10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2004 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	23-1462070
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	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 x  No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes x  No o

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 A	Outstanding at August 2, 2004
Common Stock, $.01 par value	9,606,885 shares

Class B	Outstanding at August 2, 2004
Common Stock, $.01 par value	18,152,755 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)		5-6
	Consolidated Statements of Cash Flows (Unaudited)		7
	Notes to Consolidated Financial Statements (Unaudited)		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		47
Item 4.	Controls and Procedures		47
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings		47
Item 4.	Submission of Matters to a Vote of Security Holders		48
Item 6.	Exhibits and Reports on Form 8-K		49
AGREEMENT RELATING TO FLEET CREDIT CARD SERVICES, L.P. DATED 5/28/04
LETTER AGREEMENT DATED JUNE 8, 2004
RELOCATION AGREEMENT DATED MAY 20, 2004
LETTER AGREEMENT DATED JUNE 8, 2004
CONSOLIDATED COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
CERTIFICATION OF CEO PURSUANT TO SECTION 302
CERTIFICATION OF CFO PURSUANT TO SECTION 302
CERTIFICATION OF CEO PURSUANT TO SECTION 906
CERTIFICATION OF CFO PURSUANT TO SECTION 906

2

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ADVANTA CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

	June 30,			December 31,
(In thousands, except share amounts)	2004			2003
ASSETS
Cash	$	20,002		$	26,941
Federal funds sold		288,627			258,311
Restricted interest-bearing deposits		2,937			77,872
Investments available for sale		208,455			222,624
Receivables, net:
Held for sale		230,085			214,664
Other		295,943			291,109
Total receivables, net		526,028			505,773
Accounts receivable from securitizations		238,862			244,337
Premises and equipment, net		19,847			20,414
Other assets		179,131			278,703
Assets of discontinued operations, net		31,864			63,469
Total assets	$	1,515,753		$	1,698,444
LIABILITIES
Deposits	$	647,104		$	672,204
Debt and other borrowings		291,226			314,817
Subordinated debt payable to preferred securities trust		103,093			103,093
Other liabilities		107,718			267,123
Total liabilities		1,149,141			1,357,237
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Class A preferred stock, $1,000 par value:
Authorized, issued and outstanding – 1,010 shares in 2004 and 2003		1,010			1,010
Class A voting common stock, $.01 par value:
Authorized - 200,000,000 shares; issued - 10,041,017 shares in 2004 and 2003		100			100
Class B non-voting common stock, $.01 par value:
Authorized - 200,000,000 shares; issued - 21,279,431 shares in 2004 and 20,542,097 shares in 2003		213			206
Additional paid-in capital		254,898			245,295
Deferred compensation		(12,787	)		(13,242	)
Unearned ESOP shares		(10,164	)		(10,387	)
Accumulated other comprehensive income (loss)		(478	)		63
Retained earnings		183,295			167,783
Less: Treasury stock at cost, 434,132 Class A common shares in 2004 and 2003; 3,186,647 Class B common shares in 2004 and 3,197,614 Class B common shares in 2003		(49,475	)		(49,621	)
Total stockholders’ equity		366,612			341,207
Total liabilities and stockholders’ equity	$	1,515,753		$	1,698,444

See Notes to Consolidated Financial Statements

3

ADVANTA CORP. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS (Unaudited)

	Three Months Ended					Six Months Ended
(In thousands, except per share amounts)	June 30,					June 30,
	2004		2003			2004		2003
Interest income:
Receivables	$	19,583	$	18,914		$	36,976	$	36,387
Investments		1,375		2,163			2,791		4,089
Other interest income		4,276		4,373			8,878		7,965
Total interest income		25,234		25,450			48,645		48,441
Interest expense:
Deposits		4,343		7,419			8,835		13,640
Debt and other borrowings		4,213		5,692			8,963		10,742
Subordinated debt payable to preferred securities trust		2,290		0			4,579		0
Total interest expense		10,846		13,111			22,377		24,382
Net interest income		14,388		12,339			26,268		24,059
Provision for credit losses		10,494		9,265			20,005		18,711
Net interest income after provision for credit losses		3,894		3,074			6,263		5,348
Noninterest revenues:
Securitization income		32,627		31,752			65,167		61,362
Servicing revenues		12,499		9,873			24,632		19,900
Other revenues, net		28,779		24,929			55,533		50,361
Total noninterest revenues		73,905		66,554			145,332		131,623
Expenses:
Operating expenses		59,896		57,195			118,090		112,717
Minority interest in income of consolidated subsidiary		0		2,220			0		4,440
Total expenses		59,896		59,415			118,090		117,157
Income before income taxes		17,903		10,213			33,505		19,814
Income tax expense		7,071		3,932			13,234		7,628
Income from continuing operations		10,832		6,281			20,271		12,186
Gain (loss), net, on discontinuance of mortgage and leasing businesses, net of tax		160		(1,968	)		160		(1,968	)
Net income	$	10,992	$	4,313		$	20,431	$	10,218
Basic income from continuing operations per common share
Class A	$	0.42	$	0.25		$	0.78	$	0.47
Class B		0.44		0.27			0.83		0.52
Combined		0.43		0.26			0.82		0.50
Diluted income from continuing operations per common share
Class A	$	0.39	$	0.24		$	0.73	$	0.46
Class B		0.40		0.26			0.76		0.51
Combined		0.40		0.26			0.75		0.49
Basic net income per common share
Class A	$	0.42	$	0.16		$	0.79	$	0.39
Class B		0.45		0.19			0.84		0.44
Combined		0.44		0.18			0.82		0.42
Diluted net income per common share
Class A	$	0.40	$	0.16		$	0.74	$	0.38
Class B		0.41		0.18			0.76		0.43
Combined		0.41		0.18			0.76		0.41
Basic weighted average common shares outstanding
Class A		8,794		9,151			8,790		9,168
Class B		16,172		14,893			15,891		14,854
Combined		24,966		24,044			24,681		24,022
Diluted weighted average common shares outstanding
Class A		8,794		9,151			8,790		9,168
Class B		18,329		15,445			18,046		15,329
Combined		27,123		24,596			26,836		24,497

See Notes to Consolidated Financial Statements

4

ADVANTA CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

				Class A				Class B			Additional
	Comprehensive			Preferred		Class A		Common			Paid-In
($ in thousands)	Income (Loss)			Stock		Common Stock		Stock			Capital
Balance at December 31, 2002				$	1,010	$	100	$	204		$	243,910
Net income	$	28,245
Other comprehensive income (loss):
Change in unrealized appreciation (depreciation) of investments, net of tax benefit (expense) of $66		(123	)
Comprehensive income	$	28,122
Preferred and common cash dividends declared
Exercise of stock options									3			2,310
Stock option exchange program stock distribution
Issuance of restricted stock									2			2,150
Amortization of deferred compensation
Forfeitures of restricted stock									(3	)		(2,976	)
Stock buyback
ESOP shares committed to be released												(99	)
Balance at December 31, 2003				$	1,010	$	100	$	206		$	245,295
Net income	$	20,431
Other comprehensive income (loss):
Change in unrealized appreciation (depreciation) of investments, net of tax benefit (expense) of $291		(541	)
Comprehensive income	$	19,890
Preferred and common cash dividends declared
Exercise of stock options									6			5,525
Modification of stock options												196
Stock option exchange program stock distribution
Stock-based nonemployee compensation expense												482
Issuance of restricted stock									3			4,761
Amortization of deferred compensation
Forfeitures of restricted stock									(2	)		(1,421	)
ESOP shares committed to be released												60
Balance at June 30, 2004				$	1,010	$	100	$	213		$	254,898

See Notes to Consolidated Financial Statements

5

	Deferred			Accumulated
	Compensation			Other									Total
	& Unearned			Comprehensive			Retained			Treasury			Stockholders’
($ in thousands)	ESOP Shares			Income (Loss)			Earnings			Stock			Equity
Balance at December 31, 2002	$	(28,668	)	$	186		$	147,205		$	(42,634	)	$	321,313
Net income								28,245						28,245
Other comprehensive income (loss):
Change in unrealized appreciation (depreciation) of investments, net of tax benefit (expense) of $66					(123	)								(123	)
Comprehensive income
Preferred and common cash dividends declared								(7,667	)					(7,667	)
Exercise of stock options														2,313
Stock option exchange program stock distribution											183			183
Issuance of restricted stock		(2,152	)											0
Amortization of deferred compensation		4,105												4,105
Forfeitures of restricted stock		2,643												(336	)
Stock buyback											(7,170	)		(7,170	)
ESOP shares committed to be released		443												344
Balance at December 31, 2003	$	(23,629	)	$	63		$	167,783		$	(49,621	)	$	341,207
Net income								20,431						20,431
Other comprehensive income (loss):
Change in unrealized appreciation (depreciation) of investments, net of tax benefit (expense) of $291					(541	)								(541	)
Comprehensive income
Preferred and common cash dividends declared								(4,919	)					(4,919	)
Exercise of stock options														5,531
Modification of stock options														196
Stock option exchange program stock distribution											146			146
Stock-based nonemployee compensation expense														482
Issuance of restricted stock		(4,764	)											0
Amortization of deferred compensation		4,061												4,061
Forfeitures of restricted stock		1,158												(265	)
ESOP shares committed to be released		223												283
Balance at June 30, 2004	$	(22,951	)	$	(478	)	$	183,295		$	(49,475	)	$	366,612

See Notes to Consolidated Financial Statements

6

ADVANTA CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

($ in thousands)	Six Months Ended
	June 30,
	2004			2003
OPERATING ACTIVITIES – CONTINUING OPERATIONS
Net income	$	20,431		$	10,218
Adjustments to reconcile net income to net cash used in operating activities:
(Gain) loss, net, on discontinuance of mortgage and leasing businesses, net of tax		(160	)		1,968
Investment securities (gains) losses, net		(49	)		1,766
Valuation adjustments on other receivables held for sale		0			(450	)
Depreciation and amortization		4,948			4,217
Stock-based compensation expense		4,474			1,991
Provision for credit losses		20,005			18,711
Provision for interest and fee losses		4,539			5,013
Change in deferred origination costs, net of deferred fees		4,572			8,546
Change in receivables held for sale		(110,782	)		(278,811	)
Proceeds from sale of receivables held for sale		95,361			299,376
Change in accounts receivable from securitizations		5,475			(632,953	)
Change in other assets and other liabilities		(52,313	)		87,762
Net cash used in operating activities		(3,499	)		(472,646	)
INVESTING ACTIVITIES – CONTINUING OPERATIONS
Change in federal funds sold and restricted interest-bearing deposits		44,619			52,924
Purchase of investments available for sale		(370,058	)		(314,625	)
Proceeds from sales of investments available for sale		381,461			246,686
Proceeds from maturing investments available for sale		1,983			36,564
Change in receivables not held for sale		(33,950	)		(38,078	)
(Purchases) sales of premises and equipment, net		(3,788	)		2,820
Net cash provided by (used in) investing activities		20,267			(13,709	)
FINANCING ACTIVITIES – CONTINUING OPERATIONS
Change in demand and savings deposits		(2,433	)		(3,519	)
Proceeds from issuance of time deposits		247,040			561,659
Payments for maturing time deposits		(272,702	)		(71,629	)
Proceeds from issuance of debt		13,942			50,621
Payments on maturity and redemption of debt		(49,430	)		(50,224	)
Change in other borrowings and cash overdraft		5,823			0
Proceeds from exercise of stock options		5,531			850
Cash dividends paid		(4,919	)		(3,919	)
Stock buyback		0			(4,067	)
Net cash (used in) provided by financing activities		(57,148	)		479,772
DISCONTINUED OPERATIONS
Net cash provided by operating activities		33,441			10,109
Net cash provided by investing activities		0			26,559
Net cash provided by discontinued operations		33,441			36,668
Net (decrease) increase in cash		(6,939	)		30,085
Cash at beginning of period		26,941			14,834
Cash at end of period	$	20,002		$	44,919

See Notes to Consolidated Financial Statements

7

ADVANTA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS, UNLESS OTHERWISE NOTED)

June 30, 2004
(Unaudited)

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

Note 1) Basis of Presentation

We have prepared the consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission. We have condensed or omitted certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles 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.

The preparation of financial statements in accordance with U.S. generally accepted accounting principles 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 that are particularly susceptible to significant changes in the near term relate to the accounting for the allowance for receivable losses, securitization income, business credit card rewards programs, litigation contingencies, income taxes, and discontinued operations.

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

Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure,” defines a fair value based method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. However, it permits entities to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion (“Opinion”) No. 25, “Accounting for Stock Issued to Employees,” whereby compensation cost is the excess, if any, of the quoted market price of the stock at the grant date or other measurement date over the amount an employee must pay to acquire the stock. We have elected to continue with the accounting methodology in Opinion No. 25 and, as a result, have provided pro forma disclosures of compensation expense for options granted to employees under our stock option plans, net of related tax effects, net income and earnings per share, as if the fair value based method of accounting had been applied. Had compensation cost for

8

these plans been determined using the fair value method, our compensation expense for stock option plans, net of related tax effects, net income and net income per common share would have changed to the following pro forma amounts:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2004		2003		2004		2003
Stock-based employee compensation expense for stock option plans, net of related tax effects
As reported	$	196	$	0	$	196	$	0
Pro forma		763		603		1,209		1,216
Net income
As reported	$	10,992	$	4,313	$	20,431	$	10,218
Pro forma		10,425		3,710		19,418		9,002
Basic net income per common share
As reported
Class A	$	0.42	$	0.16	$	0.79	$	0.39
Class B		0.45		0.19		0.84		0.44
Combined		0.44		0.18		0.82		0.42
Pro forma
Class A	$	0.40	$	0.14	$	0.75	$	0.34
Class B		0.43		0.16		0.80		0.39
Combined		0.42		0.15		0.78		0.37
Diluted net income per common share
As reported
Class A	$	0.40	$	0.16	$	0.74	$	0.38
Class B		0.41		0.18		0.76		0.43
Combined		0.41		0.18		0.76		0.41
Pro forma
Class A	$	0.38	$	0.14	$	0.70	$	0.33
Class B		0.39		0.16		0.73		0.38
Combined		0.39		0.15		0.72		0.36

Note 2) Recently Issued Accounting Standards

In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities — An Interpretation of ARB No. 51” (“FIN 46”). This interpretation requires a company to consolidate a variable interest entity if the company has variable interests that give it a majority of the expected losses or a majority of the expected residual returns of the entity. In December 2003, the FASB revised FIN 46 to clarify some of the provisions and incorporate several FASB staff positions related to FIN 46 that were already effective. This interpretation, as revised, did not have a material effect on our financial position or results of operations since qualifying special-purpose entities, as defined in SFAS No. 140, are exempt from the consolidation requirements of FIN 46. However, our adoption of the revised interpretation resulted in the deconsolidation of the subsidiary trust that issued our company-obligated mandatorily redeemable preferred securities (the “trust preferred securities”) effective December 31, 2003. As a result of the deconsolidation of that trust, the consolidated balance sheets include subordinated debt payable to preferred securities trust of $103 million and an equity investment in the trust of $3 million, rather than $100 million of trust preferred securities. Also as a result of the deconsolidation of that trust, the consolidated income statement includes interest expense on subordinated debt payable to preferred securities trust beginning January 1, 2004, as compared to periods through December 31, 2003 that included payments on the trust preferred securities classified as minority interest in income of consolidated subsidiary.

9

In June 2003, the FASB issued an exposure draft, “Qualifying Special-Purpose Entities and Isolation of Transferred Assets — An Amendment of FASB Statement No. 140.” The changes and clarifications in the proposed statement would prevent derecognition by transferors that may continue to retain effective control of transferred assets by providing financial support other than a subordinated retained interest or making decisions about beneficial interests. The changes would also help to ensure that variable interest entities will not qualify for the qualifying special-purpose entity exception to FIN 46, as revised, if any party involved is in a position to enhance or protect the value of its own subordinated interest by providing financial support for or making decisions about reissuing beneficial interests. For public entities, this proposed statement would apply prospectively to transfers of assets occurring after the beginning of the first interim period after the issuance of the final statement. In June 2004, the FASB announced plans to issue a revised exposure draft in the fourth quarter of 2004 and a final standard in the second quarter of 2005. Management will evaluate any potential impact of this revised proposed statement when it is available.

In March 2004, the FASB issued an exposure draft, “Share-Based Payment - An Amendment of Statements No. 123 and 95” that addresses the accounting for equity-based compensation arrangements, including employee stock options. Upon implementation of the changes proposed in this statement, entities would no longer be able to account for equity-based compensation using the intrinsic value method under Opinion No. 25. Entities would be required to measure the cost of employee services received in exchange for awards of equity instruments at the grant date of the award using a fair value based method. The comment period for this proposed statement ended on June 30, 2004. For public entities, this proposed statement would apply prospectively for fiscal years beginning after December 15, 2004 as if all equity-based compensation awards granted, modified or settled after December 15, 1994 had been accounted for using a fair value based method of accounting. Management is currently evaluating the potential impact of the proposed statement.

Note 3) Restricted Interest-Bearing Deposits and Investments Available For Sale

At December 31, 2003, restricted interest-bearing deposits included amounts held in escrow in connection with our litigation with Fleet Financial Group, Inc. (“Fleet”) of $74.2 million. On February 2, 2004, the court issued its final judgment and order in the Delaware Chancery Court litigation with Fleet. In early February 2004, the escrow agent released $63.8 million from the escrow account to Fleet in satisfaction of all amounts due to Fleet in connection with this litigation and the $10.5 million of funds remaining in the escrow account were released and transferred from the restricted escrow account to an unrestricted cash account. See Note 8 for further discussion of this litigation.

10

Investments available for sale consisted of the following:

	June 30, 2004				December 31, 2003
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
U.S. Treasury & other U.S. Government securities	$	80,179	$	79,582	$	28,593	$	28,544
State and municipal securities		2,361		2,396		1,946		2,014
Mortgage-backed securities		4,538		4,497		4,954		4,996
Corporate bonds		9,473		9,407		0		0
Equity securities(1)		19,894		19,828		20,018		20,053
Money market funds(2)		92,632		92,632		166,875		166,875
Other		113		113		142		142
Total investments available for sale	$	209,190	$	208,455	$	222,528	$	222,624

(1)	Includes venture capital investments of $9.5 million at June 30, 2004 and December 31, 2003. The amount shown as amortized cost represents fair value for these investments.
(2)	As of June 30, 2004, money market funds include investments in the Reserve Primary Money Market Fund of $48.1 million and the Barclays Global Investors Prime Money Market Fund of $34.1 million. As of December 31, 2003, money market funds include an investment in the Merrill Lynch Premier Institutional Money Market Fund of $163.8 million.

Note 4) Receivables

Receivables on the balance sheet, including those held for sale, consisted of the following:

	June 30,			December 31,
	2004			2003
Business credit card receivables	$	549,862		$	518,040
Other receivables		10,858			16,976
Gross receivables		560,720			535,016
Add: Deferred origination costs, net of deferred fees		14,639			19,211
Less: Allowance for receivable losses
Business credit cards		(47,981	)		(47,041	)
Other receivables		(1,350	)		(1,413	)
Total allowance for receivable losses		(49,331	)		(48,454	)
Receivables, net	$	526,028		$	505,773

In June 2001, Advanta Corp. provided a mortgage financing loan and a revolving home equity line of credit to an executive officer as part of a relocation agreement. Upon the termination of the executive officer’s employment in February 2004, a repayment event under the terms of the agreement occurred. The former executive officer sold the property in May 2004 and used the net proceeds from the sale to satisfy his loan obligations in accordance with the terms of the relocation agreement. The outstanding balances on these loans were included in other receivables and were $474 thousand at December 31, 2003. We recognized $91 thousand of compensation expense in the second quarter of 2004 related to loan forgiveness, based on the net proceeds from the sale of the property.

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Note 5) Allowance for Receivable Losses

The following table presents activity in the allowance for receivable losses for the periods presented:

	Six Months Ended
	June 30,
	2004			2003
Beginning balance	$	48,454		$	46,159
Provision for credit losses		20,005			18,711
Provision for interest and fee losses		4,539			5,013
Gross principal charge-offs:
Business credit cards		(20,169	)		(19,442	)
Other receivables		(3	)		(28	)
Total gross principal charge-offs		(20,172	)		(19,470	)
Principal recoveries:
Business credit cards		1,402			1,479
Other receivables		4			0
Total principal recoveries		1,406			1,479
Net principal charge-offs		(18,766	)		(17,991	)
Interest and fee charge-offs:
Business credit cards		(4,901	)		(4,566	)
Ending balance	$	49,331		$	47,326

Note 6) Securitization Activities

Accounts receivable from securitizations consisted of the following:

	June 30,		December 31,
	2004		2003
Retained interests in business credit card securitizations	$	149,998	$	149,998
Accrued interest and fees on securitized business credit card receivables, net(1)		53,016		58,178
Amounts due from the trust		35,848		36,161
Total accounts receivable from securitizations	$	238,862	$	244,337

(1) Reduced by an estimate for uncollectible interest and fees of $10.8 million at June 30, 2004 and $12.6 million at December 31, 2003.

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

	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2004		2003		2004		2003
Average securitized receivables	$	2,532,885	$	2,290,671	$	2,524,208	$	2,231,572
Securitization income		32,627		31,752		65,167		61,362
Discount accretion		4,276		4,373		8,878		7,965
Interchange income		28,801		23,521		54,745		43,925
Servicing revenues		12,499		9,873		24,632		19,900
Proceeds from new securitizations		0		226,851		90,000		299,376
Proceeds from collections reinvested in revolving-period securitizations		1,633,689		710,553		3,257,245		1,768,945
Cash flows received on retained interests		68,208		84,702		134,890		133,002

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	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2004			2003			2004			2003
Key assumptions:
Discount rate		10.98% - 13.13	%		12.14% - 14.56	%		10.98% - 14.33	%		11.44% - 14.56	%
Monthly payment rate		20.63% - 22.25	%		18.79% - 21.00	%		20.63% - 22.25	%		18.79% - 21.00	%
Loss rate		6.70% - 8.20	%		8.55% - 9.68	%		6.70% - 8.47	%		8.55% - 10.29	%
Interest yield, net of interest earned by noteholders		12.36% - 13.47	%		14.26% - 14.95	%		12.36% - 13.84	%		14.26% - 14.95	%

There were no purchases of delinquent accounts from the securitization trust during the three or six months ended June 30, 2004 or 2003.

The following assumptions were used in estimating the fair value of retained interests in business credit card securitizations as of June 30, 2004 and December 31, 2003. The assumptions listed represent weighted averages of assumptions used for each securitization.

	June 30,			December 31,
	2004			2003
Discount rate		11.15% - 13.13	%		12.44% - 14.33	%
Monthly payment rate		20.67% - 22.25	%		20.80% - 22.25	%
Loss rate		6.70% - 7.37	%		7.70% - 8.47	%
Interest yield, net of interest earned by noteholders		12.36	%		13.84	%

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

We have prepared sensitivity analyses of the valuations of retained interests in securitizations estimated using the assumptions identified above. The sensitivity analyses show the hypothetical effect on the fair value of those assets of two unfavorable variations from the expected levels for each key assumption, independently from any change in another key assumption. Set forth below are the results of those sensitivity analyses on the valuation as of June 30, 2004.

Effect on fair value of the following hypothetical changes in key assumptions:
Discount rate increased by 2%	$	(2,256	)
Discount rate increased by 4%		(4,444	)
Monthly payment rate at 110% of base assumption		(1,618	)
Monthly payment rate at 125% of base assumption		(3,647	)
Loss rate at 110% of base assumption		(4,075	)
Loss rate at 125% of base assumption		(10,188	)
Interest yield, net of interest earned by noteholders, decreased by 1%		(6,082	)
Interest yield, net of interest earned by noteholders, decreased by 2%		(12,164	)

The objective of these hypothetical analyses is to measure the sensitivity of the fair value of the retained interests to changes in assumptions. The methodology used to calculate the fair value in the analyses is a discounted cash flow analysis, the same methodology used to estimate the fair value of the retained interests when quoted market prices are not available at each reporting date. These estimates do not factor in the impact of simultaneous changes in other key

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assumptions. The above scenarios do not reflect management’s expectation regarding the future direction of these rates, and they depict only certain possibilities out of a large set of possible scenarios.

Managed receivable data

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

	June 30,		December 31,		June 30,
	2004		2003		2003
Owned business credit card receivables	$	549,862	$	518,040	$	442,769
Securitized business credit card receivables		2,546,777		2,463,747		2,365,176
Total managed receivables		3,096,639		2,981,787		2,807,945
Receivables 30 days or more delinquent:
Owned		25,493		25,301		25,839
Securitized		123,123		148,177		150,380
Total managed		148,616		173,478		176,219
Receivables 90 days or more delinquent:
Owned		13,309		12,696		13,184
Securitized		63,980		74,762		76,459
Total managed		77,289		87,458		89,643
Nonaccrual receivables:
Owned		10,081		7,866		7,091
Securitized		48,966		47,381		42,162
Total managed		59,047		55,247		49,253
Accruing receivables past due 90 days or more:
Owned		11,677		11,320		11,741
Securitized		56,111		66,376		67,804
Total managed		67,788		77,696		79,545
Net principal charge-offs for the year-to-date period ended June 30 and December 31:
Owned		18,767		43,670		17,963
Securitized		90,827		179,538		92,060
Total managed		109,594		223,208		110,023

Note 7) Selected Balance Sheet Information

Other assets consisted of the following:

	June 30,		December 31,
	2004		2003
Deferred income taxes	$	69,969	$	82,175
Investment in Fleet Credit Card Services, L.P.		32,453		35,988
Cash surrender value of insurance contracts		20,419		21,792
Intangible assets		3,875		4,295
Investment in preferred securities trust		3,093		3,093
Amounts due from transfer of consumer credit card business		0		70,545
Other assets		49,322		60,815
Total other assets	$	179,131	$	278,703

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Other liabilities consisted of the following:

	June 30,		December 31,
	2004		2003
Accounts payable and accrued expenses	$	31,916	$	28,458
Business credit card rewards		19,431		24,785
Current income taxes		12,936		13,449
Accrued interest payable		9,783		4,008
Amounts due to the securitization trust		3,664		4,021
Other(1)		29,988		192,402
Total other liabilities	$	107,718	$	267,123

(1) A substantial portion of other liabilities at December 31, 2003 represented our litigation reserves.

In February 2004, the court issued its final judgment and order in the Delaware Chancery Court litigation with Fleet, and a payment was made to Fleet in satisfaction of all amounts due in connection with this litigation. In accordance with the court’s February 2004 order, the payment to Fleet was net of amounts due to Advanta from Fleet. As a result of the court’s order and payment to Fleet in February 2004, there was a decrease in other assets and other liabilities as of the payment date. There was no impact to the results of our operations since, based on the final judgment and order, our reserves at December 31, 2003 were adequate. In March 2004, we filed a notice of appeal to commence the appeals process related to this final judgment and order. On May 28, 2004, we reached an agreement with Bank of America Corp. (“Bank of America”) to resolve all outstanding litigation, including partnership tax disputes, between Advanta and FleetBoston Financial Corporation, which was recently acquired by Bank of America. See Note 8. In connection with the anticipated combination of Bank of America’s and Fleet’s consumer credit card businesses and the May 28, 2004 agreement, our partnership interest in Fleet Credit Card Services, L.P. would represent an interest in the combined business. Subsequent to the date of the agreement, we have accounted for our investment in the partnership interest in Fleet Credit Card Services, L.P. using the cost method.

Eligible cardholders earn cash back rewards or business rewards based on net purchases charged on their business credit card accounts. The costs of future reward redemptions are estimated and a liability is recorded at the time cash back rewards or business rewards are earned by the cardholder. In each reporting period, we adjust our estimate of the percentage of earned rewards that will ultimately be redeemed by cardholders and the cost of rewards based on our experience with each program. In the three months ended June 30, 2004, we expanded our business rewards program to include offers of gift certificates and merchandise, in addition to our traditional travel awards. We anticipate that the expanded program will have the effect of increasing the volume of future reward redemptions while decreasing the associated costs per redemption. In the first quarter of 2003, we changed the redemption terms of certain business reward programs resulting in a decrease in the anticipated costs of future reward redemptions. The impact of the changes in the estimated percentage of earned rewards that will ultimately be redeemed by cardholders and other changes in anticipated costs of future period reward redemptions for these programs in the three and six months ended June 30, 2004 and 2003 was as follows:

	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2004			2003			2004			2003
Increase (decrease) in other revenues	$	(900	)	$	(70	)	$	(1,400	)	$	1,200
Increase (decrease) in net income		(545	)		(40	)		(850	)		740
Amount per combined diluted share	$	(0.02	)	$	0.00		$	(0.03	)	$	0.03

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Note 8) Commitments and Contingencies

On May 28, 2004, Advanta Corp. and certain of its subsidiaries and Bank of America signed an agreement to resolve all outstanding litigation, including partnership tax disputes, between Advanta and Fleet, which was recently acquired by Bank of America, relating to the transfer of our consumer credit card business to Fleet Credit Card Services, L.P. (the “Consumer Credit Card Transaction”) in 1998. The agreement is subject to the Internal Revenue Service’s (“IRS”) final approval of the settlement of the tax disputes, which the IRS is expected to approve. Under the agreement, Bank of America will pay Advanta $63.8 million in cash which represents a return of the payments made to Fleet in the Delaware state court litigation in February 2004, as described below. That payment will be made following IRS approval of the settlement of the tax disputes. At that time, Advanta and Fleet will dismiss all outstanding litigation. Advanta and Bank of America have agreed to resolve the tax disputes between Advanta and Fleet by allocating approximately $125 million of the disputed $508 million of partnership deductions to Advanta and by Advanta recognizing for tax purposes approximately $600 thousand of the disputed $47 million partnership taxable gain. As a result of the agreement, Advanta expects to record a net after-tax gain from the settlement of the litigation of approximately $61 million in the quarter that the IRS approval is received. The disputes involving Fleet that are described below would all be resolved under the agreement with Bank of America if IRS approval of the settlement of the tax disputes is obtained.

On January 22, 1999, Fleet and certain of its affiliates filed a lawsuit against Advanta Corp. and certain of its subsidiaries in Delaware Chancery Court. Fleet’s allegations, which we denied, centered around Fleet’s assertions that we failed to complete certain post-closing adjustments to the value of the assets and liabilities we contributed to Fleet Credit Card Services, L.P. in connection with the Consumer Credit Card Transaction. We filed an answer to the complaint, and we also filed a countercomplaint against Fleet for damages we believe have been caused by certain actions of Fleet. As a result of related litigation with Fleet, $70.1 million of our reserves in connection with this litigation were funded in an interest-bearing escrow account in February 2001. On January 22, 2003, the trial court issued a ruling on all but one of the remaining issues, and ordered further briefing on the remaining outstanding issue. Effective December 31, 2002, we recognized a $43.0 million pretax loss on the transfer of our consumer credit card business, representing the estimated impact of implementing the court’s January 2003 decisions. This amount represented the amount in excess of the reserves we had been carrying for the litigation, which was based on our expectations of the outcome of the litigation. On November 7, 2003, the court ruled on the remaining outstanding issue, the method for calculating the interest to be awarded, and ordered the parties to submit revised calculations in accordance with this ruling before it issued a judgment. On February 2, 2004, the court issued its final judgment and order. In early February 2004, the escrow agent released $63.8 million from the escrow account to Fleet in satisfaction of all amounts due to Fleet in connection with this litigation and the $10.5 million of funds remaining in the escrow account were released and transferred from the restricted escrow account to an unrestricted cash account. At December 31, 2003, the escrow account was included in restricted interest-bearing deposits on the consolidated balance sheet. There was no impact to the results of our operations since, based on the final judgment and order, our reserves at December 31, 2003 were adequate. On March 1, 2004, we filed a notice of appeal to commence the appeals process relating to orders made by the Delaware Chancery Court during the litigation, and on April 15, 2004, we filed an opening brief with the Supreme Court of Delaware setting forth the basis for our appeal. Fleet filed its answering brief with the Supreme Court of Delaware on May 17, 2004, and we filed our reply brief on June 1, 2004.

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Pursuant to the May 28, 2004 agreement between Advanta and Bank of America described above, Advanta and Fleet filed a joint motion with the Delaware Supreme Court to stay the appeal and on June 28, 2004 the court granted the motion and stayed the appeal, pending fulfillment of all conditions of the agreement.

In an ongoing element of Fleet’s disputes with us, Fleet has claimed $508 million of tax deductions from its partnership with us in connection with the Consumer Credit Card Transaction, which are required under the law to be allocated solely to Advanta. As required, we reported these deductions on our 1998 corporate tax return. However, we have not used or booked the benefit from most of these deductions because for tax purposes we have a very substantial net operating loss carryforward. We have $482 million of net operating loss carryforwards from all sources at June 30, 2004, and have booked no benefit from approximately $400 million of these net operating loss carryforwards. If the deductions are ultimately allocated as claimed by Fleet, the impact on our equity at June 30, 2004 would be a decrease of approximately $35 million. The deductions are attributable to deductions for bad debt reserves that we expensed in computing our book income or loss before the Consumer Credit Card Transaction, but which were not deductible by Advanta for tax purposes until after the closing of the transaction in 1998. The tax law requires “built in losses” like these to be deducted by the party who contributed the assets to the partnership, in this case, Advanta. The Internal Revenue Service agents who have examined the returns at issue have to ensure that both parties do not obtain the deductions and therefore, following standard practice, proposed to disallow the deductions to both parties until there is a final resolution. The deductions, as well as the allocation of a gain from the sale of a partnership asset of approximately $47 million, were before the IRS Regional Office of Appeals. If the conditions of the May 28, 2004 agreement between Advanta and Bank of America are fulfilled, this matter would also be resolved in accordance with the terms of the agreement.

On January 15, 2003, Fleet filed a complaint in Rhode Island Superior Court seeking a declaratory judgment that we indemnify Fleet under the applicable partnership agreement for any damage Fleet incurs by not being entitled to the $508 million of tax deductions. Fleet is also seeking a declaratory judgment that it should not indemnify us for any damages that we incur due to any allocation to Advanta of the $47 million gain on the sale of a partnership asset. On February 28, 2003, we filed a motion to dismiss the complaint. On August 13, 2003, the court denied the motion to dismiss on procedural grounds. We answered the complaint and filed a counterclaim against Fleet on September 19, 2003. The discovery phase of the case has concluded. We believe that the indemnification provision in the partnership agreement does not indemnify Fleet for damages incurred related to the tax deductions and that the lawsuit is frivolous, having no legal basis whatsoever and therefore, we do not have any reserves for this litigation. If the conditions of the May 28, 2004 agreement between Advanta and Bank of America are fulfilled, this matter would also be resolved in accordance with the terms of the agreement.

Although the IRS is expected to approve the settlement of the tax disputes, in the event the settlement is not consummated, management does not expect the lawsuits or the tax disputes with Fleet, described above, to have a material adverse effect on our financial condition or results of operations.

On July 26, 2001, Chase Manhattan Mortgage Corporation (“Chase”) filed a complaint against Advanta Corp. and certain of its subsidiaries in the United States District Court for the District of Delaware alleging, among other things, that we breached our contract with Chase in connection with the Mortgage Transaction. Chase claims that we misled Chase concerning the value of certain of the assets sold to Chase and claims damages of approximately $70 million. In September 2001, we filed an answer to the complaint in which we denied all of the substantive allegations of

17

the complaint and asserted a counterclaim against Chase for breach of contract relating to funds owed by Chase to us in connection with the transaction. The trial was originally scheduled to begin in January 2004. In the second quarter of 2003, the parties extended the discovery period and the court delayed the scheduled trial date to April 2004. In September 2003, we filed a motion for summary judgment with the court with respect to all claims raised in Chase’s complaint and Chase filed a motion for partial summary judgment with respect to certain of its claims. On March 4, 2004, the court denied both parties’ motions for summary judgment. On April 26, 2004, a non-jury trial commenced; at trial, Chase asserted damages totaling approximately $88 million. The trial concluded on May 26, 2004, and the court has ordered the parties to make certain post-trial filings with the court. Post-trial filings were filed on July 30, 2004 and additional filings are expected to be made on September 17, 2004. We believe that the lawsuit is without merit and will vigorously defend Advanta in this litigation and therefore, we do not have any reserves for future judgments or rulings in this litigation. However, since this litigation relates to a discontinued operation, we have established reserves for estimated future litigation costs. We do not expect this lawsuit to have any impact on our continuing business and, based on the complete lack of merit, we do not anticipate that the lawsuit will have a material adverse effect on our financial condition or results of operations.

On February 13, 2004, Advanta Corp. filed a Writ of Summons against Chase in Montgomery County, Pennsylvania Court of Common Pleas, which was amended on March 4, 2004; and on March 8, 2004, Advanta Corp. and certain of its subsidiaries filed a Second Amended Writ of Summons and a Complaint against Chase in Montgomery County, Pennsylvania Court of Common Pleas seeking damages of at least $17.7 million. In May 2004, Chase filed an answer to the complaint and asserted a new matter and counterclaims seeking damages of at least $5 million. On August 2, 2004, we filed our reply to Chase’s new matter and counterclaims. On February 23, 2004 and June 4, 2004, Chase filed a complaint and a first amended complaint against us in the United States District Court for the District of Delaware seeking damages of at least $7 million. These filings relate to contractual claims under the purchase and sale agreement governing the Mortgage Transaction and are a continuation of the ongoing dispute associated with the Mortgage Transaction. We do not expect the lawsuit filed by Chase on February 23, 2004, as amended on June 4, 2004, or Chase’s new matter and counterclaims in the action brought by us in the Pennsylvania Court of Common Pleas to have a material adverse effect on our financial condition or results of operations.

Advanta Mortgage Corp. USA (“AMCUSA”) and Advanta Mortgage Conduit Services, Inc. (“AMCSI”), subsidiaries of Advanta Corp., have been involved in arbitration before the American Arbitration Association with Goodrich & Pennington Mortgage Fund, Inc. (“GPMF”), a participant in one of the programs of our former mortgage business. The arbitration process commenced June 28, 2001 in San Francisco, California with GPMF serving a demand for arbitration relating to alleged failure to provide information and documentation under the former mortgage program. On September 5, 2001, AMCUSA and AMCSI filed an answer to the Demand for Arbitration, and from December 2001, have provided information and documentation responsive to the program participant’s requests in the arbitration proceeding. In February and June 2004, GPMF filed additional Statements of Claim, each alleging contractual and other related claims. The amount of damages sought by GPMF is not known because at this time no damage amount has been specified in its pleadings. Discovery in this matter is ongoing and more recently, since June 2004, the parties have filed a number of motions and briefs with the Arbitrator in anticipation of the arbitration hearing which is presently scheduled to commence on November 2, 2004. We do not expect this arbitration to have a material adverse effect on our financial condition or results of operations. However, since this arbitration relates to a

18

discontinued operation, we have established reserves for estimated future legal costs.

In addition to the cases described above, Advanta Corp. and its subsidiaries are involved in class action lawsuits, other litigation, claims and legal proceedings arising in the ordinary course of business or discontinued operations, including litigation arising from our operation of the mortgage business prior to our exit from that business in the first quarter of 2001.

Management believes that the aggregate loss, if any, resulting from existing litigation, claims and other legal proceedings will not have a material adverse effect on our financial position or results of our operations based on the level of litigation reserves we have established and our current expectations regarding the ultimate resolutions of these existing actions. We estimate our litigation reserves based on the status of litigation and our assessment of the ultimate resolution of each action after consultation with our attorneys. However, due to the inherent uncertainty in litigation and since the ultimate resolutions of our litigation, claims and other legal proceedings are influenced by factors outside of our control, it is reasonably possible that our estimated liability under these proceedings may change or that actual results will differ from our estimates.

Note 9) Capital Stock

In 2001 and 2002, the Board of Directors of Advanta Corp. authorized management to purchase up to an aggregate 3.0 million shares of Advanta Corp. common stock. In 2003, we repurchased 434 thousand shares of our Class A Common Stock and 315 thousand shares of our Class B Common Stock, which substantially completed our purchases under the authorizations.

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2004		2003		2004		2003
Class A Common Stock	$	0.095	$	0.063	$	0.158	$	0.126
Class B Common Stock		0.113		0.076		0.189		0.151

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Note 10) Segment Information

	Advanta Business		Venture
	Cards		Capital			Other(1)		Total
Three months ended June 30, 2004
Interest income	$	23,735	$	0		$	1,499	$	25,234
Interest expense		8,590		86			2,170		10,846
Noninterest revenues		73,115		0			790		73,905
Pretax income (loss) from continuing operations		17,998		(95	)		0		17,903
Total assets at end of period		780,492		10,518			724,743		1,515,753
Three months ended June 30, 2003
Interest income	$	23,007	$	1		$	2,442	$	25,450
Interest expense		11,269		135			1,707		13,111
Noninterest revenues (losses)		66,283		(1,242	)		1,513		66,554
Pretax income (loss) from continuing operations		12,647		(2,434	)		0		10,213
Total assets at end of period		1,329,072		12,695			938,709		2,280,476
Six months ended June 30, 2004
Interest income	$	45,584	$	0		$	3,061	$	48,645
Interest expense		17,713		174			4,490		22,377
Noninterest revenues		143,377		32			1,923		145,332
Pretax income (loss) from continuing operations		34,663		(1,158	)		0		33,505
Six months ended June 30, 2003
Interest income	$	43,761	$	1		$	4,679	$	48,441
Interest expense		22,003		275			2,104		24,382
Noninterest revenues (losses)		131,232		(1,852	)		2,243		131,623
Pretax income (loss) from continuing operations		23,624		(3,810	)		0		19,814

(1) Other includes investment and other activities not attributable to reportable segments. Total assets in the “Other” segment include assets of discontinued operations.

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Note 11) Income Taxes

Income tax expense (benefit) was as follows:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2004		2003			2004		2003
Income tax expense (benefit) attributable to:
Continuing operations	$	7,071	$	3,932		$	13,234	$	7,628
Discontinued operations		105		(1,232	)		105		(1,232	)
Total income tax expense	$	7,176	$	2,700		$	13,339	$	6,396

Income tax expense (benefit) on income from continuing operations consisted of the following components:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2004		2003			2004		2003
Current:
Federal	$	0	$	(860	)	$	0	$	0
State		379		31			899		565
Total current		379		(829	)		899		565
Deferred:
Federal		6,488		4,710			11,940		7,007
State		204		51			395		56
Total deferred		6,692		4,761			12,335		7,063
Income tax expense attributable to continuing operations	$	7,071	$	3,932		$	13,234	$	7,628

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2004		2003		2004		2003
Statutory federal income tax	$	6,266	$	3,575	$	11,727	$	6,935
State income taxes, net of federal income tax benefit		379		53		841		404
Nondeductible expenses		165		158		333		270
Compensation limitation		126		49		175		98
Other		135		97		158		(79	)
Income tax expense attributable to continuing operations	$	7,071	$	3,932	$	13,234	$	7,628

Our effective tax rate was 39.5% for the three and six months ended June 30, 2004 and 38.5% for the three and six months ended June 30, 2003. Our effective tax rate increased in 2004 due to higher state income taxes.

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

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	June 30,			December 31,
	2004			2003
Deferred tax assets	$	84,438		$	107,329
Deferred tax liabilities		(14,469	)		(25,154	)
Net deferred tax asset	$	69,969		$	82,175

A summary of deferred tax assets and liabilities follows:

	June 30,			December 31,
	2004			2003
Net operating loss carryforwards	$	168,601		$	191,308
Valuation allowance		(139,783	)		(139,783	)
Allowance for receivable losses		17,166			17,759
Rewards programs		6,865			8,769
Deferred origination fees and costs		(5,459	)		(7,096	)
Deferred compensation		4,306			4,618
Capital loss carryforwards		4,025			2,275
Securitization income		(1,818	)		(1,818	)
Other		16,066			6,143
Net deferred tax asset	$	69,969		$	82,175

At June 30, 2004, net operating loss carryforwards were $482 million. The scheduled expirations of these net operating loss carryforwards were as follows at June 30, 2004:

Year Ended December 31,
2018	$	231,480
2019		33,437
2020		1,427
2021		215,374

We utilized net operating loss carryforwards of $57.8 million in the six months ended June 30, 2004 and $44.0 million in the same period of 2003.

At June 30, 2004, capital loss carryforwards were $11.5 million, of which $6.5 million are scheduled to expire in the year ended December 31, 2007 and $5.0 million are scheduled to expire in the year ended December 31, 2009.

See Note 8 for a discussion of tax matters currently before the Internal Revenue Service Regional Office of Appeals. As more fully described in Note 8, on May 28, 2004, we reached an agreement with Bank of America to resolve all outstanding litigation, including partnership tax disputes, between Advanta and Fleet, which was recently acquired by Bank of America. Advanta and Bank of America have agreed to resolve the tax disputes between Advanta and Fleet by allocating approximately $125 million of the disputed $508 million of partnership deductions to Advanta and by Advanta recognizing for tax purposes approximately $600 thousand of the disputed $47 million partnership taxable gain. The agreement is subject to the IRS’ final approval of the settlement of the tax disputes, which the IRS is expected to approve. The agreement would result in an approximate $134 million reduction in both the net operating loss carryforward and valuation allowance components of our deferred tax asset. Upon receiving the IRS approval, management will evaluate the remaining valuation allowance. In connection with the agreement, Bank of America would pay Advanta $63.8 million in cash which represents a return of the payments made to Fleet in the Delaware state court litigation in February 2004. A substantial portion of this payment will not be taxable since the gain associated with the original transfer of assets to the partnership in the 1998 Consumer Credit Card Transaction was not subject to income tax. After receipt of this payment, the

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cumulative Consumer Credit Card Transaction gain would be approximately $600 million, for which no deferred taxes will have been provided as the transaction structure remains non-taxable under current tax law.

The net deferred tax asset is included in other assets on the consolidated balance sheets.

Note 12) Discontinued Operations

The components of the gain (loss) on discontinuance of our mortgage and leasing businesses for the three and six months ended June 30, 2004 and 2003 were as follows:

	Three and Six Months Ended
	June 30, 2004						June 30, 2003
										Advanta
	Advanta			Advanta			Advanta			Leasing
	Mortgage			Leasing Services			Mortgage			Services
Pretax gain (loss) on discontinuance of mortgage and leasing businesses	$	(2,770	)	$	3,035		$	(2,600	)	$	(600	)
Income tax (expense) benefit		1,094			(1,199	)		1,001			231
Gain (loss) on discontinuance of mortgage and leasing businesses, net of tax	$	(1,676	)	$	1,836		$	(1,599	)	$	(369	)

In the three months ended June 30, 2004, we recorded a $2.8 million pretax loss on discontinuance of the mortgage business representing an increase in our estimated future costs of mortgage business-related contingent liabilities, due primarily to recent litigation with Chase and disputes related to one of our former mortgage programs.

In the three months ended June 30, 2004, we adjusted our estimate of operating results of the leasing segment over the remaining life of the lease portfolio and recorded a $3.0 million pretax gain on leasing discontinuance. The increase in estimated operating results was principally associated with favorable performance in revenues and an insurance settlement, partially offset by increased operating expenses due to a lengthening of the anticipated timeframe over which we expect to incur certain operating expenses related to the lease portfolio.

In the three months ended June 30, 2003, we recorded a $2.6 million pretax loss on discontinuance of the mortgage business for an increase in our estimated future costs of mortgage business-related contingent liabilities, due primarily to a lengthening of the anticipated timeframe of the resolution for those contingent liabilities, which included an extension of the discovery process and a delay in the scheduled trial date in the original litigation with Chase.

In the three months ended June 30, 2003, we adjusted our estimate of operating results of the leasing segment over the remaining life of the lease portfolio and recorded a $600 thousand pretax loss on leasing discontinuance. The decrease in estimated operating results of the leasing segment was primarily associated with an unfavorable sales tax assessment, partially offset by favorable credit performance on the leasing portfolio.

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Per share data was as follows:

	Three and Six Months Ended June 30,
	Advanta						Advanta Leasing
	Mortgage						Services
	2004			2003			2004		2003
Basic gain (loss), net, on discontinuance of mortgage and leasing businesses, net of tax, per common share
Class A	$	(0.07	)	$	(0.07	)	$	0.07	$	(0.02	)
Class B		(0.07	)		(0.07	)		0.07		(0.02	)
Combined		(0.07	)		(0.07	)		0.07		(0.02	)
Diluted gain (loss), net, on discontinuance of mortgage and leasing businesses, net of tax, per common share
Class A	$	(0.06	)	$	(0.07	)	$	0.07	$	(0.02	)
Class B		(0.06	)		(0.07	)		0.07		(0.02	)
Combined		(0.06	)		(0.07	)		0.07		(0.02	)

The components of assets of discontinued operations, net, were as follows:

	June 30,			December 31,
	2004			2003
Lease receivables, net	$	35,843		$	68,860
Other assets		1,424			1,719
Liabilities		(5,403	)		(7,110	)
Assets of discontinued operations, net	$	31,864		$	63,469

We are continuing to service the existing lease portfolio. Based on the terms of the remaining leases, we expect assets of discontinued operations to be less than $10 million by June 2005 and the wind down of the lease portfolio to be complete by January 2007.

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Note 13) Calculation of Earnings Per Share

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2004			2003			2004			2003
Income from continuing operations	$	10,832		$	6,281		$	20,271		$	12,186
Less: Preferred A dividends		0			0			(141	)		(141	)
Income from continuing operations available to common stockholders		10,832			6,281			20,130			12,045
Gain (loss), net, on discontinuance of mortgage and leasing businesses, net of tax		160			(1,968	)		160			(1,968	)
Net income available to common stockholders		10,992			4,313			20,290			10,077
Less: Class A dividends declared		(856	)		(579	)		(1,407	)		(1,155	)
Less: Class B dividends declared		(2,028	)		(1,303	)		(3,371	)		(2,623	)
Undistributed net income	$	8,108		$	2,431		$	15,512		$	6,299
Basic income from continuing operations per common share
Class A	$	0.42		$	0.25		$	0.78		$	0.47
Class B		0.44			0.27			0.83			0.52
Combined(1)		0.43			0.26			0.82			0.50
Diluted income from continuing operations per common share
Class A	$	0.39		$	0.24		$	0.73		$	0.46
Class B		0.40			0.26			0.76			0.51
Combined(1)		0.40			0.26			0.75			0.49
Basic net income per common share
Class A	$	0.42		$	0.16		$	0.79		$	0.39
Class B		0.45			0.19			0.84			0.44
Combined(1)		0.44			0.18			0.82			0.42
Diluted net income per common share
Class A	$	0.40		$	0.16		$	0.74		$	0.38
Class B		0.41			0.18			0.76			0.43
Combined(1)		0.41			0.18			0.76			0.41
Basic weighted average common shares outstanding
Class A		8,794			9,151			8,790			9,168
Class B		16,172			14,893			15,891			14,854
Combined		24,966			24,044			24,681			24,022
Dilutive effect of
Options Class B		1,339			218			1,282			168
Restricted stock Class B		818			334			873			307
Diluted weighted average common shares outstanding
Class A		8,794			9,151			8,790			9,168
Class B		18,329			15,445			18,046			15,329
Combined		27,123			24,596			26,836			24,497
Antidilutive shares
Options Class B		239			1,663			244			2,197
Restricted stock Class B		0			113			0			127

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

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

In this Form 10-Q, “Advanta”, “we”, “us”, and “our” refer to Advanta Corp. and its subsidiaries, unless the context otherwise requires.

OVERVIEW

Income from continuing operations includes the following business segment results:

	Three Months Ended						Six Months Ended
($ in thousands)	June 30,						June 30,
	2004			2003			2004			2003
Pretax income (loss):
Advanta Business Cards	$	17,998		$	12,647		$	34,663		$	23,624
Venture Capital		(95	)		(2,434	)		(1,158	)		(3,810	)
Total pretax income		17,903			10,213			33,505			19,814
Income tax expense		(7,071	)		(3,932	)		(13,234	)		(7,628	)
Income from continuing operations	$	10,832		$	6,281		$	20,271		$	12,186
Per combined common share, assuming dilution	$	0.40		$	0.26		$	0.75		$	0.49

Advanta Business Cards pretax income increased for the three and six months ended June 30, 2004 as compared to the same periods of 2003 due primarily to growth in both owned and securitized receivables, a decrease in cost of funds and net principal charge-off rates and a decrease in operating expenses as a percentage of owned and securitized receivables, partially offset by a decline in yields. The decrease in yields reflects our array of competitively-priced offerings and products, including promotional pricing and rewards, designed to selectively attract and retain more high credit quality customers and to respond to the competitive environment. We anticipate that these types of customers will have lower credit losses in future periods. Although there may be month-to-month or quarterly variations, we expect yields on our business credit cards to decline modestly for the remainder of 2004 as compared to 2003, because we anticipate the continued transition of the portfolio to higher credit quality customers.

Venture Capital pretax loss in the six months ended June 30, 2004 includes $807 thousand of expenses relating to lease commitments and severance costs associated with the closure of an operational location of our Venture Capital segment in the first quarter of 2004. Venture Capital segment results include pretax investment gains of $32 thousand in the six months ended June 30, 2004 and net pretax investment losses of $1.2 million in the three months ended June 30, 2003 and $1.9 million in the six months ended June 30, 2003, which reflect the market conditions for our venture capital investments in those periods.

For the three months ended June 30, 2004, we recorded a net after-tax gain on the discontinuance of our mortgage and leasing businesses of $160 thousand, or $0.01 per combined diluted common share. For the three months ended June 30, 2003, we recorded a net after-tax loss on the discontinuance of our mortgage and leasing businesses of $2.0 million, or $0.08 per combined diluted common share. See “Discontinued Operations” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. We have identified accounting for allowance for receivable losses, securitization transactions, business credit card rewards programs, litigation contingencies, income taxes, and discontinued operations as our most critical accounting policies and estimates because they require management’s most difficult, subjective or complex judgments as a result of the need to make estimates about the effect of matters that are inherently uncertain. Estimates are inherently subjective and are susceptible to significant revision as more information becomes available. Changes in such estimates could have a material impact on our financial condition or results of operations. These accounting policies are described in our Annual Report on Form 10-K for the year ended December 31, 2003.

ADVANTA BUSINESS CARDS

Advanta Business Cards originates new accounts directly and through the use of third parties. The following table provides key statistical information on our business credit card portfolio for the three and six months ended June 30. Credit quality statistics for the business credit card portfolio are included in the “Provision and Allowance for Receivable Losses” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

	Three Months Ended				Six Months Ended
($ in thousands)	June 30,				June 30,
	2004		2003		2004		2003
Average owned receivables	$	583,581	$	506,200	$	567,617	$	510,800
Average securitized receivables	$	2,532,885	$	2,290,671	$	2,524,208	$	2,231,572
Cardholder transaction volume	$	1,994,647	$	1,677,804	$	3,916,580	$	3,280,302
New account originations		26,187		36,162		65,322		90,093
Average number of active accounts(1)		585,519		585,780		588,063		582,542
Ending number of accounts at June 30		780,415		788,470		780,415		788,470

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

In the second quarter of 2003, we enhanced our targeting and decision models used in identifying prospective customers. We have also expanded our activities to identify and establish strategic relationships with organizations focused on certain business owners, executives and small businesses. We expect that our targeted approach will result in acquiring more engaged customers, but may result in somewhat lower account growth rates. We also plan to strengthen and deepen our relationships with our existing customers by providing value based on factors other than pricing in order to build lasting, profitable relationships. The decrease in new account originations in the three and six months ended June 30, 2004 as compared to the same period of 2003 is due primarily to refinements that increased the selectivity of our customer acquisition targeting. We expect the volume of new account originations in the second half of 2004 to be higher than the volume of new

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account originations in the first half of 2004 and comparable to the volume in the second half of 2003, based on the number and timing of planned marketing campaigns. We estimate that managed receivables growth for the year ended December 31, 2004 will be approximately 10%. We also anticipate increasing the percentage of receivables that are held on-balance sheet to between 20% and 25% of managed receivables in the second half of 2004, as compared to 18% in the six months ended June 30, 2004 in order to further diversify our sources of funding. The following is a reconciliation of projected estimated owned business credit card receivable growth to managed business credit card receivable growth:

			Projected
	Actual at		Estimate at
	December 31,		December 31,		Percentage
($ in thousands)	2003		2004		Increase
Owned receivables	$	518,040	$	738,000		42.5	%
Securitized receivables		2,463,747		2,542,000		3.2	%
Managed receivables	$	2,981,787	$	3,280,000		10.0	%

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
($ in thousands)	2004			2003			2004			2003
Net interest income on owned interest-earning assets	$	15,145		$	11,738		$	27,871		$	21,758
Noninterest revenues		73,115			66,283			143,377			131,232
Provision for credit losses		(10,654	)		(9,555	)		(20,067	)		(18,963	)
Operating expenses		(59,608	)		(55,819	)		(116,518	)		(110,403	)
Pretax income	$	17,998		$	12,647		$	34,663		$	23,624

Net interest income on owned interest-earning assets increased by $3.4 million for the three months ended June 30, 2004 as compared to the same period of 2003 and increased by $6.1 million for the six months ended June 30, 2004 as compared to the same period in 2003. The increases were due primarily to decreases in our cost of funds and increases in average owned business credit card receivables of $77.4 million for the three months ended June 30, 2004 and $56.8 for the six months ended June 30, 2004, partially offset by decreases in the average yields earned on our business credit card receivables. The decrease in yields is a result of our competitively-priced offerings and products. Average owned business credit card receivables increased in the three and six months ended June 30, 2004 as compared to the same period of 2003 due to growth and the level of securitization activity.

Noninterest revenues include securitization income, interchange income, business credit card rewards costs and other fee revenues. The increases in noninterest revenues in the three and six months ended June 30, 2004 as compared to the same period of 2003 are due primarily to higher transaction volume that yielded higher interchange income and the increased volume of securitized business credit card receivables that produced higher servicing fees and securitization income. Noninterest revenues also include the impact of changes in estimated costs of future reward redemptions in all periods. See further discussion in the “Other Revenues” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The increases in provision for credit losses in the three and six months ended June 30, 2004 as compared to the same periods of 2003 primarily reflect the increases in average owned business credit card receivables, partially offset by a reduction in the estimate of losses inherent in the portfolio based on the delinquency and

28

principal charge-off trends and the current composition of the portfolio as compared to the same periods of 2003.

The increases in operating expenses in the three and six months ended June 30, 2004 as compared to the same periods of 2003 were due primarily to an increase in salaries and employee benefits expense including higher incentive compensation expense resulting from improved earnings and collections performance, and personnel hired in connection with initiatives to originate and retain relationships with high credit quality customers. In addition, salaries and employee benefits expenses in the six months ended June 30, 2004 include executive compensation expense incurred related to changes in senior management. Marketing expenses also increased in the three and six months ended June 30, 2004 as compared to the same periods of 2003 due primarily to costs incurred related to our development of alliances with other organizations serving segments of the small business market and amortization expense on marketing rights related to certain of these alliances, as well as increased marketing activity in response to the competitive environment. Operating expenses reflect decreases in the amortization of deferred origination costs, due to the number and timing of new account originations in prior periods.

VENTURE CAPITAL

The components of pretax loss for our Venture Capital segment are as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
($ in thousands)	2004			2003			2004			2003
Net interest expense	$	(86	)	$	(134	)	$	(174	)	$	(274	)
Realized gains		0			197			0			197
Unrealized gains (losses), net		0			(1,439	)		32			(2,049	)
Operating expenses		(9	)		(1,058	)		(1,016	)		(1,684	)
Pretax loss	$	(95	)	$	(2,434	)	$	(1,158	)	$	(3,810	)

The estimated fair value of our venture capital investments was $9.5 million as of June 30, 2004 and December 31, 2003. Unrealized gains (losses) on our venture capital investments reflect the market conditions for those investments in each respective period.

In recent years, we have limited our new venture capital investment activity and we presently do not expect to make significant additional investments. Operating expenses for the six months ended June 30, 2004 include expenses associated with the closure of an operational location of our Venture Capital segment in the first quarter of 2004, consisting of $571 thousand of expense relating to lease commitments and $236 thousand of severance costs. Due to the closure of the operational location, we expect to incur minimal operating expenses in the Venture Capital segment in future periods. Operating expenses for the three and six months ended June 30, 2003 include approximately $410 thousand of lease termination costs paid in June 2003.

INTEREST INCOME AND EXPENSE

Interest income decreased $216 thousand to $25.2 million for the three months ended June 30, 2004 as compared to the same period of 2003 and increased $204 thousand to $48.6 million for the six months ended June 30, 2004 as compared to the same period of 2003. Interest income was impacted by decreases in average balances of investments and the average yields earned on our investments. Average investments decreased $223 million in the three months ended June 30, 2004 and decreased $150

29

million in the six months ended June 30, 2004 as compared to the same periods of 2003. Interest income was also impacted by decreases in the average yield earned on our business credit card receivables as a result of our competitively-priced offerings and products. The impact of lower yields on business credit card receivables was more than offset by increases in average business credit card receivables of $77.4 million to $584 million in the three months ended June 30, 2004 and $56.8 million to $568 million in the six months ended June 30, 2004 as compared to the same periods of 2003. Interest income was also impacted by an increase in average balances and the average yield on retained interests in securitizations in the six months ended June 30, 2004. The increase in average balances of retained interests in securitizations is due to additional securitizations completed since June 30, 2003. The increase in average yield on retained interests in securitization to 11.84% for the six months ended June 30, 2004 as compared to 10.91% for the same period of 2003 is due primarily to the composition of retained interests in the respective periods. Retained interests in securitizations in the six months ended June 30, 2003 included an investment-grade subordinated trust asset with a lower effective yield than our other retained interests in securitizations.

Interest expense includes $2.3 million for the three months ended June 30, 2004 and $4.6 million for the six months ended June 30, 2004 of interest expense on subordinated debt payable to preferred securities trust. Our adoption of FIN 46, as revised, resulted in the deconsolidation of the subsidiary trust that issued our trust preferred securities effective December 31, 2003. As a result of the deconsolidation of that trust, the consolidated income statement includes interest expense on subordinated debt payable to preferred securities trust beginning January 1, 2004, as compared to periods through December 31, 2003 that included payments on the trust preferred securities classified as minority interest in income of consolidated subsidiary.

Interest expense decreased $2.3 million to $10.8 million for the three months ended June 30, 2004 and decreased $2.0 million to $22.4 million for the six months ended June 30, 2004 as compared to the same periods of 2003. The decrease in interest expense is due primarily to decreases in our average deposits and debt and decreases in our average cost of funds, partially offset by the $2.3 million for the three months ended June 30, 2004 and $4.6 million for the six months ended June 30, 2004 of interest expense on subordinated debt payable to preferred securities trust described above. Average balances of deposits and debt outstanding decreased $469 million in the three months ended June 30, 2004 and $313 million in the six months ended June 30, 2004 as compared to the same periods of 2003. Average debt and deposits in the three and six months ended June 30, 2003 reflected the funding of higher levels of on-balance sheet assets as a result of principal collections of receivables allocated to the Series 2000-B securitization during its amortization period in 2003. The decrease in our average cost of funding debt and deposits was due to the prevailing interest rate environment and our ability to lower interest rates offered on senior debt resulting from our liquidity position.

The following tables provide an analysis of interest income and expense data, average balance sheet data, net interest spread and net interest margin for both continuing and discontinued operations. The net interest spread represents the difference between the yield on interest-earning assets and the average rate paid on interest-bearing liabilities. The net interest margin represents the difference between the yield on interest-earning assets and the average rate paid to fund interest-earning assets. Interest income includes late fees on business credit card receivables.

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INTEREST RATE ANALYSIS AND AVERAGE BALANCES

	Three Months Ended June 30,
	2004							2003
	Average				Average			Average				Average
($ in thousands)	Balance		Interest		Rate			Balance		Interest		Rate
Owned receivables:
Business credit cards(1)	$	583,581	$	19,459		13.41	%	$	506,200	$	18,634		14.76	%
Other receivables		11,073		124		4.51			23,448		281		4.81
Total owned receivables		594,654		19,583		13.25			529,648		18,915		14.32
Investments(2)		438,478		1,378		1.25			660,999		2,170		1.31
Retained interests in securitizations		149,998		4,276		11.40			157,801		4,373		11.08
Interest-earning assets of discontinued operations		45,629		1,142		10.01			39,043		1,412		14.47
Total interest-earning assets(3)		1,228,759	$	26,379		8.62	%		1,387,491	$	26,870		7.76	%
Noninterest-earning assets		280,109							739,807
Total assets	$	1,508,868						$	2,127,298
Deposits	$	639,793	$	4,526		2.85	%	$	1,076,572	$	7,836		2.92	%
Debt		286,473		4,389		6.16			318,368		5,059		6.37
Subordinated debt payable to preferred securities trust		103,093		2,290		8.88			0		0		0.00
Other borrowings		324		1		1.30			55		0		1.62
Total interest-bearing liabilities(4)		1,029,683	$	11,206		4.37	%		1,394,995	$	12,895		3.71	%
Noninterest-bearing liabilities		118,143							306,032
Total liabilities		1,147,826							1,701,027
Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debentures of Advanta Corp. (trust preferred securities)		0							100,000
Stockholders’ equity		361,042							326,271
Total liabilities and stockholders’ equity	$	1,508,868						$	2,127,298
Net interest spread						4.25	%						4.05	%
Net interest margin						4.97	%						4.04	%

(1)	Interest income includes late fees for owned business credit cards receivables of $1.4 million for the three months ended June 30, 2004 and $1.5 million for the three months ended June 30, 2003.
(2)	Interest and average rate for tax-free securities are computed on a tax equivalent basis using a statutory rate of 35%.
(3)	Includes assets held and available for sale and nonaccrual receivables.
(4)	Includes funding of assets for both continuing and discontinued operations.

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	Six Months Ended June 30,
	2004							2003
	Average				Average			Average				Average
($ in thousands)	Balance		Interest		Rate			Balance		Interest		Rate
Owned receivables:
Business credit cards(1)	$	567,617	$	36,706		13.00	%	$	510,800	$	35,796		14.13	%
Other receivables		12,481		270		4.36			24,150		592		4.94
Total owned receivables		580,098		36,976		12.82			534,950		36,388		13.72
Investments(2)		468,020		2,797		1.19			618,286		4,102		1.33
Retained interests in securitizations		149,998		8,878		11.84			145,969		7,965		10.91
Interest-earning assets of discontinued operations		54,338		2,668		9.82			40,407		2,689		13.31
Total interest-earning assets(3)		1,252,454	$	51,319		8.22	%		1,339,612	$	51,144		7.68	%
Noninterest-earning assets		314,715							631,373
Total assets	$	1,567,169						$	1,970,985
Deposits	$	653,032	$	9,208		2.84	%	$	942,634	$	14,444		3.09	%
Debt		295,161		9,021		6.15			318,322		10,124		6.41
Subordinated debt payable to preferred securities trust		103,093		4,579		8.88			0		0		0.00
Other borrowings		162		1		1.30			139		1		1.67
Total interest-bearing liabilities(4)		1,051,448	$	22,809		4.36	%		1,261,095	$	24,569		3.93	%
Noninterest-bearing liabilities		161,544							285,793
Total liabilities		1,212,992							1,546,888
Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debentures of Advanta Corp. (trust preferred securities)		0							100,000
Stockholders’ equity		354,177							324,097
Total liabilities and stockholders’ equity	$	1,567,169						$	1,970,985
Net interest spread						3.86	%						3.75	%
Net interest margin						4.58	%						4.00	%

(1)	Interest income includes late fees for owned business credit cards receivables of $2.8 million for the six months ended June 30, 2004 and $3.0 million for the six months ended June 30, 2003.
(2)	Interest and average rate for tax-free securities are computed on a tax equivalent basis using a statutory rate of 35%.
(3)	Includes assets held and available for sale and nonaccrual receivables.
(4)	Includes funding of assets for both continuing and discontinued operations.

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PROVISION AND ALLOWANCE FOR RECEIVABLE LOSSES

For the three months ended June 30, 2004, provision for credit losses on a consolidated basis was $10.5 million as compared to $9.3 million for the same period of 2003. For the six months ended June 30, 2004, provision for credit losses on a consolidated basis was $20.0 million as compared to $18.7 million for the same period of 2003. Average owned business credit card receivables increased by $77.4 million in the three months ended June 30, 2004 and $56.8 million in the six months ended June 30, 2004 as compared to the same periods of 2003. The impact of the increases in average owned business credit card receivables on provision for credit losses in both periods was partially offset by a reduction in the estimate of losses inherent in the portfolio based on delinquency and principal charge-off trends and the current composition of the portfolio that included more high credit quality customers as compared to the same period of 2003. In addition, we have refined and enhanced our procedures and tools used in the risk management of existing customers, which has helped to reduce credit risk in the portfolio.

For the three months ended June 30, 2004, the provision for interest and fee losses, which is recorded as a direct reduction to interest and fee income, decreased by $39 thousand to $2.4 million as compared to the same period of 2003. For the six months ended June 30, 2004, the provision for interest and fee losses decreased by $474 thousand to $4.5 million as compared to the same period of 2003. The decrease was due to a reduction in the estimate of losses inherent in the portfolio based on improved delinquency and charge-off trends and the current composition of the portfolio as compared to the same periods of 2003, partially offset by growth in average owned business credit card receivables.

The allowance for receivable losses on business credit card receivables was $48.0 million as of June 30, 2004, or 8.73% of owned receivables, which was lower as a percentage of owned receivables than the allowance of $47.0 million, or 9.08% of owned receivables, as of December 31, 2003. The decrease in allowance as a percentage of receivables is due to a reduction in the estimate of losses inherent in the portfolio based on delinquency and principal charge-off trends and the current composition of the portfolio that included more high credit quality customers as compared to the same period of 2003.

Although charge-off levels are not always predictable since they are impacted by the economic environment and other factors beyond our control, and there may be month-to-month or quarterly variations in losses or delinquencies, we anticipate that the owned and managed net principal charge-off rates for the second half of 2004 will be lower than those experienced for the same period of 2003 and lower than those experienced for the first half of 2004. This expectation is based upon the level of receivables 90 days or more delinquent at June 30, 2004 and the current composition of the portfolio that reflects our strategic initiative to selectively attract and retain more high credit quality customers.

The following table provides credit quality data as of and for the year-to-date periods indicated for our owned receivable portfolio including a summary of allowances for receivable losses, delinquencies, nonaccrual receivables, accruing receivables past due 90 days or more, and net principal charge-offs. Consolidated data includes business credit cards and other receivables.

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	June 30,			December 31,			June 30,
($ in thousands)	2004			2003			2003
CONSOLIDATED – OWNED
Allowance for receivable losses	$	49,331		$	48,454		$	47,326
Receivables 30 days or more delinquent		25,605			25,413			27,228
Receivables 90 days or more delinquent		13,421			12,808			13,953
Nonaccrual receivables		10,193			7,978			7,860
Accruing receivables past due 90 days or more		11,677			11,320			11,741
As a percentage of gross receivables:
Allowance for receivable losses		8.80	%		9.06	%		10.15	%
Receivables 30 days or more delinquent		4.57			4.75			5.84
Receivables 90 days or more delinquent		2.39			2.39			2.99
Nonaccrual receivables		1.82			1.49			1.69
Accruing receivables past due 90 days or more		2.08			2.12			2.52
Net principal charge-offs for the year-to-date period ended June 30 and December 31	$	18,766		$	43,704		$	17,991
Net principal charge-offs for the three months ended June 30 and December 31		9,857			10,169			9,563
As a percentage of average gross receivables (annualized):
Net principal charge-offs for the year-to-date period ended June 30 and December 31		6.47	%		7.18	%		6.73	%
Net principal charge-offs for the three months ended June 30 and December 31		6.63			6.66			7.22
BUSINESS CREDIT CARDS – OWNED
Allowance for receivable losses	$	47,981		$	47,041		$	45,914
Receivables 30 days or more delinquent		25,493			25,301			25,839
Receivables 90 days or more delinquent		13,309			12,696			13,184
Nonaccrual receivables		10,081			7,866			7,091
Accruing receivables past due 90 days or more		11,677			11,320			11,741
As a percentage of gross receivables:
Allowance for receivable losses		8.73	%		9.08	%		10.37	%
Receivables 30 days or more delinquent		4.64			4.88			5.84
Receivables 90 days or more delinquent		2.42			2.45			2.98
Nonaccrual receivables		1.83			1.52			1.60
Accruing receivables past due 90 days or more		2.12			2.19			2.65
Net principal charge-offs for the year-to-date period ended June 30 and December 31	$	18,767		$	43,670		$	17,963
Net principal charge-offs for the three months ended June 30 and December 31		9,854			10,163			9,555
As a percentage of average gross receivables (annualized):
Net principal charge-offs for the year-to-date period ended June 30 and December 31		6.61	%		7.42	%		7.03	%
Net principal charge-offs for the three months ended June 30 and December 31		6.75			6.84			7.55

SECURITIZATION INCOME

Advanta Business Cards recognized securitization income as follows:

($ in thousands)	2004		2003
Three months ended June 30	$	32,627	$	31,752
Six months ended June 30		65,167		61,362

Securitization income for the three and six months ended June 30, 2004 increased as compared to the same periods of 2003, due to the positive impacts from increased volume of securitized receivables and a decrease in the net principal charge-off rate on securitized receivables, partially offset by a decrease in yield on securitized receivables. These fluctuations in yields and rates are similar to those experienced in owned business credit card receivables as discussed in the

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“Interest Income and Expense” and “Provision and Allowance for Receivable Losses” sections of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Managed Receivable Data

In addition to evaluating the financial performance of the Advanta Business Cards segment under generally accepted accounting principles (“GAAP”), we evaluate Advanta Business Cards’ performance on a managed basis. Our managed business credit card receivable portfolio is comprised of both owned and securitized business credit card receivables. We sell business credit card receivables through securitizations accounted for as sales under GAAP. We continue to own and service the accounts that generate the securitized receivables. Managed data presents performance as if the securitized receivables had not been sold. We believe that performance on a managed basis provides useful supplemental information because we retain interests in the securitized receivables and, therefore, we have a financial interest in and exposure to the performance of the securitized receivables. Revenue and credit data on the managed portfolio provides additional information useful in understanding the performance of the retained interests in securitizations. The following tables provide managed data for Advanta Business Cards and a reconciliation of the managed data to the most directly comparable GAAP financial measures:

INCOME STATEMENT MEASURES AND STATISTICS

									Advanta
	Advanta								Business
	Business		GAAP			Securitization			Cards		Managed
($ in thousands)	Cards GAAP		Ratio(3)			Adjustments			Managed		Ratio(3)
Three Months Ended June 30, 2004:
Interest income	$	23,735		12.94	%	$	92,046		$	115,781		14.86	%
Interest expense		8,590		4.68			11,373			19,963		2.56
Net interest income		15,145		8.26			80,673			95,818		12.30
Noninterest revenues		73,115		39.87			(36,033	)		37,082		4.76
Provision for credit losses		10,654		5.81			44,640	(2)		55,294		7.10
Risk-adjusted revenues(1)		77,606		42.32			0			77,606		9.96
Average business credit card interest-earning assets		733,579					2,382,887			3,116,466
Average business credit card receivables		583,581					2,532,885			3,116,466
Net principal charge-offs		9,854		6.75			44,640			54,494		6.99
Three Months Ended June 30, 2003:
Interest income	$	23,007		13.86	%	$	89,819		$	112,826		16.14	%
Interest expense		11,269		6.79			9,684			20,953		3.00
Net interest income		11,738		7.07			80,135			91,873		13.14
Noninterest revenues		66,283		39.93			(33,550	)		32,733		4.68
Provision for credit losses		9,555		5.76			46,585	(2)		56,140		8.03
Risk-adjusted revenues(1)		68,466		41.24			0			68,466		9.79
Average business credit card interest-earning assets		664,001					2,132,870			2,796,871
Average business credit card receivables		506,200					2,290,671			2,796,871
Net principal charge-offs		9,555		7.55			46,585			56,140		8.03

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INCOME STATEMENT MEASURES AND STATISTICS

									Advanta
	Advanta								Business
	Business		GAAP			Securitization			Cards		Managed
($ in thousands)	Cards GAAP		Ratio(3)			Adjustments			Managed		Ratio(3)
Six Months Ended June 30, 2004:
Interest income	$	45,584		12.70	%	$	185,153		$	230,737		14.93	%
Interest expense		17,713		4.93			22,707			40,420		2.62
Net interest income		27,871		7.77			162,446			190,317		12.31
Noninterest revenues		143,377		39.96			(71,619	)		71,758		4.64
Provision for credit losses		20,067		5.60			90,827	(2)		110,894		7.17
Risk-adjusted revenues(1)		151,181		42.13			0			151,181		9.78
Average business credit card interest-earning assets		717,615					2,374,210			3,091,825
Average business credit card receivables		567,617					2,524,208			3,091,825
Net principal charge-offs		18,767		6.61			90,827			109,594		7.09
Six Months Ended June 30, 2003:
Interest income	$	43,761		13.33	%	$	176,914		$	220,675		16.09	%
Interest expense		22,003		6.70			19,205			41,208		3.00
Net interest income		21,758		6.63			157,709			179,467		13.09
Noninterest revenues		131,232		39.96			(65,649	)		65,583		4.78
Provision for credit losses		18,963		5.78			92,060	(2)		111,023		8.10
Risk-adjusted revenues(1)		134,027		40.81			0			134,027		9.77
Average business credit card interest-earning assets		656,769					2,085,603			2,742,372
Average business credit card receivables		510,800					2,231,572			2,742,372
Net principal charge-offs		17,963		7.03			92,060			110,023		8.02

(1)	Risk-adjusted revenues represent net interest income and noninterest revenues, less provision for credit losses.
(2)	Includes the amount by which the credit losses would have been higher had the securitized receivables remained as owned and the provision for credit losses on securitized receivables been equal to actual reported charge-offs.
(3)	Ratios are as a percentage of average business credit card interest-earning assets except net principal charge-off ratios, which are as a percentage of average business credit card receivables.

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BALANCE SHEET MEASURES AND STATISTICS

	Advanta							Advanta
	Business		GAAP			Securitization		Business		Managed
($ in thousands)	Cards GAAP		Ratio(1)			Adjustments		Cards Managed		Ratio(1)
As of June 30, 2004
Number of business credit card accounts		780,415					N/A		780,415
Ending business credit card receivables	$	549,862				$	2,546,777	$	3,096,639
Receivables 30 days or more delinquent		25,493		4.64	%		123,123		148,616		4.80	%
Receivables 90 days or more delinquent		13,309		2.42			63,980		77,289		2.50
Nonaccrual receivables		10,081		1.83			48,966		59,047		1.91
Accruing receivables past due 90 days or more		11,677		2.12			56,111		67,788		2.19
As of December 31, 2003
Number of business credit card accounts		786,700					N/A		786,700
Ending business credit card receivables	$	518,040				$	2,463,747	$	2,981,787
Receivables 30 days or more delinquent		25,301		4.88	%		148,177		173,478		5.82	%
Receivables 90 days or more delinquent		12,696		2.45			74,762		87,458		2.93
Nonaccrual receivables		7,866		1.52			47,381		55,247		1.85
Accruing receivables past due 90 days or more		11,320		2.19			66,376		77,696		2.61
As of June 30, 2003
Number of business credit card accounts		788,470					N/A		788,470
Ending business credit card receivables	$	442,769				$	2,365,176	$	2,807,945
Receivables 30 days or more delinquent		25,839		5.84	%		150,380		176,219		6.28	%
Receivables 90 days or more delinquent		13,184		2.98			76,459		89,643		3.19
Nonaccrual receivables		7,091		1.60			42,162		49,253		1.75
Accruing receivables past due 90 days or more		11,741		2.65			67,804		79,545		2.83

(1) Ratios are as a percentage of ending business credit card receivables.

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SERVICING REVENUES

Advanta Business Cards recognized servicing revenue as follows:

($ in thousands)	2004		2003
Three months ended June 30	$	12,499	$	9,873
Six months ended June 30		24,632		19,900

The increase in servicing revenue in both the three and six months ended June 30, 2004 as compared to the same periods of 2003 was due to increased volume of securitized business credit card receivables.

OTHER REVENUES

	Three Months Ended						Six Months Ended
($ in thousands)	June 30,						June 30,
	2004			2003			2004			2003
Interchange income	$	35,513		$	29,289		$	67,088		$	55,427
Business credit cards cash back rewards		(5,933	)		(4,349	)		(11,684	)		(6,775	)
Business credit cards business rewards		(4,295	)		(3,185	)		(7,765	)		(4,891	)
Balance transfer fees		962			865			2,389			2,216
Cash usage fees		805			616			1,568			1,371
Other fee revenues		1,182			1,644			2,471			3,047
Earnings allocable to partnership interest		400			500			1,000			1,000
Investment securities gains (losses), net		0			(1,158	)		49			(1,766	)
Valuation adjustments on other receivables held for sale		0			555			0			450
Other		145			152			417			282
Total other revenues, net	$	28,779		$	24,929		$	55,533		$	50,361

Interchange income includes interchange fees on both owned and securitized business credit cards. The increases in interchange income in the three and six months ended June 30, 2004 as compared to the same periods of 2003 were due primarily to higher transaction volume. In the three months ended June 30, 2004, the increase in interchange income also includes the impact of increased interchange rates established by MasterCard®* in April 2004. The average interchange rate was 2.2% in the three month period ended June 30, 2004 as compared to 2.1% in the three month period ended June 30, 2003 and in each of the six month periods ended June 30, 2004 and 2003.

The increases in business credit cards cash back rewards in the three and six months ended June 30, 2004 as compared to the same periods of 2003 were due primarily to the increase in average business credit card accounts in the cash back rewards programs.

* MasterCard® is a federally registered service mark of MasterCard International, Inc.

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The increases in business credit cards business rewards in the three and six months ended June 30, 2004 as compared to the same periods of 2003 were due primarily to changes in estimate of anticipated costs of future rewards redemptions. Business credit cards business rewards included a $900 thousand increase in estimated costs in the three months ended June 30, 2004, a $1.4 million increase in the six months ended June 30, 2004, a $179 thousand increase in the three months ended June 30, 2003 and a $1.1 million decrease in the six months ended June 30, 2003. See Note 7 to the consolidated financial statements for further discussion.

In the three months ended June 30, 2004, we recognized an estimated $400 thousand of earnings allocable to our partnership interest in Fleet Credit Card Services, L.P., as compared to $500 thousand in the same period of 2003. In the six months ended June 30, 2004 and 2003, we recognized an estimated $1.0 million of earnings allocable to our partnership interest in Fleet Credit Card Services, L.P. In connection with the anticipated combination of Bank of America’s and Fleet’s consumer credit card businesses and our May 28, 2004 agreement with Bank of America, our partnership interest in Fleet Credit Card Services, L.P. would represent an interest in the combined business. See Note 8 to the consolidated financial statements. Subsequent to the date of the agreement, we have accounted for our investment in the partnership interest in Fleet Credit Card Services, L.P. using the cost method.

Investment securities gains (losses), net, primarily represent increases (decreases) in valuations of venture capital investments reflecting the market conditions for the investments.

OPERATING EXPENSES

	Three Months Ended				Six Months Ended
	June 30,				June 30,
($ in thousands)	2004		2003		2004		2003
Salaries and employee benefits	$	23,276	$	18,891	$	45,707	$	36,882
Amortization of deferred origination costs, net		8,796		12,973		18,133		27,157
Marketing		6,209		4,444		9,470		7,371
External processing		5,137		5,410		10,356		10,268
Professional fees		3,675		2,879		7,923		6,075
Equipment		2,738		2,533		5,726		5,927
Occupancy		1,996		2,473		4,577		4,262
Credit		1,481		997		3,072		2,182
Insurance		1,095		976		2,179		1,727
Fraud		902		1,036		1,856		1,951
Postage		833		902		1,807		1,804
Telephone		656		772		1,581		1,846
Other		3,102		2,909		5,703		5,265
Total operating expenses	$	59,896	$	57,195	$	118,090	$	112,717

Salaries and employee benefits increased in the three and six months ended June 30, 2004 as compared to the same periods of 2003 due to higher incentive compensation expense resulting from improved earnings and collections performance and personnel hired in connection with initiatives to originate and retain relationships with high credit quality customers. In addition, salaries and employee benefits in the six months ended June 30, 2004 include $1.6 million of expense associated with executive compensation expense incurred in connection with changes in senior management and Venture Capital segment severance costs.

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Amounts paid to third parties to acquire business credit card accounts and certain other origination costs are deferred and netted against any related business credit card origination fee, and the net amount is amortized on a straight-line basis over the privilege period of one year. Amortization of deferred origination costs, net, decreased in the three and six months ended June 30, 2004 as compared to the same periods of 2003 due primarily to the number and timing of new account originations in prior periods. We originated a significant volume of new accounts in the fourth quarter of 2002, and the costs to originate those accounts increased amortization expense throughout most of 2003. We expect amortization of business credit card deferred origination costs to be lower in each of the remaining quarters of 2004, as compared to the same periods of 2003, based on the level of deferred origination costs and the timing of new accounts during prior periods.

Marketing expense increased in the three and six months ended June 30, 2004 as compared to the same periods of 2003 due primarily to costs incurred related to our development of alliances with other organizations serving segments of the small business market and amortization expense on marketing rights related to certain of these alliances, as well as increased marketing activity in response to the competitive environment.

Professional fees increased in the three and six months ended June 30, 2004 as compared to the same periods of 2003 due primarily to an increase in the use of external consultants for certain initiatives to originate and retain relationships with high credit quality customers and other corporate matters, partially offset by a reduction in legal expenses.

Occupancy expense decreased in the three months ended June 30, 2004 as compared to the same period of 2003 due to $410 thousand of lease termination costs paid in June 2003 related to office space formerly used in our venture capital operations. Occupancy expense increased in the six months ended June 30, 2004 as compared to the same period of 2003 due to additional office space that we began leasing in March 2003, partially offset by the impact of the lease termination costs discussed above. In addition, occupancy expense in the six months ended June 30, 2004 includes approximately $571 thousand of expense relating to lease commitments associated with the closure of an operational location of our Venture Capital segment in the first quarter of 2004.

Credit expense increased in the three and six months ended June 30, 2004 as compared to the same periods of 2003 due in part to a shift in the types of our recoveries. There was an increase in the dollar volume of charged-off accounts collected through outsourced individual account recovery efforts. Credit expense also increased in the three and six months due to the utilization of additional services from credit information service providers.

Insurance expense increased in the three and six months ended June 30, 2004 as compared to the same periods of 2003 due to an increase in directors’ and officers’ professional liability insurance costs as a result of market rates for this type of insurance.

LITIGATION CONTINGENCIES

We estimate our litigation reserves based on the status of litigation and our assessment of the ultimate resolution of each action after consultation with our attorneys. However, due to the inherent uncertainty in litigation and since the ultimate resolutions of our litigation, claims and other legal proceedings are influenced by factors outside of our control, it is reasonably possible that our estimated liability under these proceedings may change or that actual results will differ from our estimates. Changes in estimates or other charges related to

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litigation are included in operating expenses of the respective business segment if related to continuing operations, or gain (loss) on discontinuance of mortgage and leasing businesses if related to discontinued operations. See Note 8 to the consolidated financial statements for further discussion of litigation contingencies.

INCOME TAXES

Our effective tax rate increased to 39.5% in 2004 due to higher state income taxes. Income tax expense on income from continuing operations was as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
($ in thousands)	2004			2003			2004			2003
Income tax expense	$	7,071		$	3,932		$	13,234		$	7,628
Effective tax rate		39.5	%		38.5	%		39.5	%		38.5	%

See Note 8 for a discussion of tax matters currently before the Internal Revenue Service Regional Office of Appeals and the agreement with Bank of America signed in the second quarter of 2004.

DISCONTINUED OPERATIONS

For the three months ended June 30, 2004, we recorded an after-tax gain on the discontinuance of our mortgage and leasing businesses of $160 thousand. The components of this net gain include a $2.8 million pretax loss on the discontinuance of the mortgage business, a $3.0 million pretax gain on the discontinuance of the leasing business, and tax expense of $105 thousand. The loss on the discontinuance of the mortgage business was the result of an increase in our estimated future costs of mortgage business-related contingent liabilities, due primarily to recent litigation with Chase and disputes related to one of our former mortgage programs. The gain on the discontinuance of the leasing business was principally associated with favorable performance in revenues and an insurance settlement, partially offset by increased operating expenses due to a lengthening of the anticipated timeframe over which we expect to incur certain operating expenses related to the lease portfolio.

For the three months ended June 30, 2003, we recorded an after-tax loss on the discontinuance of our mortgage and leasing businesses of $2.0 million. The components of this net loss include a pretax loss on the discontinuance of the mortgage business of $2.6 million, a pretax loss on the discontinuance of the leasing business of $600 thousand, and a tax benefit of $1.2 million. The loss on the discontinuance of the mortgage business represents an increase in our estimated future costs of mortgage business-related contingent liabilities, due primarily to a lengthening of the anticipated timeframe of the resolution for those contingent liabilities, which included an extension of the discovery process and a delay in the scheduled trial date in the original litigation with Chase. The loss on the discontinuance of the leasing business represents an adjustment in our estimate of operating results of the leasing segment over the remaining life of the lease portfolio. The decrease in estimated operating results of the leasing segment was primarily associated with an unfavorable sales tax assessment, partially offset by favorable credit performance on the leasing portfolio.

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OFF-BALANCE SHEET ARRANGEMENTS

Off-balance sheet securitizations provide a significant portion of our funding and they are one of our primary sources of liquidity. At June 30, 2004, off-balance sheet securitized receivables represented 64% of our funding. These transactions enable us to limit our credit risk in the securitized receivables to the amount of our retained interests in securitizations. We had $150.0 million of retained interests in securitizations at June 30, 2004 and at December 31, 2003.

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

	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
($ in thousands)	2004		2003		2004		2003
Average securitized receivables	$	2,532,885	$	2,290,671	$	2,524,208	$	2,231,572
Securitization income		32,627		31,752		65,167		61,362
Discount accretion		4,276		4,373		8,878		7,965
Interchange income		28,801		23,521		54,745		43,925
Servicing revenues		12,499		9,873		24,632		19,900
Proceeds from new securitizations		0		226,851		90,000		299,376
Proceeds from collections reinvested in revolving-period securitizations		1,633,689		710,553		3,257,245		1,768,945
Cash flows received on retained interests		68,208		84,702		134,890		133,002

See Note 6 to the consolidated financial statements for the key assumptions used in estimating the fair value of retained interests in securitizations as of June 30, 2004 and December 31, 2003 and for the three and six months ended June 30, 2004 and 2003.

We have a $280 million committed commercial paper conduit facility that provides off-balance sheet funding, $90 million of which was used at June 30, 2004. In June 2004, this facility was renewed through June 14, 2005.

Each of our business credit card securitization series has a date that the revolving period is scheduled to end. The revolving periods for each of the series in our securitization trust, except Series 1997-A, may be extended for up to seven months past the scheduled end of the revolving period, if the payment rates on the receivables in the trust meet certain thresholds. Based on current payment rates, we do not anticipate that any of our business credit card securitization series will end their revolving period in 2004.

In June 2003, the FASB issued an exposure draft, “Qualifying Special-Purpose Entities and Isolation of Transferred Assets – An Amendment of FASB Statement No. 140.” The changes and clarifications in the proposed statement would prevent derecognition by transferors that may continue to retain effective control of transferred assets by providing financial support other than a subordinated retained interest or making decisions about beneficial interests. The changes would also help to ensure that variable interest entities will not qualify for the qualifying special-purpose entity exception to FASB Interpretation No. 46, as revised, if any party involved is in a position to enhance or protect the value of its own subordinated interest by providing financial support for or making decisions about reissuing beneficial interests. For public entities, this proposed

42

statement would apply prospectively to transfers of assets occurring after the beginning of the first interim period after the issuance of the final statement. In June 2004, the FASB announced plans to issue a revised exposure draft in the fourth quarter of 2004 and a final standard in the second quarter of 2005. Management will evaluate any potential impact of this revised proposed statement when it is available.

MARKET RISK SENSITIVITY

Market risk is the potential for loss or diminished financial performance arising from adverse changes in market forces including interest rates and market prices. Market risk sensitivity is the degree to which a financial instrument, or a company that owns financial instruments, is exposed to market forces. Fluctuations in interest rates, changes in economic conditions, shifts in customer behavior, and other factors can affect our financial performance. Changes in economic conditions and shifts in customer behavior are difficult to predict, and our financial performance generally cannot be insulated from these forces.

We measure our interest rate risk using a rising rate scenario and a declining rate scenario. Net interest income is estimated using a third party software model that uses standard income modeling techniques. We also measure the effect of interest rate risk on our managed net interest income, which includes net interest income on owned assets and net interest income on securitized receivables. The measurement of managed net interest income in addition to net interest income on owned assets is meaningful because our securitization income fluctuates with yields on securitized receivables and interest rates earned by noteholders. Both increasing and decreasing rate scenarios assume an instantaneous shift in rates and measure the corresponding change in expected net interest income as compared to a base case scenario. As of June 30, 2004 and December 31, 2003, we estimated that our net interest income would change as follows over a twelve-month period:

	June 30,			December 31,
	2004			2003
Estimated percentage increase (decrease) in net interest income on owned receivables:
Assuming 200 basis point increase in interest rates		11	%		11	%
Assuming 200 basis point decrease in interest rates		(5	)%		3	%
Estimated percentage increase (decrease) in net interest income on securitized receivables:
Assuming 200 basis point increase in interest rates		(5	)%		(5	)%
Assuming 200 basis point decrease in interest rates		10	%		9	%
Estimated percentage increase (decrease) in net interest income on managed receivables:
Assuming 200 basis point increase in interest rates		(2	)%		(2	)%
Assuming 200 basis point decrease in interest rates		7	%		8	%

Our business credit card receivables include interest rate floors that cause our net interest income on managed receivables to rise in the declining rate scenario. Our net interest income on managed receivables decreases in a rising rate scenario due to the variable rate funding of off-balance sheet securitized receivables and the portion of the business credit card portfolio that is effectively at a fixed rate because of the nature of the pricing of the accounts or because the cardholder pays their balance in full each month resulting in an effective fixed yield of 0%.

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Changes in the composition of our balance sheet and the interest rate environment have also impacted the results of the net interest income sensitivity analyses.

The above estimates of net interest income sensitivity alone do not provide a comprehensive view of our exposure to interest rate risk. The quantitative risk information is limited by the parameters and assumptions utilized in generating the results. These analyses are useful only when viewed within the context of the parameters and assumptions used. The above rate scenarios do not reflect management’s expectation regarding the future direction of interest rates, and they depict only two possibilities out of a large set of possible scenarios.

LIQUIDITY, CAPITAL RESOURCES AND ANALYSIS OF FINANCIAL CONDITION

Our goal is to maintain an adequate level of liquidity, for both long-term and short-term needs, through active management of both assets and liabilities. Since Advanta Corp.’s debt rating is not investment grade, our access to unsecured, institutional debt is limited. However, we do have access to diverse funding sources as described below, and had a high level of liquidity at June 30, 2004. At June 30, 2004, we had $289 million of federal funds sold, $230 million of receivables held for sale, and $180 million of investments, which could be sold to generate additional liquidity.

Components of funding were as follows:

	June 30, 2004					December 31, 2003
($ in thousands)	Amount		%			Amount		%
Off-balance sheet securitized receivables(1)	$	2,454,849		64	%	$	2,371,819		62	%
Deposits		647,104		17			672,204		18
Debt and other borrowings		291,226		7			314,817		8
Subordinated debt payable to preferred securities trust		103,093		3			103,093		3
Equity		366,612		9			341,207		9
Total	$	3,862,884		100	%	$	3,803,140		100	%

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

As shown above in the components of funding table, off-balance sheet securitizations provide a significant portion of our funding and they are one of our primary sources of liquidity. See the “Off-Balance Sheet Arrangements” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion of off-balance sheet securitizations and their impact on our liquidity, capital resources and financial condition. In order to further diversify our sources of funding, we anticipate increasing the percentage of receivables that are held on-balance sheet in the second half of 2004, and expect off-balance sheet securitized receivables to represent approximately 60% of our funding at December 31, 2004, as compared to 64% at June 30, 2004. Given our current expectations, we may not have any significant public business card securitizations in the remainder of 2004.

We continue to offer unsecured debt securities of Advanta Corp., in the form of RediReserve Certificates and Investment Notes, to retail investors through our

44

retail note program. We change the interest rates we offer frequently, depending on market conditions and our funding needs. In the three and six months ended June 30, 2004, we reduced originations of retail notes due to our liquidity position and, as a result, the balance of RediReserve Certificates and Investment Notes outstanding decreased by $33.6 million in the six months ended June 30, 2004 to $281 million at June 30, 2004. Based on anticipated liquidity needs, we plan to continue reducing originations of retail notes during the remainder of 2004.

In June 2004, we exercised an option to extend the term of an existing operating lease for five years through 2010 for office space used for certain business card operations and general business purposes. The minimum lease payments under the extension will be $2.5 million in each of the years 2006 through 2009 and $2.0 million in 2010.

On February 2, 2004, the court issued its final judgment and order in the Delaware Chancery Court litigation with Fleet. In early February 2004, the escrow agent released $63.8 million from the escrow account to Fleet in satisfaction of all amounts due to Fleet in connection with this litigation and the $10.5 million of funds remaining in the escrow account were released and transferred from the restricted escrow account to an unrestricted cash account. At December 31, 2003, the escrow account was included in restricted interest-bearing deposits on the consolidated balance sheet. In accordance with the court’s order, the payment to Fleet was net of amounts due to Advanta from Fleet. As a result of the court’s order and payment to Fleet in February 2004, there was a decrease in other assets and other liabilities as of the payment date. There was no impact to the results of our operations since, based on the final judgment and order, our reserves at December 31, 2003 were adequate. In March 2004, we filed a notice of appeal to commence the appeals process related to this final judgment and order. On May 28, 2004, we reached an agreement with Bank of America to resolve all outstanding litigation, including partnership tax disputes, between Advanta and FleetBoston Financial Corporation, which was recently acquired by Bank of America. Under the agreement, Bank of America will pay Advanta $63.8 million in cash which represents a return of the payments made to Fleet in February 2004 described above. That payment will be made following IRS approval of the settlement of the tax disputes. We expect our book value would increase by approximately $2.45 per share as a result of the agreement and other considerations associated with the agreement. We anticipate that the $63.8 million of cash will be used for general corporate purposes and to enable us to have lower debt levels than would otherwise be the case. See Note 8 to the consolidated financial statements for further discussion.

Advanta Corp. and its subsidiaries are involved in other litigation, including litigation relating to the Mortgage Transaction, class action lawsuits, claims and legal proceedings arising in the ordinary course of business or discontinued operations, including litigation arising from our operation of the mortgage business prior to our exit from that business in the first quarter of 2001. See Note 8 to the consolidated financial statements for further discussion. Management believes that the aggregate loss, if any, resulting from existing litigation, claims and other legal proceedings will not have a material adverse effect on our liquidity or capital resources based on our current expectations regarding the ultimate resolutions of these actions. However, due to the inherent uncertainty in litigation and since the ultimate resolutions of these proceedings are influenced by factors outside of our control, it is reasonably possible that the estimated cash flow related to these proceedings may change or that actual results will differ from our estimates.

45

In February 2004, the Board of Directors of Advanta Corp. approved a 50% increase in the regular quarterly cash dividends per share beginning in the second quarter of 2004. We funded the increase in dividends with operating cash flows.

Our bank subsidiaries are subject to regulatory capital requirements and other regulatory provisions that restrict their ability to lend and/or pay dividends to Advanta Corp. and its affiliates. Advanta Bank Corp. issues and funds our business credit cards and is the servicer of our discontinued leasing business. Advanta Bank Corp. paid dividends to Advanta Corp. of $20 million in March 2004 and $5 million in June 2004. At June 30, 2004, Advanta Bank Corp.’s combined total capital ratio (combined Tier I and Tier II capital to risk-weighted assets) was 28.15% as compared to 26.28% at December 31, 2003. At both dates, Advanta Bank Corp. had capital in excess of levels a bank is required to maintain to be classified as well-capitalized under the regulatory framework for prompt corrective action. Prior to our exit from the mortgage business in the first quarter of 2001, Advanta National Bank issued and funded a large portion of our mortgage business. Advanta National Bank’s operations are currently not material to our consolidated operating results. Our insurance subsidiaries are also subject to certain capital and dividend rules and regulations as prescribed by state jurisdictions in which they are authorized to operate. Management believes that these restrictions, for both bank and insurance subsidiaries, will not have an adverse effect on Advanta Corp.’s ability to meet its cash obligations due to the current levels of liquidity and diversity of funding sources.

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. These forward-looking statements may be identified by the use of forward-looking phrases such as “will likely result,” “may,” “are expected to,” “is anticipated,” “estimate,” “projected,” “intends to” or other similar words or phrases. The most significant among these risks and uncertainties are:

(1)	our managed net interest income including changes resulting from fluctuations in the volume of receivables and the range and timing of pricing offers to cardholders;
(2)	competitive pressures;
(3)	political conditions, social conditions, monetary and fiscal policies and general economic conditions that affect the level of new account originations, customer spending, delinquencies and charge-offs;
(4)	factors affecting fluctuations in the number of accounts or receivable balances including the retention of cardholders after promotional pricing periods have expired;
(5)	interest rate fluctuations;
(6)	the level of expenses;
(7)	the timing of the securitizations of our receivables;
(8)	factors affecting the value of investments that we hold;
(9)	the effects of government regulation, including restrictions and limitations imposed by banking laws, regulators, examinations, and Advanta National Bank’s agreements with its regulators;
(10)	effect of, and changes in, tax laws, rates, regulations and policies;
(11)	relationships with customers, significant vendors and business partners;
(12)	difficulties or delays in the development, production, testing and marketing of products or services;
(13)	the amount and cost of financing available to us;
(14)	the ratings on our debt and the debt of our subsidiaries;
(15)	revisions to estimates associated with the discontinuance of our mortgage and leasing businesses;

46

(16)	obtaining Internal Revenue Service approval of the settlement of the tax disputes, as required under the agreement with Bank of America;
(17)	the impact of litigation;
(18)	the proper design and operation of our disclosure controls and procedures; and
(19)	the ability to attract and retain key personnel.

Additional risks that may affect our future performance are set forth elsewhere in this Quarterly Report on Form 10-Q, in our Annual Report on Form 10-K for the year ended December 31, 2003 and in our other filings with the Securities and Exchange Commission.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this item is set forth in “Item 2-Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Report on Form 10-Q. See “Market Risk Sensitivity.”

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, rather than absolute, assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

An evaluation was performed by management with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2004, our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. There have been no changes in our internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, these internal controls over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The legal proceedings and claims described under the heading captioned “Commitments and Contingencies” in Note 8 of the Notes to Consolidated Financial Statements set forth in Part I, Item 1 of this Quarterly Report are hereby incorporated by reference.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a)	Advanta Corp. held its Annual Meeting of Stockholders on June 9, 2004 (the “Annual Meeting”).
(b)	Dennis Alter, Dana Becker Dunn, Arthur P. Bellis and Robert S. Blank were the nominees for director who were included in the proxy statement sent to stockholders of record in connection with the Annual Meeting and each received sufficient votes at the Annual Meeting, in person or by proxy, to be reelected to the Board. However, Mr. Bellis did not stand for reelection because prior to the Annual Meeting he retired from the Board of Directors. In addition to Ms. Becker Dunn and Messrs. Alter and Blank, the following directors’ terms of office continued after the Annual Meeting: Max Botel, Ronald Lubner, Robert H. Rock, Olaf Olafsson, William A. Rosoff and Michael Stolper.
(c)	The following proposal was submitted to a vote of stockholders.

The election of four directors to hold office until the 2007 Annual Meeting of Stockholders.

NOMINEES	VOTES FOR			VOTES WITHHELD
Dennis Alter		8,332,783			336,725
Dana Becker Dunn		8,018,834			650,674
Arthur P. Bellis		8,354,917	*		314,591	*
Robert S. Blank		8,055,439			614,069

* Mr. Bellis did not stand for reelection at the Annual Meeting because prior to the Annual Meeting he retired from the Board of Directors. See Item 4(b) above.

(d) Not required.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits – The following exhibits are being filed with this report on Form 10-Q.

Exhibit
Number	Description of Document
10.1	Agreement relating to Fleet Credit Card Services, L.P., dated as of May 28, 2004, by and between Advanta Corp., Advanta National Bank, Advanta Service Corp., Fleet Credit Card Holdings, Inc., Fleet Credit Card Services, L.P. and Bank of America Corp.
10.2	Letter Agreement between Advanta Corp. and Brian Tierney dated June 8, 2004.
10.3	Relocation Agreement by and between Advanta Corp. and John F. Moore, dated as of May 20, 2004.
10.4	Letter Agreement between Advanta Corp. and Arthur Bellis dated June 8, 2004.
12	Consolidated Computation of Ratio of Earnings to Fixed Charges
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

(b)(1)	A Current Report on Form 8-K, dated April 22, 2004, was filed by Advanta setting forth the financial highlights of Advanta’s results of operations for the quarter ended March 31, 2004.
(b)(2)	A Current Report on Form 8-K, dated April 22, 2004, was filed by Advanta for the purpose of filing disclosures made during the April 22, 2004 conference call discussing the company’s results for the quarter ended March 31, 2004.
(b)(3)	A Current Report on Form 8-K, dated June 21, 2004, was filed by Advanta announcing that it had reached an agreement with Bank of America Corp. to resolve all outstanding litigation, including partnership tax disputes, between Advanta and FleetBoston Financial Corporation, which was recently acquired by Bank of America. The agreement is subject to the Internal Revenue Service’s final approval of the settlement of the tax disputes.

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SIGNATURES

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

	Advanta Corp. (Registrant)
By	/s/ Philip M. Browne
Senior Vice President and
Chief Financial Officer
August 6, 2004
By	/s/ David B. Weinstock
Vice President and
Chief Accounting Officer
August 6, 2004

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EXHIBIT INDEX

		Manner of
Exhibit	Description	Filing
10.1	Agreement relating to Fleet Credit Card Services, L.P., dated as of May 28, 2004, by and between Advanta Corp., Advanta National Bank, Advanta Service Corp., Fleet Credit Card Holdings, Inc., Fleet Credit Card Services, L.P. and Bank of America Corp.	*
10.2	Letter Agreement between Advanta Corp. and Brian Tierney dated June 8, 2004.	*
10.3	Relocation Agreement by and between Advanta Corp. and John F. Moore, dated as of May 20, 2004	*
10.4	Letter Agreement between Advanta Corp. and Arthur Bellis dated June 8, 2004.	*
12	Consolidated Computation of Ratio of Earnings to Fixed Charges	*
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	*
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	*
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	*
32.2	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	*

* Filed electronically herewith.

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EX-10.1

                                                                    Exhibit 10.1

                              AGREEMENT RELATING TO
                        FLEET CREDIT CARD SERVICES, L.P.

      THIS AGREEMENT (the "AGREEMENT") is made and entered into as of the 28th
day of May, 2004 (the "EFFECTIVE DATE"), by and between ADVANTA CORP. ("AC"),
ADVANTA NATIONAL BANK ("ANB"), ADVANTA SERVICE CORP. ("ASC"), FLEET CREDIT CARD
HOLDINGS, INC. ("FCCH"), FLEET CREDIT CARD SERVICES, L.P. ("SERVICES") and BANK
OF AMERICA CORP. ("BAC"). AC, ANB and ASC are sometimes referred to herein
individually as an "ADVANTA PARTNER" and collectively as "ADVANTA." Each Advanta
Partner, FCCH, Services and BAC are sometimes referred to herein individually as
a "PARTY" and collectively as the "PARTIES." Any capitalized term used in this
Agreement and not otherwise defined herein shall have the same meaning given
such term in the Limited Partnership Agreement of Fleet Credit Card Services,
L.P., dated as of May 26, 1998 (the "LIMITED PARTNERSHIP AGREEMENT").

                              STATEMENT OF PURPOSE

      Since February 20, 1998, Services (or its predecessor, Fleet Credit Card
LLC) has owned and operated the consumer credit card business of FleetBoston
Financial Corporation and its Affiliates (collectively "FLEET"), which business
resulted from the contribution by Advanta and Fleet Financial Group, Inc. (the
predecessor to Fleet) of the assets and liabilities of their respective consumer
credit card businesses to Fleet Credit Card LLC pursuant to that certain
Contribution Agreement, dated as of October 28, 1997, as amended (the
"CONTRIBUTION AGREEMENT"). Services is a Rhode Island limited partnership that
is governed by the terms and conditions of the Limited Partnership Agreement.
FCCH is the sole general partner of Services and owns a 98.7% Interest in
Services, and AC, ANB and ASC are the sole limited partners in Services and
collectively own a 1.3% Interest in Services. Effective as of April 1, 2004,
Fleet merged with and into BAC, with BAC being the survivor corporation. BAC now
desires to combine the credit card business owned and operated by Services with
BAC's consumer credit card business primarily owned and operated by BAC's
subsidiary, Bank of America, N.A. (USA) ("BANA(USA)"), and BAC and Advanta also
desire to settle certain issues that have arisen relating to the ownership and
operation of, and contributions to, Services, all as set forth in this
Agreement.

      ACCORDINGLY, in consideration of the premises and the mutual covenants and
agreements set forth below, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto hereby agree as follows:

1.    STRUCTURE OF COMBINED CREDIT CARD BUSINESS.

      (a)   Drop Down. As soon as reasonably practicable following the Effective
Date, BAC and Services shall cause their respective credit card businesses to be
combined into a single new entity (referred to herein as "NEWCO"), which shall
be a limited liability company or limited partnership, as selected by BAC in its
sole discretion. This combination into Newco shall be referred to as the "DROP
DOWN" structure and shall be accomplished by the contribution by Services of all
of its assets and liabilities to Newco and by the contribution of all of the
assets



and liabilities of BAC's consumer credit card business to Newco; provided,
however, certain of the credit card assets and liabilities of BAC's credit card
business may be transferred to Newco through a rights or participation
agreement. Anything in this Agreement to the contrary notwithstanding, BAC,
BANA(USA), Newco and Services covenant that no Advanta Partner shall recognize
any taxable income or gain, directly or indirectly, as a result of the transfer
of the assets and liabilities of Services to Newco pursuant to the Drop Down;
provided, however, each Advanta Partner's sole remedy for any breach of this
covenant shall be a claim for indemnification to the extent applicable under
Subparagraph 1(d)(ii)(A)(2) below.

      (b)   Ownership. The initial owners of Newco shall be Services and
BANA(USA) (or, as determined by BAC in its sole discretion, a subsidiary of
BANA(USA)) (the "BANA(USA) OWNER"), and the percentage ownership interest of
each such owner in Newco shall be equal to the quotient of (i) the fair market
value of such owner's business contributed to Newco divided by (ii) the sum of
the fair market values of both owner's businesses contributed to Newco;
provided, however, that the product of (A) the fair market value of Services'
business times (B) 1.3% shall not be less than $38.0 million. Subject to the
preceding sentence, the determination of the fair market value of each of these
businesses shall be made as soon as possible after the Effective Date by Goldman
Sachs & Co. and Goldman Sachs & Co.'s appraisal shall be final and binding on
the Parties hereto. The fees paid to Goldman Sachs & Co. for its valuation
services shall be paid equally by Services and BAC. Effective upon the
consummation of the Drop Down, Advanta's Percentage in Services shall be 1.3%,
and, from and after the Drop Down, Advanta's interest in Newco shall only be
indirect through its Interest in Services, and Advanta shall not be a partner,
member or other owner of Newco.

      (c)   Future Acquisitions. Neither Services nor Advanta shall be entitled
in any way, directly or indirectly, to participate in or benefit from any single
credit card portfolio acquisition having an aggregate acquisition cost in excess
of $250 million or other business acquired by or contributed to Newco (or any
other BAC subsidiary or affiliate) (an "ACQUISITION") after the Effective Date,
and in the event of any such Acquisition(s) by Newco, Newco's governing
documents shall be modified as necessary, in BAC's discretion, to cause all
participation in or benefit from such Acquisition(s) to inure solely to the
benefit of the BANA(USA) Owner. Notwithstanding the foregoing, neither the
acquisition by Newco of BAC's consumer credit card business pursuant to the Drop
Down structure set forth in Paragraph 1(a) above nor the acquisition of credit
card accounts or receivables in the ordinary course of business of Newco shall
be deemed to be an Acquisition for the purposes of this Agreement. In connection
with any Acquisition, BAC shall cause Newco to be compensated for Newco's costs
plus a reasonable profit (which may provide for less profit than an arms length
agreement with a third-party provider due to economies of scale generated by
Newco's business and such Acquisition) for the use of any Newco property or
personnel by any such acquired business in which Advanta and Services do not
participate.

      (d)   Governance. Newco shall be governed by an operating agreement (or,
if applicable, limited partnership agreement) that will provide that the
BANA(USA) Owner will be the manager (or general partner) of Newco and of the
combined business with the sole authority, subject to Subparagraph 1(d)(i)
below, to operate Newco in the best interest of Newco in its sole discretion
without any requirement to obtain Services' approval, except as may be required
by applicable law. Newco's governing documents shall also have no requirement to
obtain

                                        2



Advanta's consent for any purpose. Newco's initial governing documents shall be
agreed upon and executed by Services and the BANA(USA) Owner and Newco's owners
shall have the right to amend such governing documents in their discretion from
time to time; provided, however, as long as any Advanta Partner is a Partner in
Services, Newco's governing documents shall be required to include provisions in
substantially the following form:

            (i)   Newco and each of its owners shall not

                  (A)   approve any act that would reduce the Percentage owned
            by Advanta in Services below 1% in the aggregate;

                  (B)   reduce the total amount of (x) the indebtedness of
            Services and (y) the indebtedness of Newco that is allocable to
            Services (the sum of (x) and (y) being hereafter referred to as the
            "ALLOCABLE INDEBTEDNESS") if the reduction causes the amount of any
            Advanta Partner's share of the Allocable Indebtedness to be less
            than such Advanta Partner's Deficit Balance Amount (as defined
            below). For purposes of this Agreement, the term "DEFICIT BALANCE
            AMOUNT" means an amount, to the extent such amount is negative,
            equal to the adjusted income tax basis of an Advanta Partner's
            Interest computed without taking into account the increase in such
            Advanta Partner's adjusted income tax basis attributable to such
            Advanta Partner's share of liabilities of Services;

                  (C)   approve any sale, transfer or other disposition of
            Newco's property or assets that were Restricted Sale Assets at
            Services, if any such sale, transfer or other disposition would
            result in the recognition of gain or income to any Advanta Partner
            under Section 704(c) of the Code;

                  (D)   make any election that would result in Services being
            taxed as other than a "partnership" for federal income tax purposes,
            including (but not limited to) electing to be taxed as other than a
            "partnership" by filing Form 8832, "Entity Classification Election"
            or making any election inconsistent with Section 4.5.3 of the
            Limited Partnership Agreement;

                  (E)   on or before February 20, 2009, make any distribution of
            Services property (other than money) to any Advanta Partner; or

                  (F)   approve any activities of Services or Newco that are not
            part of or incidental to the business of banking or are not
            permissible for any operating subsidiary of a national bank.

      To the extent that Newco or any of its owners breaches any of the above
      provisions (other than Subparagraph 1(d)(i)(F)), Advanta's sole remedy
      shall be a claim for indemnification to the extent applicable under
      Subparagraph 1(d)(ii) below.

            (ii)  (A) Newco, its owners, BAC and BANA(USA) shall indemnify,
            defend and hold harmless Advanta from and against any and all
            Damages for Indemnified Taxes (as defined below) owed or incurred by
            Advanta or any Advanta Affiliate as the result of (1) Newco or any
            of its owners taking any action

                                        3



            in violation of the provisions of Subparagraph 1(d)(i) above or (2)
            the transfer of the assets and liabilities of Services to Newco
            pursuant to the Drop Down; provided, however, such indemnification
            shall not include any indemnity for Damages for Indemnified Taxes
            relating to the Book/Tax Differential. The amount of the Indemnified
            Taxes for purposes of this indemnification shall be computed in the
            manner set forth in Section 7.2.6 of the Limited Partnership
            Agreement, to the extent that such section specifies the procedure
            for identifying the person that makes this computation. Payments to
            Advanta under this indemnification provision shall be "grossed-up"
            in the same manner as described in Section 6.4.3 of the Limited
            Partnership Agreement.

                  (B)   For purposes of this indemnification, the term
            "INDEMNIFIED TAXES" shall mean Taxes owed or incurred due to (1) the
            recognition of gain or income pursuant to Section 704(c) of the Code
            for up to the $540,909,000 amount of built-in gain of the Restricted
            Sale Assets (the "BUILT-IN GAIN AMOUNT") upon any sale, transfer or
            other disposition of any such Restricted Sale Assets or (2) the
            recognition of gain or income as the result of a breach of
            Subparagraph 1(d)(i)(B) above. The Built-in Gain Amount and the
            Deficit Balance Amount shall be adjusted by the amount of the gain
            recognition for which indemnity payments, if any, are payable to
            Advanta from time to time pursuant to this Subparagraph 1(d)(ii).

                  (C)   Indemnification procedures shall be substantially
            similar to Section 6.5 of the Limited Partnership Agreement (as
            amended by this Agreement).

            (iii) BAC shall cause Newco to provide copies of Newco's quarterly
      and annual financial statements to Services on a timely basis, and
      Services agrees to transmit such information to each Advanta Partner
      promptly upon receipt.

      (e)   BAC Covenant. Notwithstanding any other provision herein to the
contrary, BAC shall assume the obligations of Fleet and Fleet's Affiliates
(other than Services) under the terms of the Limited Partnership Agreement and
the Contribution Agreement, and Advanta shall have the right to enforce such
obligations against BAC directly without the necessity to make demand on any
other Person.

2.    LIMITED PARTNERSHIP AGREEMENT MATTERS.

      (a)   Consent to Drop Down. To the extent required by the Limited
Partnership Agreement and subject to the provisions of this Agreement (other
than Paragraph 3 below), each Advanta Partner hereby consents to the Drop Down.
In this regard, Advanta acknowledges that BAC intends after the Effective Date,
and before and after the consummation of the Drop Down, to consolidate and
outsource operations, close facilities, hire and terminate employees, acquire
and dispose of assets and perform such other activities to operate the business
and attain best practices in the discretion of BAC with respect to the business
of Services and the combined business of Newco. Advanta's consent to the Drop
Down is without prejudice to their rights to indemnification as provided in
Subparagraph 1(d)(ii)(A)(2) above as a result of the transfer of the assets and
liabilities of Services to Newco pursuant to the Drop Down.

                                        4



      (b)   Amendments to Limited Partnership Agreement. The Limited Partnership
Agreement is hereby amended as follows:

            (i)   Section 4.6 is hereby deleted in its entirety and the
      following new Section 4.6 is substituted in lieu thereof:

                  "4.6 Net Gains from Sales. Net Gains from Sales shall be
                  allocated as follows: A percentage of the Net Gains from Sales
                  shall be allocated to the Advanta Partners and the balance
                  shall be allocated to the Fleet Partners. The percentage
                  referred to in the immediately preceding sentence shall (A) be
                  zero with respect to any Advanta Partner that does not have a
                  Deficit Balance Amount (as defined in Section 5.7.2) and (B)
                  with respect to each Advanta Partner that has a Deficit
                  Balance Amount, be determined by dividing the Deficit Balance
                  Amount (which for this purpose shall be a positive number) of
                  such Advanta Partner by the outstanding Company "excess
                  nonrecourse liabilities" (within the meaning of Section
                  1.752-3(a)(3) of the Regulations) at the end of the fiscal
                  year or at other applicable times (including immediately
                  before a disposition giving rise to the Net Gains from Sales),
                  and expressing the resulting decimal as a percentage."

            (ii)  The second sentence of Section 4.7.2 is hereby deleted in its
      entirety and the following new sentence is substituted in lieu thereof:

                  "Notwithstanding the immediately preceding sentence, the
                  Company shall compute the amount of nonrecourse liabilities
                  allocable to the Advanta Partners in such manner, and
                  utilizing such conventions and methodologies, so as to
                  maximize the amount of nonrecourse liabilities allocable to
                  the Advanta Partners under Section 1.752-3(a) of the
                  Regulations."

            (iii) Section 5.7.1 is hereby deleted in its entirety and the
      following new Section 5.7.1 is substituted in lieu thereof:

                  "5.7.1 approving any act that would reduce the Percentage
                  owned by the Advanta Partners below one percent in the
                  aggregate;"

            (iv)  Section 5.7.2 is hereby deleted in its entirety and the
      following new Section 5.7.2 is substituted in lieu thereof:

                  "5.7.2 reducing the amount of indebtedness of the Company
                  which can be allocated to any Advanta Partner below the amount
                  of such Advanta Partner's Deficit Balance Amount (as defined
                  below). For purposes of this Agreement, the term "Deficit
                  Balance Amount" means an amount, to the extent such amount is
                  negative, equal to the adjusted income tax basis of an Advanta
                  Partner's Interest computed without taking into account the
                  increase in such

                                        5



                  Advanta Partner's adjusted income tax basis attributable to
                  such Advanta Partner's share of Company liabilities;"

            (v)   Section 5.7.3 is hereby amended by deleting the phrase "are in
      the ordinary course of the Company's business and" where it appears in
      said Section 5.7.3.

            (vi)  Section 5.7.4 is hereby deleted in its entirety.

            (vii) Section 5.7.6 is hereby deleted in its entirety and the
      following new Section 5.7.6 is substituted in lieu thereof:

                  "5.7.6 for eleven years after the Closing Date, making any
                  distribution of Company property (other than money) to any
                  Advanta Partner; or"

            (viii) The following sentence is added to the end of Section 5.7:

                  "Notwithstanding any other provision of this Agreement, to the
                  extent that the Company or any Partner (other than an Advanta
                  Partner) breaches the provisions of this Section 5.7 (other
                  than Section 5.7.7), the sole remedy of any Advanta Partner
                  shall be a claim for indemnification to the extent applicable
                  pursuant to Section 6.4.2 below."

            (ix)  Section 6.4.2 is hereby deleted in its entirety and the
      following new Section 6.4.2 is substituted in lieu thereof:

                  "Fleet and the Fleet Partners, BAC and BANA(USA) shall
                  indemnify, defend and hold harmless each of the Company,
                  Advanta and Advanta's Affiliates from and against any and all
                  Damages for Indemnified Taxes (as defined below) owed or
                  incurred by any such Advanta Partner as the result of Fleet,
                  Fleet's Affiliates, the LLC, the Company, BAC, BANA(USA) or
                  any Partner (other than an Advanta Partner) taking any action
                  in violation of Section 5.7 or the last sentence of Section
                  9.5.3 of this Agreement; provided, however, that the
                  indemnification provided for in this Section 6.4.2 shall not
                  include an indemnification for Damages for Indemnified Taxes
                  relating to the Book/Tax Differential. The amount of the
                  Indemnified Taxes for purposes of this Section 6.4.2 shall be
                  computed in the manner set forth in Section 7.2.6, to the
                  extent that such section specifies the procedure for
                  identifying the person that computes the amount of Indemnified
                  Taxes. For purposes of this Section 6.4.2, the term
                  "INDEMNIFIED TAXES" shall mean Taxes owed or incurred due to
                  (A) the recognition of gain or income pursuant to Section
                  704(c) of the Code for up to the $540,909,000 amount of the
                  built-in gain of the Restricted Sale Assets (the "BUILT-IN
                  GAIN AMOUNT") upon any sale, transfer or other disposition of
                  any such Restricted Sale

                                        6



                  Assets or (B) the recognition of gain or income as the result
                  of a breach of Section 5.7.2. The Built-in Gain Amount and the
                  Deficit Balance Amount shall be reduced by the amount of gain
                  recognition for which indemnification payments, if any, are
                  payable to Advanta from time to time pursuant to this Section
                  6.4.2."

            (x)   Section 6.5 is hereby amended by adding new Section 6.5.6,
      6.5.7 and 6.5.8, as follows:

                  "6.5.6 In the event that both the Indemnifying Party and the
                  Indemnified Partner participate in the defense of a Claim, (i)
                  the Indemnifying Party shall have the right to assume the
                  defense of the Claim with authority to negotiate and settle
                  such Claim with respect to all components of the Claim that
                  involve an indemnity payment for which the Indemnifying
                  Partner is responsible or which otherwise would have an
                  adverse impact on the Indemnifying Party and not the
                  Indemnified Partner, and (ii) the Indemnified Partner shall
                  have the right to assume the defense of, with authority to
                  negotiate and settle, all other components of the Claim. In
                  the event that the Claim is such that the applicable
                  components cannot be resolved independently, both the
                  Indemnifying Party and the Indemnified Partner must consent to
                  any settlement of the Claim, which consent shall not be
                  unreasonably conditioned, withheld or delayed.

                  6.5.7 Upon completion of the indemnification procedure set
                  forth in Sections 6.5.1 through 6.5.6 with respect to a Claim
                  arising under Section 6.4.2, Advanta shall calculate the
                  amount of Damages for Indemnified Taxes as soon as possible
                  after: (i) having received notice of any circumstance giving
                  rise to a Claim for Damages for Indemnified Taxes, (ii) the
                  conclusion of a tax audit or other similar examination in
                  which a taxing authority proposes an adjustment that would
                  give use to a Claim for Damages for Indemnified Taxes, or
                  (iii) the occurrence or the receipt of knowledge of the
                  occurrence of any other circumstances giving rise to a Claim
                  for Damages for Indemnified Taxes, and shall deliver a copy of
                  such calculation to BAC in accordance with Section 10.7
                  hereof. The calculation shall contain the following:

                        (a)   a detailed calculation of the amount of Damages
                  for Indemnified Taxes prepared by Advanta and certified by the
                  officer of Advanta responsible for signing Advanta's corporate
                  federal income tax return and by Advanta's federal income tax
                  return preparer;

                                        7



                        (b)   the amount of Damages for Indemnified Taxes shall
                  be calculated by determining, with respect to the taxable
                  period to which such Claim relates, the additional Taxes
                  required to be paid as a result of the events or adjustments
                  giving rise to the Claim by (x) calculating the amount of
                  Taxes required to be paid for such period and subtracting
                  therefrom (y) the amount of Taxes that would have been
                  required to be paid had there been no adjustment to taxable
                  income that gave rise to the Claim for Damages for Indemnified
                  Taxes (regardless of the taxable period in which any taxable
                  income or gain is required to be recognized).

                        (c)   A calculation of the amount of Damages for
                  Indemnified Taxes "grossed-up" in accordance with Section
                  6.4.3.

                        (d)   The latest date by which Advanta is required to
                  make a payment of Taxes in order to avoid any additional
                  penalty, which date shall be no less than thirty (30) calendar
                  days from the date such calculation is delivered to BAC and
                  the account to which the payment should be wired.

                  6.5.8. The payment of any Claim for Damages for Indemnified
                  Taxes shall be made to Advanta not later than three (3)
                  business days prior to the date specified in Section 6.5.7(d)
                  by immediately available federal funds wired to an account
                  designated by Advanta; provided, however, that the amount of
                  Damages for Indemnified Taxes shall be adjusted to account for
                  any delay in the receipt of the payment beyond the date
                  specified in Section 6.5.7(d) hereof. In the event that
                  Advanta receives a refund or credit with respect to the
                  Indemnified Taxes for which an indemnification payment has
                  been made, Advanta shall remit to the party that made the
                  indemnification payment an amount equal to the applicable
                  portion of such indemnification payment (including the amount
                  of the "gross-up") calculated with respect to such refund or
                  credit."

            (xi)  Section 6 is hereby amended by adding the following new
      Section 6.6:

                  "6.6. Provided that draft copies of the Partnership's tax
                  returns and other accompanying statements to be filed by the
                  Company with the Internal Revenue Service are provided to the
                  Advanta Partners as required by Section 9.5.3 of the Agreement
                  and that the tax returns, as filed, are identical in all
                  material respects with the draft copies distributed to the
                  Advanta Partners, no Advanta Partner shall take a return
                  filing position inconsistent with the K-1 such Advanta Partner
                  receives from Services, unless such Advanta Partner receives
                  an opinion of tax counsel regularly employed by such Advanta
                  Partner stating that the filing of such Advanta Partner's
                  return consistent with such K-1 would, more likely than

                                        8



                  not, subject the Advanta Partner to an accuracy-related
                  penalty under Internal Revenue Code Sections 6662 or 6663, or
                  other state tax penalties."

            (xii) The last sentence of Section 7.2.1 is hereby amended by
      deleting the word "sixth" where it appears in said sentence and by
      substituting in lieu thereof the word "tenth."

            (xiii) Clause (iii) of the first sentence of Section 7.2.2 is hereby
      amended by deleting the word "seven" where it appears in the proviso to
      said clause (iii) and by substituting in lieu thereof the word "eleven."

            (xiv) Clause (ii) of the second sentence of Section 7.2.2 is hereby
      amended by deleting the phrase "clauses (a) and (b)" where it appears in
      said clause (ii) and by substituting in lieu thereof the phrase "clause
      (b)."

            (xv)  The first sentence of Section 7.2.7 is hereby amended by
      deleting the phrase "clauses (a) and (b)" where it appears in said
      sentence and by substituting in lieu thereof the phrase "clause (b)."

      Except to the extent the Limited Partnership Agreement is expressly or by
      necessary implication amended hereby, the Limited Partnership Agreement
      shall remain in full force and effect.

      (c)   The Parties agree to review and amend the Contribution Agreement
with changes consistent with the amendments to the Limited Partnership Agreement
in this Agreement.

3.    LITIGATION SETTLEMENT AND RELEASES.

      (a)   General.

            (i)   Except as expressly set forth in the last sentence of this
      Paragraph 3(a)(i) and Paragraph 3(b) below, each of the Advanta Partners,
      on behalf of itself, and its successors and assigns, does hereby remise,
      release and forever discharge BAC, Services and FCCH, and their respective
      Affiliates, officers, directors, employees, agents, stockholders,
      successors and assigns (collectively, the "BAC RELEASED PARTIES"), of and
      from any and all acts, actions, causes of action, suits, debts, sums of
      money, claims, demands, liabilities, obligations, charges and expenses,
      whether the same be liquidated, unliquidated, contingent or otherwise, of
      whatever nature in law, equity or otherwise which each such Advanta
      Partner ever had, now has, or hereafter can, shall or may have against the
      BAC Released Parties or any of them for, upon or by reason of or related
      to or in any manner connected with or arising out of Services, including
      without limitation its formation, operation and contributions of assets
      and liabilities thereto from the beginning of time through and including
      the Effective Date. This is a full and final release of all claims, known
      or unknown, fixed or contingent, relating to the above matters. Subject to
      the proviso at the end of this sentence, this release does not apply to,
      and each of the Advanta Partners reserves its rights to assert, any claim
      relating to the liabilities and obligations assumed by Services under the
      provisions of the Contribution Agreement and

                                        9



      any claim for Damages for Indemnified Taxes pursuant to Section 6.4.2 of
      the Limited Partnership Agreement; provided, however, each Advanta Partner
      jointly and severally represents and warrants that, subject to BAC's
      representation and warranty set forth in Paragraph 3(a)(ii) below and
      except for a possible claim relating to Services' compliance with the
      provisions of Section 9.5.3 of the Limited Partnership Agreement, as of
      the Effective Date it has no knowledge of any such claim that it has or
      may have relating to the liabilities or obligations assumed by Services
      under the provisions of the Contribution Agreement or for Damages for
      Indemnified Taxes.

            (ii)  Except as expressly set forth in Paragraph 3(b) below, each of
      BAC, Services and FCCH (the "BAC RELEASING PARTIES"), on behalf of itself,
      and its successors and assigns, does hereby remise, release and forever
      discharge Advanta and their respective Affiliates, officers, directors,
      employees, agents, stockholders, partners, members, successors and assigns
      (collectively, the "ADVANTA RELEASED PARTIES"), of and from any and all
      acts, actions, causes of action, suits, debts, sums of money, claims,
      demands, liabilities, obligations, charges and expenses, whether the same
      be liquidated, unliquidated, contingent or otherwise, of whatever nature
      in law, equity or otherwise which each of the BAC Releasing Parties ever
      had, now has, or hereafter can, shall or may have against the Advanta
      Released Parties or any of them for, upon or by reason of or related to or
      in any manner connected with or arising out of Services, including without
      limitation its formation, operation and contributions of assets and
      liabilities thereto from the beginning of time through and including the
      Effective Date. This is a full and final release of all claims, known or
      unknown, fixed or contingent, relating to the above matters. BAC
      represents and warrants that, since April 1, 2004, neither it nor any of
      its Affiliates has taken any action in violation of Section 5.7 of the
      Limited Partnership Agreement.

      (b)   Settlement of All Existing Litigation. Upon the receipt of the IRS
Approval (as defined below) with respect to the Tax Settlement (as defined
below), BAC, Services and Advanta agree, without delay, (i) to settle and enter
into full and complete releases with respect to all existing litigation between
them (and Fleet and any Affiliates of Fleet) (including the Delaware and Rhode
Island lawsuits, captioned Advanta Corp., et al. v. FleetBoston Financial
Corporation, et al., No. 80,2004 (Del) and FleetBoston Financial Corporation,
et. al., v. Advanta Corp., et al., No. PC03-0220 (R.I.), and the tax protest
with the Internal Revenue Service) (collectively, the "LITIGATION DISPUTES") and
(ii) to file dismissals with prejudice in all cases with respect thereto in
consideration of the following:

            (i)   BAC shall pay AC the sum of $63,802,657.27, which sum
      represents a return of the payments that Advanta made to Fleet in February
      and March, 2004, representing the judgment Fleet obtained in the Delaware
      state court action between Advanta and Fleet. BAC shall make this payment
      to AC upon the receipt of the IRS Approval and Advanta's compliance
      (without regard to the compliance of BAC, Fleet or their Affiliates) with
      the foregoing provision of Paragraph 3(b) with respect to releases and
      dismissals with prejudice of all Litigation Disputes.

            (ii)  With regard to the tax dispute relating to the proper
      allocation of loss deduction for the chargeoff of approximately $508
      million in receivables, $120 million of

                                       10



      Services' 1998 chargeoffs shall be treated as a built-in loss under
      Section 704(c) of the Code, allocable 100% to Advanta for Services' 1998
      taxable year, and the remaining approximately $388 million of chargeoffs
      shall not be treated as a built-in loss under Section 704(c) of the Code
      and shall be allocated 98.7% to FCCH and 1.3% to Advanta (and among
      Advanta in accordance with their relative Percentages).

            (iii) With regard to the tax dispute relating to the proper
      allocation of gain in the amount of $47,430,210 from the disposition of
      the interest in RBS Advanta, none of such gain shall be classified as Code
      Section 704(c) built-in gain allocable to Advanta and 100% of such taxable
      gain shall be treated as an item of taxable income of Services for its
      1998 taxable year and allocated 98.7% to FCCH and 1.3% to Advanta (and
      among Advanta in accordance with their relative Percentages).

            (iv)  The Parties shall cooperate with each other as reasonably
      necessary in coordinating the resolution of the above tax disputes with
      the Internal Revenue Service ("IRS") pursuant to the terms set forth in
      Subparagraphs 3(b)(ii)-(iii) above (the "TAX SETTLEMENT"). The Parties
      shall not take any position inconsistent with the terms of the Tax
      Settlement or the terms of this Agreement before the IRS. Furthermore,
      immediately following the Effective Date, Services and Advanta shall
      notify the IRS Appellate Conferee of the Tax Settlement and shall request
      the expedited preparation of IRS Form 870-P(AD), Settlement Agreement for
      Partnership Adjustments, consistent with the Tax Settlement. Services,
      Advanta and BAC shall be given draft copies of any of such Party's
      submissions to the IRS in respect of the Tax Settlement and no such
      submission shall be delivered until each of such Parties has had the
      opportunity to comment on such submission. If the IRS agrees and approves
      the Tax Settlement on the terms set forth in this Paragraph 3(b), then
      such agreement and approval shall be referred to as the "IRS APPROVAL."
      For purposes of this Agreement, an IRS Form 870-P(AD) (or other similar
      form) which incorporates the terms of the Tax Settlement, signed by or on
      behalf of the Commissioner, shall constitute an IRS Approval. If the IRS
      refuses to agree to the Tax Settlement and to issue the IRS Approval,
      then, subject to a Party's compliance with the above provisions of this
      Subparagraph 3(b)(iv), such Party shall have the right to take any
      position in court or before any taxing authority with respect to the tax
      disputes and shall no longer be obligated to the terms of the Tax
      Settlement.

Resolution of the Litigation Disputes on the terms set forth in this Paragraph
3(b) shall not constitute a condition or be subject to any other provisions of
this Agreement, which other provisions shall be valid and binding whether or not
the Litigation Disputes are resolved on the terms set forth in this Paragraph
3(b), except that if the IRS refuses to agree to the Tax Settlement on the terms
set forth in this Paragraph 3(b) and to issue the IRS Approval, then BAC shall
have no obligation to make the payment described in Subparagraph 3(b)(i) above,
the mutual releases set forth in Paragraph 3(a) above shall not be valid or
binding and the Parties shall not be obligated to settle, dismiss or otherwise
release the Litigation Disputes.

4.    REGULATORY DISCLOSURE. Advanta and BAC each acknowledges and agrees to
full, complete and open disclosure of the matters set forth in this Agreement to
all appropriate regulatory agencies, whether or not such disclosures are made by
BAC, Services or AC or their respective affiliates.

                                       11



5.    CONDITION TO EFFECTIVENESS OF AGREEMENT. Advanta shall have the right to
terminate this Agreement and declare it void ab initio by delivering written
notice of termination to BAC no later than ten (10) calendar days after the
Effective Date if Advanta has not received written confirmation from KPMG of
AC's conclusion that the Agreement and the transactions contemplated herein will
not require Advanta to make any provision for income tax expense and an
associated increase in current or deferred tax reserves or a reduction in a
deferred tax asset. If Advanta does not terminate this Agreement pursuant to the
immediate preceding sentence, then this Agreement shall be valid and binding on
the Parties as of the Effective Date.

6.    MISCELLANEOUS TERMS AND CONDITIONS.

      (a)   Dispute. If a dispute arises between the Parties in connection with
this Agreement or any document or instrument delivered in connection herewith
(except any document or instrument that contains separate dispute resolution
provisions), including without limitation alleged breach of any representation,
warranty or covenant herein or therein, or a disagreement regarding the
interpretation of any provision hereof or thereof (a "DISPUTE"), the Parties
shall use the procedures set forth herein in good faith prior to any Party
pursuing other available judicial or nonjudicial remedies. A meeting shall be
held among the Parties within ten (10) business days after any Party gives
written notice of a Dispute to another Party. The meeting shall be attended by a
representative of each Party having decision making authority regarding the
Dispute (subject to Board of Directors, or equivalent approval, if required), to
attempt in good faith to negotiate a resolution of the Dispute.

      (b)   Confidentiality. Except as set forth in this Agreement or as the
Parties otherwise agree or as otherwise required by law or any national
securities exchange, each of the Parties agrees to maintain this Agreement and
any document or instrument delivered in connection herewith and the terms and
conditions hereof and thereof as confidential for the term of the Limited
Partnership Agreement and for a period of one (1) year thereafter.
Notwithstanding anything herein to the contrary, any Party (and any of its
employees, representatives and other agents) may disclose to any and all
persons, without limitation of any kind, the tax treatment or tax structure of
this transaction. Furthermore, the Parties of this transaction may disclose, as
required by federal or state laws or the requirements or requests of any
regulatory agency having jurisdiction over one or more of the Parties, any
information as required to comply with such federal or state laws.

      (c)   Governing Law. This Agreement shall be governed by the laws of the
State of Rhode Island without regard to principles of conflicts of laws
applicable therein.

      (d)   Entire Agreement. This Agreement, the Limited Partnership Agreement
and the Contribution Agreement and any other document or instrument executed in
connection herewith, constitutes the entire agreement between the Parties with
respect to the subject matter hereof, and supersedes all prior agreements and
understandings between the Parties with respect to such matters.

      (e)   Notices. Any notice, demand, election or communication required,
permitted or desired to be given hereunder shall be sent by prepaid registered
or certified mail, return receipt requested, or by a nationally recognized
commercial courier service (such as FedEx or UPS), or

                                       12



by electronic facsimile (but in the latter instance, also by U.S. Postal Service
or by a nationally recognized commercial courier service). Notices, demands,
elections or communications shall be deemed received on the first to occur of
the following:

            (i)   when personally delivered;

            (ii)  when actually delivered by a nationally recognized commercial
      courier; or

            (iii) two (2) business days following the deposit thereof with the
      U.S. Postal Service.

Notices, demands, elections or communications sent to (A) BAC, Services or FCCH
shall be sent to Timothy Mayopolis, General Counsel, Bank of America Corp., Bank
of America Corporate Center, Charlotte, NC 28255, and (B) any other Party shall
be sent to the address given for such Party on Schedule A of the Limited
Partnership Agreement. Any Party may change its address to which such notices
shall be given by written notices to the other Parties pursuant to the
provisions of this Paragraph 6(e).

      (f)   Successors and Assigns. All of the terms, conditions and covenants
of this Agreement shall be binding upon and inure to the benefit of the Parties
and their respective successors and permitted assigns.

      (g)   Expenses. Except as set forth in this Agreement or as otherwise
agreed to in writing by the Parties, each of the Parties will bear its own costs
and expenses, if any, incurred in connection with the preparation and execution
of this Agreement and any documents relating thereto.

      (h)   Further Assurances. Each Party shall execute and deliver such
further agreements, documents and instruments and do such further acts and
things as may be reasonably required to carry out the intent and purpose of this
Agreement

      (i)   No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.

      (j)   Amendments. This Agreement shall not be amended or modified except
by an instrument in writing signed by Services, AC and BAC.

      (k)   Headings. All headings and captions herein are inserted for
convenience and identification only and are in no way intended to describe,
interpret, define or limit the scope or intent of this Agreement or any
provision hereof.

      (1)   Waiver. No waiver of a breach or default hereunder shall be
considered valid unless in writing and signed by the Party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach of default
of the same or similar nature. No failure or delay by any Party in exercising
any right, power or privilege hereunder (other than the failure or delay beyond
the period of time as specified herein) shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the

                                       13



exercise of any other right, power or privilege. Except as otherwise provided in
this Agreement, the rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by law.

      (m)   Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in any number of counterparts, and by the
different Parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, and such counterparts taken
together shall constitute one and the same Agreement.

      (n)   Severability. Should any part or provision of this Agreement be held
unenforceable or in conflict with the applicable laws or regulations of any
jurisdiction, the invalid or unenforceable part or provision shall be replaced
with the revision that accomplishes, to the extent possible, the original
business purpose of such part or provision in a valid and enforceable manner,
and the balance of this Agreement shall remain in full force and effect and be
binding upon the Parties hereto.

      (o)   WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDINGS ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

                                       14



      IN WITNESS WHEREOF, the Parties have caused this AGREEMENT RELATING TO
FLEET CREDIT CARD SERVICES, L.P. to be executed by their duly authorized
representatives as of the Effective Date.

                                              ADVANTA CORP.

                                              By:  /s/ William A. Rosoff
                                                  -----------------------------
                                                  Name: William A. Rosoff
                                                  Title: President

                                              ADVANTA NATIONAL BANK

                                              By:  /s/ William A. Rosoff
                                                  -----------------------------
                                                  Name: William A. Rosoff
                                                  Title: Vice Chairman

                                              ADVANTA SERVICE CORP.

                                              By:  /s/ William A. Rosoff
                                                  -----------------------------
                                                  Name: William A. Rosoff
                                                  Title: Vice Chairman

                                       15



                                            FLEET CREDIT CARD HOLDINGS, INC.

                                            By: /s/ G. Patrick Phillips
                                                --------------------------------
                                                Name: G. Patrick Phillips
                                                Title: Executive Vice President

                                            FLEET CREDIT CARD SERVICES, L.P.

                                            By: /s/ G. Patrick Phillips
                                                --------------------------------
                                                Name: G. Patrick Phillips
                                                Title: Executive Vice President

                                            BANK OF AMERICA CORP.

                                            By: /s/ G. Patrick Phillips
                                                --------------------------------
                                                Name: G. Patrick Phillips
                                                Title: Executive Vice President

                                       16

EX-10.2

                                                                    Exhibit 10.2

June 8, 2004

Mr. Brian Tierney
1020 Rock Creek Road
Bryn Mawr, Pa. 19010

Dear Brian:

This letter is intended to reflect the terms we have been discussing for your
joining us on a full time basis as a member of the Office of the Chair of
Advanta Corp.

1. POSITION. Vice Chairman of Advanta. Corp.

2. START DATE. Your Start Date will be on or about July 1, 2004.

3. BASE SALARY. Your Base Salary will be $595,000 per annum.

4. ANNUAL BONUS. You will be eligible to participate in the Company's Management
Incentive Plan ("AMIP") at the "A" level. As such, you will have a target bonus
of 75% of Base Salary. As a member of the Office of the Chair, a stock election
will automatically be applicable with respect to the target portion of your AMIP
bonus

5. RESTRICTED STOCK. You will be granted 200,000 restricted shares of Advanta
Class B Common Stock ("Grant Shares") on your Start Date, Fifty thousand shares
will vest on each of the first four anniversaries of your employment. When
shares vest they will be registered shares freely tradable by you free of
restrictions, subject, of course, to applicable law. You will be entitled to all
dividends on the shares from the time they are issued in you in restricted form.

6. OPTIONS. You will be granted options on 100,000 shares of Advanta Class B
Common Stock, exercisable at the closing price on your Start Date, except as
noted below ("Initial Option Grant"). Options on Twenty-five thousand shares
will vest on each of the first four anniversaries of your employment. You will
also be eligible for annual option grants under the Company's option plan at the
discretion of the Board of Directors. The option guidelines for members of the
Office of the Chair are annual grants in the 75,000 to 125,000 range. The
Initial Option Grant is in lieu of the option grant provided for in the March 19
agreement between T2 Group, its personnel and Advanta, but the exercise price on
the options to vest with respect to the purchasing the first 50,000 shares will
not be above the closing price on March 19, 2004.

7. ACCELERATED VESTING. There will also be accelerated vesting of all Grant
Shares and all unvested options from the Initial Option Grant in the case of
Change of Control, as defined in Advanta's Stock Option Plan or if your
employment ceases for any reason other than your choice or Cause, as defined
below. If you cease to be employed by Advanta under any of the



circumstances set forth above giving rise to accelerated vesting you will have
one year from the cessation of employment to exercise all of the Intial Grant
Options which are vested after the accelerated vesting, except in the case of
Change of Control. In the case of Change of Control the exercise periods will be
those set by the Board for general application in the Company under the Option
Plan.

8. BENEFITS. The Company will acquire a $5,000,000 life insurance policy on your
life, the full premium of which is paid by Advanta during your employment and
the beneficiary of which is named by you. You will be entitled to a car and the
company will pay for one club membership. In addition, Advanta provides a broad
range of health, medical, disability and other benefits to which you will be
entitled in accordance with the applicable plans.

9. T2 . You will cease to be employed by T2 Group prior to your Start Date. A
subsidiary of Advanta will purchase all of the assets of T2 Group on or before
July 31, 2004. The purchase price will be $2,000,000 plus the face amount of the
accounts receivable, after allowance for any uncollectible receivables, at the
time of the asset purchase, or $830,000 whichever is less. The purchase price
will be paid in the following manner:

      (a). Advanta's subsidiary will assume or repay up to $800,000 of any
      outstanding portion of T2 presently outstanding bank debt that is
      outstanding at the closing.

      (b). $100,000 will be payable on the last day of the month from August to
      December, 2004 and the balance will be payable in three equal installments
      on the second, third, and fourth anniversaries of your employment.

All payments on account of the purchase price are conditioned upon your being
employed by Advanta at the time of the payment or having ceased to be employed
by the Company under circumstances that entitle you to accelerated vesting of
the Grant Shares and Initial Option Grant. There will be an appraisal of the T2
Group's business by a mutually agreed upon appraiser and the purchase is
conditioned upon confirmation that the purchase price does not exceed the value
of the T2 assets, assuming they were sold as a going concern with you providing
the type of covenant not to compete common for such a purchase and without
attributing any value to the future work from Advanta.. In that regard, you will
agree, in connection with the purchase of T2's assets, not to compete in the
business that T2 Group has engaged in, obviously, while you are employed by
Advanta, and, if you should cease to be employed by Advanta under circumstances
that do not entitle you to Accelerated vesting of the Grant Shares and the
Initial Option Grant, for 18 months after ceasing to be employed by Advanta or
for three years after the purchase, whichever is earlier. We will make offers to
all T2 personnel to whom you wish to have offers made.

10. NO RESTRICTIONS. You have assured us that there are no restrictions to which
you are a party that would restrict you in performing your job for Advanta, or
limit Advanta from engaging in any activity.

11. BUSINESS ETHICS AGREEMENT. Our Company's policy requires delivery, prior to
beginning work, of an executed copy of the enclosed Business Ethics Agreement as
a condition of employment.

12. MISCELLANEOUS. Cause, for purposes of this letter, shall mean your
commission of a felony, or of any act of fraud, misappropriation or criminal
conduct involving or relating in any material way to the Company, or of personal
dishonesty materially injurious to the Company, or your willful refusal to
perform a material and substantial part of your duties which has



not been cured after 30 days written notice of the failure. Your salary and
bonus for 2004 will be prorated based on the portion of the year that you are
employed. The agreement between T2 Group, its personnel, and Advanta dated March
19, 2004 will be terminated effective at the close of business the day before
your Start Date, except the provisions of Paragraph 7 will remain in effect. The
laws of the Commonwealth of Pennsylvania will govern your employment
arrangements and the purchase of T2 Group's assets.

Assuming this accurately reflects our understanding, please sign and return the
enclosed copy of this letter where indicated. As you know this is subject to the
approval of the Compensation Committee, Audit Committee and the Board of
Directors of Advanta Corp., and the next step is for us to submit it to them for
consideration at the June 9 meeting.

Brian, we can't tell you how pleased we are that you are joining us as a member
of the Office of the Chair and can't wait to pursue together the wonderful
opportunities ahead.

Sincerely,

/s/ Dennis Alter
Accepted and agreed to
this 8th day of June, 2004.

/s/ Brian Tierney

EX-10.3

                                                                    Exhibit 10.3

                              RELOCATION AGREEMENT

      THIS RELOCATION AGREEMENT (this "Agreement") is made as of May 20, 2004 by
and between ADVANTA CORP., a Delaware corporation ("Advanta"), having an address
at Welsh and McKean Roads, Spring House, Pennsylvania 19477, and JOHN F. MOORE,
an individual ("John"), having an address at c/o Advanta Bank Corp., Welsh and
McKean Roads, Spring House, Pennsylvania 19477.

                                   BACKGROUND

      A. John is President of Advanta Bank Corp., an affiliate of Advanta. In
connection with his presidency of Advanta Bank Corp., Advanta has asked John to
establish and maintain his principal residency in Utah and in return has agreed
to (i) pay John a relocation payment for certain expenses related to his
relocation to Utah, (ii) reimburse John for amounts borrowed under a home equity
line of credit that he uses to pay for certain expenses relating to the
maintenance of his residence in Utah and (iii) under certain circumstances
described below, purchase John's Utah residence.

      B. John has signed an agreement of sale to purchase certain real property
located in Salt Lake County, Utah, and known as 3160 East Old Ridge Circle (the
"Property"), which is more particularly described in Exhibit "A" attached
hereto.

      C. Advanta and John now wish to enter into this Agreement in order to set
forth their mutual understanding regarding the foregoing.

      NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
John and Advanta hereby agree as follows:

      1. Relocation Payment.

            (a) In order to assist John in purchasing the Property, which John
shall use as his principal residence, Advanta has agreed to pay to John the sum
of One Hundred Fifty-Seven Thousand Five Hundred Dollars ($157,500) as a
relocation payment (the "Relocation Payment"), plus an additional sum equal to
the amount of John's income tax liability for the Relocation Payment.

            (b) A Seventy-Three Thousand Two Hundred Dollar ($73,200) portion of
the Relocation Payment (the "Equity Amount") has been paid by Advanta to John at
the time of the signing of this Agreement, the receipt of which is hereby
acknowledged by John. The Equity Amount shall be used by John to pay that
portion of the purchase price for the Property that exceeds the amount of John's
First Mortgage Loan (hereinafter defined). If for any reason John does not
purchase the Property on or before June 1, 2004, John shall promptly return the
Equity Amount to Advanta.

            (c) The balance of the Relocation Payment (i.e., the Relocation
Payment less the Equity Amount, which balance is hereinafter called the
"Relocation Payment Balance"), plus

                                      -1-


the additional sum equal to the amount of John's income tax liability for the
Relocation Payment, shall be paid to John by Advanta on the date of settlement
for John's purchase of the Property.

            (d) The Relocation Payment Balance shall be used by John for the
payment of the following expenses (collectively, the "First Year Expenses")
during the one-year period between the Effective Date and the first anniversary
of the Effective Date: (1) regularly scheduled payments of principal and
interest on John's First Mortgage Loan (hereinafter defined), (2) his costs of
maintaining the Property, including, for example, the payment of repair bills,
condominium fees, taxes, insurance and utility bills, as mutually agreed by John
and Advanta from time to time, and (3) his miscellaneous costs of initially
preparing the Property for his occupancy, as mutually agreed by John and Advanta
from time to time.

            (e) As soon as reasonably possible after the first anniversary of
the Effective Date, John and Advanta shall mutually determine the aggregate
total amount of the First Year Expenses and John's income tax liability for the
Relocation Payment. If (1) the First Year Expenses exceed the Relocation Payment
Balance and/or (2) John's income tax liability for the Relocation Payment
exceeds the amount paid by Advanta to John for such purpose, Advanta shall pay
to John the sum equal to such excess amount(s), plus the additional sum equal to
the amount of John's income tax liability for such payment. If (1) the
Relocation Payment Balance exceeds the First Year Expenses and/or (2) the amount
paid by Advanta to John for John's income tax liability for the Relocation
Payment exceeds John's actual income tax liability for the Relocation Payment,
such excess amount(s) shall be credited to Advanta's obligation to reimburse
John for Reimbursable HELOC Expenses (hereinafter defined) pursuant to
subparagraph 2(b) below.

      2. Reimbursable HELOC Expenses.

            (a) John intends to partially finance his purchase of the Property
with a first mortgage loan in the amount of $292,800 (which first mortgage loan
and any replacement first mortgage loan is hereinafter called "John's First
Mortgage Loan"). John also intends to obtain a home equity line of credit (which
home equity line of credit and any replacement home equity line of credit is
hereinafter called "John's HELOC"), which shall be used by John, after he has
expended the remainder of the Relocation Payment for such purposes, to (1) make
regularly scheduled payments of principal and interest on John's First Mortgage
Loan, (2) pay his costs of maintaining the Property, including, for example, the
payment of repair bills, condominium fees, taxes, insurance and utility bills,
as mutually agreed by John and Advanta from time to time, (3) pay interest on
that portion of the principal amount of John's HELOC that qualifies as
Reimbursable HELOC Expenses and (4) pay the amount of John's income tax
liability, net of the effect of any income tax deductions for the Property that
are taken by John, for reimbursement payments for Reimbursable HELOC Expenses
(items (1) through (4), plus that portion of the outstanding balance of
principal of John's HELOC that qualifies as any of items (1) through (4),
collectively, "Reimbursable HELOC Expenses").

            (b) Advanta shall reimburse John for all Reimbursable HELOC
Expenses. Requests for reimbursement may be made by John as of: (A) the second
anniversary of the Effective Date (hereinafter defined), (B) each subsequent
anniversary of the Effective Date and

                                      -2-


(C) the date determined pursuant to subparagraph (c) of this Paragraph. The
procedure to be followed for reimbursement is as follows:

                  (i) John shall submit to Advanta (to the attention of Marci
Wilf, Vice President of Corporate Administration) a Draw Request Form in the
form attached as Exhibit "B" to this Agreement, together with copies of all
supporting receipts or proof of payment and other appropriate documentation and,
if not clear from the documentation submitted, an explanation of the expenses
represented by such documentation.

                  (ii) Upon confirmation by Advanta of the expenses that qualify
as Reimbursable HELOC Expenses, Advanta shall reimburse such amount to John.

            (c) For purposes of this Agreement, the term "Termination Date"
shall mean the date determined as follows:

                  (i) If a Put Option Trigger Event (as hereinafter defined)
occurs and John: (1) is not eligible to exercise the Put Option (as hereinafter
defined) because the FMV (hereinafter defined) equals or exceeds the Put Option
Sale Price (hereinafter defined) or (2) is eligible to exercise the Put Option
but fails to do so within the fifteen-day period provided in subparagraph 3(c)
below, the Termination Date shall be the date of the first to occur of the
following events:

                        (A) John ceases to be President of Advanta Bank Corp.
for any reason; or

                        (B) John leaves or retires or otherwise ceases to be
employed by Advanta Bank Corp., Advanta or any other Advanta affiliate for any
reason.

                  (ii) If a Put Option Trigger Event occurs and John is eligible
to and does properly exercise the Put Option, the Termination Date shall be the
date of the first to occur of the following events:

                        (A) The date of settlement for the sale of the Property
pursuant to subparagraph 3(d) below; or

                        (B) The date of settlement for Advanta's purchase of the
Property pursuant to subparagraph 3(e) below.

                  (iii) If the Property is sold at any time prior to the
occurrence of a Put Option Trigger Event, the Termination Date shall be the date
of settlement for such sale.

            (d) All rights to reimbursement for Reimbursable HELOC Expenses
shall cease as of the date determined as follows:

                  (i) In the case of subparagraph 2(c)(i) above, the earlier of
the following dates:

                                      -3-


                        (A) the one hundred eightieth (180th) day after the
Termination Date; or

                        (B) the date of settlement for the sale of the Property.

                  (ii) In the case of subparagraphs 2(c)(ii) and (iii) above,
the Termination Date.

      3. Option to Put the Property to Advanta.

            (a) Within thirty (30) days after the occurrence of a Put Option
Trigger Event (hereinafter defined), or at any other time as John and Advanta
shall mutually agree, John shall cause the Property to be appraised (by an
appraiser mutually acceptable to John and Advanta) to determine its fair market
value ("FMV").

            (b) As used in this Agreement, the term "Put Option Trigger Event"
means the first to occur of the following events:

                  (i) John ceases to be President of Advanta Bank Corp. for any
reason; or

                  (ii) John leaves or retires or otherwise ceases to be employed
by Advanta Bank Corp., Advanta or any other Advanta affiliate for any reason.

            (c) In the event that the FMV is less than the Put Option Sale Price
(hereinafter defined), John shall, within fifteen (15) days after determination
of the FMV, advise Advanta whether he elects to require Advanta to purchase the
Property (the "Put Option").

            (d) If John elects to exercise the Put Option, John shall, for a
period of one hundred eighty (180) days following the date of the exercise,
diligently attempt to sell the Property to a third party for a price that equals
or exceeds the Put Option Sale Price.

            (e) If John is not successful in selling the Property pursuant to
subparagraph (d) of this Paragraph, then Advanta shall purchase the Property
from John for an amount equal to the Put Option Sale Price (less any costs, such
as brokerage commissions, that are payable solely in connection with a sale to a
third party), subject to the following conditions:

                  (i) Title to the Property shall not be subject to any liens,
encumbrances or other title objections created or suffered by John that are not
contemplated under this Agreement.

                  (ii) In the event that the Property has been damaged by fire
or other casualty that has not been fully repaired or restored as of the date of
settlement, John shall (1) pay to Advanta the proceeds of any casualty insurance
received by him and not applied to the repair or restoration of the Property and
(2) assign to Advanta John's right to receive any unpaid insurance proceeds.

                                      -4-


            (f) As used in this Agreement, the term "Put Option Sale Price"
means the total of the following estimated amounts:

                  (i) the outstanding balance of principal and interest of
John's First Mortgage Loan as of the date of settlement for the sale; plus

                  (ii) the outstanding balance of principal and interest of that
portion of John's HELOC that qualifies as Reimbursable HELOC Expenses (and not
yet reimbursed by Advanta) as of the date of settlement for the sale; plus

                  (iii) John's cost of the sale, including customary brokerage
commissions and closing costs.

      4. Return Amount.

            (a) Notwithstanding anything to the contrary contained in this
Agreement, in the event that the Termination Date occurs at any time prior to
the third anniversary of the Effective Date, John shall return to Advanta, but
only to the extent of any Net Proceeds (as hereinafter defined), a percentage of
the Return Amount (as hereinafter defined) based on the following schedule:



                  Applicable Period                                         Percentage
                  -----------------                                         ----------
                                                                         
The Effective Date to the day prior to the first anniversary
     of the Effective Date                                                    100.00%

The first anniversary of the Effective Date to the day prior
     to the second anniversary of the Effective Date                           66.66%

The second anniversary of the Effective Date to the day
     prior to the third anniversary of the Effective Date                      33.33%


            (b) Any Return Amount payable to Advanta pursuant to subsection (a)
of this Paragraph shall be paid on or before the date (the "Determination Date")
that is the earlier to occur of the following:

                  (i) the date of settlement for the sale of the Property; or

                  (ii) one hundred eighty (180) days after the Termination Date.

            (c) As used in this Paragraph, the following terms have the
following meanings:

                  (i) "Net Proceeds" means the Gross Proceeds (as hereinafter
defined) less the total of the following amounts:

                        (A) the outstanding balance of principal and interest of
John's First Mortgage Loan as of the Determination Date; plus

                                      -5-


                        (B) the outstanding balance of principal and interest of
that portion of John's HELOC that qualifies as Reimbursable HELOC Expenses (and
not yet reimbursed by Advanta) as of the Determination Date; plus

                        (C) in the case of a sale of the Property, all of John's
costs of the sale, including customary brokerage commissions and closing costs.

                  (ii) "Gross Proceeds" means:

                        (A) in the case of a sale of the Property, the actual
gross proceeds of the sale; or

                        (B) if John has not sold the Property by the
Determination Date, the FMV.

                  (iii) "Return Amount" means the total of the following
amounts:

                        (A) the Equity Amount; plus

                        (B) the portion of the Relocation Payment used by John
to purchase furniture for the Property; plus

                        (C) the portion of the Relocation Payment used by John
to pay the closing costs of John's purchase of the Property; plus

                        (D) in the case of any such reimbursements pursuant to
subparagraph 2(d)(i) above, all Reimbursable HELOC Expenses reimbursed by
Advanta to John with respect to any period following the Termination Date.

      5. Effective Date. This Agreement is effective as of May 20, 2004 (the
"Effective Date").

      6. Notices. All notices required to be given by either party to this
Agreement (the "Sending Party") to the other party (the "Receiving Party") shall
be given by either hand delivering it or mailing it by first class mail to the
address of the Receiving Party stated in the first paragraph of this Agreement
or to another address if the Receiving Party has sent notice of such other
address to the Sending Party in accordance with this Paragraph 6.

      7. Captions. The headings and captions used in this Agreement are for
convenience of reference only and shall not be construed to affect in any way
the interpretation of this Agreement.

      8. Successors and Assigns. Subject to the following limitation, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, successors and
assigns. Notwithstanding the immediately preceding sentence, except for a
transfer that occurs by reason of John's death, John shall not voluntarily,
involuntarily, or by operation of law assign or transfer any right to receive
funds or any other

                                      -6-


rights or interests he may have under this Agreement, without the prior written
consent of Advanta, which consent may be withheld in the sole discretion of
Advanta.

      9. Amendment. This Agreement cannot be changed or amended except by
agreement in writing signed by the party against whom enforcement of the change
or amendment is sought.

      10. Governing Law. The provisions of this Agreement shall be construed in
accordance with the laws of the Commonwealth of Pennsylvania, without regard to
its conflicts-of-law principles.

      11. Execution in Counterparts. This Agreement may be executed in any
number of counterparts, which together shall be deeded to constitute one and the
same instrument.

      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.

                                   ADVANTA CORP.

                                   By: /s/ Elizabeth Mai
                                      _____________________________________
                                      Name: Elizabeth H. Mai
                                      Title: Senior Vice President and General
                                             Counsel

                                       /s/ John F. Moore
                                   __________________________________ (SEAL)
                                             JOHN F. MOORE

                                      -7-


                                  EXHIBIT "A"

                            DESCRIPTION OF PROPERTY

All of Unit 9, of the CANYON RIDGE CONDOMINIUMS, as the same is identified in
the Record of Survey Map recorded in Salt Lake County, Utah, as Entry No.
7697068, in Book 2000P, at Page 211, and in the Declaration of Covenants,
Conditions and Restrictions and Bylaws of the CANYON RIDGE CONDOMINIUMS,
recorded in Salt Lake County, Utah, on August 14, 2000, as Entry No. 7697069.

TOGETHER WITH: (a) the undivided ownership interest in said Condominium
Project's Common Areas and Facilities which are appurtenant to said Unit (the
referenced Declaration of Condominium providing for periodic alteration both in
the magnitude of said undivided ownership interest and in the composition of the
Common Areas and Facilities to which said interest relates), (b) the exclusive
right to use and enjoy each of the Limited Common Areas which is appurtenant to
said Unit, and (c) the non-exclusive right to use and enjoy the Common Areas and
Facilities included in said Condominium Project (as said Project may hereafter
be expanded) in accordance with the aforesaid Declaration and Survey Map (as
said Declaration and Map may hereafter be amended or supplemented) and the Utah
Condominium Ownership Act.

                                      -8-


                                  EXHIBIT "B"

                               DRAW REQUEST FORM

                                      -9-

EX-10.4

                                                                    Exhibit 10.4

SENT VIA FAX
- ------------

June 8, 2004

Mr. Arthur P. Bellis
The Park Laurel
15 West 63rd Street
Apt. 20B
New York, NY 10023

     Re:  Retirement

Dear Arthur:

This letter agreement reflects the agreement between you and Advanta Corp.
("Advanta") with respect to your retirement from the Board of Directors, as well
as your retirement as a director, trustee or officer of any Advanta affiliate,
which is effective upon approval of this agreement by the Board and the Audit
Committee when they meet on June 9, 2004.

Advanta acknowledges your retirement from the Board of Directors after 30 years
of service and confirms that, under the provisions of Advanta's Omnibus Plan,
you will be entitled to exercise your currently vested options under the terms
of the Omnibus Plan and your option grants at any time until June 9, 2006.

In light of the present interest rate environment and Advanta's current
liquidity needs, you will be permitted to redeem any of your currently
outstanding Advanta Corp. investment notes, without penalty, at any time until
June 9, 2005, upon prior written notice to Advanta.

In the event that the Board of Directors elects, in its discretion, to adopt a
retirement plan for non-executive Board members at any time before June 9, 2009,
you will be treated as "grandfathered" for purposes of participation in the
retirement plan and entitled to receive benefits in accordance with the terms of
the plan.

Please sign below indicating your agreement.


                                   /s/ William A. Rosoff
                              --------------------------------
                              William A. Rosoff, Vice Chairman

    /s/ Arthur P. Bellis
- ---------------------------
Arthur P. Bellis
June 8, 2004

cc: Martin L. Budd, Esquire

EX-12

                                                                               .
                                                                               .
                                                                               .

EXHIBIT 12

                         ADVANTA CORP. AND SUBSIDIARIES
         CONSOLIDATED COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES



                                                           THREE MONTHS ENDED              SIX MONTHS ENDED
($ IN THOUSANDS)                                                 JUNE 30,                       JUNE 30,
- ----------------------------------------------------------------------------------------------------------------
                                                            2004           2003            2004             2003
- ----------------------------------------------------------------------------------------------------------------
                                                                                             
Income from continuing operations                       $10,832          $ 6,281        $20,271          $12,186
Income tax expense                                        7,071            3,932         13,234            7,628
- ----------------------------------------------------------------------------------------------------------------
Earnings before income taxes                             17,903           10,213         33,505           19,814
Fixed charges:
  Interest on debt, deposits and other borrowings         8,556           13,111         17,798           24,382
  Interest on subordinated debt
    payable to preferred securities
    trust(2)                                              2,290                0          4,579                0
  One-third of all rentals                                  408              664          1,042            1,304
  Preferred stock dividend of
    subsidiary trust(2)                                       0            2,248              0            4,495
- ----------------------------------------------------------------------------------------------------------------
  Total fixed charges                                    11,254           16,023         23,419           30,181
- ----------------------------------------------------------------------------------------------------------------
Earnings before income taxes and
  fixed charges                                         $29,157          $26,236        $56,924          $49,995
Ratio of earnings to fixed charges(1)                      2.59 x           1.64 x         2.43 x           1.66 x


(1)     For purposes of computing these ratios, "earnings" represent income
        before income taxes plus fixed charges. "Fixed charges" consist of
        interest expense, one-third (the portion deemed representative of the
        interest factor) of rental expense on operating leases, and preferred
        stock dividends of subsidiary trust.

(2)     Our adoption of FIN 46, as revised, resulted in the deconsolidation of
        the subsidiary trust that issued our trust preferred securities
        effective December 31, 2003. As a result of the deconsolidation of that
        trust, the consolidated income statement includes interest expense on
        subordinated debt payable to preferred securities trust beginning
        January 1, 2004, as compared to periods through December 31, 2003 that
        included payments on the trust preferred securities classified as
        minority interest in income of consolidated subsidiary.

EX-31.1

EXHIBIT 31.1

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
                         PURSUANT TO SECTION 302 OF THE
                           SARBANES-OXLEY ACT OF 2002

I, Dennis Alter, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Advanta Corp.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer(s) and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a)   Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          registrant, including its consolidated subsidiaries, is made known to
          us by others within those entities, particularly during the period in
          which this report is being prepared;

     b)   (Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986);

     c)   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     d)   Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's fourth fiscal quarter in
          the case of an annual report) that has materially affected, or is
          reasonably likely to materially affect, the registrant's internal
          control over financial reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     a)   All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the registrant's ability to
          record, process, summarize and report financial information; and



     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          control over financial reporting.

/s/ Dennis Alter
- -----------------------
Dennis Alter
Chief Executive Officer
August 6, 2004

                                      - 2 -

EX-31.2

EXHIBIT 31.2

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
                         PURSUANT TO SECTION 302 OF THE
                           SARBANES-OXLEY ACT OF 2002

I, Philip M. Browne, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Advanta Corp.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer(s) and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a)   Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          registrant, including its consolidated subsidiaries, is made known to
          us by others within those entities, particularly during the period in
          which this report is being prepared;

     b)   (Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986);

     c)   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     d)   Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's fourth fiscal quarter in
          the case of an annual report) that has materially affected, or is
          reasonably likely to materially affect, the registrant's internal
          control over financial reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     a)   All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the registrant's ability to
          record, process, summarize and report financial information; and



     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          control over financial reporting.

/s/ Philip M. Browne
- -----------------------
Philip M. Browne
Chief Financial Officer
August 6, 2004

                                      - 2 -

EX-32.1

EXHIBIT 32.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report on Form 10-Q of Advanta Corp. (the
"Company") for the quarterly period ended June 30, 2004 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Dennis
Alter, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:

     (1)  the Report fully complies with the requirements of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  the information contained in the Report fairly presents, in all
          material respects, the financial condition and results of operations
          of the Company.

/s/ Dennis Alter
- -----------------------
Dennis Alter
Chief Executive Officer
August 6, 2004

EX-32.2

EXHIBIT 32.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report on Form 10-Q of Advanta Corp. (the
"Company") for the quarterly period ended June 30, 2004 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Philip
M. Browne, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:

     (1)  the Report fully complies with the requirements of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  the information contained in the Report fairly presents, in all
          material respects, the financial condition and results of operations
          of the Company.

/s/ Philip M. Browne
- ------------------------
Philip M. Browne
Chief Financial Officer
August 6, 2004