1994, respectively. The Company amortizes deferred credit card origination costs under Issue 93-1 of the Emerging Issues Task Force ("EITF Issue 93-1") of the Financial Accounting Standards Board regarding the acquisition of individual credit card accounts from independent third parties. EITF Issue 93-1 stated that credit card accounts acquired individually should be accounted for as originations under SFAS 91 and EITF Issue 92-5. Amounts paid to a third party to acquire individual credit card accounts should be deferred and netted against the related credit card fee, if any, and the net amount should be amortized on a straight line basis over the privilege period. If a significant fee is charged, the privilege period is the period that the fee entitles the cardholder to use the card. If there is no significant fee, the privilege period should be one year. Direct origination costs incurred related to credit card account originations initiated after EITF Issue 93-1 are deferred and amortized over 12 months. Costs incurred for originations which were initiated prior to EITF Issue 93-1 will continue to be amortized over a 60 month period as was the practice prior to the EITF 93-1 consensus. The Company records excess servicing income on credit card securitizations representing additional cash flow from the receivables initially sold based on the repayment term, including prepayments. Prior to the EITF Issue 93-1 consensus, net gains were not recorded at the time each transaction was completed as excess servicing income was offset by the write-off of deferred origination costs and the establishment of recourse reserves. Subsequent to the prospective adoption discussed above, excess servicing income has been recorded at a lower level at the time of each transaction, and is predominantly offset by the establishment of recourse reserves. The lower level of excess servicing income corresponds with the discontinuance of deferred origination cost write-offs upon securitization of receivables as discussed above. During the "revolving period" of each securitization, income is recorded based on additional cash flows from the new receivables which are sold to the securitization trust on a continual basis to replenish the investors' interest in trust receivables which have been repaid by the credit cardholders. 6) The following table shows the changes in the reserve for credit losses for the periods presented: Six Months Ended Year Ended June 30, December 31, 1995 1994 Balance, beginning of period $ 41,617 $ 31,227 Current provision 17,508 34,198 Transfer of recourse reserves to on-balance sheet reserves 0 11,485 Net charge-offs (19,350) (35,293) Balance, end of period $ 39,775 $ 41,617 7) At June 30, 1995 and December 31, 1994, the Company had $164.9 million and $144.5 million, respectively, of amounts due from credit card securitizations. These amounts include excess servicing, accrued interest receivable and other amounts related to these securitizations and are net of recourse reserves established. A portion of these amounts is subject to liens held by the providers of credit enhancement facilities for the respective securitizations. 8) Selected Balance Sheet Information Other Assets June 30, December 31, 1995 1994 Excess mortgage servicing rights $ 82,745 $ 73,223 Accrued interest receivable 42,848 39,353 Prepaid assets 34,228 28,516 Investments in operating leases 11,791 13,123 Deferred costs 9,962 9,500 Excess servicing - leasing 8,373 5,949 Due from trustees - mortgage 7,812 6,295 Current and deferred federal income taxes 9,102 18,658 Goodwill 5,140 5,318 Other real estate owned 3,982 4,564 Due from trustees - leasing 2,490 2,010 Other 36,519 34,016 Total other assets $254,992 $240,525 Other Liabilities June 30, December 31, 1995 1994 Deferred fees and other reserves $ 36,033 $ 42,855 Accounts payable and accrued expenses 27,540 31,380 Accrued interest payable 23,855 10,640 Current and deferred state income taxes 9,306 6,813 Other 17,538 17,184 Total other liabilities $114,272 $108,872 9) Income tax expense reflects an effective tax rate of approximately 35.0% and 35.7%, for the three and six month periods ended June 30, 1995, compared to 36.6% and 36.4% for the comparable 1994 periods. The Company accounts for income taxes under the Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Income tax expense consisted of the following components: Three Months Ended Six Months Ended June 30, June 30, 1995 1994 1995 1994 Current: Federal $17,518 $18,212 $32,087 $30,476 State 392 2,224 3,518 4,496 Total current 17,910 20,436 35,605 34,972 Deferred: Federal (623) (5,205) (529) (6,224) State 694 (375) 575 250 Total deferred 71 (5,580) 46 (5,974) Total tax expense $17,981 $14,856 $35,651 $28,998 The reconciliation of the statutory federal income tax to the consolidated tax expense is as follows: Three Months Ended Six Months Ended June 30, June 30, 1995 1994 1995 1994 Statutory federal income tax $17,983 $14,228 $34,942 $27,901 State income taxes 706 1,202 2,660 3,085 Tax-free income (315) (241) (594) (569) Other (393) (333) (1,357) (1,419) Consolidated tax expense $17,981 $14,856 $35,651 $28,998 The net deferred tax asset is comprised of the following: June 30, December 31, 1995 1994 Deferred taxes: Gross assets $ 73,641 $ 78,602 Gross liabilities (56,315) (52,344) Total deferred taxes $ 17,326 $ 26,258 The Company did not record any valuation allowances against deferred tax assets at June 30, 1995 and December 31, 1994. The tax effect of significant temporary differences representing deferred tax assets and liabilities is as follows: June 30, December 31, 1995 1994 SFAS 91 $(22,204) $(20,034) Loan losses 17,540 14,965 Mortgage banking income 10,702 10,174 Securitization income (30,977) (28,949) Leasing income 33,933 42,473 Insurance underwriting (3,134) (3,361) Deferred compensation 1,902 1,388 Mark to market adjustment 1,556 3,021 Change in accounting method 1,109 1,008 Other 6,899 5,573 Net deferred tax asset $ 17,326 $ 26,258 10) The Company has adopted several management incentive plans designed to provide incentives to participating employees to remain in the employ of the Company and devote themselves to its success. Under these plans, certain eligible employees were required and others were given the opportunity to elect to take portions of their anticipated or "target" bonus payments for future years in the form of restricted shares of common stock. The restricted shares are subject to forfeiture should the employee terminate employment with the Company prior to vesting. The shares become unrestricted over time if certain performance criteria are met. At June 30, 1995, a total of 1,314,059 shares issued under these plans were subject to restrictions and were included in the number of shares outstanding. These shares are considered common stock equivalents in the calculation of earnings per common share. Deferred compensation of $22.8 million and $14.2 million related to these shares of restricted stock is reflected as a reduction of equity at June 30, 1995 and December 31, 1994, respectively. 11) In April 1994, the Company, through its subsidiary, Colonial National Bank USA ("Colonial National" or the "Bank"), reached an agreement with NationsBank of Delaware, N.A., to sell certain credit card customer relationships which at that time represented approximately $150 million of securitized credit card receivables (less than 4% of the Company's managed credit card receivables as of June 30, 1994). In the second quarter of 1994, the Company recorded an $18.4 million pretax gain on the sale related to the value associated with the customer relationships. In addition, the Company deferred a portion of the proceeds related to the excess spread of the receivables over the remaining life of the securitization trust, which terminated in the second quarter of 1995. These proceeds were recognized as securitization income over the related period. While the accounts related to these customer relationships were transferred to NationsBank upon termination of the securitization trust, these accounts were serviced by Colonial National at market rates until the systems conversion to NationsBank was completed, which occurred in July 1995. 12) The following table shows the calculation of earnings per common share: Three Months Ended Six Months Ended June 30, June 30, 1995 1994 1995 1994 Net income $33,400 $25,757 $64,183 $50,681 less: preferred dividends 0 0 (141) (141) Net income available to common shares $33,400 $25,757 $64,042 $50,540 Average common stock outstanding 39,676 38,863 39,585 38,759 Common stock equivalents 2,096 2,310 2,009 2,198 Weighted average common shares outstanding (in thousands) 41,772 41,173 41,594 40,957 Earnings per common share $ .80 $ .63 $ 1.54 $ 1.23 ADVANTA CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Net income for the three months ended June 30, 1995 was $33.4 million, a $7.6 million or 30% increase from the $25.8 million reported for the second quarter of 1994. Earnings per share for the second quarter of 1995 were $.80, a 27% increase from $.63 per share for the same period last year. Earnings increased in the second quarter of 1995 primarily as a result of a 57% increase in average managed receivables, partially offset by an approximate 14% contraction in the managed net interest margin, reflecting the Company's growth strategy of utilizing low introductory rate pricing on credit cards. Earnings also reflected continuing strong credit quality with the total managed charge-off rate decreasing to 2.1% for the second quarter of 1995 from 2.5% for the second quarter of 1994. The Company continues to securitize a majority of its receivables and report the performance of the securitized receivables as noninterest revenues. Noninterest revenues increased $23.3 million, or 22%, to $130.8 million in the second quarter of 1995 from $107.5 million in the comparable 1994 period. This increase was due to the 68% increase in average securitized receivables, which outweighed the $18.4 million gain on the sale of credit card customer relationships recorded in the second quarter of 1994. The operating expense ratio decreased to 3.0% of average managed receivables in the second quarter of 1995, compared to 4.3% in the second quarter of 1994. The Company made additional investments in marketing and developmental initiatives during last year's second quarter. For the six months ended June 30, 1995, net income was $64.2 million, a 27% increase over the $50.7 million for the comparable year earlier period. Earnings per share for the six months ended June 30, 1995 increased 25% to $1.54 from $1.23 for the comparable 1994 period. NET INTEREST INCOME Net interest income for the second quarter of 1995 decreased $4.8 million, or 27%, to $13.0 million from $17.8 million for the same period of 1994. This resulted from a decline in the owned net interest margin to 2.38% for the second quarter of 1995 from 3.85% for the second quarter of 1994, partially offset by a $392 million increase in average interest earning assets. The lower owned net interest margin resulted from a significant increase in the proportion of credit card receivables earning low introductory rates, reflecting the success of the Company's marketing campaigns. The credit cards earning introductory rates reprice upwards after an introductory period of up to one year. However, due to the substantial volume of new credit cards being originated in 1995, it is not anticipated that the net interest margin will widen in the last half of 1995. Furthermore, while a large number of credit cards will reprice upwards in the first quarter of 1996, most of the receivables on those credit cards will have been securitized. Consequently, the enhanced revenues on those receivables will be recorded primarily as increased noninterest revenues (securitization income) and will not affect the owned net interest margin, although it is expected that they will positively impact the managed net interest margin. The following table provides an analysis of both owned and managed interest income and expense data, average balance sheet data, net interest spread (the difference between the yield on interest earning assets and the average rate paid on interest-bearing liabilities), and net interest margin (the difference between the yield on interest earning assets and the average rate paid to fund interest earning assets) for the three and six month periods ended June 30, 1995 and 1994. Average owned loan and lease receivables and the related interest revenues include certain loan fees. INTEREST RATE ANALYSIS
Three Months Ended June 30, 1995 1994 Average Yield/ Average Yield/ Balance (1) Interest Rate Balance (1) Interest Rate On-balance sheet Credit cards $1,280,210 $ 31,246 9.76% $1,099,843 $ 28,006 10.19% Mortgage loans 188,465 4,319 9.19 135,025 2,550 7.57 Leases 89,538 2,785 12.44 52,894 1,909 14.43 Other loans 5,096 92 7.24 3,772 68 7.23 Gross receivables 1,563,309 38,442 9.84 1,291,534 32,533 10.08 Investments (2) 741,625 10,917 5.89 621,424 7,463 4.80 Total interest earning assets $2,304,934 $ 49,359 8.57% $1,912,958 $ 39,996 8.37% Interest-bearing liabilities $2,182,913 $ 35,571 6.47% $1,747,315 $ 21,580 4.87% Net interest spread 2.10% 3.50% Net interest margin 2.38% 3.85% Off-balance sheet Credit cards $5,752,617 $3,118,461 Mortgage loans 1,300,537 1,073,957 Leases 213,475 135,160 Total average securitized receivables $7,266,629 $4,327,578 Total average managed receivables $8,829,938 $5,619,112 Managed Net Interest Analysis (3): Interest earning assets $8,057,551 $251,006 12.46% $5,031,419 $151,233 12.03% Interest-bearing liabilities $7,935,530 $130,723 6.58% $4,865,776 $ 63,898 5.23% Net interest spread 5.88% 6.80% Net interest margin 5.96% 6.95% (1) Includes assets held and available for sale and nonaccrual loans and leases. (2) Interest and average rate for tax-free securities computed on a tax equivalent basis using a statutory rate of 35%. (3) Combination of owned interest earning assets/owned interest-bearing liabilities and securitized credit card assets/liabilities.
INTEREST RATE ANALYSIS
Six Months Ended June 30, 1995 1994 Average Yield/ Average Yield/ Balance (1) Interest Rate Balance (1) Interest Rate On-balance sheet Credit cards $1,399,131 $ 74,135 10.60% $1,115,658 $ 58,210 10.44% Mortgage loans 162,497 7,240 8.98 127,038 5,361 8.51 Leases 88,203 5,854 13.27 49,453 3,652 14.77 Other loans 5,115 180 7.10 3,707 135 7.34 Gross receivables 1,654,946 87,409 10.57 1,295,856 67,358 10.41 Investments (2) 755,738 22,206 5.90 602,759 13,912 4.63 Total interest earning assets $2,410,684 $109,615 9.11% $1,898,615 $ 81,270 8.57% Interest-bearing liabilities $2,308,170 $ 73,681 6.36% $1,747,496 $ 42,335 4.83% Net interest spread 2.75% 3.74% Net interest margin 2.95% 4.07% Off-balance sheet Credit cards $5,466,776 $2,954,347 Mortgage loans 1,260,784 1,057,728 Leases 201,523 129,219 Total average securitized receivables $6,929,083 $4,141,294 Total average managed receivables $8,584,029 $5,437,150 Managed Net Interest Analysis (3): Interest earning assets $7,877,460 $489,559 12.43% $4,852,962 $292,669 12.06% Interest-bearing liabilities $7,774,946 $254,679 6.54% $4,701,843 $118,883 5.05% Net interest spread 5.89% 7.01% Net interest margin 5.95% 7.15% (1) Includes assets held and available for sale and nonaccrual loans and leases. (2) Interest and average rate for tax-free securities computed on a tax equivalent basis using a statutory rate of 35%. (3) Combination of owned interest earning assets/owned interest-bearing liabilities and securitized credit card assets/liabilities.
MANAGED PORTFOLIO DATA The following table provides selected information on a managed basis, as well as a summary of the effects of credit card securitizations on selected line items of the Company's consolidated income statements as of and for the six months ended June 30, 1995 and 1994. Six Months Ended June 30, 1995 1994 Balance sheet data: Average managed receivables $ 8,584,029 $ 5,437,150 Managed receivables 9,370,626 5,933,121 Total managed assets 10,560,924 6,795,223 Managed net interest margin (on a fully tax equivalent basis) 5.95% 7.15% As a percentage of gross managed receivables: Total loans 30 days or more delinquent 2.7% 2.9% Net charge-offs 2.1% 2.5% Effects of credit card securitizations on: Net interest income $ (198,947) $ (134,851) Provision for credit losses 65,632 44,788 With respect to the above information on the effects of credit card securitizations, net interest income represents the amount by which net interest income would have been higher had the securitized receivables remained on the balance sheet. In addition, provision for credit losses represents the amount by which the provision for credit losses would have been higher had the securitized receivables remained as owned and the provision for credit losses been equal to charge-offs. Both effects on net interest income and the provision for credit losses described above are netted and included in other noninterest revenues in the Consolidated Condensed Income Statements. PROVISION FOR CREDIT LOSSES The provision for credit losses for the second quarter of 1995 totalled $8.6 million compared to $15.4 million for the comparable period of 1994. The Company provided approximately $10 million of additional general reserves during the second quarter of 1994. Excluding this addition to general reserves, the provision increased $3.2 million primarily due to the Company's desire to maintain a targeted level of reserve coverage of impaired assets on credit cards. For the six month period ended June 30, 1995, the provision for credit losses was $17.5 million compared to $22.3 million for the six months of 1994. The owned impaired asset level was $36.1 million or 1.9% of receivables at June 30, 1995 compared to $48.7 million or 3.7% of receivables a year ago. The higher 1994 level was due to the repurchase of approximately $45 million of nonperforming mortgage loans from the securitization trusts during the first half of 1994. In connection with these repurchases, the Company also transferred $11 million of off-balance sheet recourse reserves to on-balance sheet reserves. These repurchases increased the owned impaired asset level while having no impact on either the level of managed impaired assets or the provision for credit losses (see also Asset Quality below). At June 30, 1995, approximately $16 million of the loans that had been repurchased during 1994 remained on the balance sheet as either nonperforming loans or other real estate owned. ASSET QUALITY The reserve for credit losses is maintained for on-balance sheet receivables. The reserve is intended to cover credit losses inherent in the owned loan portfolio. With regard to securitized assets, anticipated losses and related recourse reserves are reflected in the calculations of securitization income, amounts due from credit card securitizations and other assets. Recourse reserves are intended to cover all probable credit losses over the life of the receivables securitized. The Company periodically evaluates its on-balance sheet and recourse reserve requirements and, as appropriate, effects transfers between these accounts. The reserve for credit losses on a consolidated owned basis was $39.8 million or 2.1% of receivables at June 30, 1995 compared to $41.6 million or 2.1% of receivables at December 31, 1994 and $50.2 million or 3.8% of receivables at June 30, 1994. The consolidated reserve coverage of impaired assets was 110.2% at June 30, 1995 compared to 96.1% at year end 1994 and 103.1% at June 30, 1994. On the total managed portfolio, impaired assets were $113.9 million or 1.2% of receivables at June 30, 1995, compared to $102.4 million or 1.3% of receivables at December 31, 1994 and $90.9 million or 1.5% of receivables at June 30, 1994. A key credit quality statistic, the 30 day and over delinquency rate on managed credit cards, was 2.0% at June 30, 1995, flat with the rate of a year ago. On the total owned portfolio, impaired assets were $36.1 million or 1.9% of receivables at June 30, 1995, compared to $43.3 million or 2.2% of receivables and $48.7 million or 3.7% of receivables at December 31, 1994 and June 30, 1994, respectively. The total managed charge-off rate for the six months of 1995 was 2.1%, down from 2.3% for the full year of 1994 and 2.5% for the six months of 1994. The charge-off rate on managed credit cards was 2.4% for the six months of 1995, down from 2.5% for the full year of 1994 and 2.7% for the comparable 1994 period. The charge-off rate on managed mortgage loans was 1.0% for the six months of 1995, down from 1.7% for the comparable 1994 period. The charge-off rate on consolidated owned receivables was 2.3% of average receivables for the six months of 1995, compared to 2.6% for the full year of 1994 and 2.3% for the year ago period. The charge-off rate on owned credit cards was 2.2% for the six months of 1995, up from 1.9% for the full year of 1994 and 2.0% for the comparable 1994 period. The following tables provide a summary of impaired assets, delinquencies and charge-offs, as of and for the year-to-date periods indicated. June December June 30, 31, 30, CONSOLIDATED - MANAGED 1995 1994 1994 Nonperforming assets $ 66,489 $ 61,587 $ 63,062 Accruing loans past due 90 days or more 47,365 40,837 27,831 Impaired assets 113,854 102,424 90,893 Total loans 30 days or more delinquent 248,358 220,390 173,725 As a percentage of gross receivables: Nonperforming assets .7% .8% 1.1% Accruing loans past due 90 days or more .5 .5 .5 Impaired assets 1.2 1.3 1.5 Total loans 30 days or more delinquent 2.7 2.7 2.9 Net charge-offs: Amount $ 90,496 $139,676 $ 67,836 As a percentage of average gross receivables (annualized) 2.1% 2.3% 2.5% CREDIT CARDS - MANAGED Nonperforming assets $ 18,052 $ 14,227 $ 13,885 Accruing loans past due 90 days or more 47,206 40,721 27,793 Impaired assets 65,258 54,948 41,678 Total loans 30 days or more 152,441 133,121 89,306 delinquent As a percentage of gross receivables: Nonperforming assets .2% .2% .3% Accruing loans past due 90 days or .6 .6 .6 more Impaired assets .9 .8 .9 Total loans 30 days or more 2.0 2.0 2.0 delinquent Net charge-offs: Amount $ 80,959 $115,218 $ 55,862 As a percentage of average gross receivables (annualized) 2.4% 2.5% 2.7% MORTGAGE LOANS - MANAGED Nonperforming assets $ 45,881 $ 44,678 $ 47,396 Total loans 30 days or more delinquent 73,945 65,966 69,086 As a percentage of gross receivables: Nonperforming assets 3.0% 3.3% 3.9% Total loans 30 days or more 4.8 4.9 5.6 delinquent Net charge-offs: Amount $ 6,895 $ 20,709 $ 10,366 As a percentage of average gross receivables(annualized) 1.0% 1.7% 1.7% LEASES - MANAGED Nonperforming assets $ 2,556 $ 2,682 $ 1,771 Total loans 30 days or more 21,538 20,972 15,239 delinquent As a percentage of receivables: Nonperforming assets .8% 1.0% .9% Total loans 30 days or more delinquent 6.8 7.9 7.6 Net charge-offs: Amount $ 2,651 $ 3,747 $ 1,625 As a percentage of average receivables (annualized) 1.8% 2.0% 1.8% June December June 30, 31, 30, CONSOLIDATED - OWNED 1995 1994 1994 Reserve for credit losses $39,775 $41,617 $50,222 Nonperforming assets 26,312 31,949 41,783 Accruing loans past due 90 days or more 9,767 11,354 6,907 Impaired assets 36,079 43,303 48,690 Reserve as a percentage of impaired assets 110.2% 96.1% 103.1% As a percentage of gross receivables: Reserve 2.1% 2.1% 3.8% Nonperforming assets 1.4 1.6 3.1 Accruing loans past due 90 days or more .5 .6 .5 Impaired assets 1.9 2.2 3.7 Net charge-offs: Amount $19,350 $35,293 $14,603 As a percentage of average gross receivables (annualized) 2.3% 2.6% 2.3% CREDIT CARDS - OWNED Reserve for credit losses $24,906 $27,486 $18,125 Nonperforming assets 3,684 3,502 2,875 Accruing loans past due 90 days or more 9,608 11,238 6,869 Impaired assets 13,292 14,740 9,744 Reserve as a percentage of impaired 187.4% 186.5% 186.0% assets As a percentage of gross receivables: Reserve 1.6% 1.6% 1.6% Nonperforming assets .2 .2 .2 Accruing loans past due 90 days or more .6 .6 .6 Impaired assets .8 .9 .8 Net charge-offs: Amount $15,327 $22,688 $11,074 As a percentage of average gross receivables (annualized) 2.2% 1.9% 2.0% MORTGAGE LOANS - OWNED (1) Reserve for credit losses $ 2,275 $ 5,164 $11,953 Nonperforming assets 21,825 27,379 38,453 Reserve as a percentage of impaired 10.4% 18.9% 31.1% assets As a percentage of gross receivables: Reserve 1.1% 3.6% 10.6% Nonperforming assets 11.0 19.2 34.1 Net charge-offs: Amount $ 3,363 $11,689 $ 3,145 As a percentage of average gross receivables(annualized) 4.1% 9.7% 5.0% LEASES - OWNED Reserve for credit losses $ 995 $ 1,076 $ 1,385 Nonperforming assets 803 1,068 445 Reserve as a percentage of impaired 123.9% 100.7% 311.2% assets As a percentage of receivables: Reserve 1.3% 1.2% 2.4% Nonperforming assets 1.0 1.2 .8 Net charge-offs: Amount $ 669 $ 914 $ 401 As a percentage of average receivables (annualized) 1.5% 1.5% 1.6% (1) Beginning March 1994, the Company initiated a program for repurchasing nonperforming assets from the securitized portfolios (see "Provision for Credit Losses"). NONINTEREST REVENUES Three Months Ended Six Months Ended June 30, June 30, 1995 1994 1995 1994 Gain on sale of credit cards $ 0 $ 18,352 $ 0 $ 18,352 Other noninterest revenues: Credit card securitization income 45,666 36,247 86,735 68,921 Credit card servicing income 27,927 15,336 52,799 29,136 Credit card interchange income 22,052 16,569 41,550 30,575 Income from mortgage banking activities 11,929 8,587 22,147 16,792 Leasing revenues, net 8,301 5,787 17,895 10,380 Insurance revenues, net 6,117 3,056 12,275 5,966 Equity securities gain 3,803 0 3,803 0 Other 5,054 3,572 7,868 7,164 Total other noninterest revenues $130,849 $89,154 $245,072 $168,934 Total noninterest revenues $130,849 $107,506 $245,072 $187,286 For the second quarter of 1995, noninterest revenues increased 22% to $130.8 million from $107.5 million for the same period of 1994. Included in the second quarter of 1994 was an $18.4 million gain on the sale of $150 million of credit card customer relationships (See Note 11). Total other noninterest revenues rose $41.7 million or 47% from $89.2 million in the second quarter of 1994. Credit card securitization income increased $9.4 million or 26% to $45.7 million as a result of an 84% increase in average securitized credit card receivables partially offset by contraction in the net interest margin. For the 1994 periods, securitized interchange income has been reclassified from credit card securitization income to credit card interchange income. Credit card interchange income, which represents approximately 1.4% of credit card purchases, increased $5.5 million to $22.1 million. Credit card servicing income increased $12.6 million due to higher securitized balances. Leasing revenues, net, increased $2.5 million to $8.3 million primarily due to a 58% growth in average securitized lease receivables from the comparable quarter of 1994. Insurance revenues, net, were $6.1 million for the second quarter of 1995, up from $3.1 million for last year's second quarter. This growth is attributed to the successful marketing of insurance products in the credit card, mortgage and leasing businesses. The $3.8 million equity securities gain in 1995 related to an equity investment, held by the Company's venture capital unit, Advanta Partners LP, in a corporation whose initial public offering occurred during the second quarter of 1995. For the six month period ended June 30, 1995 noninterest revenues rose to $245.1 million from $187.3 million for the comparable 1994 period, a 31% increase. This improvement resulted primarily from an 85% growth in average securitized credit card receivables and a 56% growth in average securitized lease receivables partially offset by 1994's gain on sale of the credit card customer relationships. OPERATING EXPENSES Three Months Ended Six Months Ended June 30, June 30, 1995 1994 1995 1994 Amortization of credit card deferred origination costs, net $16,717 $ 9,202 $ 32,118 $ 14,647 Other operating expenses: Salaries and employee benefits 27,074 21,460 51,062 42,023 Marketing 6,665 11,976 14,283 18,360 External processing 6,552 5,349 12,279 10,006 Credit card fraud losses 4,464 4,737 8,526 8,244 Postage 4,339 3,052 8,730 5,753 Professional fees 3,293 1,824 5,565 3,576 Equipment expense 2,953 2,291 5,707 4,346 Telephone expense 2,499 1,804 5,354 3,597 Credit and collection expense 2,332 1,769 4,476 3,435 Occupancy expense 2,249 2,076 4,265 3,863 Other 4,734 3,684 9,647 5,184 Total other operating expenses $67,154 $60,022 $129,894 $108,387 Total operating expenses $83,871 $69,224 $162,012 $123,034 The amortization of credit card deferred origination costs, net, increased from $9.2 million for the second quarter of 1994 to $16.7 million for the second quarter of 1995. This increase resulted primarily from amortization related to the $66 million of credit card origination costs that have been deferred since the second quarter of 1994. Costs incurred for credit card originations initiated after May 1993 are being amortized over 12 months, rather than pursuant to the previous policy of 60 months. Total other operating expenses of $67.2 million for the three months ended June 30, 1995 increased 12% from $60.0 million for the same period of 1994. Other operating expenses as a percentage of average managed receivables were 3.0% for the second quarter of 1995, down from 4.3% in the comparable 1994 period. The increase in total other operating expenses is attributable, in part, to a 24% increase in the number of employees from 1,693 at June 30, 1994 to 2,094 at June 30, 1995 to effectively service the current and anticipated account growth. Other expenses, including external processing, postage and telephone expense showed increases consistent with the increase in the number of credit card accounts managed. Marketing expenses, however, were lower in 1995 due to additional investments in marketing and developmental initiatives the Company made in the second quarter of 1994. For the first six months of 1995, total operating expenses increased 32% to $162.0 million from $123.0 million for the same 1994 period. Average managed receivables grew 58% over the same period of time. Other operating expenses as a percentage of average managed receivables were 3.0% for the six months ended June 30, 1995, down from 4.0% for the six months ended June 30, 1994. As a result of continued investments in developmental initiatives, the Company entered into a joint venture agreement with The Royal Bank of Scotland ("RBS"), for the purpose of issuing credit cards in the United Kingdom. This new company, RBS Advanta, anticipates the issuance of bankcards to commence by the end of 1995. LIQUIDITY AND CAPITAL RESOURCES The Company's goal is to maintain an adequate level of liquidity, both long- and short-term, through active management of both assets and liabilities. During the first six months of 1995, the Company, through its subsidiaries, securitized $1.3 billion of credit card receivables, $250 million of mortgage loans and $88 million of equipment lease receivables. Cash generated from these transactions was temporarily invested in short-term, high quality investments at money market rates awaiting redeployment to pay down borrowings and to fund future credit card, mortgage and lease receivable growth. At June 30, 1995, the Company had approximately $661 million of loan and lease receivables and $303 million of investments available for sale which could be sold to generate additional liquidity. The debt securities of Advanta Corp. achieved investment-grade ratings from the nationally recognized rating agencies in 1993. These ratings have allowed the Company to further diversify its funding sources. As a result, in 1994 the Company obtained revolving credit facilities totaling $255 million from a consortium of banks and $200 million in money market bid lines. In the second quarter of 1995, the Company's revolving credit facilities were consolidated into one facility and doubled in size to $510 million. The Company may also sell up to $325 million of medium-term notes as needed. In April 1994, the Company, through its subsidiary, Colonial National Bank USA, reached an agreement with NationsBank of Delaware, N.A., to sell certain credit card customer relationships which at that time represented approximately $150 million of securitized credit card receivables (less than 4% of the Company's managed credit card receivables as of June 30, 1994). While the accounts related to these customer relationships were transferred to NationsBank upon termination of the securitization trust in the second quarter of 1995, these accounts were serviced by Colonial National at market rates until the systems conversion to NationsBank was completed, which occurred in July 1995. Subsequent to quarter end, the Company securitized $600 million of credit card receivables, generating additional funding for future asset growth, and a $500 million universal shelf registration statement filed by the Company with the Securities and Exchange Commission became effective. On August 1, 1995, the Company announced a planned offering, under the universal shelf, of depositary shares representing interests in a new series of convertible Class B preferred stock, which preferred stock will be mandatorily convertible into shares of the Company's Class B common stock. INTEREST RATE SENSITIVITY Interest rate sensitivity refers to net interest income variability resulting from mismatches between asset and liability indices (basis risk) and the effects which these changes in market interest rates have on asset and liability maturity mismatches (gap risk). The Company attempts to minimize the impact of market interest rate fluctuations on net interest income and net income by regularly evaluating the risk inherent in its asset and liability structure, including securitized assets. This risk arises from continuous changes in the Company's asset/liability mix, market interest rates, the yield curve, prepayment trends and the timing of cash flows. Computer simulations are used to evaluate net interest income volatility under varying rate, spread and volume projections over monthly time periods of up to two years. Beginning in the first quarter of 1995, the Company's credit card marketing efforts were weighted heavily towards variable rate cards priced at a spread over LIBOR rather than a spread over the prime rate. The Company believes that this shift will prospectively reduce the basis risk to which the Company has been subject as the result of maintaining credit card portfolios indexed to the prime rate while funding certain on-balance sheet liabilities and securitizing a majority of the credit card receivables at a spread over LIBOR. In managing its interest rate sensitivity position, the Company periodically securitizes, sells and purchases assets, alters the mix and term structure of its funding base, changes its investment portfolio and short-term investment position, and uses derivative financial instruments. Derivative financial instruments are used for the express purpose of managing exposure to changes in interest rates and, by policy, are not used for any speculative purposes (see discussion under "Derivatives Activities"). The Company has primarily utilized variable rate funding in pricing its credit card securitization transactions in an attempt to match the variable rate pricing dynamics of the underlying receivables sold to the trusts. Variable rate funding is also used on the balance sheet as well, in support of unsecuritized receivables which carry variable rates. Although credit card receivable rates are generally set at a spread over the prime rate, they often contain interest rate floors. These floors have the impact of converting the credit card receivables to fixed rate receivables in a low interest rate environment. In addition, the Company at times offers fixed rate pricing to consumers for the introductory rate period of its credit cards. In instances when a significant portion of credit card receivables are at fixed rates or their contractual floors, the Company may convert part of the underlying funding to a fixed rate by using interest rate hedges, swaps and fixed rate securitizations. In pricing mortgage and lease securitizations, both fixed rate and variable rate funding are used depending upon the characteristics of the underlying receivables. Additionally, basis risk exists in on-balance sheet funding as well as securitizing credit card receivables at a spread over LIBOR when the rate on the underlying assets is indexed to the prime rate. The underlying liability or coupon on a securitization is often indexed to LIBOR, and LIBOR does not perfectly correlate to movements in the prime rate. The Company measures the basis risk resulting from potential variability in the spread between prime and LIBOR and incorporates such risk into the asset and liability management process. During 1994, $425 million in prime-LIBOR corridors were executed in order to provide protection against narrowing of these spreads. During the first six months of 1995 there were no additional prime-LIBOR corridors executed. Interest rate fluctuations affect net interest income at virtually all financial institutions. While interest rate volatility does have an effect on net interest income, other factors also contribute significantly to changes in net interest income. Specifically, within the credit card portfolio, pricing decisions and customer behavior regarding convenience usage affect the yield on the portfolio. These factors may counteract or exacerbate income changes due to fluctuating interest rates. The Company closely monitors interest rate movements, competitor pricing and consumer behavioral changes in its ongoing analysis of net interest income sensitivity. DERIVATIVES ACTIVITIES The Company utilizes derivative financial instruments for the purpose of managing its interest rate and foreign currency exposure. The Company has a number of mechanisms in place that enable it to monitor and control both market and credit risk from these derivatives activities. At the broader level, all derivatives strategies are managed under the hedging policy approved by the Board of Directors that details the use of such derivatives and the individuals authorized to execute derivatives transactions. All derivatives strategies must be approved by the Company's senior management (President, Chief Financial Officer and Treasurer). As part of this approval process, a market risk analysis is completed to determine the potential impact on the Company from severe negative (stressed) movements in the market. By policy, derivatives transactions may only be used to manage the Company's exposure to interest rate and foreign currency risk and may not be used for speculative purposes. As such, the impact of any derivatives transaction is calculated using the Company's asset/liability model to determine its suitability. Procedures and processes are in place to provide reasonable assurance that prior to and after the execution of any derivatives strategy, market, credit and liquidity risks are fully analyzed and incorporated into the Company's asset/liability and risk measurement models and the proper accounting treatment for the transaction is identified. As of June 30, 1995 and December 31, 1994, all of the Company's derivatives were designated as hedges or synthetic alterations and were accounted for as such. For the six months ended June 30, 1995 and the year ended December 31, 1994, there were no derivatives contracts terminated prior to scheduled maturity. The following table summarizes by notional amounts the Company's derivative instruments: June 30, December 31, 1995 1994 Interest rate swaps $ 782,735 $ 459,735 Interest rate options: Caps written 1,180,000 1,100,000 Caps purchased 190,000 110,000 Corridors 425,000 425,000 Forward contracts 89,497 39,000 Total notional amount $2,667,232 $2,133,735 The notional amounts of derivatives do not represent amounts exchanged by the counterparties and, thus, are not a measure of the Company's exposure through its use of derivatives. The amounts exchanged are determined by reference to the notional amounts and the other terms of the derivatives contracts. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a)(1) A report on Form 8-K, dated June 28, 1995, was filed by the Company describing litigation commenced against the Company's subsidiary, Colonial National Bank USA, over the exportation of certain credit card fees from Delaware into Pennsylvania. The Company does not consider this litigation to be material. No financial statements were filed with the report. (a)(2) A report on Form 8-K, dated July 20, 1995, was filed by the Company setting forth the financial highlights of the Company's results of operations for the period ended June 30, 1995. A Financial Data Schedule was included as an exhibit in this Form 8-K. (a)(3) A report on Form 8-K, dated August 3, 1995, was filed by the Company to report that the Board of Directors had elected Alex "Pete" Hart as the Company's new Chief Executive Officer. Dennis Alter, who has served as Chief Executive Officer since 1972, will remain as Chairman of the Board of the Company. No financial statements were filed with the report. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. Advanta Corp. (Registrant) August 11, 1995 By /s/Gene S. Schneyer Vice President, Secretary & General Counsel August 11, 1995 By /s/John J. Calamari Vice President, Finance and Principal Accounting Officer EXHIBIT INDEX Exhibit Description 2 Inapplicable. 4 Inapplicable. 11 Inapplicable. 15 Inapplicable. 18 Inapplicable. 19 Inapplicable 22 Inapplicable. 23 Inapplicable. 24 Inapplicable. 27 Incorporated by reference to Exhibit 27 to the Company's Report on Form 8-K filed July 20, 1995. 99 Inapplicable. -----END PRIVACY-ENHANCED MESSAGE-----